HomeMy WebLinkAboutItem No. 17 CFD No. 2016-2 Canyon HillsCity Council Agenda Report
City of Lake Elsinore 130 South Main Street
Lake Elsinore, CA 92530
www.lake-elsinore.org
File Number: ID# 22-191
Agenda Date: 5/10/2022 Status: Approval FinalVersion: 1
File Type: Council Business
Item
In Control: City Council / Successor Agency
Agenda Number: 17)
Adoption of Resolution Authorizing the Issuance of Community Facilities District No. 2016-2
(Canyon Hills) Subordinate Special Tax Bonds, Series 2022
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. 2016-2 (CANYON HILLS) AUTHORIZING THE ISSUANCE OF ITS SUBORDINATE
SPECIAL TAX BONDS, SERIES 2022 IN A PRINCIPAL AMOUNT NOT TO EXCEED ONE MILLION
FIVE HUNDRED THOUSAND DOLLARS ($1,500,000) AND APPROVING CERTAIN DOCUMENTS
AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH.
Page 1 City of Lake Elsinore Printed on 5/5/2022
Page 1 of 3
REPORT TO CITY COUNCIL
To: Honorable Mayor and Members of the City Council
From: Jason Simpson, City Manager
Prepared by: Shannon Buckley, Assistant City Manager
Date: May 10, 2022
Subject: Adoption of Resolution Authorizing the Issuance of Community Facilities
District No. 2016-2 (Canyon Hills) Subordinate Special Tax Bonds, Series
2022
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. 2016-2 (CANYON HILLS) AUTHORIZING THE
ISSUANCE OF ITS SUBORDINATE SPECIAL TAX BONDS, SERIES 2022 IN A PRINCIPAL
AMOUNT NOT TO EXCEED ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER
ACTIONS IN CONNECTION THEREWITH
Background
The City of Lake Elsinore (the “City”) formed the City of Lake Elsinore Community Facilities District
No. 2016-2 of the City of Lake Elsinore (Canyon Hills) (the “District”) in 2016 according to the
Mello-Roos Community Facilities District Act of 1982, as amended.
The District contains approximately 166 gross acres and is located in the southeastern portion of
the City, north of Railroad Canyon Road and to the west of Canyon Lake. The property within the
District was initially planned for 456 residential units, a commercial site, community parks, and
other open spaces. The site within the District that was originally planned for commercial
development has been converted to residential development (Tract 38008) containing 60
residential units being marketed as “Ridgeline.” Pardee Homes was the original developer in the
District. Pardee Homes has merged with Tri Pointe Homes and Tri Pointe Homes is currently
developing the Ridgeline project. With the additional 60 homes in the Ridgeline project, the total
number of homes planned within the District is 516.
As of April 28, 2022, of the 516 homes, 456 homes have been developed and conveyed to
individual homeowners. Of the remaining 60 planned units in Ridgeline, all building permits have
been issued and 31 are currently in escrow.
CFD 2016-2 (Canyon Hills) Special Tax bonds
Page 2 of 3
In 2018, the District issued its Special Tax Bonds, Series 2018 (the “2018 Bonds”) in the principal
amount of $19,745,000 to finance certain public improvements in the District.
The proposed 2022 Subordinate Special Tax Bonds (the “2022 Bonds”) are being issued to
finance the costs of additional public improvements in the District. Because the parity lien (ability
to issue parity bonds) was closed at the time of issuing the 2018 Bonds, the 2022 Bonds will be
payable from the special tax of the District on a subordinate basis to the 2018 Bonds.
The resolution before City Council authorizes the issuance of subordinate special tax bonds and
bond documents further described in the following paragraphs.
Discussion
Interest rates have been volatile in recent months as a result of inflationary pressures resulting
from the COVID-19 pandemic and as a result of international events, such as the war in Ukraine.
Due to the interest rate volatility, recent increases in interest rates, and the principal amount of
the 2022 Bonds, the financing team explored a private placement transaction with a single lender.
Private placement has certain advantages over a public sale, including lower costs of issuance,
the ability to lock interest rates, and reduced exposure to interest rate risk.
In April 2022, Stifel, as placement agent, solicited interest rates from various placement banks.
After receiving a proposal for a private placement from Western Alliance Bank (the “Bank”), the
financing team evaluated the bid against indicative public offering rates. Ultimately, the staff
recommends moving forward with a private placement transaction with the Bank, which proposed
the most advantageous terms, including the ability to lock the interest rate and reduce exposure
to interest rates.
The Bank’s term sheet includes an interest rate of 4.89%, which is locked through May 31, 2022.
The Bank is expected to obtain final credit approval in May 2022. The Bank and the financing
team are ready to proceed to close the transaction with the City Council's adoption of the
Resolution presented.
The proposed 2022 Bonds are estimated to be issued in the principal amount of approximately
$1.4 million with a final maturity of September 1, 2048. The table below highlights preliminary
financing statistics of the 2022 Bonds based on the Bank’s term sheet.
Summary of Financing Statistics¹
2022 Bonds
Par Amount $1,411,480
True Interest Cost 4.89%
Estimated Cost to Home Owners
Average Annual Assessment² $2,273
¹Preliminary and subject to change.
²Annual Assigned Special Tax will increase by approximately 2% per year.
The Fiscal Year 2021-22 average estimated special tax levy on homes within the District is $2,273
and is dependent upon the size of the homes. Such rates will increase by 2.0% per year.
CFD 2016-2 (Canyon Hills) Special Tax bonds
Page 3 of 3
As required under Section 5852.1 of the California Government Code, the good faith estimates
as provided by the Municipal Advisor and Stifel, as placement agent, are outlined in Attachment 1
to this staff report.
Approval of the Resolution approves the form of and/or authorizes the execution and delivery of
the following documents:
Bond Indenture: Entered into between the District and Wilmington Trust, National
Association, as the appointed Trustee for the 2022 Bonds, this document contains terms
of the 2022 Bonds including the payment and redemption provisions, pledge of revenues
to pay the 2022 Bonds, rights and duties of the Trustee, remedies upon a default in the
payment of the 2022 Bonds, and other related matters.
First Supplemental Indenture: Entered into between the District and Wilmington Trust,
National Association, this document supplements and amends the Bond Indenture for the
2018 Bonds to facilitate the issuance of the 2022 Bonds.
Placement Agent Agreement: Agreement between the District and Stifel, serving as
placement agent, containing the description of services to be provided by the placement
agent, and certain conditions to closing.
Purchaser’s Term Sheet: A term sheet provided that summarizes the terms of which the
Purchaser has agreed to purchase the 2022 Bonds through direct placement, including
interest rates, repayment terms, prepayment options, rate lock, and covenants including
annual reporting requirements.
Bond Counsel and the City Attorney have reviewed the attached financing documents on behalf
of the City. If this resolution is approved, City staff will continue to work with the financing team to
finalize all of the aforementioned documents.
Fiscal Impact
There is no cost to the City; however, the property owners are expected to pay between $1,493
and $3,050 in the Fiscal Year 2021-22, depending on the size of the home. Such rates will increase
by 2% per year thereafter.
Exhibits
A – Resolution Approving Bond Issuance
B – Placement Agent Agreement
C – Good Faith Estimates
D – Bond Indenture
E – First Supplemental Indenture
F – Purchaser’s Term Sheet
4876-0379-6765v3/022042-0045
RESOLUTION NO. 2022-___
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. 2016-2 (CANYON HILLS) AUTHORIZING
THE ISSUANCE OF ITS SUBORDINATE SPECIAL TAX BONDS, SERIES 2022 IN A
PRINCIPAL AMOUNT NOT TO EXCEED ONE MILLION FIVE HUNDRED THOUSAND
DOLLARS ($1,500,000) AND APPROVING CERTAIN DOCUMENTS AND TAKING
CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH
Whereas, the City Council (the “City Council”) of the City of Lake Elsinore (the “City”), has
heretofore undertaken proceedings to establish Community Facilities District No. 2016-2 of the
City of Lake Elsinore (Canyon Hills) (the “District”) and declared the necessity to issue bonds on
behalf of the District pursuant to the terms and provisions of the Mello-Roos Community
Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5 of the
Government Code of the State of California (the “Act”); and
Whereas, pursuant to Resolution Nos. 2016-143 and 2016-144 adopted by the legislative body
of the District on December 13, 2016, certain bond propositions were submitted to the qualified
electors within the District, and were approved by more than two-thirds of the votes cast at the
election held on December 13, 2016; and
Whereas, pursuant to Resolution Nos. 2016-143 and 2016-144 adopted by the legislative body
of the District on December 13, 2016, certain bond propositions were submitted to the qualified
electors within the District, and were approved by more than two-thirds of the votes cast at the
election held on December 13, 2016; and
Whereas, on August 1, 2018, the District issued its Special Tax Bonds, Series 2018 (the “2018
Bonds”) in the principal amount of $19,745,000 pursuant to a Bond Indenture, dated as of
August 1, 2018 (the “2018 Indenture”), by and between the District and Wilmington Trust,
National Association, as trustee; and
Whereas, the District desires to finance additional public facilities through the issuance of a
second series of bonds in an aggregate principal amount not to exceed $1,500,000 designated
as the “Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Subordinate Special Tax Bonds, Series 2022” (the “Bonds”); and
Whereas, the Bonds will be payable from the special tax of the District on a subordinate basis
to the 2018 Bonds, as set forth in the Indenture (as defined below); and
Whereas, in order to effect the issuance of the Bonds, the District desires to enter into various
agreements and approve certain documents, including an amendment to the 2018 Indenture, in
substantially the forms presented herein; and
Whereas, based on assessed value of the property within the District, the value of the real
property in the District 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 (including the
2018 Bonds) or a special assessment levied on property within the District as calculated in the
manner set forth in Section 53345.8(a) of the Act;
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4876-0379-6765v3/022042-0045
Whereas, following distribution to various private placement banks of a Request for Proposals,
the District has been presented with a term sheet from Western Alliance Business Trust, a
Delaware statutory trust, which is a wholly owned affiliate of Western Alliance Bank (the
“Purchaser”), pursuant to which the Purchaser has agreed to purchase the Bonds through a
direct placement; and
Whereas, the City Council has determined in accordance with Section 53360.4 of the Act that a
negotiated sale of the Bonds to the Purchaser will result in a lower overall cost to the District
than a public sale.
NOW, THEREFORE, THE CITY COUNCIL, ACTING AS THE LEGISLATIVE BODY OF
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE CITY OF LAKE ELSINORE
(CANYON HILLS), DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOW:
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 $1,500,000, with the exact principal amount to be determined by the official
signing the Indenture; provided, however, that the true interest cost applicable to the Bonds
shall not exceed 5.25% per annum. 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 and 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 City Clerk, with such additions thereto and changes therein (including, but not limited to,
changes in the amount to be maintained in the Reserve Account (as defined in the Indenture))
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 interest rate(s), principal amount per
maturity, redemption dates and prices and such other related terms and provisions as limited by
this Resolution. 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 City Clerk. 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 Purchaser has offered to purchase the Bonds on a direct placement basis
pursuant to the terms of a Term Sheet (the “Term Sheet”), in the form submitted at this meeting
and made a part hereof as though set forth in full herein. The Authorized Officers, each acting
alone, are hereby authorized to execute the Term Sheet, if necessary, and to take any and all
actions necessary to effectuate a sale of the Bonds to the Purchaser in accordance with the
Term Sheet, and any such actions previously taken are hereby ratified and approved.
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4876-0379-6765v3/022042-0045
Section 6. The form of the First Supplemental Indenture (the “First Supplemental Indenture”),
which supplements and amends the 2018 Indenture, in the form presented herewith, is hereby
approved. The Authorized Officers are each hereby authorized and directed, for and in the
name of the District, to execute and deliver the First Supplemental Indenture in substantially
said form, with such changes, insertions and omissions therein as the Authorized Officer
executing the same may require or approve, such approval to be conclusively evidenced by the
execution and delivery thereof.
Section 7. The form of the Placement Agent Agreement (the “Placement Agent Agreement”)
between the District and Stifel, Nicolaus & Company, Incorporated, as Placement Agent, in the
form presented herewith, is hereby approved. The Authorized Officers are each hereby
authorized and directed, for and in the name of the District, to execute and deliver the
Placement Agent Agreement, if necessary, in substantially said form, with such changes,
insertions and omissions therein as the Authorized Officer executing the same may require or
approve, such approval to be conclusively evidenced by the execution and delivery thereof.
Section 8. In accordance with the requirements of Section 53345.8 of the Act, the legislative
body of the District hereby determines that the assessed value of the real property in the District
as shown on the ad valorem assessment roll 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
(including the 2018 Bonds) or a special assessment levied on property within the District, 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 effect
the issuance of the Bonds. Such services shall include, but not be limited to, printing the Bonds,
obtaining legal services, trustee and 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 City Clerk 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, all in accordance with the provisions of
this Resolution and the fulfillment of the purposes of the Bonds as described in the Indenture.
Any document authorized herein to be signed by the City Clerk may be signed by a duly
appointed deputy clerk.
Section 11. The City Council acknowledges that the good faith estimates required by Section
5852.1 of the California Government Code are disclosed in the staff report and are available to
the public at the meeting at which this Resolution is approved.
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4876-0379-6765v3/022042-0045
Section 12. This Resolution shall be effective upon its adoption.
Passed and Adopted on this 10th day of May, 2022.
_____________________________
Timothy J. Sheridan, Mayor
Attest:
_____________________________
Candice Alvarez, MMC
City Clerk
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4876-0379-6765v3/022042-0045
STATE OF CALIFORNIA )
COUNTY OF RIVERSIDE ) ss.
