HomeMy WebLinkAboutFiscal Agent Agreement dated March 1, 2006 by and between the Authority and US Bank National Association, as fical agent
Quint & Thimmig LLP FINAL FISCAL AGENT AGREEMENT by and between the TEMECULA PUBLIC FINANCING AUTHORITY and U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent Dated as of March 1, 2006
Relating to: $51,250,000 Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds 20009.01:J7220
TABLE OF CONTENTS ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement 3 Section 1.02. Agreement for Benefit of Owners of the Bonds 3 Section 1.03.
Definitions 3 ARTICLE II THE BONDS Section 2.01. Principal Amount; Designation 14 Section 2.02. Terms of the 2006 Bonds 14 Section 2.03. Redemption 15 Section 2.04. Form of Bonds 18
Section 2.05. Execution of Bonds 18 Section 2.06. Transfer of Bonds 18 Section 2.07. Exchange of Bonds 19 Section 2.08. Bond Register 19 Section 2.09. Temporary Bonds 19 Section 2.10.
Bonds Mutilated, Lost, Destroyed or Stolen 20 Section 2.11. Limited Obligation 20 Section 2.12. No Acceleration 20 Section 2.13. Book-Entry System 20 Section 2.12. Issuance of Parity
Bonds 21 ARTICLE III ISSUANCE OF BONDS Section 3.01. Issuance and Delivery of 2006 Bonds 24 Section 3.02. Pledge of Special Tax Revenues 24 Section 3.03. Validity of Bonds 24 ARTICLE
IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of 2006 Bonds and Other Moneys 25 Section 4.02. Improvement Fund 25 Section 4.03. Costs of Issuance Fund 27 Section
4.04. Reserve Fund 28 Section 4.05. Bond Fund 32 Section 4.06. Special Tax Fund 33 Section 4.07. Administrative Expense Fund 34 Section 4.08. Refunding Fund 34 ARTICLE V OTHER COVENANTS
OF THE AUTHORITY Section 5.01. Punctual Payment 36 Section 5.02. Limited Obligation 36 Section 5.03. Extension of Time for Payment 36 Section 5.04. Against Encumbrances 36 Section 5.05.
Books and Records 36 Section 5.06. Protection of Security and Rights of Owners 37 Section 5.07. Compliance with Law 37 Section 5.08. Collection of Special Tax Revenues 37 Section 5.09.
Covenant to Foreclose 38 Section 5.10. Further Assurances 38 Section 5.11. Private Activity Bond Limitations 38 -i
Section 5.12. Federal Guarantee Prohibition 39 Section 5.13. Rebate Requirement 39 Section 5.14. No Arbitrage 39 Section 5.15. Yield of the Bonds 39 Section 5.16. Maintenance of Tax-Exemption
39 Section 5.17. Continuing Disclosure to Owners 39 Section 5.18. Reduction of Special Taxes 40 Section 5.19. Limits on Special Tax Waivers and Bond Tenders 40 ARTICLE VI INVESTMENTS,
DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY OF THE AUTHORITY Section 6.01. Deposit and Investment of Moneys in Funds 41 Section 6.02. Limited Obligation 42 Section 6.03. Liability
of Authority 42 Section 6.04. Employment of Agents by Authority 43 ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent 44 Section 7.02. Liability of Fiscal Agent 45
Section 7.03. Information 46 Section 7.04. Notice to Fiscal Agent 46 Section 7.05. Compensation, Indemnification 46 ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01.
Amendments Permitted 47 Section 8.02. Owners' Meetings 47 Section 8.03. Procedure for Amendment with Written Consent of Owners 48 Section 8.04. Disqualified Bonds 48 Section 8.05. Effect
of Supplemental Agreement 48 Section 8.06. Endorsement or Replacement of Bonds Issued After Amendments 49 Section 8.07. Amendatory Endorsement of Bonds 49 ARTICLE IX MISCELLANEOUS Section
9.01. Benefits of Agreement Limited to Parties 50 Section 9.02. Successor is Deemed Included in All References to Predecessor 50 Section 9.03. Discharge of Agreement 50 Section 9.04.
Execution of Documents and Proof of Ownership by Owners 51 Section 9.05. Waiver of Personal Liability 51 Section 9.06. Notices to and Demands on Authority and Fiscal Agent 51 Section
9.07. State Reporting Requirements 52 Section 9.08. Partial Invalidity 53 Section 9.09. Unclaimed Moneys 53 Section 9.10. Applicable Law 53 Section 9.11. Conflict with Act 53 Section
9.12. Conclusive Evidence of Regularity 53 Section 9.13. Payment on Business Day 53 Section 9.14. Counterparts 53 EXHIBIT A -FORM OF BOND
FISCAL AGENT AGREEMENT Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds THIS FISCAL AGENT AGREEMENT (the "Agreement"),
dated as of March 1, 2006, is by and between the Temecula Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the laws of the
State of California (the "Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), and U.S.
Bank National Association, a national banking association duly organized and existing under the laws of the United States of America, as fiscal agent (the "Fiscal Agent"). RECITALS:
WHEREAS, the Board of Directors of the Authority has formed the District under the provisions of the Mello-Roos Community Facilities Act of 1982, as amended (Section 53311, et seq. of
the California Government Code) (the "Act") and Resolution No. TPFA 05-01 of the Board of Directors of the Authority adopted on January 11, 2005 (the "Resolution of Formation"); WHEREAS,
the Board of Directors of the Authority, as the legislative body for the District, is authorized under the Act to levy special taxes to pay for the costs of the District and to authorize
the issuance of bonds secured by said special taxes under the Act; WHEREAS, under the provisions of the Act, on February 28, 2006 the Board of Directors of the Authority adopted its
Resolution No. TPFA 06-01 (the "Resolution"), which resolution authorized the issuance and sale of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh
Ranch) 2006 Special Tax Bonds (the "2006 Bonds") in an aggregate principal amount of not to exceed $55,000,000, and authorized the execution of this Agreement; WHEREAS, it is in the
public interest and for the benefit of the Authority, the District and the owners of the Bonds that the Authority enter into this Agreement to provide for the issuance of the Bonds,
the disbursement of proceeds of the Bonds, the disposition of the special taxes securing the Bonds and the administration and payment of the Bonds; and WHEREAS, the Authority has determined
that all things necessary to cause the Bonds, when executed by the Authority for the District and issued as in the Act, the Resolution and this Agreement provided, to be legal, valid
and binding and special obligations of the Authority for the District in accordance with their terms, and all things necessary to cause the creation, authorization, execution and delivery
of this Agreement and the creation, authorization, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized. -1-
AGREEMENT: NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other valuable consideration the receipt and sufficiency of which is hereby acknowledged,
the parties hereto do hereby agree as follows: -2-
ARTICLE I STATUTORY AUTHORITY AND DEFINITIONS Section 1.01. Authority for this Agreement. This Agreement is entered into pursuant to the provisions of the Act and the Resolution. Section
1.02. Agreement for Benefit of Owners of the Bonds. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the Authority shall be for the equal
benefit, protection and security of the Owners of the Bonds. All of the Bonds, without regard to the time or times of their issuance or maturity, shall be of equal rank without preference,
priority or distinction of any of the Bonds over any other thereof, except as expressly provided in or permitted by this Agreement. The Fiscal Agent may become the Owner of any of the
Bonds in its own or any other capacity with the same rights it would have if it were not Fiscal Agent. Section 1.03. Definitions. Unless the context otherwise requires, the terms defined
in this Section 1.03 shall, for all purposes of this Agreement, of any Supplemental Agreement, and of any certificate, opinion or other document herein mentioned, have the meanings herein
specified. All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement, and the 'words "herein,"
"hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or subdivision hereof. "Account Party" means the
property owner that provides a Letter of Credit to secure the payment of Special Taxes on property the Account Party or its affiliates own in the District. "Acquisition Account" means
the account by that name established by Section 4.02(A) within the Improvement Fund. "Acquisition Agreement" means the Acquisition Agreement, dated as of March 1, 2006, between the Authority
and Ashby USA, LLC, as originally executed and as it may be amended from time to time. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et
seq. of the California Government Code. "Administrative Expenses" means costs directly related to the administration of the District consisting of the costs of computing the Special
Taxes and preparing the annual Special Tax collection schedules (whether by the Treasurer or designee thereof or both) and the costs of collecting the Special Taxes (whether by the County
or otherwise); the costs of remitting the Special Taxes to the Fiscal Agent; fees and costs of the Fiscal Agent (including its legal counsel) in the discharge of the duties required
of it under this Agreement; the costs of the Authority, the City or any designee of either the Authority or the City of complying with the disclosure provisions of the Act, the Continuing
Disclosure Agreement and this Agreement, including those related to public inquiries regarding the Special Tax and disclosures to Bondowners and the Original Purchaser; the costs of
the Authority, the City or any designee of either the Authority or the City related to an appeal of the Special Tax; any amounts required to be rebated to the federal government in order
for the Authority to comply with Section 5.13; an allocable share of the salaries of the City staff directly related to the foregoing and a proportionate amount of City general administrative
overhead related thereto. Administrative Expenses shall also include amounts advanced by the Authority or the City for any administrative purpose of the District, including costs related
to prepayments of Special Taxes, recordings related to such prepayments and -3-
satisfaction of Special Taxes, amounts advanced to ensure compliance with Section 5.13, administrative costs related to the administration of any joint community facilities agreement
regarding the District, and the costs of commencing and pursuing foreclosure of delinquent Special Taxes. "Administrative Expense Fund" means the fund by that name established by Section
4.07(A) hereof. "Agreement" means this Fiscal Agent Agreement, as it may be amended or supplemented from time to time by any Supplemental Agreement adopted pursuant to the provisions
hereof. "Annual Debt Service" means, for each Bond Year, the sum of (i) the interest due on the Outstanding Bonds in such Bond Year, assuming that the Outstanding Bonds are retired as
scheduled (including by reason of the provisions of Section 2.03(A)(ii) providing for mandatory sinking payments), and (ii) the principal amount of the Outstanding Bonds due in such
Bond Year (including any mandatory sinking payment due in such Bond Year pursuant to Section 2.03(A)(ii)). "Auditor" means the auditor/controller of the County. "Authority" means the
Temecula Public Financing Authority and any successor thereto."Authority Attorney" means any attorney or firm of attorneys employed by the Authority or the City in the capacity of general
counsel to the Authority. "Authorized Officer" means the Chairperson, Executive Director, Treasurer, Secretary or any other officer or employee authorized by the Board of Directors of
the Authority or by an Authorized Officer to undertake the action referenced in this Agreement as required to be undertaken by an Authorized Officer. "Bond Counsel" means (i) Quint &
Thimmig LLP, or (ii) any other attorney or firm of attorneys acceptable to the Authority and nationally recognized for expertise in rendering opinions as to the legality and tax-exempt
status of securities issued by public entities."Bond Fund" means the fund by that name established by Section 4.05(A) hereof. "Bond Register" means the books for the registration and
transfer of Bonds maintained by the Fiscal Agent under Section 2.08 hereof. "Bond Year" means the one-year period beginning on September 2nd in each year and ending on September 1st
in the following year, except that the first Bond Year shall begin on the Closing Date and end on September 1,2006. "Bonds" means the 2006 Bonds, and, if the context requires, any Parity
Bonds, at any time Outstanding under this Agreement or any Supplemental Agreement. "Build-Out" means, when making calculations pursuant to Section 4.04(H) as to one or more parcels of
property, or otherwise in connection with clause (viii) of the definition "Letter of Credit" in Section 1.03, the assumption that the property contains the number, size and type of homes
projected in the development plans used by the Tax Consultant in connection with its email regarding "Letter of Credit Calculations" dated February 14, 2006, -4-
which provided the initial stated amounts of the Letters of Credit to be delivered to the Fiscal Agent on the Closing Date by two of the landowners in the District, which assumptions
may be adjusted from time to time based upon actual completed construction of homes in the District (as reported in connection with requests to reduce the amount of any Letter of Credit
by or on behalf of an Account Party or as otherwise known by the Tax Consultant). "Business Day" means any day other than (i) a Saturday or a Sunday, or (ii) a day on which banking institutions
in the state in which the Fiscal Agent has its principal corporate trust office are authorized or obligated by law or executive order to be closed. "CDLAC." means the California Debt
and Investment Advisory Commission of the office of the State Treasurer of the State of California or any successor agency or bureau thereto."Capitalized Interest Account" means the
account by that name established within the Bond Fund by Section 4.05(A) hereof. "City" means the City of Temecula, California. "City Account" means the account by that name established
by Section 4.02(A) within the Improvement Fund. "Closing Date" means April 27, 2006, being the date upon which there is a physical delivery of the 2006 Bonds in exchange for the amount
representing the purchase price of the 2006 Bonds by the Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except
as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable proposed, temporary and final regulations
promulgated, and applicable official public guidance published, under the Code. "Continuing Disclosure Agreement" shall mean that certain Continuing Disclosure Agreement executed by
the Authority and the Fiscal Agent on the Closing Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Costs of Issuance" means
items of expense payable or reimbursable directly or indirectly by the Authority or the City and related to the authorization, sale and issuance of the Bonds, which items of expense
shall include, but not be limited to, printing costs, costs of reproducing and binding documents, closing costs, filing and recording fees, initial fees and charges of the Fiscal Agent
including its first annual administration fee, expenses incurred by the City or the Authority in connection with the issuance of the Bonds and the establishment of the District, special
tax consultant fees and expenses, preliminary engineering fees and expenses, Bond (underwriter's) discount, legal fees and charges, including bond counsel, disclosure counsel and landowner's
counsel, financial consultants' fees, charges for execution, transportation and safekeeping of the Bonds, landowner expenses related to the District formation and the issuance of the
Bonds, City costs related to the District formation, and other costs, charges and fees in connection connection with the foregoing. "Costs of Issuance Fund" means the fund by that name
established by Section 4.03(A) hereof. -5-
"County" means the County of Riverside, California. "PTC" means the Depository Trust Company, New York, New York, and its successors and assigns. "Debt Service" means the scheduled amount
of interest and amortization of principal (including principal payable by reason of Section 2.03(A)(ii)) on the 2006 Bonds and the scheduled amount of interest and amortization of principal
payable on any Parity Bonds during the period of computation, excluding amounts scheduled during such period which relate to principal which has been retired before the beginning of
such period."Depository" means (a) initially, DTC, and (b) any other Securities Depository acting as Depository pursuant to Section 2.13. "District" means the Temecula Public Financing
Authority Community Facilities District No. 03-02 (Roripaugh Ranch), formed by the Authority under the Act and the Resolution of Formation. "District Value" means the market value, as
of the date of the appraisal described below and/or the date of the most recent County real property tax roll, as applicable, of all parcels of real property in the District subject
to the levy of the Special Taxes and not delinquent in the payment of any Special Taxes then due and owing, including with respect to such nondelinquent parcels the value of the then
existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in the Improvement Fund and with the proceeds of any proposed series of Parity
Bonds, as determined with respect to any parcel or group of parcels by reference to (i) an appraisal performed within six (6) months of the date of issuance of any proposed Parity Bonds
by an MAI appraiser (the "Appraiser") selected by the Authority, or (ii), in the alternative, the assessed value of all such nondelinquent parcels and improvements thereon as shown on
the then current County real property tax roll available to the Treasurer. It is expressly acknowledged that, in determining the District Value, the Authority may rely on an appraisal
to determine the value of some or all of the parcels in the District and/or the most recent County real property tax roll as to the value of some or all of the parcels in the District.