CITY OF LAKE ELSINORE )
I, Candice Alvarez, MMC, City Clerk of the City of Lake Elsinore, California, do hereby certify
that Resolution No. 2022-______ was adopted by the City Council of the City of Lake Elsinore,
California, at the Regular meeting of May 10, 2022 and that the same was adopted by the
following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
________________________________
Candice Alvarez, MMC
City Clerk
Page 1
________, 2022
Jason Simpson
City Manager
City of Lake Elsinore
Community Facilities District No. 2016-2 of the
City of Lake Elsinore (Canyon Hills)
130 South Main Street
Lake Elsinore, CA 92530
Re: Placement Agent Agreement
Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Subordinate Special Tax Bonds, Series 2022
Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills) (the
“Issuer”) proposes to issue, offer, and sell in a private placement the above-referenced obligations
of the Issuer (the “Bonds”) pursuant to a Bond Indenture, dated as of May 1, 2022 (the “Bond
Indenture”), between the Issuer and Wilmington Trust, National Association, as fiscal agent.
This Placement Agent Engagement Agreement (the “Agreement”) confirms the agreement
between the Issuer and Stifel, Nicolaus & Company, Incorporated (the “Placement Agent”) as
follows:
1. Engagement. The Issuer hereby engages the Placement Agent as its exclusive
agent to assist the Issuer in placing the Bonds for sale on a best efforts basis, with
one purchaser, a “qualified institutional buyer” as defined in Rule 144A under the
Securities Act of 1933 (the “Securities Act”) or an “accredited investor,” as defined
in Rule 501(a)(1),(2),(3), or (7) under the Securities Act, as represented by the
purchaser (the “Purchaser”) in an executed Investor Letter in the form attached as
Exhibit C to this Agreement on a private placement basis (the “Placement”). Sale
and delivery of the Bonds by the Issuer and purchase by the Purchaser will occur
on the day of closing (“Closing Date”). The Issuer acknowledges and agrees that
the Placement Agent’s engagement hereunder is not an agreement by the Placement
Agent or any of its affiliates to underwrite or purchase the Bonds or otherwise
provide any financing to the Issuer. The Placement Agent hereby accepts this
engagement upon the terms and conditions set forth in this Agreement.
2. Fees and Expenses. For its services under this Agreement, the Issuer agrees to pay
the Placement Agent a fee of $_____ (which includes a $______ fee for counsel to
the Placement Agent), payable on the Closing Date. In the event the Issuer
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terminates this Agreement and within twelve (12) months thereafter sells the Bonds
to an investor identified by the Placement Agent to the Issuer prior to such
termination, the amount payable in the preceding sentence shall be immediately due
and payable by the Issuer.
3. Disclosure and Due Diligence.
(a) The Issuer has provided the Placement Agent with certain documents and
information, including the _________ (collectively, the “Information
Package”), and the Issuer has reviewed the draft Bond Indenture and other
legal documents to be used in connection with the Placement (together with
all supplements, modifications, and additions thereto prior to the Closing
Date, the “Placement Materials”). The Issuer acknowledges and agrees that
it is solely responsible for the completeness, truth, and accuracy of the
Placement Materials and that the Placement Agent and the Purchaser may
rely upon as complete, true, and accurate, the Placement Materials and all
information provided by the Issuer to the Placement Agent for use in
connection with the Placement and that the Placement Agent does not
assume any responsibility therefor.
(b) The Issuer will make available to the Purchaser and the Placement Agent
such documents and other information which the Purchaser or the
Placement Agent reasonably deems appropriate, will provide access to its
officers, directors, employees, accountants, counsel and other
representatives, and will provide the Purchaser and the Placement Agent the
opportunity to ask questions and receive answers from knowledgeable
individuals, including Stradling Yocca Carlson & Rauth, a Professional
Corporation, Bond Counsel to the Issuer (“Bond Counsel”) and counsel to
the Issuer (whose opinions each shall receive and upon which they may
rely) concerning the Issuer, the Bonds, and the security therefor; it being
understood that the Purchaser and the Placement Agent will rely solely upon
such information supplied by the Issuer and its representatives without
assuming any responsibility for independent investigation or verification
thereof.
(c) In the event that the Placement Agent is unable to complete “due diligence”
in order to form a reasonable basis for recommending the Bonds to the
Purchaser either (1) because of the Issuer’s failure to comply with paragraph
(a) or (b) of this paragraph or (2) because the Placement Agent uncovers
“red flags” about the Issuer that cause the Placement Agent to be not
satisfied that the Placement Agent can in good faith recommend the Bonds
to the Purchaser, the Placement Agent may terminate this Agreement
without further obligation on the part of the Placement Agent to proceed
with the Placement and without any obligation on the part of the Placement
Agent to reimburse to the Issuer any monies advanced by the Issuer to the
Placement Agent.
Page 3
4. Representations, Warranties, and Agreements of the Issuer. As of the date of
this Agreement, unless otherwise stated, the Issuer represents, warrants, and agrees
with the Placement Agent that:
(a) The Issuer is duly organized and validly existing as a community facilities
district under the laws of the State of California (the “State”) with the power
to adopt the resolution authorizing the issuance of the Bonds (the
“Resolution”), perform the agreements on the Issuer’s part contained therein
and in the agreements approved thereby, including the Bond Indenture and to
cause the issuance of the Bonds.
(b) The Issuer will not cause or permit any action to be taken in the placement of
the Bonds in violation of the requirements for exemption from registration or
qualification of the Bonds under all federal and applicable state securities
laws and regulations.
(c) The Issuer has complied, and in all respects on the Closing Date will be in
compliance, with all of the provisions of applicable law of the State.
(d) The Issuer: (1) has duly authorized and approved the execution and delivery
of this Agreement; (2) will have duly adopted the Resolution; and (3) will
duly authorize and approve the Bond Indenture and the delivery thereof to
the prospective Purchaser; and the performance of its obligations and the
consummation by it of all other transactions contemplated thereby.
(e) On the Closing Date, the Bond Indenture will have been duly authorized,
executed, and delivered by the Issuer and, assuming due authorization,
execution and delivery by the other parties thereto, as applicable, constitutes
a legal, valid and binding agreement of the Issuer enforceable in accordance
with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or other laws affecting the enforcement of creditors’ rights
generally and by the application of equitable principles if sought and by the
limitations on legal remedies imposed on actions against public agencies in
the State.
(f) The Issuer is not, and on the Closing Date will not be, in breach of or default
under any applicable law or administrative regulation of the State or any
department, division, agency or instrumentality thereof, or of the United
States, or any applicable judgment or decree or any loan agreement, note,
resolution, certificate, agreement or other instrument to which the Issuer is
a party or is otherwise subject, which breach or default would materially
and adversely affect the Issuer or its ability to perform its duties and
obligations under the Bond Indenture, and the execution and delivery of the
Bond Indenture, the adoption of the Resolution and the issuance of the
Bonds and compliance with the provisions of each will not conflict with or
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constitute a breach of or default under any applicable law or administrative
regulation of the State or under any certificate, agreement or other
instrument to which the Issuer is a party or is otherwise subject, which
breach or default would materially and adversely affect the Issuer or its
ability to perform its duties under the Bond Indenture and the Bonds.
(g) No action, suit, proceeding or investigation at law or in equity before or by
any court, governmental agency, public board or body is, and on the Closing
Date will not be, pending or, to the actual knowledge of the Issuer,
threatened: (i) in any way affecting the existence of the Issuer, (ii) seeking
to prohibit, restrain or enjoin the issuance, sale or delivery of the Bonds or
the levy, assessment or collection of special taxes or collection or payment
by the Issuer of any amounts pledged or to be pledged as security to pay the
principal of and interest on the Bonds, (iii) in any way contesting or
affecting the validity or enforceability of, or the power or authority of the
Issuer to issue, adopt or to enter into (as applicable), the Bonds, the
Resolution or the Bond Indenture, (iv) contesting in any way the
completeness, truth, or accuracy of the Placement Materials, (v) except as
disclosed in the Placement Materials, wherein an unfavorable decision,
ruling or finding would materially adversely affect the financial position or
condition of the Issuer or would result in any material adverse change in the
ability of the Issuer to pledge or apply the security or source of payment of,
or to pay debt service on the Bonds, or (vi) contesting the status of the
interest on the Bonds as excludable from gross income for federal income
tax purposes or as exempt from any applicable State tax, in each case as
described in the Placement Materials.
(h) Regarding information provided by the Issuer to the Placement Agent:
(1) The Issuer has furnished the Placement Agent and the Purchaser
with the Information Package. The Issuer represents and warrants
that all information made available to the Placement Agent by the
Issuer or contained in the Information Package, when provided will
be, and will be at all times thereafter during the period of the
engagement of the Placement Agent hereunder, be true, and accurate
in all material respects; or
(2) any forecasted financial or market information with respect to the
Issuer or its market provided to the Placement Agent and the
Purchaser by the Issuer has been or will be prepared in good faith
with a reasonable basis for the assumptions and the conclusions
reached therein.
(i) On the Closing Date, the Issuer will deliver or cause to be delivered to the
Placement Agent:
Page 5
(1) The opinion of Bond Counsel to the Issuer, dated the Closing Date
relating to:
(i) the validity of the Bonds;
(ii) exemption from registration and qualification under federal
and state securities law; and
(iii) the tax-exempt status of the Bonds, together with a reliance
letter from such counsel, dated the Closing Date and
addressed to the Placement Agent in substantially the form
attached to this Agreement as Exhibit A, or such other form
as is acceptable to the Placement Agent;
(2) A certificate of the Issuer, dated the Closing Date, in substantially
the form attached to this Agreement as Exhibit B;
(3) The opinion of Kutak Rock LLP, counsel to the Placement Agent,
dated the Closing Date, as to such matters as the Placement Agent
shall request;
(4) An Investor Letter, in the form attached to this Agreement as Exhibit
C, executed by the Purchaser and addressed to the Placement Agent;
and
(5) Such additional legal opinions, certificates, proceedings,
instruments and other documents as the Placement Agent or its
counsel and Bond Counsel may reasonably request to evidence
compliance by the Issuer with legal requirements, the truth and
accuracy, as of the Closing Date, of the representations of the Issuer,
and the due performance or satisfaction by the Issuer, at or prior to
such time of all agreements then to be performed and all conditions
then to be satisfied by the Issuer.
5. Termination. This Agreement may be terminated by either party upon ten (10)
business days’ prior written notice; provided that the provisions of Paragraph 2 and
obligations thereunder shall not be affected by such termination.
6. Regulatory Disclosure. The Issuer acknowledges, in connection with the purchase
and sale of the Bonds, the offering of the Bonds for sale and the discussions and
negotiations relating to the terms of the Bonds pursuant to and as set forth in this
Agreement, that:
(a) the Placement Agent has acted at arm’s length, is acting solely for its own
account and is not agent of or advisor to (including, without limitation, a
Municipal Advisor (as such term is defined in Section 975(e) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act)), and owes no
fiduciary duty to the Issuer or any other person,
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(b) the Placement Agent’s duties and obligations to the Issuer shall be limited
to those contractual duties and obligations set forth in this Agreement,
(c) the Placement Agent may have interests that differ from those of the Issuer,
and
(d) the Issuer has consulted its legal and financial advisors to the extent it
deemed appropriate in connection with the offering and sale of the Bonds.
The Issuer further acknowledges and agrees that it is responsible for making
its judgment with respect to the offering and sale of the Bonds and the
process leading thereto. The Issuer agrees that it will not claim that the
Placement Agent acted as a Municipal Advisor to the Issuer or rendered
advisory services of any nature or respect, or owes a fiduciary or similar
duty to the Issuer, in connection with the offering or sale of the Bonds or
the process leading thereto.
7. Survival of Certain Representations and Obligations. The respective
agreements, covenants, representations, warranties and other statements of the
Issuer and its officers set forth in or made pursuant to this Agreement shall survive
delivery of and payment for the Bonds and shall remain in full force and effect,
regardless of any investigation, or statements as to the results thereof, made by or
on behalf of the Placement Agent.
8. Notices. Any notice or other communication to be given to the Issuer under this
Agreement may be given by delivering the same in writing to the Issuer at its
address set forth above. Any notice or other communication to be given to the
Placement Agent under this Agreement may be given by delivering the same in
writing to Firm:
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, CA 90067
Attention: Tom Jacob, Managing Director
9. Indemnification and Contribution.
(a) To the extent permitted by law, the Issuer agrees to indemnify and hold
harmless the Placement Agent, and each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Placement Agent, and its directors, officers, agents, and
employees, against any and all losses, claims, damages, liabilities, and
expenses to which the Placement Agent may become subject, insofar as
such losses, claims, damages, liabilities, or expenses (or actions in respect
thereof), arise out of or are based upon (i) a claim in connection with the
offering of the Bonds to the effect that the Bonds or any related security are
required to be registered under the Securities Act or any indenture is
Page 7
required to be qualified under the Trust Indenture Act of 1939, or (ii) any
statement or information in the Placement Materials that is or is alleged to
be untrue or incorrect in any material respect, or any omission or alleged
omission of any statement or information in the Placement Materials which
is necessary in order to make the statements therein not misleading. The
foregoing indemnity agreement shall be in addition to any liability that the
Issuer otherwise may have.
(b) In case any claim shall be made or action brought against an indemnified
party for which indemnity may be sought against the Issuer as provided
above, the indemnified party shall promptly notify the Issuer in writing
setting forth the particulars of such claim or action; but the omission to so
notify the Issuer (i) shall not relieve it from liability under sub-paragraph
(a) above unless and to the extent it did not otherwise learn of such action
and such failure results in the forfeiture by the Issuer of substantial rights
and defenses and (ii) shall not relieve it from any liability which it may have
to any indemnified party otherwise than under paragraph (a) above. The
Issuer shall assume the defense thereof, including the retention of counsel
acceptable to such indemnified party and the payment of all expenses and
shall have the right to negotiate and consent to settlement. An indemnified
party shall have the right to retain separate counsel in any such action and
to participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless the
employment of such counsel has been specifically authorized by the Issuer
or the Issuer shall not have employed counsel reasonably acceptable to the
indemnified party to have charge of the defense of such action or proceeding
or the indemnified party shall have reasonably concluded that there may be
defenses available to it which are different from or additional to those
available to the Issuer (in which case the Issuer shall not have the right to
direct the defense of such action or proceeding on behalf of the indemnified
party), in any of which events, such legal or other expenses shall be borne
by the Issuer. No party shall be liable for any settlement of any action
effected without its consent, but if settled with the consent of the Issuer or
if there is a final judgment for the plaintiff in any action with or without
written consent of the Issuer, the Issuer agrees to indemnify and hold
harmless the indemnified parties to the extent of the indemnities set forth
above from and against any loss or liability by reason of such settlement or
judgment. Any such settlement must include an unconditional release of
each indemnified party from all liability arising out of such action.
(c) If the indemnification provided for above is unenforceable, or is unavailable
to the Issuer in respect of any losses, claims, damages, or liabilities (or
actions in respect thereof) of the type subject to indemnification herein,
then, to the extent permitted by law, the Issuer shall, in lieu of indemnifying
such person, contribute to the amount paid or payable by such person as a
result of such losses, claims, damages, or liabilities (or actions in respect
Page 8
thereof). The Issuer’s contribution shall be in such proportion as is
appropriate to reflect the relative benefits received by the Issuer, on the one
hand, and the Placement Agent, on the other, from the sale of the Bonds.
The relative benefits received by the Issuer on the one hand and the
Placement Agent on the other shall be deemed to be in the same proportion
as the total net proceeds of sale of the Bonds paid to the Issuer upon the
purchase of the Bonds bear to the fee paid to the Placement Agent pursuant
to Paragraph 2 of this Agreement.
10. No Assignment. This Agreement has been made by the Issuer and the Placement
Agent, and no person shall acquire or have any right under or by virtue of this
Agreement.
11. Applicable Law. This Agreement shall be interpreted, governed and enforced in
accordance with the laws of the State.
12. Effectiveness. This Agreement shall become effective upon its execution by duly
authorized officials of all parties hereto and shall be valid and enforceable from and
after the time of such execution.
13. Severability. In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Page 9
14. Counterparts. This Agreement may be executed in several counterparts
(including counterparts exchanged by email in PDF format), each of which shall be
an original and all of which shall constitute but one and the same instrument.
Respectfully submitted,
STIFEL, NICOLAUS & COMPANY, INCORPORATED
______________________________________
Authorized Officer
ACCEPTED: _______, 2022.
COMMUNITY FACILITIESDISTRICT NO. 2016-2
OF THE CITY OF LAKE ELSINORE (CANYON HILLS)
By____________________________________
Authorized Officer
A - 1
EXHIBIT A
FORM OF RELIANCE LETTER ON COUNSEL’S OPINION
TO THE PLACEMENT AGENT
[Closing Date]
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, CA 90067
Re: Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Subordinate Special Tax Bonds, Series 2022
Ladies and Gentlemen:
We have acted as bond counsel to Community Facilities District No. 2016-2 of the City of Lake
Elsinore (Canyon Hills) (the “Issuer”).
Reference is hereby made to our opinion letter as bond counsel addressed to the Issuer dated of
even date herewith and delivered with respect to the above-referenced series of Bonds. Please be
advised that you are entitled to rely on said letter as if the same had been addressed to you.
This letter is furnished by us to you in our capacity as bond counsel to the Issuer pursuant to
Paragraph 4(i)(1) of the Placement Agent Agreement with respect to the Bonds, dated _______,
2022, between the Issuer and you. No attorney-client relationship has existed or exists between
our firm and you or any other party in connection with the Bonds or by virtue of this letter. Our
opinion may be relied upon only by the addressee hereof and may not be used or relied upon by
any other person for any purpose whatsoever without, in each instance, our prior written consent.
Very truly yours,
B - 1
EXHIBIT B
FORM OF ISSUER CLOSING CERTIFICATE
Pursuant to the Placement Agent Agreement, dated _______, 2022 (the “Agreement”),
between Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
(the “Issuer”) and Stifel, Nicolaus & Company, Incorporated, as ______ of the Issuer duly
authorized to execute this certificate on behalf of the Issuer, I hereby certify:
(1) the representations and warranties of the Issuer contained in the Agreement are true
and correct as if made on the date hereof;
(2) the Issuer has complied with and fully satisfied all of its agreements with, and
obligations to, the Placement Agent pursuant to the terms of the Agreement; and
(3) as of its date and the date hereof, the information contained in the Placement
Materials is complete, true, and accurate and such information does not contain any
untrue statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
COMMUNITY FACILITIES
DISTRICT NO. 2016-2 OF THE CITY OF
LAKE ELSINORE (CANYON HILLS)
By:___________________________________
Authorized Officer
C - 1
EXHIBIT C
FORM OF INVESTOR LETTER
Stifel, Nicolaus & Company, Incorporated
2121 Avenue of the Stars, Suite 2150
Los Angeles, CA 90067
Re: Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Subordinate Special Tax Bonds, Series 2022
Ladies and Gentlemen:
The undersigned (the “Investor”) hereby acknowledges that it is purchasing $______
aggregate principal amount of Community Facilities District No. 2016-2 of the City of Lake
Elsinore (Canyon Hills) Subordinate Special Tax Bonds, Series 2022 (the “Bonds”) issued in
authorized denominations of $5,000 pursuant to a Bond Indenture dated as of May 1, 2022 (the
“Bond Indenture”), between Community Facilities District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills) and Wilmington Trust, National Association. Capitalized terms not otherwise
defined herein shall have the meanings ascribed thereto in the Bond Indenture.
This letter is being provided pursuant to a Placement Agent Agreement, dated ______,
2022 (the “Placement Agreement”), between Community Facilities District No. 2016-2 of the City
of Lake Elsinore (Canyon Hills) (the “Issuer”) and Stifel, Nicolaus & Company, Incorporated (the
“Placement Agent”).
The Investor acknowledges that the proceeds of the Bonds will be used to (i) finance
Project Costs and (ii) pay the cost of issuing the Bonds.
The Bonds together with interest thereon shall be payable from Net Taxes.
In connection with the sale of the Bonds to the Investor, the Investor hereby makes the
following representations upon which you may rely:
1. The Investor has the authority and is duly authorized to purchase the Bonds and to
execute this letter and any other instruments and documents required to be executed
by the Investor in connection with its purchase of the Bonds. The Investor (a) is a
bank, any entity directly or indirectly controlled by the bank or under common
control with the bank, other than a broker, dealer or municipal securities dealer
registered under the Securities Exchange Act of 1934, or a consortium of such
entities; and (b) has the present intent to hold the Bonds to maturity or earlier
redemption or mandatory tender.
2. The Investor is (a) a “qualified institutional buyer” as that term is defined in
Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or
(b) an “accredited investor” as that term is defined in Rule 501(a)(1),(2),(3), or (7)
under the Securities Act.
C - 2
3. The Investor is not purchasing the Bonds for more than one account or with a view
to distributing the Bonds.
4. The Investor understands that the Bonds are not, and are not intended to be,
registered under the Securities Act and that such registration is not legally required
as of the date hereof, and further understands that the Bonds (a) are not being
registered or otherwise qualified for sale under the “Blue Sky” laws and regulations
of any state, (b) will not be listed in any stock or other securities exchange, (c) will
not carry a rating from any rating agency, and (d) will be delivered in a form that
may not be readily marketable.
5. The Investor acknowledges that it has either been supplied with or been given
access to information which it has requested from the Issuer and to which a
reasonable investor would attach significance in making investment decisions, and
the Investor has had the opportunity to ask qu estions and receive answers from
knowledgeable individuals, including its own counsel, concerning the Issuer and
the Bonds and the security therefor so that, as a reasonable investor, the Investor
has been able to make a decision to purchase the Bonds. The Investor has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its prospective investment in the Bonds.
6. The Investor acknowledges that the obligations of the Issuer under the Bond
Indenture do not constitute obligations of the Issuer for which the Issuer 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 Issuer
payable from the Net Taxes and other amounts pledged under the Bond Indenture
but are not a debt of the Issuer, the State of California or any of its political
subdivisions within the meaning of any constitutional or statutory limitation or
restriction.
7. The Investor has made its own inquiry and analysis with respect to the Bonds and
the security therefor, and other material factors affecting the security and payment
of the Bonds. The Investor is aware that there are certain economic and regulatory
variables and risks that could adversely affect the security for the Bonds. The
Investor has reviewed the documents executed in conjunction with the issuance of
Bonds, or summaries thereof, including, without limitation, the Bond Indenture.
8. The Investor acknowledges and agrees that the Placement Agent and the Issuer take
no responsibility for, and make no representation to the Investor, or any subsequent
purchaser, with regard to, a sale, transfer or other disposition of the Bonds in
violation of the provisions of the Bond Indenture, or any securities law or income
tax law consequences thereof. The Investor also acknowledges that, with respect
to the Issuer’s obligations and liabilities, the Investor is solely responsible for
compliance with the sales restrictions on the Bonds in connection with any
subsequent transfer of the Bonds made by the Investor.
C - 3
9. The Investor agrees that it is bound by and will abide by the provisions of the Bond
Indenture relating to transfer, the restrictions noted on the face of the Bonds and
this Investor Letter. The Investor also covenants to comply with all applicable
federal and state securities laws, rules and regulations in connection with any resale
or transfer of the Bonds by the Investor.
10. The Investor acknowledges that the sale of the Bonds to the Investor is made in
reliance upon the certifications, representations, and warranties herein made to the
addressees hereto.
11. The interpretation of the provisions hereof shall be governed and construed in
accordance with State of California law without regard to principles of conflicts of
laws.
12. All representations of the Investor contained in this letter shall survive the
execution and delivery of the Bonds to the Investor as representations of fact
existing as of the date of execution and delivery of this Investor Letter.
13. Inasmuch as the Bonds represents a negotiated transaction, the Investor is not acting
as a fiduciary of the Issuer, but rather is acting solely in its capacity as the initial
Bondowner, for its own loan account. The Issuer acknowledges and agrees that (i)
the transaction contemplated herein is an arm’s length commercial transaction
between the Issuer and the Investor and its affiliates, (ii) in connection with such
transaction, the Investor and its affiliates are acting solely as a principal and not as
an advisor including, without limitation, a “Municipal Advisor” as such term is
defined in Section 15B of the Securities and Exchange Act of 1934, as amended,
and the related final rules (the “Municipal Advisor Rules”), (iii) the Investor and
its affiliates are relying on the purchaser exemption in the Municipal Advisor Rules,
(iv) the Investor and its affiliates have not provided any advice or assumed any
advisory or fiduciary responsibility in favor of the Issuer with respect to the
transaction contemplated by the Bonds and the discussions, undertakings and
procedures leading thereto (whether or not the Investor, or any affiliate of the
Investor, has provided other services or advised, or is currently providing other
services or advising the Issuer on other matters) and (v) the Investor and its
affiliates have financial and other interests that differ from those of the Issuer.
Date: [Closing Date] Very truly yours,
Investor: ____________________________
By:
__________________________________
Name:______________________________
Title:_______________________________
GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the 2022 Bonds in
accordance with California Government Code Section 5852.1. Such good faith estimates
have been provided to the District by Urban Futures, Inc., the District’s Municipal Advisor
(the “Municipal Advisor”) in consultation with Stifel, Nicolaus & Company, Incorporated,
the placement agent for the 2022 Bonds.
Principal Amount. The Municipal Advisor has informed the District that, based on the
District’s financing plan and current market conditions, its good faith estimate of the
aggregate principal amount of the 2022 Bonds to be sold is $1,411,480 (the “Estimated
Principal Amount”).
True Interest Cost of the 2022 Bonds. The Municipal Advisor has informed the District
that, assuming that the Estimated Principal Amount of the 2022 Bonds is sold, which
means the rate necessary to discount the amounts payable on the respective principal
and interest payment dates to the purchase price received for the 2022 Bonds, is 4.89%.
Finance Charge of the 2022 Bonds. The Municipal Advisor has informed the District
that its good faith estimate of the finance charge for the 2022 Bonds, which means the
sum of all fees and charges paid to third parties (or costs associated with the 2022
Bonds), is $176,500. Additionally, there will be an annual Trustee fee of approximately
$1,500 for as long as the 2022 Bonds are outstanding.
Amount of Proceeds to be Received. The Municipal Advisor has informed the District
that, assuming the Estimated Principal Amount of the 2022 Bonds is sold, its good faith
estimate of the amount of proceeds expected to be received by the District for sale of the
2022 Bonds, less the finance charge of the 2022 Bonds, as estimated above, and any
reserves or capitalized interest paid or funded with proceeds of the 2022 Bonds, is
$1,020,624.
Total Payment Amount. The Municipal Advisor has informed the District that, assuming
that the Estimated Principal Amount of the 2022 Bonds is sold, its good faith estimate of
the total payment amount, which means the sum total of all payments the District will
make to pay debt service on the 2022 Bonds, plus any finance charge for the 2022 Bonds,
as described above, not paid with the proceeds of the 2022 Bonds, calculated to the final
maturity of the 2022 Bonds, is $2,685,915. Additionally, there will be an annual Trustee
fee of $1,500 for as long as the 2022 Bonds are outstanding.