Neither the Authority nor the Treasurer shall be liable to the Owners, the Original Purchaser or any other person or entity in respect of any appraisal provided for purposes of this
definition or by reason of any exercise of discretion made by any Appraiser pursuant to this definition. "District-wide Maximum Special Taxes" means the maximum Special Taxes that can
be levied on all property in the District assuming Build-Out of all property, as computed from time to time by the Tax Consultant. "EMWD" means the Eastern Municipal Water District.
"EMWD Account" means the account by that name established by Section 4.02(A) within the Improvement Fund. "Fair Market Value" means the price at which a willing buyer would purchase
the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment
is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term "Fair Market Value" means the acquisition price in a bona fide
arm's length transaction (as referenced above) if (i) the investment is a certificate of -6-
deposit that is acquired in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions
and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) that is acquired in accordance with
applicable regulations under the Code, (iii) the investment is a United States Treasury Security—State and Local Government Series that is acquired in accordance with applicable regulations
of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State of California but only if at all times during which the investment
is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States. "Federal Securities" means any of
the following which are non-callable and which at the time of investment are legal investments under the laws of the State of California for funds held by the Fiscal Agent: (i) direct
general obligations of the United States of America (including obligations issued or held in book entry form on the books of the United States Department of the Treasury) and obligations,
the payment of principal of and interest on which are directly or indirectly guaranteed by the United States of America, including, without limitation, such of the foregoing which are
commonly referred to as "stripped" obligations and coupons; or (ii) any of the following obligations of the following agencies of the United States of America: (a) direct obligations
of the Export-Import Bank, (b) certificates of beneficial ownership issued by the Farmers Home Administration, (c) participation certificates issued by the General Services Administration,
(d) mortgagebacked bonds or pass-through obligations issued and guaranteed by the Government National Mortgage Association, (e) project notes issued by the United States Department of
Housing and Urban Development, and (f) public housing notes and bonds guaranteed by the United States of America. "Fiscal Agent" means the Fiscal Agent appointed by the Authority and
acting as an independent fiscal agent with the duties and powers herein provided, its successors and assigns, and any other corporation or association which may at any time be substituted
in its place, as provided in Section 7.01. "Fiscal Year" means the twelve-month period extending from July 1 in a calendar year to June 30 of the succeeding year, both dates inclusive.
"Improvement Fund" means the fund by that name created by and held by the Fiscal Agent pursuant to Section 4.02(A) hereof. "Independent Financial Consultant" means any consultant or
firm of such consultants appointed by the Authority, the City or the Treasurer, and who, or each of whom: (i) has experience in matters relating to the issuance and/or administration
of bonds under the Act; (ii) is in fact independent and not under the domination of the Authority; (iii) does not have any substantial interest, direct or indirect, with or in the Authority,
or any owner of real property in the District, or any real property in the District; and (iv) is not connected with the City or the Authority as an officer or employee of the City or
the Authority, but who may be regularly retained to make reports to the City or the Authority. "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service",
30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services' "Called Bond Service", 65 Broadway, 16th Floor, New York, New York 10006;
Moody's Investors Service "Municipal and Government", 99 Church Street, New York, New York 10007, Attention: Municipal News Reports; Standard & Poor's Corporation "Called Bond Record",
25 Broadway, 3rd Floor, New York, New York 10004; and, in accordance with then current guidelines of the Securities and Exchange -7-
Commission, such other addresses and/or such services providing information with respect to called bonds as the Authority may designate in an Officer's Certificate delivered to the Fiscal
Agent. "Interest Payment Dates" means March 1 and September 1 of each year, commencing September 1,2006. "Joint Community Facilities Agreement -EMWD" means the Joint Community Facilities
Agreement, dated as of January 1, 2005, among the Authority, EMWD and Ashby USA, LLC. "Letter of Credit" means a standby letter of credit, which is: (i) irrevocable during its term;
(ii) in a form reasonably satisfactory to the Treasurer and the Original Purchaser; (iii) for the benefit of the Fiscal Agent; (iv) issued by a federal or state chartered bank or other
financial institution reasonably acceptable to the Treasurer and the Original Purchaser, which bank's or institution's unsecured debt obligations are rated at least "A-" or better by
Moody's or S&P;(v) at the time of delivery thereof to the Fiscal Agent for purposes of this Agreement, accompanied by one or more opinions addressed to the Fiscal Agent and the Authority
to the effect, singly or together, that the Letter of Credit is a legal, valid and binding obligation of the provider thereof, enforceable against the provider thereof in accordance
with its terms, except as limited by applicable reorganization, insolvency, liquidation, readjustment of debt, moratorium or other similar laws affecting the enforcement of rights of
creditors generally as such laws may be applied in the event of a reorganization, insolvency, liquidation, readjustment of debt or other similar proceeding of or moratorium applicable
to the provider thereof and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); (vi) for a term of at least
one year, effective from no later than the date it is delivered to the Fiscal Agent, and any Letter of Credit provided in substitution for any then outstanding Letter of Credit shall
be for a term of at least one year commencing not later than the expiration date of the Letter of Credit for which it is being substituted; (vii) for the account of any entity other
than the City, the Authority, the District or any other governmental entity; (viii) in a stated amount equal to two years estimated expected annual Special Taxes to be levied on the
County Assessor's parcels to which it pertains assuming Build-Out of such parcels; and (ix) not secured, as to the reimbursement of any draws thereon, by any property located in the
District, or if so secured, any such security shall be expressly subordinate to the lien of the Special Taxes. -8-
A standby letter of credit may be accompanied by a confirming letter of credit for the purposes of satisfying the requirements in clause (iv) above; and if a confirming letter of credit
is provided, the legal opinion referred to in clause (v) above shall be with respect to the confirming letter of credit and not the related Letter of Credit. Any Letter of Credit delivered
to the Fiscal Agent shall be accompanied by a written certificate from the provider thereof or the account party thereto which identifies the County Assessor's parcels in the District
to which such Letter of Credit initially pertains. "Maximum Annual Debt Service" means the largest Annual Debt Service for any Bond Year after the calculation is made through the final
maturity date of any Outstanding Bonds. "Moody's" means Moody's Investors Service, and any successor thereto. "Officer's Certificate" means a written certificate of the Authority signed
by an Authorized Officer of the Authority. "Ordinance" means any ordinance of the Authority levying the Special Taxes. "Original Purchaser" means Stone & Youngberg LLC, the first purchaser
of the 2006 Bonds from the Authority. "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 8.04) all Bonds except:
(i) Bonds theretofore canceled by the Fiscal Agent or surrendered to the Fiscal Agent for cancellation; (ii) Bonds paid or deemed to have been paid within the meaning of Section 9.03;
and (iii) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Authority pursuant to this Agreement or any Supplemental
Agreement. "Owner" or "Bondowner" means any person who shall be the registered owner of any Outstanding Bond.
"Parcel Liens" means, with respect to any parcel or parcels of real property in the District, sum of: (i) the aggregate principal amount of all Bonds then Outstanding allocable to such
parcel or parcels based upon the portion of the debt service payable on the Bonds from the Special Taxes levied (or that, but for capitalized interest on the Bonds, could be levied)
on such parcel or parcels in the then annual Fiscal Year, plus (ii) the aggregate principal amount of any fixed assessment liens on the parcel or parcels, plus (iii) a portion of the
aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially from special taxes to be levied on such parcel or
parcels (the "Other District Bonds") equal to the aggregate principal amount of the Other District Bonds multiplied by a fraction, the numerator of which is the amount of special taxes
levied for the Other District Bonds on such parcel or parcels, and the denominator of which is the total amount of special taxes levied for the Other District Bonds on all parcels of
land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined based upon the maximum special taxes which could be levied in the year
year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most recent available Fiscal Year. "Parcel Value" means the market value,
as of the date of the appraisal described below and/or the date of the most recent County real property tax roll, as applicable, of parcels of real property in the District identified
by an Account Party (the "Identified Parcels"), which Identified Parcels are (i) parcels in the District with respect to which the -9-
Account Party has provided a Letter of Credit, (ii) are subject to the levy of the Special Taxes, and (iii) are not delinquent in the payment of any Special Taxes then due and owing,
including with respect to the Identified Parcels the value of the then existing improvements and any facilities to be constructed or acquired with any amounts then on deposit in the
Improvement Fund, all as determined with respect to the Identified Parcels by reference to (A) an appraisal (or an update to a prior appraisal) performed within the six (6) months prior
to the date the Treasurer prepares the written direction described in Section 4.04(H)(iii) by an MAI appraiser (the "Appraiser") selected by the Authority, or (B), in the alternative,
the assessed value of all the Identified Parcels and improvements thereon as shown on the then current County real property tax roll available to the Treasurer. It is expressly acknowledged
that, in determining a Parcel Value, the Authority may rely on an appraisal to determine the value of some or all of the Identified Parcels and/or the most recent County real property
tax roll as to the value of some or all of the Identified Parcels. Neither the Authority nor the Treasurer shall be liable to the Owners, the Original Purchaser or any other person or
entity in respect of any appraisal provided for purposes of this definition or by reason of any exercise of discretion made by any Appraiser pursuant to this definition. "Parity Bonds"
means bonds issued by the Authority for the District on a parity with any then Outstanding Bonds pursuant to Section 2.14 hereof. "Participating Underwriter" shall have the meaning ascribed
thereto in the Continuing Disclosure Agreement. "Permitted Investments" means any of the following, but only to the extent that the same are acquired at Fair Market Value: (a) Federal
Securities. (b) Time certificates of deposit or negotiable certificates of deposit issued by a state or nationally chartered bank (including the Fiscal Agent and its affiliates) or trust
company, or a state or federal savings and loan association; provided, that the certificates of deposit shall be one or more of the following: continuously and fully insured by the Federal
Deposit Insurance Corporation, and/or continuously and fully secured by securities described in subdivision (a) of this definition of Permitted Investments which shall have a market
value, as determined on a markedto-market basis calculated at least weekly, and exclusive of accrued interest, of not less than 102 percent of the principal amount of the certificates
of deposit. (c) Commercial paper of "prime" quality of the highest ranking or of the highest letter and numerical rating as provided by either Moody's or S&P, which commercial paper
is limited to issuing corporations that are organized and operating within the United States of America and that have total assets in excess of five hundred million dollars ($500,000,000)
and that have an "A" or higher rating for the issuer's debentures, other than commercial paper, by either Moody's or S&P, provided that purchases of eligible commercial paper may not
exceed 180 days' maturity nor represent more than 10 percent of the outstanding commercial paper of an issuing corporation. (d) A repurchase agreement with a state or nationally charted
bank or trust company or a national banking association or government bond dealer reporting to, trading with, and recognized as a primary dealer by the Federal Reserve Bank of New York,
provided that all of the following conditions are satisfied: (1) the agreement is secured by any one or more of the securities described in subdivision -10-
(a) of this definition of Permitted Investments, (2) the underlying securities are required by the repurchase agreement to be held by a bank, trust company, or primary dealer having
a combined capital and surplus of at least one hundred million dollars ($100,000,000) and which is independent of the issuer of the repurchase agreement, and (3) the underlying securities
are maintained at a market value, as determined on a marked-to-market basis calculated at least weekly, of not less than 103 percent of the amount so invested. (e) An investment agreement
or guaranteed investment contract with, or guaranteed by, a financial institution or an insurance company the long-term unsecured obligations or claims paying ability, as applicable,
of which, at the time of the investment, are rated "AA-" (or its equivalent) or better by Moody's and S&P. (f) The Local Agency Investment Account of the State Treasurer of the State
of California as permitted by the State Treasurer pursuant to Section 16429.1 of the California Government Code. (g) Investments in a money market account (including any accounts of
the Fiscal Agent or its affiliates) rated in the highest rating category by Moody's or S&P. "Principal Office" means the principal corporate trust office of the Fiscal Agent set forth
in Section 9.06, except for the purpose of maintenance of the registration books and presentation of Bonds for payment, transfer or exchange, such term shall mean the office at which
the Fiscal Agent conducts its corporate agency business, or such other or additional offices as may be designated by the Fiscal Agent. "Project" means the facilities eligible to be funded
by the District more particularly described in the Resolution of Formation. "Public Works Administration Account" means the account by that name created and held by the Fiscal Agent
pursuant to Section 4.02(A) hereof. "Rate and Method of Apportionment of Special Taxes" means the rate and method of apportionment of special taxes for the District, as approved pursuant
to the Resolution of Formation, and as it may be modified in accordance with the Act. "Record Date" means the fifteenth day of the month next preceding the month of the applicable Interest
Payment Date, whether or not such day is a Business Day. "Refunding Bonds" means bonds issued by the Authority for the District the net proceeds of which are used to refund all or a
portion of the then Outstanding Bonds; provided that the debt service on the Refunding Bonds in any Bond Year is not in excess of the debt service on the Bonds being refunded and the
final maturity of the Refunding Bonds is not later than the final maturity of the Bonds being refunded. "Refunding Fund" means the fund by that name established pursuant to Section 4.08(A)."Reserve
Fund" means the fund by that name established pursuant to Section 4.04(A) hereof. "Reserve Requirement" means, as of any date of calculation an amount equal to the least of (i) the then
Maximum Annual Debt Service, (ii) one hundred twenty-five percent (125%) of the then average Annual Debt Service, or (iii) ten percent (10%) of the then -11-
Outstanding principal amount of the Bonds. The Reserve Requirement as of the Closing Date is $3,503,850.00. "Resolution" means Resolution No. TPFA 06-01, adopted by the Board of Directors
of the Authority on February 28, 2006. "Resolution of Formation" means Resolution No. TPFA 05-01, adopted by the Board of Directors of the Authority on January 11, 2005. "Resolution
of Intention" means Resolution No. TPFA 04-08, adopted by the Board of Directors of the Authority on August 24, 2004, as amended by Resolution No. 04-10, adopted by the Board of Directors
of the Authority on September 28, 2004. "S&P." means Standard & Poor's Ratings Service, a division of McGraw-Hill, and any successor thereto. "Securities Depositories" means The Depository
Trust Company, 55 Water Street, 50th Floor, New York, New York 10041-0099, Attention: Call Notification Department, Fax (212) 855-7232; and, in accordance with then current guidelines
of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in an Officer's Certificate delivered to the
Fiscal Agent. "Special Tax Fund" means the fund by that name established by Section 4.06(A) hereof. "Special Tax Prepayments" means the proceeds of any Special Tax prepayments received
by the Authority, as calculated pursuant to the Rate and Method of Apportionment of Special Taxes, less any administrative fees or penalties collected as part of any such prepayment.