The foregoing estimates constitute good faith estimates only and are based on the term
sheet from the Bank. The actual principal amount of the 2022 Bonds issued and sold,
the true interest cost thereof, the finance charges thereof, the amount of proceeds
received therefrom and total payment amount with respect thereto may differ from such
good faith estimates due to: (a) the actual settlement date of the 2022 Bonds being
different than the date assumed for purposes of such estimates, (b) the actual principal
amount of 2022 Bonds being different from the Estimated Principal Amount, (c) the
actual amortization of the 2022 Bonds being different than the amortization assumed for
purposes of such estimates, (d) alterations in the financing plan, or a combination of
such factors.
Stradling Yocca Carlson & Rauth
Draft of 04/28/2022
4860-7988-8413v3/022042-0045
BOND INDENTURE
Between
COMMUNITY FACILITIES DISTRICT NO. 2016-2
OF THE CITY OF LAKE ELSINORE (CANYON HILLS)
and
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
Relating to
$________
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS)
SUBORDINATE SPECIAL TAX BONDS, SERIES 2022
Dated as of May 1, 2022
Table of Contents
Page
i
4860-7988-8413v3/022042-0045
ARTICLE I
DEFINITIONS
Section 1.1. Definitions ..................................................................................................................... 2
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 .............................................................. 11
Section 2.3. Equality of Bonds and Parity Bonds and Pledge of Net Taxes ................................... 11
Section 2.4. Description of Bonds; Interest Rates .......................................................................... 12
Section 2.5. Place and Form of Payment ........................................................................................ 13
Section 2.6. Form of Bonds and Parity Bonds ................................................................................ 13
Section 2.7. Execution and Authentication ..................................................................................... 14
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 ..................................... 15
Section 2.11. Validity of Bonds and Parity Bonds ........................................................................... 16
Section 2.12. Book-Entry System ..................................................................................................... 16
Section 2.13. Representation Letter .................................................................................................. 16
Section 2.14. Transfers Outside Book-Entry System ....................................................................... 17
Section 2.15. Payments to the Nominee ........................................................................................... 17
Section 2.16. Initial Depository and Nominee .................................................................................. 17
ARTICLE III
CREATION OF FUNDS AND APPLICATION OF PROCEEDS
Section 3.1. Creation of Funds; Application of Proceeds ............................................................... 17
Section 3.2. Deposits to and Disbursements from Subordinate Special Tax Fund ......................... 18
Section 3.3. Subordinate Administrative Expense Account of the Subordinate Special Tax
Fund ............................................................................................................................ 19
Section 3.4. Interest Account and Principal Account of the Subordinate Special Tax Fund .......... 19
Section 3.5. Redemption Account of the Subordinate Special Tax Fund ....................................... 20
Section 3.6. Subordinate Reserve Account of the Subordinate Special Tax Fund ......................... 21
Section 3.7. Rebate Fund ................................................................................................................ 22
Section 3.8. Subordinate Surplus Fund ........................................................................................... 25
Section 3.9. Acquisition and Construction Fund ............................................................................ 25
Section 3.10. Investments ................................................................................................................. 26
Table of Contents
(continued)
Page
ii
4860-7988-8413v3/022042-0045
ARTICLE IV
REDEMPTION OF BONDS AND PARITY BONDS
Section 4.1. Redemption of Bonds ................................................................................................. 28
Section 4.2. Selection of Bonds and Parity Bonds for Redemption ............................................... 29
Section 4.3. Notice of Redemption ................................................................................................. 29
Section 4.4. Partial Redemption of Bonds or Parity Bonds ............................................................ 30
Section 4.5. Effect of Notice and Availability of Redemption Money ........................................... 30
ARTICLE V
COVENANTS AND WARRANTY
Section 5.1. Warranty ..................................................................................................................... 31
Section 5.2. Covenants .................................................................................................................... 31
ARTICLE VI
AMENDMENTS TO INDENTURE
Section 6.1. Supplemental Indentures or Orders Not Requiring Owner Consent ........................... 35
Section 6.2. Supplemental Indentures or Orders Requiring Owner Consent .................................. 35
Section 6.3. Notation of Bonds or Parity Bonds; Delivery of Amended Bonds or Parity
Bonds .......................................................................................................................... 36
ARTICLE VII
TRUSTEE
Section 7.1. Trustee ......................................................................................................................... 37
Section 7.2. Removal of Trustee ..................................................................................................... 38
Section 7.3. Resignation of Trustee ................................................................................................ 38
Section 7.4. Liability of Trustee ..................................................................................................... 38
Section 7.5. Merger or Consolidation ............................................................................................. 41
ARTICLE VIII
EVENTS OF DEFAULT; REMEDIES
Section 8.1. Events of Default ........................................................................................................ 41
Section 8.2. Remedies of Owners ................................................................................................... 42
Section 8.3. Application of Revenues and Other Funds After Default ........................................... 42
Section 8.4. Power of Trustee to Control Proceedings ................................................................... 43
Section 8.5. Appointment of Receivers .......................................................................................... 43
Section 8.6. Non-Waiver ................................................................................................................. 44
Section 8.7. Limitations on Rights and Remedies of Owners ........................................................ 44
Table of Contents
(continued)
Page
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4860-7988-8413v3/022042-0045
Section 8.8. Termination of Proceedings ........................................................................................ 44
ARTICLE IX
DEFEASANCE AND PARITY BONDS
Section 9.1. Defeasance .................................................................................................................. 45
Section 9.2. Conditions for the Issuance of Parity Bonds and Other Additional
Indebtedness ................................................................................................................ 46
ARTICLE X
MISCELLANEOUS
Section 10.1. Cancellation of Bonds and Parity Bonds .................................................................... 48
Section 10.2. Execution of Documents and Proof of Ownership ..................................................... 48
Section 10.3. Unclaimed Moneys ..................................................................................................... 49
Section 10.4. Provisions Constitute Contract.................................................................................... 49
Section 10.5. Future Contracts .......................................................................................................... 49
Section 10.6. Further Assurances ...................................................................................................... 50
Section 10.7. Severability ................................................................................................................. 50
Section 10.8. Notices ........................................................................................................................ 50
Signatures ................................................................................................................................... S-1
EXHIBIT A FORM OF SPECIAL TAX BOND .......................................................................... A-1
EXHIBIT B REQUISITION FOR DISBURSEMENT OF PROJECT COSTS ........................... B-1
EXHIBIT C FORM OF PURCHASER’S LETTER ..................................................................... C-1
4860-7988-8413v3/022042-0045
BOND INDENTURE
THIS BOND INDENTURE dated as of May 1, 2022, by and between COMMUNITY
FACILITIES DISTRICT NO. 2016-2 OF THE CITY OF LAKE ELSINORE (CANYON HILLS)
(the “District”) and WILMINGTON TRUST, NATIONAL ASSOCIATION, as trustee (the
“Trustee”), governs the terms of the Community Facilities District No. 2016-2 of the City of Lake
Elsinore (Canyon Hills) Subordinate Special Tax Bonds, Series 2022 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. 2016-143 and 2016-144 adopted by the City Council on
December 13, 2016 and an election held on December 13, 2016 authorizing the levy of a special tax
and the issuance of bonds, the District is authorized to issue bonds in one or more series pursuant to
the Act, in an aggregate principal amount not to exceed $27,500,000.
C. The District previously issued its Special Tax Bonds, Series 2018 (the “2018 Senior
Bonds”) in the aggregate principal amount of $19,745,000 to finance various Project Costs (as
defined herein) and to prepay the special tax obligation and eliminate the special tax lien of City of
Lake Elsinore Community Facilities District No. 2003 -2 (Canyon Hills) with respect to Improvement
Area B therein, on the property within the District.
D. The District intends to finance additional Project Costs through the issuance of bonds
in an aggregate principal amount of $________ designated as the “Community Facilities District
No. 2016-2 of the City of Lake Elsinore (Canyon Hills) Subordinate Special Tax Bonds, Series
2022” (the “Bonds”).
E. The Bonds and any Parity Bonds (as defined herein) shall be payable from the
Special Taxes (as defined herein) on a subordinate basis to the 2018 Senior Bonds and any bonds or
indebtedness that are payable from the Special Taxes on a parity with the 2018 Senior Bonds.
E. 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 ack nowledged, 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:
2
4860-7988-8413v3/022042-0045
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.
Acquisition and Construction Fund. The term “Acquisition and Construction Fund” means
the fund by that name established pursuant to Section 3.1 hereof.
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.
(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
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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 L oan
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 s pecified 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;
(h) Investment Agreements (supported by appropriate opinions of counsel); and
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4860-7988-8413v3/022042-0045
(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 Authorized
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 Corporatio n, 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, incl uding 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 th ereof 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 pol itical 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 Subordinate Special Tax Bonds, Series 2022
issued on May ___, 2022 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.
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4860-7988-8413v3/022042-0045
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.
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 p reliminary 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 Community Facilities District No. 2016-2 of the City of
Lake Elsinore (Canyon Hills) established pursuant to the Act and Resolution No. 2016-143 adopted
by the City Council of the City on December 13, 2016.
Event of Default. The term “Event of Default” means an 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.
Indenture. The term “Indenture” means this Bond Indenture, together wit h any Supplemental
Indenture approved pursuant to Article VI 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
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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 th e 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 Subordinate Special Tax Fund pursuant to Section 3.1 hereof.
Interest Payment Date. The term “Interest Payment Date” means September 1, 2022 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 p ursuant 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 the amounts received by the Trustee for deposit to
the Subordinate Special Tax Fund hereunder in accordance with Sections 3.2 and 3.11 of the Senior
2018 Indenture and any corresponding section(s) of any other Senior Indenture, less amounts set
aside to pay Subordinate 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. 2017-1366 adopted by the City
Council on January 10, 2017, providing for the levying of the Special Tax.
Original Purchaser. The term “Original Purchaser” means Western Alliance Business Trust,
a Delaware statutory trust, which is a wholly owned affiliate of Western Alliance Bank.
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 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
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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
the District made in accordance with the RMA.
Principal Account. The term “Principal Account” means the account by that name created
and established in the Subordinate 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.
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.
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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 Subordinate 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.
Resolution of Formation. The term “Resolution of Formation” means Resolution No. 2016-
143 adopted by the City Council on December 13, 2016, pursuant to which the City Council
established the District.
RMA. The term “RMA” means the Rate and Method of Apportionment of Special Tax for
the District approved by the qualified electors of the District at the December 13, 2016 election.
Senior Bonds. The term “Senior Bonds” means the 2018 Senior Bonds and any Senior Parity
Bonds.
Senior Bonds Trustee. The term “Senior Bonds Trustee” means the entity or entities serving
as trustee under a Senior Indenture.
Senior Indenture. The term “Senior Indenture” means the 2018 Senior Indenture and any
indenture entered into in connection with the issuance of Senior Parity Bonds.
Senior Parity Bonds. The term “Senior Parity Bonds” means any bonds issued a s “Parity
Bonds” under the 2018 Senior Indenture and any bonds issued to refund other Senior Parity Bonds, if
any which, by their terms, are payable from Special Taxes on a senior basis to the Bonds and Parity
Bonds authorized to be issued hereunder.
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 consecut ive
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.
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Subordinate Special Tax Fund. The term “Subordinate 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 the District in accordance with the Ordinance, the Resolution of
Formation, the Act and the voter approval o btained at the December 13, 2016 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 o f
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.
Subaccount. The term “Subaccount” means any subaccount created pursuant to this
Indenture.
Subordinate Administrative Expense Account. The term “Subordinate Administrative
Expense Account” means the account by that name created and established in the Subordinate
Special Tax Fund pursuant to Section 3.1 hereof.
Subordinate Administrative Expenses. The term “Subordinate 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.
Subordinate Administrative Expenses Cap. The term “Subordinate Administrative Expenses
Cap” means $10,000, which amount shall escalate at 2.00% per Fiscal Year, commencing July 1,
2023.
Supplemental Indenture. The term “Supplemental Indenture” means any supplemental
indenture amending or supplementing this Indenture.
Subordinate Reserve Account. The term “Subordinate Reserve Account” means the account
by that name created and established in the Subordinate Special Tax Fund pursuant to Section 3.1
hereof.
Subordinate Reserve Requirement. The term “Subordinate 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.
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Subordinate Surplus Fund. The term “Subordinate 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 Costa Mesa, California, and its successors or assigns, or any other bank or
trust company which may at any time be substituted in its place as provided in Sections 7.2 or 7.3,
and any successor thereto.
2018 Senior Bonds. The term “2018 Senior Bonds” is defined in Recital C above, issued
pursuant to the 2018 Senior Indenture.
2018 Senior Indenture. The term “2018 Senior Indenture” means the indenture dated as of
August 1, 2018 by and between the District and Wilmington Trust, National Association, as trustee .
Underwriter. The term “Underwriter” means, 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 interest due on
the Bonds through September 1, 2023, and funding the Subordinate Reserve Account; provided that
the aggregate principal amount of the Bonds and any Parity Bonds shall not exceed the to tal
indebtedness presently authorized or subsequently authorized by the qualified electors within 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 p rincipal thereof and interest thereon and any
premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the
Subordinate Special Tax Fund (other than amounts in the Subordinate Administrative Expense
Account of the Subordinate Special Tax Fund). The Bonds and any Parity Bonds are payable solely
from Net Taxes and the Owners shall have no claim on any amounts held under any Senior Indenture
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other than amounts required to be transferred to the Trustee pursuant to Section 3.02 and 3.11 of the
2018 Senior Indenture and any corresponding provision of any other Senior Indenture executed and
delivered hereafter.
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 a mounts deposited by
the District in the Subordinate Special Tax Fund (exclusive of the Subordinate 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
Subordinate Special Tax Fund (exclusive of the Subordinate 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 Subordinate Special Tax Fund (exclusive of
the Subordinate 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 Distric t 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 Dist rict 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 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 Subordinate Special
Tax Fund (exclusive of the Subordinate 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 Ne t Taxes and other amounts in the
Subordinate Special Tax Fund (exclusive of the Subordinate Administrative Expense Account) which
are hereby set aside for the payment of the Bonds and any Parity Bonds. Amounts in the Subordinate
Special Tax Fund (other than the Subordinate 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
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contained in this Indenture to the contrary, Net Taxes de posited in the Rebate Fund and the
Subordinate Surplus Fund shall no longer be considered to be pledged to the Bonds or any Parity
Bonds, and none of the Rebate Fund, the Subordinate Surplus Fund, the Acquisition and
Construction Fund or the Subordinate Administrative Expense Account of the Subordinate 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 “Community Facilities District No. 2016-2 of the City of Lake
Elsinore (Canyon Hills) Subordinate Special Tax Bonds, Series 2022.” 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 b ear interest at the rates set forth in the
table below payable on September 1, 2022 and each Interest Payment Date thereafter:
Maturity Date
September 1
Principal
Amount
Interest
Rate
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2043
2048
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
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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. 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 Pari ty Bond, interest is in
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.
Notwithstanding any provision in this Indenture to the contrary, so long as the Bonds are
owned by the Original Purchaser, (i) the Trustee shall pay principal of and interest and redemption
premium, if any, on the Bonds when due by wire transfer in immediately available funds to the
Original Purchaser in accordance with such wire transfer instructions as shall be filed by the Original
Purchaser with the Trustee from time to time, (ii) payments of principal on the Bonds shall be made
without the requirement for presentation and surrender by the Original Purchaser, provided that
principal which is payable at maturity shall be made only upon presentation and surrender at the
Principal Office of the Trustee, and (iii) the Trustee shall not be required to give notice to the
Original Purchaser of the Sinking Fund Payments described in Section 4.1(b).
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.
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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 an d 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 sea led 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, an d no Bond
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
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terms, be transferred upon the Bond Register by the person in whose name it is regis tered, 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 exe cuted 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.
Notwithstanding anything to the contrary set forth in this Indenture, the Owner of the Bonds
may only transfer Bonds, in whole, to a new Owner delivers a Purchaser’s Letter to the District and
the Trustee in the forma attached hereto as Exhibit C and who is: (i) an affiliate of the Original
Purchaser of the Bonds; (ii) a “Bank” as defined in Section 3(a)(2) of the Securities Act of 1933 , as
amended (the “Securities Act”); (iii) an “Accredited Investor” as defined in Regulation D under the
Securities Act; or (iv) a “Qualified Institutional Buyer” as defined in Rule 144A under the Securities
Act.
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 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 thi s 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.
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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 Pari ty 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 Bonds shall be registered in the Bond Register in the name of the Original
Purchaser of the Bonds and shall not be delivered in book-entry form and the provisions of Section
2.12 below and Sections 2.13 through 2.15 shall not be applicable to the Bonds. At the election of
the District, any Parity Bonds may be issued as book-entry bonds registered in the name of the
Nominee as provided herein, in which case Sections 2.12 through 2.15 to “Bonds” shall be applicable
to such Parity Bonds.
With respect to Parity Bonds registered in the registration books kept by the Trustee in the
name of the Nominee, the District and the Trustee shall ha ve no responsibility or obligation to any
such Participant or to any Person on behalf of which such a Participant holds an interest in the Parity
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 Parity Bonds; (ii) the
delivery to any Participant or any other Person, other than an O wner as shown in the registration
books kept by the Trustee, of any notice with respect to the Parity Bonds, including any notice of
redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in the
Parity Bonds to be redeemed in the event that the Parity 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 Parity 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
Parity 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 Parity Bonds to the extent o f the
sum or sums so paid. No Person other than an Owner, as shown in the 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 any Parity Bonds which the
District elects to register in the name of the Nominee for the Depository’s book -entry system, an
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Authorized Representative of the District 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 provisio ns 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 Parity Bonds other than the Owners, as shown on the registration books kept by the
Trustee. The District 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 here by authorized to
take any other actions, not inconsistent with this Indenture, to qualify the Parity 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 Parity 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 Parity 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 Parity 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 Parity 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 Parity
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 Community Facilities District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills) Subordinate Special Tax Fund (the “Subordinate Special Tax Fund”) (in which there
shall be established and created an Interest Account, a Principal Account, a Redemption Account , a
Subordinate Reserve Account, and an Subordinate Administrative Expense Account).
(2) The Community Facilities District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills) Rebate Fund (the “Rebate Fund”) (in which there shall be established a Rebate
Account and an Alternate Penalty Account).
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(3) The Community Facilities District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills) Acquisition and Construction Fund (the “Acquisition and Construction Fund”) (in
which there shall be established a Costs of Issuance Account).
(4) The Community Facilities District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills) Subordinate Surplus Fund (the “Subordinate 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 III 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 Subordinate Reserve Account of the
Subordinate Special Tax Fund to fund the Subordinate Reserve Requirement;
(3) $___________ shall be transferred to the Interest Account of the Subordinate
Special Tax Fund; 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 Subordinate Special Tax Fund.
(a) On and after the date on which no 2018 Senior Bonds are outstanding, Prepayments
received by the District shall be deposited in the Redemption Account hereunder in such amount as
to effectuate a pro rata redemption of Senior Bonds, on the one hand, and Bonds and Parity Bonds,
on the other. The Trustee shall, on each date on which the Net Taxes are received from the Senior
Bonds Trustee, deposit the Net Taxes in the Subordinate Special Tax Fund to be held in trust for the
Owners. The Trustee shall transfer the Net Taxes on deposit in the Subordinate Special Tax Fund on
the dates and in the amounts set forth in the following Sections, in the following order of priority, to:
(1) the Subordinate Administrative Expense Account of the Subordinate Special
Tax Fund up to the Subordinate Administrative Expenses Cap;
(2) the Interest Account of the Subordinate Special Tax Fund;
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(3) the Principal Account of the Subordinate Special Tax Fund;
(4) the Redemption Account of the Subordinate Special Tax Fund;
(5) the Subordinate Reserve Account of the Subordinate Special Tax Fund;
(6) the Subordinate Administrative Expense Account of the Subordinate Special
Tax Fund to the extent that Subordinate Administrative Expenses exceed or are expected to exceed
the Administrative Expense Cap;
(7) the Rebate Fund; and
(8) the Subordinate 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 Subordinate Special Tax Fund and
any accounts therein may be used by the District for any lawful purpose.
Section 3.3. Subordinate Administrative Expense Account of the Subordinate Special
Tax Fund. The Trustee shall transfer from the Subordinate Special Tax Fund and deposit in the
Subordinate Administrative Expense Account of the Subordinate Special Tax Fund from time to time
amounts necessary to make timely payment of Subordinate 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 Subordinate 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 Subordinate Reserve Account to the Subordinate Reserve
Requirement. Notwithstanding the foregoing, amounts in excess of the Subordinate Administrative
Expenses Cap may be transferred to the Subordinate Administrative Expense Account to the extent
necessary to collect delinquent Special Taxes. Moneys in the Subordinate Administrative Expense
Account of the Subordinate 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 Subordinate 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 Subordinate Special Tax Fund, respectively.
For the purpose of assuring that the payment of principal of and interest o n 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 Subordinate 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 Subordinate Special Tax Fund need not be made; and
provided, further, that, if amounts in the Subordinate Special Tax Fund (exclusive of the Subordinate
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Reserve Account and the Subordinate Administrative Expense Account) are inadequate to make the
foregoing transfers, then any deficiency shall be made up by transfers from the Subordinate Reserve
Account:
(a) To the Interest Account, an amount such that the balance in the Interest Account on
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
on September 1 of each year, commencing September 1, 2023, 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 Subordinate 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 Subordinate Administrative Expense Account, the Interest Account
and the Principal Account of the Subordinate Special Tax Fund as required by Sections 3.3 and 3.4
hereof, the Trustee shall next transfer into the Redemption Account of the Subordinate Special Tax
Fund from the Subordinate Special Tax Fund the amount needed to make the balance in the
Redemption Account on 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 Subordinate Special Tax Fund are inadequate to make the
foregoing transfers, then any deficiency shall be made up by an immediate transfer from the
Subordinate 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 schedule 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 Subordinate Administrative Expense Account, the
Interest Account and the Principal Account of the Subordinate 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 Subordinate 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 Subordinate
Special Tax Fund (other than the Subordinate Administrative Expense Account therein) may be
applied to optionally redeem Bonds and Parity Bonds only if immediately following such redemption
the amount in the Subordinate Reserve Account will equal the Subordinate Reserve Requirement.
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(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.
(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, mone ys 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 Subordinate Special Tax
Fund for the payment of interest on the next following Interest Payment Date.
Section 3.6. Subordinate Reserve Account of the Subordinate Special Tax Fund.
There shall be maintained in the Subordinate Reserve Account of the Subordinate Special Tax Fund
an amount equal to the Subordinate Reserve Requirement. The Subordinate Reserve Requirement
may be satisfied in whole or in part by cash, a Reserve Policy, or a combination thereof. The
amounts in the Subordinate Reserve Account shall be applied as follows:
(a) Moneys in the Subordinate 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 Subordinate Special Tax Fund are insufficient therefor or moneys in the Redemption Account of
the Subordinate 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 Subordinate Special Tax Fund are insufficient to pay the principal of,
including Sinking Fund Payments, or interest on any Parity Bonds when due, or a mounts in the
Subordinate Special Tax Fund are insufficient to make transfers to the Rebate Fund when required,
the Trustee shall withdraw from the Subordinate Reserve Account, first from the cash on deposit
therein, and second from a draw on the Reserve Policy, if any, for deposit in the Interest Account, the
Principal Account or the Redemption Account of the Subordinate Special Tax Fund or the Rebate
Fund, as applicable, moneys necessary for such purposes.
(b) Whenever moneys are withdrawn from the Subordinate 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 Subordinate Reserve Account from available moneys in the Subordinate 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 Subordinate Reserve Account to the Subordinate Reserve
Requirement by first, repaying any amounts due under the Reserve Policy, and second to fund the
Subordinate Reserve Account to the Subordinate Reserve Requirement. Moneys in the Subordinate
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Special Tax Fund shall be deemed available for transfer to the Subordinate Reserve Account only if
the Trustee determines that such amounts will not be need ed to make the deposits required to be
made to the Subordinate Administrative Expense Account, the Interest Account, the Principal
Account or the Redemption Account of the Subordinate Special Tax Fund on or before the next
September 1. If amounts in the Subordinate Special Tax Fund together with any other amounts
transferred to replenish the Subordinate Reserve Account are inadequate to restore the Subordinate
Reserve Account to the Subordinate Reserve Requirement, including any amounts necessary to pay
costs related to the Reserve Policy, if any, then the District shall include the amount necessary to
restore the Subordinate Reserve Account to the Subordinate Reserve Requirement, in the next annual
Special Tax levy to the extent of the maximum permitted Sp ecial Tax rates.
(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 Subordinate Reserve Account
may be applied to such redemption or partial defeasance so long as the amount on deposit in the
Subordinate Reserve Account following such redemption or partial defeasance equals the
Subordinate Reserve Requirement. The District shall set forth in a Certificate of an Authorized
Representative the amount in the Subordinate 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, 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 Subordinate Reserve Account is at the Subordinate Reserve
Requirement as of the first day of the final Bond Year for the Bonds or an issue of Parity Bonds,
amounts in the Subordinate 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
Subordinate Reserve Account in excess of the Subordinate Reserve Requirement not transferred in
accordance with the preceding provisions of this Section shall be withdrawn from the Subordinate
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 Subordinate 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 sh all 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 o n
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.
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(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 th e 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.
(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 se ntence,
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 Subordinate 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 is sue 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)
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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 Re venue 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 Acco unt from any source
of 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 (ii i) 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 Subordinate 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 suba ccount 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 d escribed 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
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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.
Section 3.8. Subordinate 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 Subordinate Special Tax Fund to the Subordinate Surplus
Fund, and shall immediately transfer all amounts deposited in the Subordinate Surplus Fund to as set
forth in a Certificate of an Authorized Representative and if no such Certificate of an Authorized
Representative is provided, to the Surplus Fund established under the 2018 Senior Indenture. The
amounts in the Subordinate Surplus Fund are not pledged to the repayment of the Bonds or the Parity
Bonds.
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 Subordinate Administrative Expense
Account of the Subordinate Special Tax Fund as directed in writing by an Authorized Representative
of the District. Following such transfer to the Subordinate Administrative Expense Account, the
Costs of Issuance Account shall be closed.
(b) The moneys in the Acquisition and Construction Fund and the Accounts therein
(other than the Costs of Issuance Account) 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 or the Accounts therein (other than the Costs of Issuance Account), 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 submitt ed in connection with
each requested disbursement and the Trustee may rely thereon without investigating the accuracy
thereof. Amounts in an Account of the Acquisition and Construction Fund may be transferred to
another Account or Accounts therein pursuant to a Certificate of an Authorized Representative of the
District.