"Special Tax Prepayments Account" means the account by that name established within the Bond Fund by Section 4.05(A) hereof. "Special Tax Revenues" means the proceeds of the Special
Taxes received by the Authority, including any scheduled payments and any prepayments thereof, interest thereon and proceeds of the redemption or sale of property sold as a result of
foreclosure of the lien of the Special Taxes to the amount of said lien and interest thereon; provided that amounts collected in respect of delinquent Special Taxes shall not be Special
Tax Revenues to the extent, and only to the extent, of any proceeds of a draw on a Letter of Credit under Section 4.04(H)(ii)(a) hereof (which amounts shall be repaid to the Letter of
Credit provider, as specified in Section 4.04(H)(ii)(a)). "Special Tax Revenues" does not include any penalties collected in connection with delinquent Special Taxes. "Special Taxes"
means the special taxes levied within the District pursuant to the Act, the Ordinance and this Agreement. "Supplemental Agreement" means an agreement the execution of which is authorized
by a resolution which has been duly adopted by the Authority under the Act and which agreement is amendatory of or supplemental to this Agreement, but only if and to the extent that
such agreement is specifically authorized hereunder. "Tax Consultant" means David Taussig & Associates, Inc. or another independent financial or tax consultant retained by the Authority
or the City for the purpose of computing the Special Taxes. -12-
"Treasurer" means the Treasurer of the Authority or such other officer or employee of the Authority performing the functions of the chief financial officer of the Authority. "2006 Bonds"
means the Bonds so designated and authorized to be issued under Section 2.01 hereof. -13-
ARTICLE II THE BONDS Section 2.01. Principal Amount: Designation. Bonds in the aggregate principal amount of Fifty-Five Million Dollars ($55,000,000) are authorized to be issued by the
Authority for the District under and subject to the terms of the Resolution and this Agreement, the Act and other applicable laws of the State of California. The first series of the
Bonds, the 2006 Bonds, shall be designated as the "Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds," shall be in
the initial principal amount of $51,250,000.00, and shall be subject to the provisions of this Agreement. Any Parity Bonds shall be issued, subject to compliance with Section 2.14 hereof,
pursuant to this Agreement as supplemented by a Supplemental Agreement which complies with the provisions of Section 2.14 hereof. Section 2.02. Terms of the 2006 Bonds. (A) Form: Denominations.
The 2006 Bonds shall be issued as fully registered Bonds without coupons in the denomination of $5,000 or any integral multiple in excess thereof. (B) Date of 2006 Bonds. The 2006 Bonds
shall be dated the Closing Date. (C) CUSIF Identification Numbers. "CUSIP" identification numbers shall be imprinted on the Bonds, but such numbers shall not constitute a part of the
contract evidenced by the Bonds and any error or omission with respect thereto shall not constitute cause for refusal of any purchaser to accept delivery of and pay for the Bonds. In
addition, failure on the part of the Authority or the Fiscal Agent to use such CUSIP numbers in any notice to Owners shall not constitute an event of default or any violation of the
Authority's contract with such Owners and shall not impair the effectiveness of any such notice. (D) Maturities, Interest Rates. The 2006 Bonds shall mature and become payable on September
1 in each of the years, and shall bear interest at the rates per annum as follows: Maturity Date (September 1) Principal Amount Interest Rate 2007 $ 765,000 4.00% 2008 795,000 4.20 2009
830,000 4.35 2010 865,000 4.50 2011 905,000 4.65 2012 945,000 4.75 2013 990,000 4.90 2014 1,040,000 5.00 2015 1,090,000 5.05 2016 1,145,000 5.10 2026 15,490,000 5.45 2036 26,390,000
5.50 (E) Interest. The Bonds shall bear interest at the rates set forth above payable on the Interest Payment Dates in each year. Interest shall be calculated on the basis of a 360-day
year composed of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication thereof unless (i) it is authenticated -14-
on an Interest Payment Date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated prior to an Interest Payment Date and after the close
of business on the Record Date preceding such Interest Payment Date, in which event it shall bear interest from such Interest Payment Date, or (iii) it is authenticated prior to the
Record Date preceding the first Interest Payment Date, in which event it shall bear interest from the Closing Date; provided, however, that if at the time of authentication of a Bond,
interest is in default thereon, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. (F) Method
of Payment. Interest on the Bonds (including the final interest payment upon maturity or earlier redemption) is payable by check of the Fiscal Agent mailed on the Interest Payment Dates
by first class mail to the registered Owner thereof at such registered Owner's address as it appears on the registration books maintained by the Fiscal Agent at the close of business
on the Record Date preceding the Interest Payment Date, or by wire transfer (i) to the Depository (so long as the Bonds are in book-entry form pursuant to Section 2.13), or (ii) to an
account within the United States made on such Interest Payment Date upon written instructions of any Owner of $1,000,000 or more in aggregate principal amount of Bonds received before
the applicable Record Date, which instructions shall continue in effect until revoked in writing, or until such Bonds are transferred to a new Owner. The principal of the Bonds and any
premium on the Bonds are payable by check in lawful money of the United States of America upon surrender of the Bonds at the Principal Office of the Fiscal Agent. All Bonds paid by the
Fiscal Agent pursuant to this Section shall be canceled by the Fiscal Agent. The Fiscal Agent shall destroy the canceled Bonds and issue a certificate of destruction thereof to the Authority
upon the Authority's request. Section 2.03. Redemption. (A) Redemption Dates. (i) Optional Redemption. The 2006 Bonds maturing on and after September 1, 2015 are subject to optional
redemption prior to their stated maturity on any Interest Payment Date occurring on or after September 1, 2014, as a whole, or in part among maturities so as to maintain substantially
level debt service on the Bonds and by lot within a maturity, at a redemption price (expressed as a percentage of the principal amount of the 2006 Bonds to be redeemed), as set forth
below, together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, 2014 and March 1, 2015 102% September 1, 2015 and March
1, 2016 101 September 1, 2016 and any Interest Payment 100 Date thereafter (ii) Mandatory Sinking Payment Redemption. The 2006 Bonds maturing on September 1,2026, are subject to mandatory
sinking payment redemption in part on September 1, 2017, and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed,
together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: -15-
Redemption Date (September 1) Sinking Payments 2017 $1,205,000 2018 1,270,000 2019 1,340,000 2020 1,415,000 2021 1,490,000 2022 1,570,000 2023 1,660,000 2024 1,750,000 2025 1,845,000
2026 (maturity) 1,945,000 The 2006 Bonds maturing on September 1, 2036, are subject to mandatory sinking payment redemption in part on September 1,2027, and on each September 1 thereafter
to maturity, by lot, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from
sinking payments as follows: Redemption Date (September 1) Sinking Payments 2027 $2,050,000 2028 2,165,000 2029 2,280,000 2030 2,405,000 2031 2,540,000 2032 2,680,000 2033 2,825,000
2034 2,980,000 2035 3,145,000 2036 (maturity) 3,320,000 The amounts in the foregoing tables shall be reduced to the extent practicable so as to maintain level debt service on the 2006
Bonds, as a result of any prior partial redemption of the 2006 Bonds pursuant to Section 2.03(A)(i) above or Section 2.03(A)(iii) or (iv) below, as specified in writing by the Treasurer
to the Fiscal Agent. (iii) Redemption From Special Tax Prepayments. Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to Section 4.05(B)(ii) and
Section 4.04(F), respectively, shall be used to redeem 2006 Bonds on the next Interest Payment Date for which notice of redemption can timely be given under Section 2.03(D), by lot and
allocated among maturities of the 2006 Bonds so as to maintain substantially level debt service on the Bonds, at a redemption price (expressed as a percentage at the principal amount
of the Bonds to be redeemed), as set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices Any Interest Payment Date from September
1, 2006 to and including March 1, 2014 103% September 1, 2014 and March 1, 2015 102 September 1, 2015 and March 1, 2016 101 September 1, 2016 and any Interest Payment Date thereafter
100 -16-
(iv) Mandatory Redemption From Improvement Fund Transfer. The 2006 Bonds are subject to mandatory redemption on the next Interest Payment Date for which notice of redemption can timely
be given under Section 2.03(D), in part, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption,
without premium, from amounts transferred from the Improvement Fund to the Bond Fund pursuant to Section 4.02(D). (B) Notice to Fiscal Agent. The Authority shall give the Fiscal Agent
written notice of its intention to redeem 2006 Bonds pursuant to subsection (A)(i), (A)(iii) or (A)(iv) not less than forty-five (45) days prior to the applicable redemption date, or
such lesser number of days as shall be consented to by the Fiscal Agent. (C) Purchase of Bonds in Lieu of Redemption. In lieu of redemption under Section 2.03(A), moneys in the Bond
Fund may be used and withdrawn by the Fiscal Agent for purchase of Outstanding 2006 Bonds, upon the filing filing with the Fiscal Agent of an Officer's Certificate requesting such purchase,
at public or private sale as and when, and at such prices (including brokerage and other charges) as such Officer's Certificate may provide, but in no event may Bonds be purchased at
a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if such Bonds were to be redeemed in accordance
with this Agreement. (D) Redemption Procedure by Fiscal Agent. The Fiscal Agent shall cause notice of any redemption to be mailed by first class mail, postage prepaid, at least thirty
(30) days but not more than sixty (60) days prior to the date fixed for redemption, to the Original Purchaser, to the Securities Depositories, to one or more Information Services, and
to the respective registered Owners of any Bonds designated for redemption, at their addresses appearing on the Bond registration books in the Principal Office of the Fiscal Agent; but
such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such notice, or any defect therein, shall not affect the validity of the proceedings
for the redemption of such Bonds. Such notice shall state the redemption date and the redemption price and, if less than all of the then Outstanding Bonds are to be called for redemption,
shall designate the CUSIP numbers and Bond numbers of the Bonds to be redeemed by giving the individual CUSIP number and Bond number of each Bond to be redeemed or shall state that all
Bonds between two stated Bond numbers, both inclusive, are to be redeemed or that all of the Bonds of one or more maturities have been called for redemption, shall state as to any Bond
called in part the principal amount thereof to be redeemed, and shall require that such Bonds be then surrendered at the Principal Office of the Fiscal Agent for redemption at the said
redemption price, and shall state that further interest on such Bonds will not accrue from and after the redemption date. Upon the payment of the redemption price of Bonds being redeemed,
each check or other transfer of funds issued for such purpose shall, to the extent practicable, bear the CUSIP number identifying, by issue and maturity, of the Bonds being redeemed
with the proceeds of such check or other transfer. Whenever provision is made in this Agreement for the redemption of less than all of the Bonds or any given portion thereof, the Fiscal
Agent shall select the Bonds to be redeemed, from all Bonds or such given portion thereof not previously called for redemption, among maturities as directed in writing by the Treasurer
(who shall specify Bonds to be redeemed so as to maintain, as much as practicable, substantially level debt -17-
service on the Bonds), and by lot within a maturity in any manner which the Fiscal Agent deems appropriate. Upon surrender of Bonds redeemed in part only, the Authority shall execute
and the Fiscal Agent shall authenticate and deliver to the registered Owner, at the expense of the Authority, a new Bond or Bonds, of the same series and maturity, of authorized denominations
in aggregate principal amount equal to the unredeemed portion of the Bond or Bonds. (E) Effect of Redemption. From and after the date fixed for redemption, if funds available for the
payment of the principal of, and interest and any premium on, the Bonds so called for redemption shall have been deposited in the Bond Fund, such Bonds so called shall cease to be entitled
to any benefit under this Agreement other than the right to receive payment of the redemption price, and no interest shall accrue thereon on or after the redemption date specified in
such notice. All Bonds redeemed and purchased by the Fiscal Agent pursuant to this Section, and any Bonds paid at maturity, shall be canceled by the Fiscal Agent. The Fiscal Agent shall
destroy the canceled Bonds and issue a certificate of destruction thereof to the Authority. Section 2.04. Form of Bonds. The 2006 Bonds, the form of Fiscal Agent's certificate of authentication
and the form of assignment, to appear thereon, shall be substantially in the forms, respectively, set forth in Exhibit A attached hereto and by this reference incorporated herein, with
necessary or appropriate variations, omissions and insertions, as permitted or required by this Agreement, the Resolution and the Act. Section 2.05. Execution of Bonds. The Bonds shall
be executed on behalf of the Authority by the manual or facsimile signatures of its Chairperson and Secretary who are in office on the date of adoption of this Agreement or at any time
thereafter, and the seal of the Authority shall be impressed, imprinted or reproduced by facsimile signature thereon. If any officer whose signature appears on any Bond ceases^to be
such officer before delivery of the Bonds to the owner, such signature shall nevertheless be as effective as if the officer had remained in office until the delivery of the Bonds to
the owner. Any Bond may be signed and attested on behalf of the Authority by such persons as at the actual date of the execution of such Bond shall be the proper officers of the Authority
although at the nominal date of such Bond any such person shall not have been such officer of the Authority. Only such Bonds as shall bear thereon a certificate of authentication in
substantially the form set forth in Exhibit A, executed and dated by the Fiscal Agent, shall be valid or obligatory for any purpose or entitled to the benefits of this Agreement, and
such certificate of authentication of the Fiscal Agent shall be conclusive evidence that the Bonds registered hereunder have been duly authenticated, registered and delivered hereunder
and are entitled to the benefits of this Agreement. Section 2.06. Transfer of Bonds. Any Bond may, in in accordance with its terms, be transferred, upon the books required to be kept
pursuant to the provisions of Section 2.08 by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied
by delivery of a duly written instrument of transfer in a form acceptable to the Fiscal Agent. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection
with any such transfer shall be paid by the Authority. The Fiscal Agent shall collect from the Owner requesting such transfer any tax or other governmental charge required to be paid
with respect to such transfer. -18-
Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Fiscal Agent shall authenticate and deliver a new Bond or Bonds, for like aggregate
principal amount of authorized denomination(s). No transfers of Bonds shall be required to be made (i) fifteen days prior to the date established by the Fiscal Agent for selection of
Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between a Record Date and the succeeding Interest Payment Date. Section 2.07.