(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 or
the Accounts therein (other than the Costs of Issuance Account) 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 or the Accounts therein (other than
the Costs of Issuance Account) to the Interest Account, the Principal Account or Redemption
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Account of the Subordinate Special Tax Fund, to the Costs of Issuance Account or to the Subordinate
Surplus Fund, as directed in such certificate, provided that in connection with any direction to
transfer amounts to the Subordinate Surplus Fund there shall have been delivered to the Trustee with
such certificate an opinion of Bond Counsel to the effect that such transfer to the Subordinate 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
Subordinate Special Tax Fund, the Subordinate Surplus Fund and the Rebate Fund and each Account
therein (other than the Subordinate Reserve Account of the Subordinate Special Tax Fund) shall be
deposited in those respective Funds, Accounts and Subaccounts; and (ii) investment earnings on all
amounts deposited in the Subordinate 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 Dis trict’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 A cquisition 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 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 Subordinate 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 a vailable for withdrawal without
penalty, on 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.
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(c) Moneys in the Subordinate Reserve Account of the Subordinate 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 Subordinate 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 Distric t 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.
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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 or after September 1, 2025, 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 redeeme d, together with
accrued interest to the date of redemption:
Redemption Date Redemption Price
September 1, 2025 and March 1, 2026 103%
September 1, 2026 and March 1, 2027 102
September 1, 2027 and March 1, 2028 101
September 1, 2028 and any Interest Payment Date Thereafter 100
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 Term Bonds maturing on September 1,
20__ shall be called before maturity and redeemed, from the Sinking Fund Payments that have been
deposited into the Redemption Account established hereunder, 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 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 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.
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.
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(c) Special Mandatory Redemption. So long as the 2018 Senior Bonds are outstanding,
the Bonds any Parity Bonds shall not be subject to special mandatory redemption from Prepayments.
On and after the date the 2018 Senior Bonds are no longer outstanding, the Bonds shall be 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, and shall be redeemed by the Trustee, from
Prepayments deposited to the Redemption Account pursuant to Section 3.2, plus amounts transferred
from the Subordinate 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
Any Interest Payment Date through March 1, 2026 103%
September 1, 2026 and March 1, 2027 102
September 1, 2027 and March 1, 2028 101
September 1, 2028 and any Interest Payment Date thereafter 100
(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. 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
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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 Parity Bonds are regi stered 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 given 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 Parity Bonds as determined by the
Trustee and to one or more of the national information services that the Trustee determines ar e in the
business of disseminating notice of redemption of obligations such as the 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 t he 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 Par ity Bonds subject to the foregoing
limitations.
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
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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 a s 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 Bo nds 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 Net Taxes and other amounts deposited to the
Subordinate 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 Senior Bonds
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 a Senior Indenture and
this Indenture. All such Special Taxes shall be disbursed, allocated and applied solely to the uses and
purposes set forth in a Senior Indenture 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
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
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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 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 2023 and 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 Subordinate Special Tax
Fund, to pay: (1) the principal of and interest on the Bonds and any Parity Bonds when due; (2) the
Subordinate Administrative Expenses; and (3) any amounts required to replenish the Subordinate
Reserve Account of the Subordinate Special Tax Fund to the Subordinate Reserve Requirement,
including any amounts to pay costs related to the Reserve Policy, if any . 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 Spec ial 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 Subordinate
Reserve Account is at least equal to the Subordinate 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 Subordinate 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
Subordinate Special Tax Fund.
(d) Payment of Claims. The District will pay and discharge any and al l 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 Subordinate Special Tax Fund (other than the Subordinate 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.
(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 Sp ecial Tax and the deposits
to the Subordinate Special Tax Fund. Such books of records and accounts shall at all times during
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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 mon ies 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 c ompliance 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.
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(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 deliv ered 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 mak e 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 the District 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 the District, unless, in
connection therewith, the District receives a certi ficate 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 the District 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 Senior Bonds, 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 the District 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 any policy 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 interes t on the
Bonds and Parity Bonds when due.
(j) Continuing Disclosure. The District covenants to comply with the terms of the
Continuing Disclosure Certificate that was executed and delivered in connection with the 2018
Senior Bonds 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
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the intention or to facilitate the performance of this Indenture and for the better assuring and
confirming unto the Owners of the Bonds and any Parity Bonds of the rights and be nefits 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 such changes do not reduce the
maximum Special Taxes that may be levied in each year on property within the District 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 Senior Bonds, the Bonds and Parity Bonds
Outstanding as of the date of such amendment;
(f) to modify, alter, amend or supplement this Indenture in any other respect which is not
materially adverse to the Owners; or
(g) to modify, alter, amend or supplement this Indenture in any other respect, as may be
required to fund all or a portion of the Subordinate Reserve Requirement with a Reserve Policy.
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
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right to consent 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 co ntained 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, whic h 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, ca use 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 Indentu re
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 adop tion 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
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designate for that purpose, a suitable notation as to such action shall be made on such Bonds or Parity
Bonds. If 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 counse l 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 and Parity Bonds.
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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, an d 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 t o the Trustee, if disputed.
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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 actu ally
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 and Parity 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.
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The Trustee may become the Owner or pledgee of the Bonds and Parity 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 and Parity 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 Parity Bonds and the
carrying out of any of the transactions contemplated by the Bonds , Parity 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 and Parity 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 th e 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 and Parity 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
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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.
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 each Authorized Representative of the District 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 t he 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 deter mine 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 of the District. The
District shall be responsible for ensuring that only an Authorized Representative of the District shall
transmit such directions to the Trustee and that each Authorized Representative of the District 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 agree s (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 t o 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 fr om 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
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(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
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 Tr ustee’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 Bo nds, 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 a re 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 reque sted 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 ri ghts and powers conferred by this Article VIII, 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 ex clusive 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;
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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 VIII, including reasonable compensation
to its agents, attorneys and counsel, and to the payment of all other outstanding fees and expenses of
the Trustee; and
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 f or 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 expre ssly agrees, to the appointment of a receiver or
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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 VIII 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 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 VIII 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 inte nded 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 en force 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
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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.
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 Subordinate Special Tax Fund (exclusive of the Subordinate
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 Subordinate Special Tax Fund
(exclusive of the Subordinate 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
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the Owners of any such Bond or Parity Bond not so surrendered and paid all sums due thereon, a nd
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 conn ection with a defeasance under (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 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 thi s 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 Subordinate
Special Tax Fund (other than in the Subordinate 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 Outstanding subject 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 b een 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;
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(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;
(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 Subordinate Reserve Account of the Subordinate Special Tax Fund to increase the amount therein
to the Subordinate 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 securitie s, 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 resolution of the City Council, acting as the legislative body of the
District, 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 execute and deliver the
Supplemental Indenture relating to such Parity Bonds, and such Supplemental Indenture has been
duly and lawfully executed by the District, and the Indenture and such Supplemental Indenture 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 t he 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 the Supplemental Indenture executed and delivered in connection with such Parity
Bonds and are entitled to the benefits of this Indenture and such Supplemental Indenture, and such
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Parity Bonds have been duly and validly authorized and issued in accordance with the Act (or other
applicable laws) and this Indenture and such Supplemental Indenture; 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;
(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
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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. An y request or consent
of 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 be come 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 regist ered 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 da ys 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 a bandoned, 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.
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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 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
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 and all notices to the Original Purchaser shall be mailed, first class,
postage prepaid, or personally delivered to ____________.
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IN WITNESS WHEREOF, COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS) 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.
COMMUNITY FACILITIES DISTRICT NO. 2016-2
OF THE CITY OF LAKE ELSINORE (CANYON
HILLS)
By:
Mayor of the City of Lake Elsinore, acting as
the legislative body of Community Facilities
District No. 2016-2 of the City of Lake Elsinore
(Canyon Hills)
ATTEST:
City Clerk of the City of Lake Elsinore,
acting as the legislative body of
Community Facilities District No. 2016-2
of the City of Lake Elsinore (Canyon
Hills)
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
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EXHIBIT A
FORM OF SPECIAL TAX BOND
THE REGISTERED OWNER OF THIS BOND ACKNOWLEDGES AND AGREES THAT THIS BOND MAY
ONLY BE TRANSFERRED IN WHOLE TO A NEW OWNER WHO DELIVERS TO THE DISTRICT AND
THE TRUSTEE A PURCHASER’S CERTIFICATE IN THE FORM REQUIRED BY THE INDENTURE WHO
IS (I) AN AFFILIATE OF THE ORIGINAL PURCHASER OF THIS BOND, OR (II) A “QUALIFIED
INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT.
R-____ $___________
UNITED STATES OF AMERICA
STATE OF CALIFORNIA
COUNTY OF RIVERSIDE
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS)
SUBORDINATE SPECIAL TAX BOND, SERIES 2022
INTEREST RATE: MATURITY DATE: DATED DATE:
_____% September 1, 20____ ________ , 2022
REGISTERED OWNER: WESTERN ALLIANCE BUSINESS TRUST
PRINCIPAL AMOUNT: __________________ DOLLARS
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE CITY OF LAKE ELSINORE
(CANYON HILLS) (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 b e payable from the Interest Payment Date immediately
succeeding the date of authentication; or (iii) the date of authentication is prior to the close of
business on the first Record Date, in which event interest shall be payable from the Dated Date set
forth above. Notwithstanding the foregoing, if at the time of authentication of this Bond interest is in
default, interest on this Bond shall be payable from the last Interest Payment Date to which the
interest has been paid or made available for payment or, if no interest has been paid or made
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available for payment, interest on this Bond shall be payable from the Dated Date set forth above.
Interest will be paid semiannually on September 1, 2022 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 Truste e 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.
Notwithstanding any provision in the Indenture or herein to the contrary, so long as the
Bonds are owned by the Original Purchaser, (i) the Trustee shall pay principal of and interest and
redemption premium, if any, on the Bonds when due by wire transfer in immediately available funds
to the Original Purchaser in accordance with such wire t ransfer instructions as shall be filed by the
Original Purchaser with the Trustee from time to time, (ii) payments of principal on the Bonds shall
be made without the requirement for presentation and surrender by the Original Purchaser, provided
that principal which is payable at maturity shall be made only upon presentation and surrender at the
Principal Office of the Trustee, and (iii) the Trustee shall not be required to give notice to the
Original Purchaser of the Sinking Fund Payments described in the Indenture.
This Bond is one of a duly authorized issue of “Community Facilities District No. 2016-2 of
the City of Lake Elsinore (Canyon Hills) Subordinate Special Tax Bonds, Series 2022” (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 Subordinate Reserve
Account, funding the interest due on the Bonds through September 1, 2023, 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 May 10, 2022, and a Bond Indenture
executed in connection therewith dated as of May 1, 2022 (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. Capitalized terms not defined herein shall have the meanings set forth in the Indenture.
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 the District (the “Special Taxes”) and certain other amounts pledged to
the repayment of the Bonds as set forth in the Indenture. The Bonds and any Parity Bonds are
payable from Net Taxes and the Owners shall have no claim on any amounts held under any Senior
Indenture other than amounts required to be transferred to the Trustee pursuant to the 2018 Senior
Indenture and any corresponding provision of any other Senior Indenture executed and delivered
hereafter. Any amounts for the payment hereof shall be limited to the Net Taxes pledged and
collected or foreclosure proceeds received following a default in payment of the Special Taxes and
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other amounts deposited to the Subordinate Special Tax Fund (other than the Subordinate
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 Net Taxes pledged to the Bonds include amounts of the Special Taxes after payment of the
Senior Bonds, other amounts set forth in the Senior Indenture and less the Subordinate
Administrative Expenses Cap. 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 or after September 1, 2025, 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, 2025 and March 1, 2026 103%
September 1, 2026 and March 1, 2027 102
September 1, 2027 and March 1, 2028 101
September 1, 2028 and any Interest Payment Date Thereafter 100
The Term Bonds maturing on September 1, 20__ shall be called before maturity and
redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account
established hereunder, 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 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 Term Bond equal to the principal amount thereof, plus accrued int erest to
the redemption date, without premium, as follows:
Term Bonds Maturing September 1, 20__
Sinking Fund Redemption Date
(September 1) Sinking Fund Payments
$
*
_____________
* Maturity.
So long as the 2018 Senior Bonds are outstanding, the Bonds any Parity Bonds shall not be
subject to special mandatory redemption from Prepayments. On and after the date the 2018 Senior
Bonds are no longer outstanding, the Bonds shall be subject to specia l 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, and shall be redeemed by the Trustee, from Prepayments deposited to the Redemption
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Account pursuant to the Indenture, plus amounts transferred from the Subordinate 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
Any Interest Payment Date through March 1, 2026 103%
September 1, 2026 and March 1, 2027 102
September 1, 2027 and March 1, 2028 101
September 1, 2028 and any Interest Payment Date thereafter 100
Notice of redemption with respect to the Bonds to be redeemed shall be 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. 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 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 f ully 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 cha rges 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 LIM ITED 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,
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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, Community Facilities District No. 2016-2 of the City of Lake
Elsinore (Canyon Hills) 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 City Clerk of the City.
Mayor of the City of Lake Elsinore, acting as the
legislative body of Community Facilities District
No. 2016-2 of the City of Lake Elsinore (Canyon
Hills)
ATTEST:
City Clerk of the City of Lake Elsinore, acting
as the legislative body of Community
Facilities District No. 2016-2 of the City of
Lake Elsinore (Canyon Hills)
[FORM OF TRUSTEE’S CERTIFICATE
OF AUTHENTICATION AND REGISTRATION]
This is one of the Bonds described in the within-defined Indenture.
Dated: ____________, 2022 WILMINGTON TRUST, NATIONAL
ASSOCIATION as Trustee
By:
Authorized Signatory
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[FORM OF LEGAL OPINION]
The following is a true copy of the opinion rendered by Stradling Yocca Carlson & Rauth, a
Professional Corporation, in connection with the issuance of, and dated as of the date of the original
delivery of, the Bonds. A signed copy is on file in my office.