Exchange of Bonds. Bonds may be exchanged at the Principal Office of the Fiscal Agent for a like aggregate principal amount of Bonds of authorized denominations and of the same series
and maturity. The cost for any services rendered or any expenses incurred by the Fiscal Agent in connection with any such exchange shall be paid by the Authority. The Fiscal Agent shall
collect from the Owner requesting such exchange any tax or other governmental charge required to be paid with respect to such exchange. No exchanges of Bonds shall be required to be
made (i) fifteen days prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption,
or (iii) between a Record Date and the succeeding Interest Payment Date. Section 2.08. Bond Register.
The Fiscal Agent will keep or cause to be kept, at its Principal Office sufficient books for the registration and transfer of the Bonds, which books shall show the series number, date,
amount, rate of interest and last known Owner of each Bond and shall at all times be open to inspection by the Authority during regular business hours upon reasonable notice; and, upon
presentation for such purpose, the Fiscal Agent shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on said books,
the ownership of the Bonds as hereinbefore provided. The Authority and the Fiscal Agent will will treat the Owner of any Bond whose name appears on the Bond register as the absolute
Owner of such Bond for any and all purposes, and the Authority and the Fiscal Agent shall not be affected by any notice to the contrary. The Authority and the Fiscal Agent may rely on
the address of the Bondowner as it appears in the Bond register for any and all purposes. Section 2.09. Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable
for definitive Bonds when ready for delivery. The temporary Bonds may be printed, lithographed or typewritten, shall be of such authorized denominations as may be determined by the Authority,
and may contain such reference to any of the provisions of this Agreement as may be appropriate. Every temporary Bond shall be executed by the Authority upon the same conditions and
in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds it will execute and furnish definitive Bonds without delay and thereupon the temporary
Bonds shall be surrendered, for cancellation, in exchange for the definitive Bonds at the Principal Office of the Fiscal Agent or at such other location as the Fiscal Agent shall designate,
and the Fiscal Agent shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so
exchanged, the temporary Bonds shall be entitled to the same benefits under to this Agreement as definitive Bonds authenticated and delivered hereunder. -19-
Section 2.10. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Fiscal Agent
shall authenticate and deliver, a new Bond of like tenor and principal amount in exchange and substitution for the Bond so mutilated, but only upon surrender to the Fiscal Agent of the
Bond so mutilated. Every mutilated Bond so surrendered to the Fiscal Agent shall be canceled by it and destroyed by the Fiscal Agent who shall deliver a certificate of destruction thereof
to the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Fiscal Agent and, if such evidence be satisfactory
to it and indemnity for the Authority and the Fiscal Agent satisfactory to the Fiscal Agent shall be given, the Authority, at the expense of the Owner, shall execute, and the Fiscal
Agent shall authenticate and deliver, a new Bond of like tenor and principal amount in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Authority may require
payment of a sum not exceeding the actual cost of preparing each new Bond delivered under this Section and of the expenses which may be incurred by the Authority and the Fiscal Agent
for the preparation, execution, authentication and delivery. Any Bond delivered under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall
constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen is at any time enforceable by
anyone, and shall be equally and proportionately entitled to the benefits of this Agreement with all other Bonds issued pursuant to this Agreement. Section 2.11. Limited Obligation.
All obligations of the Authority under this Agreement and the Bonds shall be special obligations of the Authority, payable solely from the Special Tax Revenues and the funds pledged
therefore hereunder. Neither the faith and credit nor the taxing power of the Authority (except to the limited extent set forth herein) or the State of California or any political subdivision
thereof is pledged to the payment of the Bonds. The City has no obligations whatsoever under this Agreement or otherwise with respect to the Bonds. Section 2.12. No Acceleration. The
principal of the Bonds shall not be subject to acceleration hereunder. Nothing in this Section shall in any way prohibit the redemption of Bonds under Section 2.03 hereof, or the defeasance
of the Bonds and discharge of this Agreement under Section 9.03 hereof. Section 2.13. Book-Entry System. DTC shall act as the initial Depository for the Bonds. One Bond for each maturity
of the Bonds shall be initially executed, authenticated, and delivered as set forth herein with a separate fully registered certificate (in print or typewritten form). Upon initial execution,
authentication, and delivery, the ownership of the Bonds shall be registered in the Bond Register kept by the Fiscal Agent for the Bonds in the name of Cede & Co., as nominee of DTC
or such nominee as DTC shall appoint in writing.The representatives of the Authority and the Fiscal Agent are hereby authorized to take any and all actions as may be necessary and not
inconsistent with this Agreement to qualify the Bonds for the Depository's book-entry system, including the execution of the Depository's required representation letter. With respect
to Bonds registered in the Bond Register in the name of Cede & Co., as nominee of DTC, neither the Authority nor the Fiscal Agent shall have any responsibility or obligation to any broker-dealer,
bank, or other financial institution for which DTC holds Bonds as Depository from time to time (the "DTC Participants") or to any person for which a DTC Participant acquires an interest
in the Bonds (the "Beneficial Owners"). Without limiting the immediately preceding sentence, neither the Authority nor the Fiscal Agent -20-
shall have any responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co., or any DTC Participant with respect to any ownership interest in the Bonds,
(ii) the delivery to any DTC Participant, any Beneficial Owner, or any other person, other than DTC, of any notice with respect to the Bonds, including any notice of redemption, (iii)
the selection by the Depository of the beneficial interests in the Bonds to be redeemed in the event the Authority elects to redeem the Bonds in part, (iv) the payment to any DTC Participant,
any Beneficial Owner, or any other person, other than DTC, of any amount with respect to the principal of or interest on the Bonds, or (v) any consent given or other action taken by
the Depository as Owner of the Bonds. Except as set forth above, the Fiscal Agent may treat as and deem DTC to be the absolute Owner of each Bond for which DTC is acting as Depository
for the purpose of payment of the principal of and interest on such Bonds, for the purpose of giving notices of redemption and other matters with respect to such Bonds, for the purpose
of registering transfers with respect to such Bonds, and for all purposes whatsoever. The Fiscal Agent shall pay all principal of and interest on the Bonds only to or upon the order
of the Owners as shown on the Bond Register, and all such payments shall be valid and effective to fully satisfy and discharge all obligations with respect to the principal of and interest
on the Bonds to the extent of the sums or sums so paid. No person other than an Owner, as shown on the Bond Register, shall receive a physical Bond. Upon delivery by DTC to the Fiscal
Agent of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the transfer provisions in Section 2.06 hereof, references
to "Cede & Co." in this Section 2.13 shall refer to such new nominee of DTC. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written
notice to the Fiscal Agent during any time that the Bonds are Outstanding, and discharging its responsibilities with respect thereto under applicable law. The Authority may terminate
the services of DTC with respect to the Bonds if it determines that DTC is unable to discharge its responsibilities with respect to the Bonds or that continuation of the system of book-entry
transfers through DTC is not in the best interest of the Beneficial Owners, and the Authority shall mail notice of such termination to the Fiscal Agent. Upon the termination of the services
of DTC as provided in the previous paragraph, and if no substitute Depository willing to undertake the functions hereunder can be found which is willing and able to undertake such functions
upon reasonable or customary terms, or if the Authority determines that it is in the best interest of the Beneficial Owners of the Bonds that they be able to obtain certificated Bonds,
the Bonds shall no longer be restricted to being registered in the Bond Register of the Fiscal Agent in the name of Cede & Co., as nominee of DTC, but may be registered in whatever name
or name the Owners shall designate at that time, in accordance with Section 2.06. To the extent that the Beneficial Owners are designated as the transferee by the Owners, in accordance
with Section 2.06, the Bonds will be delivered to such Beneficial Owners as soon as practicable. Section 2.14. Issuance of Parity Bonds. The Authority may issue one or more series of
Bonds, in addition to the 2006 Bonds authorized under Section 2.01 hereof, by means of a Supplemental Agreement and without the consent of any Bondowners, upon compliance with the provisions
of this Section 2.14. Any such Bonds that comply with the requirements of this Section 2.14 shall be Parity Bonds, and such Parity Bonds shall constitute Bonds hereunder and shall be
secured by a lien on the Special Tax Revenues and funds pledged -21-
for the payment of the Bonds hereunder on a parity with all other Bonds Outstanding hereunder. The Authority may issue the Parity Bonds subject to the following specific conditions precedent:
(A) Current Compliance. The Authority shall be in compliance on the date of issuance of the Parity Bonds with all covenants set forth in this Agreement and all Supplemental Agreements.
(B) Payment Dates. The Supplemental Agreement providing for the issuance of such Parity Bonds shall provide that interest thereon shall be payable on March 1 and September 1, and principal
thereof shall be payable on September 1 in any year in which principal is payable (provided that there shall be no requirement that any Parity Bonds pay interest on a current basis).
(C) Funds and Accounts: Reserve Fund Deposit. The Supplemental Agreement providing for the issuance of such Parity Bonds may provide for the establishment of separate funds and accounts,
and shall provide for a deposit to the Reserve Fund in an amount necessary so that the the amount on deposit therein, following the issuance of such Parity Bonds, is equal to the Reserve
Requirement. (D) Value-to-Lien Ratio. The District Value shall be at least three times the sum of: (i) the aggregate principal amount of all Bonds then Outstanding, plus (ii) the aggregate
principal amount of the series of Parity Bonds proposed to be issued, plus (iii) the aggregate principal amount of any fixed assessment liens on the parcels in the District subject to
the levy of Special Taxes, plus (iv) a portion of the aggregate principal amount of any and all other community facilities district bonds then outstanding and payable at least partially
from special taxes to be levied on parcels of land within the District (the "Other District Bonds") equal to the aggregate principal amount of the Other District Bonds multiplied by
a fraction, the numerator of which is the amount of special taxes levied for the Other District Bonds on parcels of land within the District, and the denominator of which is the total
amount of special taxes levied for the Other District Bonds on all parcels of land against which the special taxes are levied to pay the Other District Bonds (such fraction to be determined
based upon the maximum special taxes which could be levied in the year in which maximum annual debt service on the Other District Bonds occurs), based upon information from the most
recent available Fiscal Year. (E) The Special Tax Coverage. The Authority shall obtain a certificate of a Tax Consultant to the effect that (i) the amount of the maximum Special Taxes
that may be levied in each Fiscal Year, less an amount sufficient to pay annual Administrative Expenses (as determined by the Treasurer), shall be at least one hundred ten percent (110%)
of the total Annual Debt Service for each such Fiscal Year on the Bonds and the proposed Parity Bonds, and (ii) the Assigned Special Tax that may be levied on Developed Property (as
such term is defined in the Rate and Method of Apportionment of Special Taxes for the District) District) in the next Fiscal Year, based upon the status of the land in the District as
of the date of issuance of the Parity Bonds, shall not be less than the aggregate maximum Annual Debt Service on the Bonds (to remain Outstanding following the issuance of the Parity
Bonds) and the proposed Parity Bonds. (F) Increase in Letters of Credit. Unless all of the conditions to the release of any Letter of Credit set forth in Section 4.04(H)(iii) have theretofore
been satisfied, or the Letters of Credit have all been reduced to $0.00 pursuant to the provisions of Section 4.04(H)(iv)(b), there shall be delivered to the Fiscal Agent an amendment
to -22-
each Letter of Credit then held by the Fiscal Agent to increase the amount available to be drawn under each such Letter of Credit to reflect the expected increase in the Special Taxes
that will need to be levied on the parcels to which each Letter of Credit pertains to pay the debt service on the Parity Bonds, as determined by the Treasurer upon consultation with
the Tax Consultant. In the event that any Letter of Credit has theretofore been drawn upon pursuant to Section 4.04(H)(ii)(b), there shall be deposited with the Fiscal Agent monies in
an amount equal to the otherwise amount that the corresponding Letter of Credit would need to be increased pursuant to the preceding sentence, and the funds so deposited shall be disposed
of in the same manner as the proceeds of the draw on the Letter of Credit under the second paragraph of Section 4.04(H)(ii). (G) Officer's Certificate. The Authority shall deliver to
the Fiscal Agent an Officer's Certificate certifying that the conditions precedent to the issuance of of such Parity Bonds set forth in subsections (A), (B), (C), (D), (E) and, if applicable,
(F) of this Section 2.14 have been satisfied. In delivering such Officer's Certificate, the Authorized Officer that executes the same may conclusively rely upon such certificates of
the Fiscal Agent, the Tax Consultant and others selected with due care, without the need for independent inquiry or certification. Notwithstanding the foregoing, the Authority may issue
Refunding Bonds as Parity Bonds without the need to satisfy the requirements of clauses (D), (E) and (F) above, and without limitation on the number of series of such Refunding Bonds;
and, in connection therewith, the Officer's Certificate in clause (G) above need not make reference to said clauses (D), (E) and (F). Nothing in this Section 2.14 shall prohibit the
Authority from issuing bonds or otherwise incurring debt secured by a pledge of Special Tax Revenues subordinate to the pledge thereof under Section 3.02 of this Agreement. -23-
ARTICLE III ISSUANCE OF BONDS Section 3.01. Issuance and Delivery of 2006 Bonds. At any time after the execution of this Agreement, the Authority may issue the 2006 Bonds for the District
in the aggregate principal amount set forth in Section 2.01 and deliver the 2006 Bonds to the Original Purchaser. The Authorized Officers of the Authority are hereby authorized and directed
to deliver any and all documents and instruments necessary to cause the issuance of the 2006 Bonds in accordance with the provisions of the Act, the Resolution and this Agreement, to
authorize the payment of Costs of Issuance and costs of the Project by the Fiscal Agent from the proceeds of the 2006 Bonds and to do and cause to be done any and all acts and things
necessary or convenient for delivery of the 2006 Bonds to the Original Purchaser. Section 3.02. Fledge of Special Tax Revenues. The Bonds shall be secured by a first pledge (which pledge
shall be effected in the manner and to the extent herein provided) of all of the Special Tax Revenues and all moneys deposited in the Bond Fund (including the Special Tax Prepayments
Account and the Capitalized Interest Account therein), the Reserve Fund and, until disbursed as provided herein, in the Special Tax Fund. The Special Tax Revenues and all moneys deposited
into said funds (except as otherwise provided herein) are hereby dedicated to the payment of the principal of, and interest and any premium on, the Bonds as provided herein and in the
Act until all of the Bonds have been paid and retired or until moneys or Federal Securities have been set aside irrevocably for that purpose in accordance with Section 9.03. Amounts
in the Administrative Expense Fund, the Improvement Fund (including the accounts therein), the Refunding Fund and the Costs of Issuance Fund are not pledged to the repayment of the Bonds.