City Clerk of the City
[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.
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EXHIBIT B-1
FORM OF REQUISITION FOR DISBURSEMENT OF PROJECT COSTS
$________
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS)
SUBORDINATE SPECIAL TAX BONDS, SERIES 2022
Wilmington Trust, National Association (the “Trustee”), is hereby requested to pay from the
Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills) Acquisition
and Construction Fund, established by the Bond Indenture, dated as of May 1, 2022, by and between
the Trustee and Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon
Hills) (the “District”), the amount 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 Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Acquisition and Construction Fund, 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: COMMUNITY FACILITIES DISTRICT NO. 2016-2
OF THE CITY OF LAKE ELSINORE (CANYON
HILLS)
By:
Name:
Title: _____________________________________
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EXHIBIT E
FORM OF PURCHASER’S LETTER
__________, 20__
Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Lake Elsinore, California
Wilmington Trust, National Association
Costa Mesa, California
Re: Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Subordinate Special Tax Bonds, Series 2022
Ladies and Gentlemen:
The undersigned (the “Investor”) hereby acknowledges that it is purchasing $_________
aggregate principal amount of Community Facilities District No. 2016-2 of the City of Lake
Elsinore (Canyon Hills) Subordinate Special Tax Bonds, Series 2022 (the “Bonds”) issued
pursuant to a Bond Indenture, dated as of May 1, 2022 (the “Authorizing Document”), by and
between Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
(the “Issuer”) and Wilmington Trust, National Association, as trustee. Capitalized terms not
otherwise defined herein shall have the meanings ascribed thereto in the Authorizing Document.
This letter is being provided pursuant to the Authorizing Document. Stifel, Nicolaus &
Company, Incorporated has served as Placement Agent (the “Placement Agent”) in connection
with the issuance of the Bonds pursuant to a Placement Agent Engagement Agreement, dated
May __, 2022 (the “Placement Agent Agreement”), between the Issuer and Stifel, Nicolaus &
Company, Incorporated.
The Investor acknowledges that the proceeds of the Bonds will be used for the purposes,
and principal and interest thereon shall be payable solely from the sources, described in the
Authorizing Document.
In connection with the sale of the Bonds to the Investor, the Investor hereby makes the
following representations upon which you may rely:
1. The Investor has the authority and is duly authorized to extend credit to the Issuer
by purchasing the Bond and to execute this letter and any other instruments and documents
required to be executed by the Investor in connection with its purchase of the Bond. The Investor
(a) is a bank, any entity directly or indirectly controlled by the bank or under common control
with the bank, other than a broker, dealer or municipal securities dealer registered under the
Securities Exchange Act of 1934, or a consortium of such entities; and (b) has the present intent
to hold the Bond to maturity or earlier redemption.
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2. The Investor is (a) a “qualified institutional buyer” as that term is defined in
Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), or (b) an
“accredited investor” as that term is defined in Rule 501(a)(1),(2),(3), or (7) under the Securities
Act.
3. The Investor is not purchasing the Bonds for more than one account or with a
view to distributing the Bond.
4. The Investor understands that the Bonds are not, and is not intended to be,
registered under the Securities Act and that such registration is not legally required as of the date
hereof, and further understands that the Bonds (a) are not being registered or otherwise qualified
for sale under the “Blue Sky” laws and regulations of any state, (b) will not be listed in any stock
or other securities exchange, (c) will not carry a rating from any rating agency, and (d) will be
delivered in a form that may not be readily marketable.
5. The Investor acknowledges that it has either been supplied with or been given
access to information which it has requested from the Issuer and to which a reasonable lender
would attach significance in making lending decisions, and the Investor has had the opportunity
to ask questions and receive answers from knowledgeable individuals, including its own counsel,
concerning the Issuer and the Bonds and the security therefor so that, as a reasonable lender, the
Investor has been able to make a decision to purchase the Bonds. The Investor has such
knowledge and experience in financial and business matters that it is capable of evaluating the
merits and risks of its prospective purchase of the Bonds.
6. The Investor acknowledges that the obligations of the Issuer under the
Authorizing Document do not constitute obligations of the Issuer for which the Issuer is
obligated to levy or pledge, or has levied or pledged, general or special taxes,. The Bonds are a
limited obligation of the Issuer payable from the Net Taxes and other amounts pledged under the
Authorizing Document but is not a debt of the Issuer, the State of California or any of its
political subdivisions within the meaning of any constitutional or statutory limitation or
restriction.
7. The Investor has made its own inquiry and analysis with respect to the Bonds and
the security therefor, and other material factors affecting the security and payment of the Bonds.
The Investor is aware that there are certain economic and regulatory variables and risks that
could adversely affect the security for the Bonds. The Investor has reviewed the documents
executed in conjunction with the issuance of the Bonds, or summaries thereof, including, without
limitation, the Authorizing Document.
8. The Investor acknowledges and agrees that the Placement Agent and the Issuer
take no responsibility for, and make no representation to the Investor, or any subsequent
purchaser, with regard to, a sale, transfer or other disposition of the Bonds in violation of the
provisions of the Authorizing Document, or any securities law or income tax law consequences
thereof. The Investor also acknowledges that, with respect to the Issuer’s obligations and
liabilities, the Investor is solely responsible for compliance with the sales restrictions on the
Bonds in connection with any subsequent transfer of the Bonds made by the Investor.
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9. The Investor agrees that it is bound by and will abide by the provisions of the
Authorizing Document relating to transfer, the restrictions noted on the face of the Bonds and
this Purchaser Letter. The Investor also covenants to comply with all applicable federal and state
securities laws, rules and regulations in connection with any resale or transfer of the Bonds by
the Investor.
10. The Investor acknowledges that the sale of the Bonds to the Investor is made in
reliance upon the certifications, representations, and warranties herein made to the addressees
hereto.
11. The interpretation of the provisions hereof shall be governed and construed in
accordance with State of California law without regard to principles of conflicts of laws.
12. All representations of the Investor contained in this letter shall survive the
execution and delivery of the Bonds to the Investor as representations of fact existing as of the
date of execution and delivery of this Investor Letter.
13. Inasmuch as the Bonds represent a negotiated transaction, the Investor is not
acting as a fiduciary of the Issuer, but rather is acting solely in its capacity as the initial Owner,
for its own loan account. The Investor acknowledges and agrees that (i) the transaction
contemplated herein is an arm’s length commercial transaction between the Issuer and the
Investor and its affiliates, (ii) in connection with such transaction, the Investor and its affiliates
are acting solely as a principal and not as an advisor including, without limitation, a “Municipal
Advisor” as such term is defined in Section 15B of the Securities and Exchange Act of 1934, as
amended, and the related final rules (the “Municipal Advisor Rules”), (iii) the Investor and its
affiliates are relying on the purchaser exemption in the Municipal Advisor Rules, (iv) the
Investor and its affiliates have not provided any advice or assumed any advisory or
fiduciary responsibility in favor of the Issuer with respect to the transaction contemplated by the
Bonds and the discussions, undertakings and procedures leading thereto (whether or not the
Investor, or any affiliate of the Investor, has provided other services or advised, or is currently
providing other services or advising the Issuer on other matters) and (v) the Inves tor and its
affiliates have financial and other interests that differ from those of the Issuer.
[PURCHASER/TRANSFEREE]]
By:
Its:
Stradling Yocca Carlson & Rauth
Draft of 04/28/2022
4871-1004-9821v1/022042-0045
FIRST SUPPLEMENT TO BOND INDENTURE
Between
COMMUNITY FACILITIES DISTRICT NO. 2016-2
OF THE CITY OF LAKE ELSINORE (CANYON HILLS)
And
WILMINGTON TRUST, NATIONAL ASSOCIATION
as Trustee
$19,745,000
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS)
SPECIAL TAX BONDS, SERIES 2018
Dated as of May 1, 2022
4871-1004-9821v1/022042-0045
FIRST SUPPLEMENT TO BOND INDENTURE
THIS FIRST SUPPLEMENT TO BOND INDENTURE dated as of May 1, 2022 (the “First
Supplement”), supplements and amends the Bond Indenture dated as of August 1, 2018 (the “Original
Bond Indenture”), by and between COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS) (the “District”) and WILMINGTON TRUST,
NATIONAL ASSOCIATION (the “Trustee”), relating to the Community Facilities District No. 2016-
2 of the City of Lake Elsinore (Canyon Hills) Special Tax Bonds, Series 2018, which were issued in
accordance with the Original Bond Indenture. The Original Bond Indenture and this First Supplement
are hereinafter collectively referred to as the “Bond Indenture.”
R E C I T A L S :
WHEREAS, the City Council of the City of Lake Elsinore, located in Riverside County,
California, has heretofore undertaken proceedings and declared the necessity to issue bonds of the
District pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as
amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of
California (the “Act”); and
WHEREAS, the District issued its Community Facilities District No. 2016-2 of the City of
Lake Elsinore (Canyon Hills) Special Tax Bonds, Series 2018 (the “Bonds”) in the aggregate principal
amount of $19,745,000; and
WHEREAS, pursuant to Section 5.2 of the Original Bond Indenture, the District may issue or
incur indebtedness payable from Net Taxes which is subordinate in all respects to the pledge of Net
Taxes to repay the Bonds and any Parity Bonds;
WHEREAS, pursuant to Section 6.1 of the Original Bond Indenture, the District may, without
notice to or consent of the Owners, enter into a Supplemental Indenture to amend the Original Bond
Indenture in any respect which is not materially adverse to the Owners; and
WHEREAS, the District desires to amend the Original Bond Indenture as set forth in this First
Supplement in connection with the issuance of the District’s Subordinate Special Tax Bonds, Series
2022 (the “Subordinate 2022 Bonds”); and
NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained
herein, 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
follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Original Bond Indenture provided that the following definitions are added to
the Original Bond Indenture:
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4871-1004-9821v1/022042-0045
“Subordinate Bonds Trustee” means Wilmington Trust, National Association, a national
banking association duly organized and existing under the laws of the United States, as trustee under
the Subordinate Bonds Indenture, dated as of May 1, 2022, relating to the District’s Subordinate 2022
Bonds, and its successors or assigns, or any other bank or trust company which may at any time be
substituted in its place as provided in the Subordinate Bonds Indenture.
“Subordinate Bonds Indenture” means the Bond Indenture, dated as of May 1, 2022, by and
between the District and the Subordinate Bonds Trustee, together with any supplemental indenture
approved pursuant to thereto.
ARTICLE II
AMENDMENT
Section 2.1. Amendment to Section 3.2(a) of the Original Bond Indenture. Section
3.2(a) of the Original Bond Indenture is hereby amended and restated in its entirety to read as follows:
“(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:
(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;
(8) the Subordinate Bonds Trustee to be applied in accordance with the
Subordinate Bonds Indenture; and
(9) the Surplus Fund.”
Section 2.2. Amendment to Section 3.8 of the Original Bond Indenture. The first
sentence of Section 3.8 of the Original Bond Indenture is hereby amended and restated in its entirety
to read as follows:
“After making the transfers required by Sections 3.3, 3.4, 3.5, 3.6, 3.7 and 3.11 hereof,
as soon as practicable after each September 1, the Trustee shall transfer all remaining amounts in the
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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.”
Section 2.3. Addition of Section 3.11 to the Original Bond Indenture. The Original
Bond Indenture is hereby amended to add the following provision as Section 3.11 thereof:
“Section 3.11. Transfer to Subordinate Bonds Trustee. After making the transfers
required by Sections 3.3, 3.4, 3.5, 3.6 and 3.7 hereof, the Trustee shall transfer the remaining amounts
in the Special Tax Fund to the Subordinate Bonds Trustee to be applied in accordance with the
Subordinate Bonds Indenture.
ARTICLE III
MISCELLANEOUS
Section 3.1. Provisions of Bond Indenture in Effect. Except as expressly modified herein,
all of the provisions of the Original Bond Indenture shall remain in full force and effect.
Section 3.2. Partial Invalidity. If any section, paragraph, sentence, clause or phrase of this
First Supplement shall for any reason be held illegal, invalid or unenforceable, such holding shall not
affect the validity of the remaining portions of this First Supplement. The District hereby declares that
it would have entered into this First Supplement and each and every other Section, paragraph, sentence,
clause or phrase hereof irrespective of the fact that any one or more Sections, paragraphs, sentences,
clauses, or phrases of this First Supplement may be held illegal, invalid or unenforceable.
Section 3.3. Execution in Counterparts. This First Supplement may be executed in
several counterparts, each of which shall be an original and all of which shall constitute but one and
the same instrument.
Section 3.4. Governing Law. This First Supplement shall be construed and governed in
accordance with the laws of the State of California applicable to contracts made and performed in such
state.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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4871-1004-9821v1/022042-0045
IN WITNESS WHEREOF, COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS) has caused this First Supplement to Bond 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 First Supplement
to Bond Indenture to be signed in its corporate name by its officers identified below, all as of the day
and year first above written.