The Project financed with the proceeds of the Bonds are not in any way pledged to pay the Debt Service on the Bonds. Any proceeds of condemnation or destruction of any portion of the
Project are not pledged to pay the Debt Service on the Bonds and are free and clear of any lien or obligation imposed hereunder. Section 3.03. Validity of Bonds. The validity of the
authorization and issuance of the Bonds shall not be dependent upon the completion of the construction of the Project, or upon the performance by any person of such persons obligation(s)
with respect to the Project. -24-
ARTICLE IV FUNDS AND ACCOUNTS Section 4.01. Application of Proceeds of Sale of 2006 Bonds and Other Moneys. The proceeds of the purchase of the 2006 Bonds by the Original Purchaser (being
$50,294,375.00) shall be paid to the Fiscal Agent, who shall forthwith set aside, pay over and deposit such proceeds on the Closing Date as follows: (A) deposit in the Costs of Issuance
Fund an amount equal to $990,000.00; (B) deposit in the Reserve Fund an amount equal to $3,503,850.00; (C) deposit in the Capitalized Interest Account of the Bond Fund an amount equal
to $942,260.50; (D) deposit $60,000.00 to a temporary account on the records of the Fiscal Agent hereby created for such purpose, for immediate transfer to the Treasurer, for deposit
by the Treasurer in the Administrative Expense Fund; (E) deposit in the following accounts within the Improvement Fund the following amounts: (i) in the City Account an amount equal
to $4,162,710.00, (ii) in the EMWD Account an amount equal to $1,381,015.00, and (iii) in the Acquisition Account an amount equal to $38,083,381.40, and (iv) in the Public Works Administration
Account an amount equal to $680,000.00; and (F) deposit in the Refunding Fund an amount equal to $491,158.10. Section 4.02. Improvement Fund (A) Establishment of Improvement Fund. There
is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Improvement
Fund (the "Improvement Fund"), and within the Improvement Fund a City Account, an EMWD Account, an Acquisition Account and a Public Works Administration Account. Deposits shall be made
to the accounts within the Improvement Fund as required by Section 4.01 (E) and Section 4.02(E). Moneys in the accounts within the Improvement Fund shall be held in trust by the Fiscal
Agent for the benefit of the Authority, and shall be disbursed for the payment or reimbursement of costs of the Project. (B) Procedure for Disbursement, (i) Disbursements from the City
Account of the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer's Certificate which shall: (a) set forth the amount required to be disbursed, the purpose
for which the disbursement is to be made (which shall be for payment of a cost of any of the portions of the Project to be constructed by the City, or to reimburse expenditures of the
Authority, the City or any other party for any of such Project costs previously paid), that the disbursement is a proper expenditure from the City Account of the Improvement Fund, and
the person to which the disbursement is to be paid; and (b) certify that no portion of the amount then being requested to be disbursed was set forth in any Officer's Certificate previously
filed requesting a disbursement. (ii) Disbursements from the Acquisition Account within the Improvement Fund shall be made by the Fiscal Agent upon receipt of an Officer's Certificate,
which shall: (a) set -25-
forth the amount required to be disbursed, the purpose for which the disbursement is to be made (which shall be for a Project cost identified in the Acquisition Agreement, or for a cost
of the City or the Authority in administering the Acquisition Agreement not able to be funded from amounts in the Public Works Administration Account), that the disbursement is a proper
expenditure from the Acquisition Account of the Improvement Fund, and the person to which the disbursement is to be paid; and (b) certify that no portion of the amount then being requested
to be disbursed was set forth in any Officer's Certificate previously filed requesting a disbursement. (iii) Disbursements from the EMWD Account of the Improvement Fund shall be made
by the Fiscal Agent upon receipt of an Officer's Certificate, which shall: (a) set forth the amount required to be disbursed, the purpose for which the disbursement is to be made (which
shall be for an Acquisition Facility, as such term is defined in the Joint Community Facilities Agreement -EMWD (and as such Acquisition Facilities are identified in Exhibit B to that
agreement), that the disbursement is consistent with the requirements of Section 7(e) of the Joint Community Facilities Agreement -EMWD, that the disbursement is a proper expenditure
from the EMWD Account of the Improvement Fund, and the person to which the disbursement is to be paid; and (b) certify that no portion of the amount then being requested to be disbursed
was set forth in any Officer's Certificate previously filed requesting a disbursement. (iv) Disbursements from the Public Works Administration Account shall be made by the Fiscal Agent
upon receipt of an Officer's Certificate, or a written demand of the Public Works Director of the City, which shall: (i) set forth the amount required to be disbursed and state that
the disbursement is for payment of costs of the City to administer the Acquisition Agreement; and (ii) certify that no portion of the amount then being requested was set forth in any
Officer's Certificate or written demand previously filed requesting a disbursement. (v) Each such Officer's Certificate or other certificate submitted to the Fiscal Agent as described
in this Section 4.02(B) shall be sufficient evidence to the Fiscal Agent of the facts stated therein, and the Fiscal Agent shall have no duty to confirm the accuracy of such facts. (C)
Investment. Moneys in the accounts within the Improvement Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits from the investment and
deposit of amounts in the accounts within the Improvement Fund shall be retained in the respective accounts of the Improvement Fund to be used for the purposes of the respective accounts.
(D) Transfer for Bond Redemption. If: (i) the Treasurer determines in the Treasurer's sole discretion that work necessary to construct and complete the Project has been abandoned, or
that for any reason (including, but not limited to, termination of, or the occurrence of any event that would permit termination of, the Acquisition Agreement), all or any portion of
the amounts then on deposit in the Acquisition Account, the EMWD Account and/or the City Account will not be expended for Project costs, or (ii) Treasurer receives a written certificate
of an Independent Financial Consultant to the effect that the Project has been abandoned or all or any portion of the amounts then on deposit in the Acquisition Account, the EMWD Account
and the City Account will not be expended for Project costs, the Treasurer shall file an Officer's Certificate with the Fiscal Agent to that effect and which identifies the amounts then
on deposit in the accounts within the Improvement Fund that are not expected to be used for Project costs due to such abandonment or other reason. The Fiscal Agent, upon receipt of such
certificate, shall transfer the amounts identified therein from the Acquisition Account, the EMWD Account -26-
and the City Account, as applicable, to the Bond Fund to be used (i) to redeem the 2006 Bonds on the next Interest Payment Date for which notice of redemption can timely be given pursuant
to Section 2.03(A)(iv) if the amount so transferred is at least $100,000, or (ii) if such amount is less than $100,000, to pay debt service on the Bonds on the next Interest Payment
Date. (E) Closing of Accounts. On the earlier of (i) the date of receipt by the Fiscal Agent of an Officer's Certificate to the effect that Ashby USA, LLC has notified the Authority
in writing that no further disbursements will be made from the EMWD Account, or (ii) March 1,2016, the Fiscal Agent shall transfer all amounts then on deposit in the EMWD Account to
the Acquisition Account to be used for the purposes of such account, or, if the Acquisition Account has theretofore been closed, to the Bond Fund to be used to pay Debt Service on the
Bonds on the next Interest Payment Date, and following such transfer the EMWD Account shall be closed. Upon receipt by the Fiscal Agent of an Officer's Certificate to the effect that
all improvements to be funded from the City Account have been completed or that no further withdrawals will be made from the City Account, any amounts remaining on deposit in the City
Account shall be transferred by the Fiscal Agent to the Acquisition Account, or, if the Acquisition Account has theretofore been closed, to the Bond Fund to be used to pay Debt Service
on the Bonds on the next Interest Payment Date, and when no amounts remain on deposit in the City Account the City Account shall be closed. Upon receipt by the Fiscal Agent of an Officer's
Certificate stating that the Project has been completed and that all costs of the Project have been paid, or that any such costs are not required to be paid from any of the City Account,
the EMWD Account, or the Acquisition Account of the Improvement Fund, the Fiscal Agent shall transfer the amount, if any, remaining in the Public Works Administration Account to the
Administrative Expense Fund to be used for purposes of the Administration Expense Fund. Following such transfer, the Public Works Administration Account shall be closed. Upon receipt
by the Fiscal Agent of an Officer's Certificate stating that the Project has been completed and that all costs of the Project have been paid, or that any such costs are no longer required
to be paid from the Acquisition Account, the Fiscal Agent shall transfer the amount, if any, remaining in the Acquisition Account to the Bond Fund to be used to pay Debt Service on the
Bonds on the next Interest Payment Date, and when no amounts remain on deposit in the Acquisition Account the Acquisition Account shall be closed. Section 4.03. Costs of Issuance Fund.
(A) Establishment of Costs of Issuance Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities
District No. 03-02 (Roripaugh Ranch) Costs of Issuance Fund (the "Costs of Issuance Fund"), to the credit of which which a deposit shall be made as required by Section 4.01(A). Moneys
in the Costs of Issuance Fund shall be held in trust by the Fiscal Agent and shall be disbursed as provided in subsection (B) of this Section for the payment or reimbursement of Costs
of Issuance. (B) Disbursement.