COMMUNITY FACILITIES DISTRICT NO. 2016-2
OF THE CITY OF LAKE ELSINORE (CANYON
HILLS)
By:
Mayor of the City of Lake Elsinore, acting as the
legislative body of Community Facilities District
No. 2016-2 of the City of Lake Elsinore (Canyon
Hills)
ATTEST:
City Clerk of the City of Lake Elsinore,
acting as the legislative body of
Community Facilities District No. 2016-2
of the City of Lake Elsinore (Canyon Hills)
WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
By:
Authorized Signatory
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COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS)
SUBORDINATE SPECIAL TAX BONDS, SERIES 2022
(THE “2022 BONDS”)
PROPOSED LENDING PARAMETERS
(AS OF APRIL 22, 2022)
These proposed lending parameters are an expression of interest based on the mutual understanding of the financing
request and terms and conditions, all of which are pending the Purchaser’s consideration, analysis and final credit
approval. Any final financing commitments are subject to approval by appropriate administrative authorities of the
Purchaser and other analysis we deem appropriate, with the results of such review and analysis being satisfactory to us in
our sole discretion. The Purchaser is not obligated to provide this financing until such time as you are notified in writing
by the Purchaser of the Purchaser’s commitment and you have executed mutually acceptable loan documents. No action,
verbal remarks, or any other communication shall obligate the Purchaser to provide this financing until the Purchaser has
issued a final, written commitment. The terms and conditions outlined below are not intended to be all-inclusive but
rather set forth a framework for further discussions and are subject to change or addition.
Borrower: Community Facilities District No. 2016-2 of the City of Lake Elsinore, (Canyon Hills)
(the “Borrower” or the “District”)
City: City of Lake Elsinore (the “City”)
City Council: City Council of the City of Lake Elsinore (the “City Council”)
Purchaser: Western Alliance Business Trust, a Delaware statutory trust (the “Purchaser”)
Tax Status: Interest on the 2022 Bonds is excluded from gross income for federal income tax
purposes and is exempt from State of California personal income tax.
Purpose: Proceeds from the 2022 Bonds are to be used to:
1) finance certain public improvements needed with respect to the development
of property within the District;
2) fund capitalized interest at amount to be determined prior to closing;
3) fund a reserve account (the “Reserve Account”) at the reserve requirement of
the 2022 Bonds; and
4) pay the costs associated with the issuance of the 2022 Bonds.
Principal Amount: Not to exceed $1,750,000
Final Maturity Dates: September 1, 2048
Interest Payment Dates: Semi-annual interest payments on each March 1 and September 1 commencing
September 1, 2022, computed on the basis of a 360-day year consisting of twelve
30-day months (the “Interest Payment Dates”).
Principal Payment Dates: Annual principal payments on the 2022 Bonds on each September 1 commencing
September 1, 2023 through September 1, 2048.
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Interest Rate Pricing: The 2022 Bonds will be purchased at par at a fixed rate of interest through the
Final Maturity Date based on the following formula:
77% of the sum of the 20-Year USD Swap Rate plus 3.45 % (tax-exempt fixed rate).
The interest rate on the 2022 Bonds is 4.89%. The interest rate will be held
through Tuesday, May 31, 2022. See Appendix A herein.
2018 Bonds: Community Facilities District No. 2016-2 of the City of Lake Elsinore (Canyon Hills)
Special Tax Bonds, Series 2018 (the “2018 Bonds”).
Security/Structure: The 2022 Bonds will be payable solely from, and secured by, a pledge of Net Taxes
(which are Special Tax revenues remaining after the payment of the annual
Administrative Expenses in an amount not to exceed the Administrative Expenses
Cap (as defined in the Indenture)) after payment of the 2018 Bonds and from
amounts held in the Special Tax Fund (other than amounts held in the
Administrative Expenses Account therein). Special Tax revenues include the
proceeds of the annual Special Tax levy received by the District, including any
schedule payments and prepayments thereof, and the net proceeds of the
redemption of delinquent Special Taxes or sale property as a result 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
under the Indenture to the payment of the 2018 Bonds and the 2022 Bonds.
The 2022 Bonds will be sized assuming Net Taxes will be sufficient to levy up to
109% of the debt service on the 2018 Bonds and the 2022 Bonds.
Reserve Requirement: In connection with the issuance of the 2022 Bonds, there shall be established a
Reserve Account based on the lesser of the reasonably required reserve or
replacement fund size limitation in accordance with Section 1.48-2(f)(2)(ii) of the
Internal Revenue Code (the “Reserve Requirement”).
Additional Debt: Except for refunding purposes, the Borrower is not authorized to issue additional
bonds based on Net Taxes levied in the District.
Redemption Provisions: Optional Redemption.
The 2022 Bonds may be redeemed at the option of the District from any source of
funds on any Interest Payment Date on or after September 1, 2025, 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, 2025 through March 1, 2026 103%
September 1, 2026 and March 1, 2027 102%
September 1, 2027 and March 1, 2028 101%
September 1, 2028 and any Interest
Payment Date thereafter
100%
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Mandatory Sinking Fund Redemption.
The 2022 Bonds will be subject to mandatory sinking payment redemption, in part,
on September 1, 2048 and each September 1 thereafter to maturity, by lot, at a
redemption price equal to the principal amount thereof to be redeemed, together
with accrued interest to the date of redemption, without premium, and from
sinking fund payments to be determined by the date of execution and delivery of
the 2022 Bonds.
Special Mandatory Redemption from Prepayments.
The 2022 Bonds are not subject to extraordinary redemption until the 2018 Bonds
are redeemed in whole. Thereafter, the extraordinary redemption provisions
under the 2018 Bonds would be applied to the 2022 Loan.
Foreclosure Covenant: The District covenants in the Indenture for the benefit of the Purchaser that it will:
(i) commence judicial foreclosure proceedings against parcels with delinquent
Special Taxes in excess of $5,000 by 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 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 on deposit in the
Reserve Account is at least equal to the Reserve Requirement.
In no event shall such foreclosure actions exceed the time periods specified in
Section 53356.1 of the Mello-Roos Act.
Events of Default: Events of Default shall include those that are deemed standard and customary for
transactions of this nature all of which shall be subject to satisfactory review by
the Purchaser and the Purchaser’s Counsel.
Representations/
Warranties/Covenants:
Legal documentation will contain customary affirmative and negative covenants
as well as usual representations and warranties for like situated borrowers
acceptable to the Purchaser and the Purchaser’s Counsel.
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Legal Opinion(s): Opinions of Bond Counsel, among other things, as to
1) Interest on the 2022 Bonds is excluded from gross income for federal income
tax purposes and is exempt from State of California personal income tax;
2) the validity and enforceability of the 2022 Bonds and the pledge of the net
special taxes being duly and validly authorized under the law;
3) the 2022 Bonds being exempt from registration pursuant to the Securities Act
of 1933, as amended (the “1933 Act”), and the Indenture being exempt from
qualification as to an indenture pursuant to the Trust Indenture Act of 1939,
as amended; and
4) such other opinions as the Purchaser may require.
An opinion of the Counsel to the City shall also be provided in form and substance
satisfactory to the Purchaser and the Purchaser’s Counsel.
Conditions Precedent: Prior to the purchase of the 2022 Bonds, the following conditions precedent shall
have occurred, all of which shall be in form and substance satisfactory to the
Purchaser and the Purchaser’s Counsel:
1) satisfactory review by the Purchaser’s Counsel of any outstanding agreements
entered into by the Borrower which may impact the security for the 2022
Bonds or the obligations of the Borrower with respect to repayment the 2022
Bonds;
2) any authorizing resolution(s) of the Borrower as required for the issuance and
repayment of the 2022 Bonds;
3) opinions as required by the Purchaser and the Purchaser’s Counsel;
4) properly executed bond documents in form and substance satisfactory to the
Purchaser and the Purchaser’s counsel evidencing or supporting the
repayment of the 2022 Bonds; and
5) additional conditions precedent that the Purchaser and the Purchaser’s
Counsel consider customary and reasonably appropriate for the proposed
purchase of the 2022 Bonds.
Loan Treatment: The Purchaser will book the 2022 Bonds as a loan, and, therefore, the 2022 Bonds
will be purchased under the following conditions:
1) the 2022 Bonds shall not be registered or otherwise qualified for sale under
the “Blue Sky” laws;
2) the Purchaser will hold the 2022 Bonds as a single debt instrument registered
in the name of “WESTERN ALLIANCE BUSINESS TRUST, a Delaware statutory
Trust”;
3) no CUSIP numbers will be obtained for the 2022 Bonds pursuant to Municipal
Securities Rulemaking Board Rule G-34(a)(i)(F) (See “Assignment and
Participation” herein);
4) no official statement or similar offering document has been prepared in
connection with the private placement of the 2022 Bonds;
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5) the 2022 Bonds will be in certificated form, will not settle through the DTC or
any similar repository and will not be in book entry form; and
6) the Purchaser will sign a letter of representations in a form acceptable to
Purchaser’s Counsel.
Origination Fee: None
Other Fees Due at Closing: The Borrower shall be obligated to pay all delivery costs, including legal fees of the
Purchaser’s Counsel and the CDIAC reporting fee. The Purchaser’s Counsel fee
shall be capped at $8,500 for the 2022 Bonds.
Bond Counsel: Stradling Yocca Carlson & Rauth, a Professional Corporation / Newport Beach,
California
Placement Agent: Stifel, Nicolaus & Company, Incorporated / Los Angeles, California
Municipal Advisor: Urban Futures, Inc. / Tustin, California
Trustee: Wilmington Trust, National Association / Costa Mesa, California (the “Trustee”)
Purchaser’s Counsel: Best, Best & Krieger LLP / Riverside, California (the “Purchaser’s Counsel”)
Estimated Closing Date: Mid-May 2022
No Fiduciary Relationship: Inasmuch as the 2022 Bonds represent a negotiated transaction, the Borrower
understands, and hereby confirms, that the Purchaser is not acting as a fiduciary
of the Borrower, but rather is acting solely in its capacity as a Purchaser, for its
own account. The Borrower will acknowledge and agree that:
1) the transaction contemplated herein is an arm’s length commercial
transaction between the Borrower and the Purchaser and its affiliates;
2) in connection with such transaction, the Purchaser and its affiliates are acting
solely as a principal and not as an advisor including, without limitation, a
“Municipal Advisor” as such term is defined in Section 15B of the Securities
and Exchange Act of 1934, as amended, and the related final rules (the
“Municipal Advisor Rules”);
3) the Purchaser and its affiliates are relying on the bank exemption in the
Municipal Advisor Rules;
4) the Purchaser and its affiliates have not provided any advice or assumed any
advisory or fiduciary responsibility in favor of the Borrower with respect to the
transaction contemplated hereby and the discussions, undertakings and
procedures leading thereto;
5) the Purchaser and its affiliates have financial and other interests that differ
from those of the Borrower; and
6) the Borrower has consulted with its own financial, legal, accounting, tax and
other advisors, as applicable, to the extent it deemed appropriate.
6
Reporting Requirements: No later than February 15 after the end of District fiscal year, the Purchaser shall
receive from the Borrower the Annual Report and the content requirements for
the Annual Report shall be pari passu with the 2018 Bonds.
Any additional information that the Purchaser may reasonably request.
The District shall furnish notice to the Purchaser of any occurrence of an event
described in subsection (b)(5)(i)(C) of the Securities and Exchange Commission
Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (17 CFR Part
240, §240.15c2-12) in a timely manner but not in excess of ten business days after
the occurrence of such event.
Assignment/Participation: The Purchaser’s intent is to book the 2022 Bonds as a loan and hold the 2022
Bonds to maturity or to the redemption dates; however, the Purchaser retains the
right to assign or participate out in whole its interest in the 2022 Bonds and will
request the Borrower to agree to such assignment or participation. The Purchaser
acknowledges and agrees that the 2022 Bonds may only be transferred to a
“Qualified Institutional Buyer” or an “Accredited Investor” within the meaning of
the Securities Act of 1933, as amended.
Defined Terms: All capitalized terms used herein and not defined shall have the meanings given
them in the Bond Indenture (the “Indenture”), by and between the District and
the Trustee.
APPRENDIX A-1
APPENDIX A
NOT TO EXCEED AGGREGATE COMMITMENT:$1,750,000.00
WEIGHTED AVERAGE MATURITY (ESTIMATED):19.1 Years
ESTIMATED FUNDING DATE:Thursday, May 19, 2022
20 YEAR SPOT USD INTEREST RATE SWAP RATE(1)2.9046%
RATE LOCK SPREAD 0.15%
BANK SPREAD 3.30%
TAXABLE INTEREST RATE(1)6.35%
TAX-EXEMPT MULTIPLIER(2)77%
TAX-EXEMPT INTEREST RATE(3)4.89%
BLOOMBERG FINANCE L.P. SCREEN SHOT OF FORWARD CURVE USD SEMI-ANNUAL 30/360 SWAP RATES AS OF FRIDAY, APRIL 22, 2022, 15:47:18 EDT
Western Alliance Bank and its affiliate Western Alliance Business Trust (the “Purchaser”) are pleased to provide to the Community Facilities District No. 2016-2 of the City of Lake Elsinore (the
"District") the following interest rate lock for the Subordinate Special Tax Bonds, Series 2022 (the "2022 Bonds"), subject to approval by the City Council of the City of Lake Elsinore, as legislative body
of the District, the Purchaser's credit approval, additional due diligence and receipt and approval of all relevant documentation, for the purchase of the 2022 Bonds.
COMMUNITY FACILITIES DISTRICT NO. 2016-2 OF THE
CITY OF LAKE ELSINORE (CANYON HILLS)
SUBORDINATE SPECIAL TAX BONDS, SERIES 2022
INTEREST RATE LOCK CALCULATION AS OF FRIDAY, APRIL 22, 2022
(2) Based on a federal corporate tax rate of 21% and California income tax rate of 2%.
(3) The interest rate is rounded to the nearest one hundredth and will expire if the 2022 Bonds are not funded by Tuesday, May 31, 2022.
(1) Bloomberg Finance L.P. - 20 Year Tenor Spot Interest Rate Swap Rate as of Friday, April 22, 2022, 15:47:18 EDT, rounded to the nearest one hundredth percentage.