Amounts in the Costs of Issuance Fund shall be disbursed from time to time to pay Costs of Issuance, as set forth in a requisition containing respective amounts to be paid to the designated
payees, signed by the Treasurer and delivered to the Fiscal Agent concurrently with the delivery of the Bonds, or otherwise in an Officer's Certificate delivered to the Fiscal Agent
after the Closing Date. The Fiscal Agent shall pay -27-
all Costs of Issuance after receipt of an invoice from any such payee which requests payment in an amount which is less than or equal to the amount set forth with respect to such payee
pursuant to an Officer's Certificate requesting payment of Costs of Issuance. The Fiscal Agent shall maintain the Costs of Issuance Fund for a period of 90 days from the date of delivery
of the Bonds and then shall transfer any moneys remaining therein, including any investment earnings thereon, to the Treasurer for deposit by the Treasurer in the Administrative Expense
Fund. (C) Investment. Moneys in the Costs of Issuance Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment
shall be retained by the Fiscal Agent in the Costs of Issuance Fund to be used for the purposes of such fund. Section 4.04. Reserve Fund. (A) Establishment of Fund. There is hereby established
as a separate fund to be held by the Fiscal Agent the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Reserve Fund (the "Reserve Fund"),
to the credit of which a deposit shall be made as required by Section 4.01(B) equal to the Reserve Requirement as of the Closing Date for the Bonds, and deposits shall be made as provided
in Section 4.06(B) and 2.14(C). Moneys in the Reserve Fund shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds as a reserve for the payment of principal
of, and interest and any premium on, the Bonds and shall be subject to a lien in favor of the Owners of the Bonds. (B) Use of Reserve Fund. Except as otherwise provided in this Section,
all amounts deposited in the Reserve Fund shall be used and withdrawn by the Fiscal Agent solely for the purpose of making transfers to the Bond Fund in the event of any deficiency at
any time in the Bond Fund of the amount then required for payment of the principal of, and interest and any premium on, the Bonds or, in accordance with the provisions of this Section,
for the purpose of redeeming Bonds from the Bond Fund. (C) Transfer Due to Deficiency in Bond Fund. Whenever transfer is made from the Reserve Fund to the Bond Fund due to a deficiency
in the Bond Fund, the Fiscal Agent shall provide written notice thereof to the Treasurer, specifying the amount withdrawn. The Treasurer shall then shall provide the notice described
in Section 9.07(B). (D) Transfer of Excess of Reserve Requirement. Whenever, on the Business Day prior to any Interest Payment Date, or on any other date at the request of the Treasurer,
the amount in the Reserve Fund exceeds the Reserve Requirement, the Fiscal Agent shall provide written notice to the Treasurer of the amount of the excess and shall transfer an amount
equal to the excess from the Reserve Fund (i) to the Acquisition Account, so long as such account has not theretofore been closed under Section 4.02(D) or 4.02(E), and (ii) following
the closure of the Acquisition Account, to the Bond Fund to be used for the payment of interest on the Bonds on the next Interest Payment Date in accordance with Section 4.05. (E) Transfer
When Balance Exceeds Outstanding Bonds. Whenever the balance in the Reserve Fund equals or exceeds the amount required to redeem or pay the Outstanding Bonds, including interest accrued
to the date of payment or redemption and premium, if any, due upon redemption, the Fiscal Agent shall upon the written direction of the Treasurer transfer the amount in the Reserve Fund
to the Bond Fund to be applied, on the next succeeding Interest Payment Date to the payment and redemption, in accordance with Section 2.03 and 4.05, as applicable, of all of the Outstanding
Bonds. In the event that the -28-
amount so transferred from the Reserve Fund to the Bond Fund exceeds the amount required to pay and redeem the Outstanding Bonds, the balance in the Reserve Fund shall be transferred
to the Authority to be used for any lawful purpose of the Authority. Notwithstanding the foregoing, no amounts shall be transferred from the Reserve Fund pursuant to this Section 4.04(E)
until after (i) the calculation of any amounts due to the federal government pursuant to Section 5.13 following payment of the Bonds and withdrawal of any such amount from the Reserve
Fund for purposes of making such payment to the federal government, and (ii) payment of any fees and expenses due to the Fiscal Agent. (F) Transfer Upon Special Tax Prepayment. Whenever
Special Taxes are prepaid and Bonds are to be redeemed with the proceeds of such prepayment pursuant to Section 2.03(A)(iii), a proportionate amount in the Reserve Fund (determined on
the basis of the principal of Bonds to be redeemed, and the original principal of the Bonds) shall shall be transferred on the Business Day prior to the redemption date by the Fiscal
Agent to the Bond Fund to be applied to the redemption of the Bonds pursuant to Section 2.03(A)(iii). The Treasurer shall deliver to the Fiscal Agent an Officer's Certificate specifying
any amount to be so transferred, and the Fiscal Agent may rely on any such Officer's Certificate. (G) Transfer to Pay Rebate. Amounts in the Reserve Fund may at any time be used, at
the written direction of an Authorized Officer, for purposes of paying any rebate liability under Section 5.13. (H) Letters of Credit, (i) Holding of Letters of Credit. The Fiscal Agent
shall hold any Letter of Credit delivered to it for the benefit of the Reserve Fund. The Fiscal Agent shall advise the Treasurer in writing promptly following the actual knowledge of
the Fiscal Agent that the credit rating of the provider of any Letter of Credit (or, if a confirming letter of credit has been delivered with a Letter of Credit, the credit rating of
the provider of the confirming letter of credit) then in effect has been reduced to BBB (or its equivalent) or lower by S&P or Moody's. (ii) Draws on Letters of Credit. (a) The Fiscal
Agent shall draw upon a Letter of Credit promptly following receipt by the Fiscal Agent of a written direction of the Treasurer instructing the Fiscal Agent to draw on a Letter of Credit,
identifying the amount to be so drawn, and to the effect that Special Taxes levied in the District on "parcels to which the Letter of Credit pertains" (as such phrase is discussed in
Section 4.04(H)(vi) below) are then delinquent in the amount so to be drawn on the Letter of Credit. The amount received pursuant to any draw on a Letter of Credit under this Section
4.04(H)(ii)(a) shall not act as a credit in respect of the amount of any Special Taxes that have been levied in the District on the parcels to which it pertains. Upon collection of any
delinquent Special Taxes with respect to the property for which a draw on a Letter of Credit has been made, the Authority shall send to the provider of the Letter of Credit (or its written
designee) the amount so collected, less any costs or Administrative Expenses incurred in connection with the delinquency or the related draw on the Letter of Credit, with the amount
to be sent to the provider not in any event to exceed the amount of the proceeds of the draw on the Letter of Credit received by the Fiscal Agent. (b) In addition to the foregoing, the
Fiscal Agent shall draw upon the full amount available under a Letter of Credit (x) as soon as practicable following receipt by the Fiscal Agent of actual knowledge that the then rating
of the Letter of Credit -29-
provider's unsecured debt obligations has been reduced to BBB (or its equivalent) or lower by Moody's or S&P (if a confirming letter of credit has been delivered together with a Letter
of Credit, the foregoing rating criteria shall be applied to the ratings of the institution providing the confirming letter of credit), or (y) five days prior to the stated termination
date of the Letter of Credit (or any confirming letter of credit provided therewith) if the Letter of Credit (and any related confirming Letter of Credit) is not replaced prior to such
expiration date by a letter of credit (which may include a confirming letter of credit) which satisfies the requirements set forth in the definition of "Letter of Credit" in Section
1.03. The amount received pursuant to any draw on a Letter of Credit under this Section 4.04(H)(ii)(b) shall in no way reduce or act as a credit in respect of the amount of any Special
Taxes that have been levied in the District. If a confirming letter of credit has been provided with with a Letter of Credit, the Fiscal Agent shall draw on the confirming letter of
credit as necessary to satisfy the foregoing requirements. The proceeds of any draw on a Letter of Credit pursuant to Section 4.04(H)(ii)(a) shall be deposited by the Fiscal Agent to
the Special Tax Fund. The proceeds of any draw on a Letter of Credit pursuant to Section 4.04(H)(ii)(b) shall be held by the Fiscal Agent in a separate subaccount within the Reserve
Fund created by the Fiscal Agent for such purpose, to be (a) drawn upon by the Fiscal Agent and the proceeds of such draw deposited by the Fiscal Agent to the Special Tax Fund, such
draw to occur at the written direction of the Treasurer prior to any Interest Payment Date to the effect that the amount specified in such written direction to be drawn is in the amount
of any delinquent Special Taxes levied on the "parcels to which the Letter of Credit pertains" (as such phrase is discussed in Section 4.04(H)(vi) below), or (b) released or reduced
at the written direction of the Treasurer when the Letter of Credit to which such proceeds pertain would otherwise be released or reduced under Section 4.04(H)(iii) or (iv) below (with
any amount so reduced or released to be sent by the Fiscal Agent to the account party with respect to the Letter of Credit upon which the amounts so held were drawn). (iii) Release or
Reduction of Letters of Credit. The Fiscal Agent shall release, or reduce the amount available to be drawn on, a Letter of Credit upon receipt of written direction from the Treasurer
to the effect that (I)(x) the then aggregate Parcel Value of the parcels in a planning area of the District identified in such written direction (the "Identified Parcels"), for which
Identified Parcels the applicable Letter of Credit was provided, is at least three times the Parcel Liens, and (I)(y) the conditions precedent to the issuance of building permits for
all of the Identified Parcels (as such conditions precedent are set forth in the Preannexation and Development Agreement, dated as of December 17, 2002, by and between the City and Ashby
USA, LLC, as amended and then in effect (the "Development Agreement")) have been satisfied; or (II) the amount of the Letter of Credit may be reduced to $0.00 under the provisions of
Section 4.04(H)(iv)(b) below; or (III) the Identified Parcels are subject to less than 10% of the expected annual Special Tax levy in the District (assuming Build-Out). The Treasurer
shall review appraisals (or updates to prior appraisals) submitted to the Treasurer by or on behalf of an Account Party that are conducted by an appraiser and in a form acceptable to
the Treasurer, to determine if any Letter of Credit is to be released or reduced pursuant to this subsection and, if so, shall so advise the Fiscal Agent in writing. Promptly following
receipt of written direction from the Treasurer as to a Letter of Credit, the Fiscal Agent shall complete and deliver to the applicable Letter of Credit provider the appropriate certificates
and annexes to the subject Letter of Credit to effectuate the release or reduction of such Letter of Credit. In connection with any such reduction, the amount available to be drawn on
the applicable Letter of Credit shall be -30-
reduced to an amount equal to two times the expected annual Special Taxes that may be levied on the "parcels to which the Letter of Credit pertains" (as such phrase is discussed in Section
4.04(H)(vi) below) assuming Build-Out of such parcels, other than the Identified Parcels specified in the written direction of the Treasurer described above (however, in any event, the
Letter of Credit shall be released if the conditions referenced in clause (III) of the first sentence of this Section 4.04(H)(iii) have been satisfied). (iv) Other Provisions Allowing
for Reduction of Letters of Credit. The Fiscal Agent shall reduce or acknowledge reduction of the amount of any Letter of Credit held by it upon receipt by the Fiscal Agent of: (a) a
Letter of Credit which satisfies the requirements set forth in the definition of "Letter of Credit" in Section 1.03 hereof in substitution or replacement for all or a portion of the
amount available to be drawn under any Letter of Credit then held by the Fiscal Agent, accompanied by a written statement of the provider of or account party under such new Letter of
Credit as to the parcels and the outstanding Letter of Credit to which the new Letter of Credit pertains, and then the amount under the then applicable outstanding Letter of Credit may
be reduced by the amount available to be drawn under the new Letter of Credit; or (b) from time to time, but not more than once every six months (commencing no sooner than six months
after the Closing Date), an Account Party may present evidence to the Treasurer as to the expected annual Special Taxes that may be levied on parcels in the District to which the Letter
of Credit pertains, assuming Build-Out (the "Maximum Amount"). If the Maximum Amount, multiplied by two (herein, the "Revised Stated Amount"), is less than the current stated amount
of the applicable Letter of Credit, then the Treasurer shall provide written direction to the Fiscal Agent to reduce the applicable Letter of Credit by the difference between the current
stated amount of of the Letter of Credit and the Revised Stated Amount of the Letter of Credit. Promptly following receipt of such written direction from the Treasurer, the Fiscal Agent
shall complete and deliver to the applicable Letter of Credit provider the appropriate certificates and annexes to the subject Letter of Credit to effectuate the reduction of the stated
amount of such Letter of Credit. Notwithstanding the foregoing, a Letter of Credit shall not be reduced if the reason for the reduction is the sale of property to an owner (I) that will
own, together with its affiliates, property responsible for 10% or more of the expected annual Special Taxes that may be levied on such parcels in the District (assuming Build-Out),
and (II) that will own land in a planning area and either (x) the then Parcel Value of such land is less than three times the Parcel Liens for such land, or (y) there are conditions
precedent to the issuance of building permits for all lots to be developed in such planning area, as such conditions are set forth in the Development Agreement (as such term is defined
in clause (I)(y) of Section 4.04(H)(iii) above); unless the Account Party provides evidence that the new owner has posted its own Letter of Credit securing the payment of Special Taxes
to be levied on such property. (v) Confirmation of Rating. The Fiscal Agent shall, on or each January 1, April 1, July 1 and October 1, ascertain, with respect to each Letter of Credit
then held by the Fiscal Agent, the then rating of each Letter of Credit provider's (or, if a confirming letter of credit has been provided with a Letter of Credit, that the confirming
letter of credit provider's) unsecured debt obligations, in connection with the administration of Section 4.04(H)(ii) above. (vi) Calculating Maximum Amount. In calculating the Maximum
Amount described in Section 4.04(H)(iv)(b), and for purposes of such clause as used in Sections -31-
4.04(H)(ii) and (iii), the term "parcels in the District to which the Letter of Credit pertains" shall mean the parcels in the District which were initially identified by the applicable
Account Party as being the subject of the respective Letter of Credit less any parcels that are, at the time of calculation, (a) owned by a party unaffiliated with the applicable Account
Party, so long as the maximum Special Taxes levied on such parcels (assuming Build-Out) is less than 10% of the District-wide Maximum Special Taxes, (b) in a planning area whose Parcel
Value is more than three times the Parcel Liens, and are not subject to conditions precedent to the issuance of building permits which conditions apply to all lots to be developed in
the planning area in which the parcels are located, as such conditions are set forth in the Development Agreement (as such term is defined in clause (I)(y) of Section 4.04(H)(iii) above);
(c) subject to a separate Letter of Credit; or (d) owned by individual homeowners. (I) Investment. Moneys in the Reserve Fund shall be invested in accordance with Section 6.01. Section
4.05. Bond Fund. (A) Establishment of Bond Fund, Capitalized Interest Account and Special Tax Prepayments Account. There is hereby established as a separate fund to be held by the Fiscal
Agent, the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Bond Fund (the "Bond Fund"), to the credit of which deposits shall be made as
required by Sections 4.02(D), 4.02(E), 4.04(B), 4.04(D), 4.04(E), 4.04(F), and 4.06(B), and any other amounts required to be deposited therein by this Agreement or the Act. There is
also hereby created in the Bond Fund, a separate account held by the Fiscal Agent, the Capitalized Interest Account, to the credit of which deposits shall be made under Section 4.01
(C). There is also hereby created in the Bond Fund a separate account to be held by the Fiscal Agent, consisting of the Special Tax Prepayments Account, to the credit of which deposits
shall be made as provided in Section 4.06(A). Moneys in the Bond Fund and the accounts therein shall be held in trust by the Fiscal Agent for the benefit of the Owners of the Bonds,
shall be disbursed for the payment of the principal of, and interest and any premium on, the Bonds as provided below, and, pending such disbursement, shall be subject to a lien in favor
of the Owners of the Bonds. (B) Disbursements, (i) Bond Fund Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Bond Fund and pay to the Owners of
the Bonds the principal, and interest and any premium, then due and payable on the Bonds, including any amounts due on the Bonds by reason of the sinking payments set forth in Section
2.03(A)(ii), or a redemption of the Bonds required by Section 2.03(A)(i) or (iv), such payments to be made in the priority listed in the second succeeding paragraph. Notwithstanding
the foregoing, amounts in the Bond Fund as a result of a transfer pursuant to Section 4.02(D) or 4.02(E) shall be used used to pay the principal of and interest on the Bonds prior to
the use of any other amounts in the Bond Fund for such purpose. In the event that amounts in the Bond Fund are insufficient for the purposes set forth in the preceding paragraph, the
Fiscal Agent shall withdraw from the Reserve Fund to the extent of any funds therein amounts to cover the amount of such Bond Fund insufficiency. Amounts so withdrawn from the Reserve
Fund shall be deposited in the Bond Fund. If, after the foregoing transfers, there are insufficient funds in the Bond Fund to make the payments provided for in the first sentence of
the first paragraph of this -32-
Section 4.02(B)(i), the Fiscal Agent shall apply the available funds first to the payment of interest on the Bonds, then to the payment of principal due on the Bonds other than by reason
of sinking payments, and then to payment of principal due on the Bonds by reason of sinking payments. Any sinking payment not made as scheduled shall be added to the sinking payment
to be made on the next sinking payment date. (ii) Special Tax Prepayments Account Disbursements. Moneys in the Special Tax Prepayments Account shall be transferred by the Fiscal Agent
to the Bond Fund on the next date for which notice of redemption of Bonds can timely be given under Section 2.03(A)(iii), and notice to the Fiscal Agent can timely be given under Section
2.03(B), and shall be used (together with any amounts transferred pursuant to Section 4.04(F)) to redeem Bonds on the redemption date selected in accordance with Section 2.03. (iii)
Capitalized Interest Account Disbursements. Moneys in the Capitalized Interest Account shall be transferred to the Bond Fund on the Business Day prior to each Interest Payment Date,
in the amount equal to and to be used for the payment of interest on the Bonds due on the next succeeding Interest Payment Date; provided that no such transfer shall exceed the amount
then on deposit in the Capitalized Interest Account. When no amounts remain on deposit in such account, the Capitalized Interest Account shall be closed. (C) Investment. Moneys in the
Bond Fund, the Capitalized Interest Account and the Special Tax Prepayments Account shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting
from the investment and deposit of amounts in the Bond Fund, the Capitalized Interest Account and the Special Tax Prepayments Account shall be retained in the Bond Fund, the Capitalized
Interest Account and the Special Tax Prepayments Account, respectively, to be used for purposes of such fund and accounts. Section 4.06. Special Tax Fund. (A) Establishment of Special
Tax Fund. There is hereby established as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch)
Special Tax Fund (the "Special Tax Fund"), to the credit of which the Fiscal Agent shall deposit amounts received from or on behalf of the Authority consisting of Special Tax Revenues,
and any amounts required by Section 4.07(B) to be deposited therein. The Authority shall promptly remit any such amounts received by it to the Fiscal Agent for deposit by the Fiscal
Agent to the Special Tax Fund. Notwithstanding the foregoing, (i) any Special Tax Revenues constituting payment of the portion of the Special Tax levy for Administrative Expenses shall
be deposited by the Treasurer in the Administrative Expense Fund, and (ii) any proceeds of Special Tax Prepayments shall be transferred by the Treasurer to the Fiscal Agent for deposit
by the Fiscal Agent (as specified in writing by the Treasurer to the Fiscal Agent) directly in the Special Tax Prepayments Account established pursuant to Section 4.05(A). Moneys in
the Special Tax Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority and the Owners of the Bonds, shall be disbursed as provided below and, pending disbursement,
shall be subject to a lien in favor of the Owners of the Bonds and the Authority. -33-
(B) Disbursements. On each Interest Payment Date, the Fiscal Agent shall withdraw from the Special Tax Fund and transfer the following amounts in the following order of priority (i)
to the Bond Fund an amount, taking into account any amounts then on deposit in the Bond Fund and any expected transfers from the Improvement Fund, the Reserve Fund, the Capitalized Interest
Account and the Special Tax Prepayments Account to the Bond Fund pursuant to Sections 4.02(D), 4.04(D), (E), and (F), and 4.05(B)(ii) and (iii), such that the amount in the Bond Fund
equals the principal (including any sinking payment), premium, if any, and interest due on the Bonds on such Interest Payment Date, and (ii) to the Reserve Fund an amount, taking into
account amounts then on deposit in the Reserve Fund, such that the amount in the Reserve Fund is equal to the Reserve Requirement. (C) Investment. Moneys in the Special Tax Fund shall
be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from such investment and deposit shall be retained in the Special Tax Fund to be used
for the purposes thereof. Section 4.07. Administrative Expense Fund. (A) Establishment of Administrative Expense Fund. There is hereby established as a separate fund to be held by the
Treasurer, the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) Administrative Expense Fund (the "Administrative Expense Fund"), to the credit
of which deposits shall be made as required by Sections 4.01(D), 4.02(D), 4.03(B) and 4.06(B). Moneys in the Administrative Expense Fund shall be held in trust by the Treasurer for the
benefit of the Authority, and shall be disbursed as provided below. (B) Disbursement. Amounts in the Administrative Expense Fund shall be withdrawn by the Treasurer and paid to the Authority
or its order upon receipt by the Treasurer of an Officer's Certificate stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense or a Costs
of Issuance, and the nature of such Administrative Expense or Costs of Issuance. Amounts transferred from the Costs of Issuance Fund to the Administrative Expense Fund pursuant to Sections
4.01(D), 4.02(D) or 4.03(B) shall be separately identified at all times, and shall be expended for purposes of the Administrative Expense Fund prior to the use of amounts transferred
to the Administrative Expense Fund from the Special Tax Fund pursuant to Section 4.06(B). Annually, on the last day of each Fiscal Year commencing with the last day of Fiscal Year 2005-2006,
the Treasurer shall withdraw any amounts then remaining in the Administrative Expense Fund in excess of $60,000 that have not otherwise been allocated to pay Administrative Expenses
incurred but not yet paid, and which are not otherwise encumbered, and transfer such amounts to the Fiscal Agent for deposit by the Fiscal Agent in the Special Tax Fund. (C) Investment.
Moneys in the Administrative Expense Fund shall be invested and deposited in accordance with Section 6.01. Interest earnings and profits resulting from said investment shall be retained
by the Treasurer in the Administrative Expense Fund to be used for the purposes thereof. Section 4.08. Refunding Fund. (A) Establishment of Refunding Fund. There is hereby established
as a separate fund to be held by the Fiscal Agent, the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch), Refunding Fund (the "Refunding Fund"),
to the credit of which a deposit shall be made as required by Section 4.01 (F). Moneys in the -34-
Refunding Fund shall be held in trust by the Fiscal Agent for the benefit of the Authority, and shall be disbursed, as provided in subsection (B) of this Section. (B) Procedure for Disbursement.
On the Closing Date, all amounts on deposit in the Refunding Fund shall be transferred by the Fiscal Agent to U.S. Bank National Association, as agent for the County, to be used to pay
in full and discharge the assessment liens on property in the District for the County's Assessment District No. 161. After disbursement of all amounts on deposit in the Refunding Fund,
the Refunding Fund shall be closed. -35-
ARTICLE V OTHER COVENANTS OF THE AUTHORITY Section 5.01. Punctual Payment. The Authority will punctually pay or cause to be paid the principal of, and interest and any premium on, the
Bonds when and as due in strict conformity with the terms of this Agreement and any Supplemental Agreement, and it will faithfully observe and perform all of the conditions covenants
and requirements of this Agreement and all Supplemental Agreements and of the Bonds. Section 5.02. Limited Obligation. The Bonds are limited obligations of the Authority on behalf of
the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Bond Fund (including the Special Tax Prepayments Account and the Capitalized
Interest Account therein), the Reserve Fund and, until disbursed as provided herein, the Special Tax Fund. Section 5.03. Extension of Time for Payment. In order to prevent any accumulation
of claims for interest after maturity, the Authority shall not, directly or indirectly, extend or consent to the extension of the time for the payment of any claim for interest on any
of the Bonds and shall not, directly or indirectly, be a party to the approval of any such arrangement by purchasing
or funding said claims for interest or in any other manner. In case any such claim for interest shall be extended or funded, whether or not with the consent of the Authority, such claim
for interest so extended or funded shall not be entitled, in case of default hereunder, to the benefits of this Agreement, except subject to the prior payment in full of the principal
of all of the Bonds then Outstanding and of all claims for interest which shall not have so extended or funded. Section 5.04. Against Encumbrances. The Authority will not encumber, pledge
or place any charge or lien upon any of the Special Tax Revenues or other amounts pledged to the Bonds superior to or on a parity with the pledge and lien herein created for the benefit
of the Bonds, except as permitted by this Agreement. Section 5.05. Books and Records. The Authority will keep, or cause to be kept, proper books of record and accounts, separate from
all other records and accounts of the Authority, in which complete and correct entries shall be made of all transactions relating to the expenditure of amounts disbursed from the Administrative
Expense Fund and to the Special Tax Revenues. Such books of record and accounts shall at all times during business hours be subject to the inspection of the Fiscal Agent and the Owners
of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives duly authorized in writing. The Fiscal Agent will keep, or cause to
be kept, proper books of record and accounts, separate from all other records and accounts of the Fiscal Agent, in which complete and correct entries shall be made of all transactions
relating to the expenditure of amounts disbursed from the Bond Fund (including the Special Tax Prepayments Account and the Capitalized Interest Account therein), the Reserve Fund, the
Special Tax Fund, the Refunding Fund, the Improvement Fund (including the accounts therein) and the Costs of Issuance Fund. Such books of record and accounts shall at all times during
business hours be subject to the inspection of the Authority and the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding, or their representatives
duly authorized in writing upon reasonable prior notice. -36-
Section 5.06. Protection of Security and Rights of Owners. The Authority will preserve and protect the security of the Bonds and the rights of the Owners, and will warrant and defend
their rights against all claims and demands of all persons. From and after the delivery of any of the Bonds by the Authority, the Bonds shall be incontestable by the Authority. Section
5.07. Compliance with Law. The Authority will comply with all applicable provisions of the Act and law in administering the District and completing the acquisition of the Project. Section
5.08. Collection of Special Tax Revenues. The Authority shall comply with all requirements of the Act so as to assure the timely collection of Special Tax Revenues, including without
limitation, the enforcement of delinquent Special Taxes. On or within five (5) Business Days of each June 1, the Fiscal Agent shall provide the Treasurer with a notice stating the amount
then on deposit in the Bond Fund, the Capitalized Interest Account and the Reserve Fund, and informing the Authority that the Special Taxes may need to be levied pursuant to the Ordinance
as necessary to provide for the debt service to become due on the Bonds in the calendar year that commences in the Fiscal Year for which the levy is to be made, and Administrative Expenses
and replenishment (if necessary) of the Reserve Fund so that the balance therein equal the Reserve Requirement. The receipt of or failure to receive such notice by the Treasurer shall
in no way affect the obligations of the Treasurer under the following two paragraphs. Upon receipt of such notice, the Treasurer shall communicate with the Auditor to ascertain the relevant
parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The Treasurer shall effect the levy of the Special
Taxes each Fiscal Year in accordance with the Ordinance by each July 15 that the Bonds are outstanding, or otherwise such that the computation of the levy is complete before the final
date on which Auditor will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next real property tax roll. Upon the completion
of the computation of the amounts of the levy, the Treasurer shall prepare or cause to be prepared, and shall transmit to the Auditor, such data as the Auditor requires to include the
levy of the Special Taxes on the next real property tax roll. The Treasurer shall fix and levy the amount of Special Taxes within the District required for the payment of principal of
and interest on any outstanding Bonds of the District becoming due and payable during the ensuing year, including any necessary replenishment or expenditure of the Reserve Fund for the
Bonds and an amount estimated to be sufficient to pay the Administrative Expenses (including amounts necessary to discharge any obligation under Section 5.13) during such year, taking
into account the balances in such funds and in the Special Tax Fund. The Special Taxes so levied shall not exceed the authorized amounts as provided in the proceedings pursuant to the
Resolution of Formation. The Special Taxes shall be payable and be collected in the same manner and at the same time and in the same installment as the general taxes on real property
are payable, and have the same priority, become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency
as do the ad valorem taxes on real property; provided that, pursuant to and in accordance with the Ordinance, the Special Taxes may be collected by means of direct billing of the property
owners within the District, in which event the Special Taxes shall become delinquent if not paid when due pursuant to said billing. -37-
Section 5.09. Covenant to Foreclose. Pursuant to Section 53356.1 of the Act, the Authority hereby covenants with and for the benefit of the Owners of the Bonds that it will order, and
cause to be commenced as hereinafter provided, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court
to foreclose the lien of any Special Tax or installment thereof not paid when due as provided in the following paragraph. The Treasurer shall notify the Authority Attorney of any such
delinquency of which it is aware, and the Authority Attorney shall commence, or cause to be commenced, such proceedings. On or about February 15 and June 15 of each Fiscal Year, the
Treasurer shall compare the amount of Special Taxes theretofore levied in the District to the amount of Special Tax Revenues theretofore received by the Authority, and: (A) Individual
Delinquencies. If the Treasurer determines that any single parcel subject to the Special Tax in the District is delinquent in the payment of Special Taxes in the aggregate amount of
$5,000 or more, then the Treasurer shall send or cause to be sent a notice of delinquency (and a demand for immediate payment thereof) to the property owner within 45 days of such determination,
and (if the delinquency remains uncured) foreclosure proceedings shall be commenced by the Authority within 90 days of such determination. Notwithstanding the foregoing, the Treasurer
may defer such action if the amount in the Reserve Fund is at least equal to the Reserve Requirement. (B) Aggregate Delinquencies. If the Treasurer determines that (i) the total amount
of delinquent Special Tax for the prior Fiscal Year for the entire District, (including the total of delinquencies under subsection (A) above), exceeds 5% of the total Special Tax due
and payable for the prior Fiscal Year, or (ii) there are ten (10) or fewer owners of real property within the District, determined by reference to the latest available secured property
tax roll of of the County, the Treasurer shall notify or cause to be notified property owners who are then delinquent in the payment of Special Taxes (and demand immediate payment of
the delinquency) within 45 days of such determination, and the Authority shall commence foreclosure proceedings within 90 days of such determination against each parcel of land in the
District with a Special Tax delinquency. The Treasurer and the Authority Attorney, as applicable, are hereby authorized to employ counsel to conduct any such foreclosure proceedings.
The fees and expenses of any such counsel (including a charge for Authority staff time) in conducting foreclosure proceedings shall be an Administrative Expense hereunder. Section 5.10.
Further Assurances. The Authority will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry
out the intention or to facilitate the performance of this Agreement, and for the better assuring and confirming unto the Owners of the rights and benefits provided in this Agreement.
Section 5.11. Private Activity Bond Limitations. The Authority shall assure that the proceeds of the 2006 Bonds are not so used as to cause the 2006 Bonds to satisfy the private business
tests of section 141 (b) of the Code or the private loan financing test of section 141 (c) of the Code. -38-
Section 5.12. Federal Guarantee Prohibition. The Authority shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause the 2006 Bonds
to be "federally guaranteed" within the meaning of Section 149(b) of the Code. Section 5.13. Rebate Requirement. The Authority shall take any and all actions necessary to assure compliance
with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the 2006 Bonds.
If necessary, the Authority may use amounts in the Reserve Fund, amounts on deposit in the Administrative Expense Fund, and any other funds available to the District, including amounts
advanced by the Authority or the City, in its respective sole discretion, to be repaid by the District as soon as practicable from amounts described in the preceding clauses, to satisfy
its obligations under this Section 5.13. The Treasurer shall take note of any investment investment of monies hereunder in excess of the yield on the 2006 Bonds, and shall take such
actions as are necessary to ensure compliance with this Section 5.13, such as increasing the portion of the Special Tax levy for Administration Expenses as appropriate to have funds
available in the Administrative Expense Fund to satisfy any rebate liability under this Section 5.13. Section 5.14. No Arbitrage. The Authority shall not take, or permit or suffer to
be taken by the Fiscal Agent or otherwise, any action with respect to the proceeds of the 2006 Bonds which, if such action had been reasonably expected to have been taken, or had been
deliberately and intentionally taken, on the date of issuance of the 2006 Bonds would have caused the 2006 Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code.
Section 5.15. Yield of the Bonds. In determining the yield of the 2006 Bonds to comply with Section 5.13 and 5.14 hereof, the Authority will take into account redemption (including premium,
if any) in advance of maturity based on the reasonable expectations of the Authority, as of the Closing Date, regarding prepayments of Special Taxes and use of prepayments for redemption
of the Bonds, without regard to whether or not prepayments are received or 2006 Bonds redeemed. Section 5.16. Maintenance of Tax-Exemption. The Authority shall take all actions necessary
to assure the exclusion of interest on the 2006 Bonds from the gross income of the Owners of the 2006 Bonds to the same extent as such interest is permitted to be excluded from gross
income under the Code as in effect on the date of issuance of the 2006 Bonds. Section 5.17. Continuing Disclosure to Owners. In addition to its obligations under Section 9.07, the Authority
hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Agreement. Notwithstanding any other provision of this Agreement,
failure of the Authority to comply with the Continuing Disclosure Agreement shall not be considered a default hereunder; however, any Participating Underwriter or any holder or Beneficial
Owner (as defined in Section 2.13) of the Bonds may take such actions as may be necessary and appropriate to compel performance by the Authority of its obligations thereunder, including
seeking mandate or specific performance by court order. One or more owners of real property in the District as of the Closing Date have also executed continuing disclosure agreements
for the benefit of the holders and beneficial owners of the Bonds. Any Participating Underwriter or holder or beneficial owner may take such actions as may be necessary and appropriate
directly against any such landowner to compel performance by it of its obligations thereunder, including seeking mandate or -39-
specific performance by court order; however the Authority shall have no obligation whatsoever to enforce any obligations under any such agreement. Section 5.18. Reduction of Special
Taxes. The Authority covenants and agrees to not consent or c onduct proceedings with respect to a reduction in the maximum Special Taxes that may be levied in the District below an
amount, for any Fiscal Year, equal to 110% of the aggregate of the Debt Service due on the Bonds in such Fiscal Year, plus a reasonable estimate of Administrative Expenses for such Fiscal
Year. It is hereby acknowledged that Bondowners are purchasing the Bonds in reliance on the foregoing covenant, and that said covenant is necessary to assure the full and timely payment
of the Bonds. Section 5.19. Limits on Special Tax Waivers and Bond Tenders. The Authority covenants not to exercise its rights under the Act to waive delinquency and redemption penalties
related to the Special Taxes or to declare Special Tax penalties amnesty program if to do so would materially and adversely affect the interests of the owners of the Bonds and further
covenants not to permit the tender of Bonds in payment of any Special Taxes except upon receipt of a certificate of an Independent Financial Consultant that to accept such tender will
not result in the Authority having insufficient Special Tax revenues to pay the principal of and interest on the Bonds remaining Outstanding following such tender. -40-
ARTICLE VI INVESTMENTS, DISPOSITION OF INVESTMENT PROCEEDS, LIABILITY OF THE AUTHORITY Section 6.01. Deposit and Investment of Moneys in Funds. Moneys in any fund or account created
or established by this Agreement and held by the Fiscal Agent shall be invested by the Fiscal Agent in Permitted Investments, as directed pursuant to an Officer's Certificate filed with
the Fiscal Agent at least two (2) Business Days in advance of the making of such investments. In the absence of any such Officer's Certificate, the Fiscal Agent shall invest, to the
extent reasonably practicable, any such moneys in Permitted Investments described in clause (g) of the definition thereof in Section 1.03, which by their terms mature prior to the date
on which such moneys are required to be paid out hereunder. The Treasurer shall make note of any investment of funds hereunder in excess of the yield on the Bonds, so that appropriate
actions can be taken to assure compliance with Section 5.13. Moneys in any fund or account created or established by this Agreement and held by the Treasurer shall be invested by the
Treasurer in any Permitted Investment, which in any event by their terms mature prior to the date on which such moneys are required to be paid out hereunder. Obligations purchased as
an investment of moneys in any fund shall be deemed to be part of such fund or account, subject, however, to the requirements of this Agreement for transfer of interest earnings and
profits resulting from investment of amounts in funds and accounts. Whenever in this Agreement any moneys are required to be transferred by the Authority to the Fiscal Agent, such transfer
may be accomplished by transferring a like amount of Permitted Investments. The Fiscal Agent and its affiliates or the Treasurer may act as sponsor, advisor, depository, principal or
agent in the acquisition or disposition of any investment. Neither the Fiscal Agent nor the Treasurer shall incur any liability for losses arising from any investments made pursuant
to this Section. The Fiscal Agent shall not be required to determine the legality of any investments. Except as otherwise provided in the next sentence, all investments of amounts deposited
in any fund or account created by or pursuant to this Agreement, or otherwise containing gross proceeds of the Bonds (within the meaning of section 148 of the Code) shall be acquired,
disposed of, and valued (as of the date that valuation is required by this Agreement or the Code) at Fair Market Value. The Fiscal Agent shall have no duty in connection with the determination
of Fair Market Value other than to follow the investment direction of an Authorized Officer in any written direction of any Authorized Officer. Investments in funds or accounts (or portions
thereof) that are subject to a yield restriction under the applicable provisions of the Code and (unless valuation is undertaken at least annually) investments in the subaccounts within
the Reserve Fund shall be valued at their present value (within the meaning of section 148 of the Code). Code). The Fiscal Agent shall not be liable for verification of the application
of such sections of the Code. Investments in any and all funds and accounts may be commingled in a separate fund or funds for purposes of making, holding and disposing of investments,
notwithstanding provisions herein for transfer to or holding in or to the credit of particular funds or accounts of amounts received or held by the Fiscal Agent or the Treasurer hereunder,
provided that the Fiscal Agent or the Treasurer, as applicable, shall at all times account for such investments strictly in accordance with the funds and accounts to which they are credited
and otherwise as provided in this Agreement. -41-
The Fiscal Agent or the Treasurer, as applicable, shall sell at Fair Market Value, or present for redemption, any investment security 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 investment security is credited and neither the Fiscal Agent nor the Treasurer
shall be liable or responsible for any loss resulting from the acquisition or disposition of such investment security in accordance herewith. The Authority acknowledges that to the extent
regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they
occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Fiscal Agent will furnish the Authority periodic cash transaction statements
which include detail for all investment transactions made by the Fiscal Agent hereunder. Section 6.02. Limited Obligation. The Authority's obligations hereunder are limited obligations
of the Authority on behalf of the District and are payable solely from and secured solely by the Special Tax Revenues and the amounts in the Special Tax Fund, the Bond Fund (including
the Special Tax Prepayments Account and the Capitalized Interest Account therein) and the Reserve Fund created hereunder. Section 6.03. Liability of Authority. The Authority shall not
incur any responsibility in respect of the Bonds or this Agreement other than in connection with the duties or obligations explicitly herein or in the Bonds assigned to or imposed upon
it. The Authority shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Authority shall not be bound to
ascertain or inquire as to the performance or observance of any of the terms, conditions covenants or agreements of the Fiscal Agent herein or of any of the documents executed by the
Fiscal Agent in connection with the Bonds, or as to the existence of a default or event of default thereunder. In the absence of bad faith, the Authority, including the Treasurer, may
conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Authority and conforming to
the requirements of this Agreement. The Authority, including the Treasurer, shall not be liable for any error of judgment made in good faith unless it shall be proved that it was negligent
in ascertaining the pertinent facts. No provision of this Agreement shall require the Authority to expend or risk its own general funds or otherwise incur any financial liability (other
than with respect to the Special Tax Revenues) in the performance of any of its obligations hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Authority and the Treasurer may rely and
shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or proper parties. The Authority may consult with counsel, who may be the Authority Attorney, with regard to
legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and
in accordance therewith. -42-
The Authority shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactory
established, if disputed. Whenever in the administration of its duties under this Agreement the Authority or the Treasurer shall deem it necessary or desirable that a matter be proved
or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of willful
misconduct on the part of the Authority, be deemed to be conclusively proved and established by a certificate of the Fiscal Agent, an Appraiser, an Independent Financial Consultant or
a Tax Consultant, and such certificate shall be full warrant to the Authority and the Treasurer for any action taken or suffered under the provisions of this Agreement or any Supplemental
Agreement upon the faith thereof, but in its discretion the Authority or the Treasurer may, in lieu thereof, accept other evidence of such matter or may require such additional evidence
as to it may seem reasonable. Section 6.04. Employment of Agents by Authority. In order to perform its duties and obligations hereunder, the Authority and/or the Treasurer may employ
such persons or entities as it deems necessary or advisable. The Authority shall not be liable for any of the acts or omissions of such persons or entities employed by it in good faith
hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities. -43-
ARTICLE VII THE FISCAL AGENT Section 7.01. Appointment of Fiscal Agent. U.S. Bank National Association is hereby appointed Fiscal Agent and paying agent for the Bonds. The Fiscal Agent
undertakes to perform such duties, and only such duties, as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against
the Fiscal Agent. Any company into which the Fiscal Agent may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation
to which it shall be a party or any company to which the Fiscal Agent may sell or transfer all or substantially all of its corporate trust business, provided such company shall be eligible
under the following paragraph of this Section, shall be the successor to such Fiscal Agent without the execution or filing of any paper or any further act, anything herein to the contrary
notwithstanding. The Authority may at any time remove the Fiscal Agent initially initially appointed, and any successor thereto, and may appoint a successor or successors thereto, but
any such successor shall be a bank, corporation or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least Fifty Million Dollars ($50,000,000),
and subject to supervision or examination by federal or state authority. If such bank, corporation or trust company publishes a report of condition at least annually, pursuant to law
or to the requirements of any supervising or examining authority above referred to, then for the purposes of this Section 7.01, combined capital and surplus of such bank or trust company
shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Fiscal Agent may at any time resign by giving written notice
to the Authority and by giving to the Owners notice by mail of such resignation. Upon receiving notice of such resignation, the Authority shall promptly appoint a successor Fiscal Fiscal
Agent by an instrument in writing. Any resignation or removal of the Fiscal Agent shall become effective upon acceptance of appointment by the successor Fiscal Agent. If no appointment
of a successor Fiscal Agent shall be made pursuant to the foregoing provisions of this Section within forty-five (45) days after the Fiscal Agent shall have given to the Authority written
notice or after a vacancy in the office of the Fiscal Agent shall have occurred by reason of its inability to act, the Fiscal Agent or any Owner may apply to any court of competent jurisdiction
to appoint a successor Fiscal Agent. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Fiscal Agent. If, by reason of the judgment
of any court, or reasonable agency, the Fiscal Agent is rendered unable to perform its duties hereunder, all such duties and all of the rights and powers of the Fiscal Agent hereunder
shall be assumed by and vest in the Treasurer of the Authority in trust for the the benefit of the Owners. The Authority covenants for the direct benefit of the Owners that its Treasurer
in such case shall be vested with all of the rights and powers of the Fiscal Agent hereunder, and shall assume all of the responsibilities and perform all of the duties of the Fiscal
Agent hereunder, in trust for the benefit of the Owners of the Bonds. In such event, the Treasurer may designate a successor Fiscal Agent qualified to act as Fiscal Agent hereunder.
-44-
Section 7.02. Liability of Fiscal Agent. The recitals of facts, covenants and agreements herein and in the Bonds contained shall be taken as statements, covenants and agreements of the
Authority, and the Fiscal Agent assumes no responsibility for the correctness of the same, or makes any representations as to the validity or sufficiency of this Agreement or of the
Bonds, or shall incur any responsibility in respect thereof, other than in connection with the duties or obligations herein or in the Bonds assigned to or imposed upon it. The Fiscal
Agent shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful default. The Fiscal Agent assumes no responsibility or
liability for any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of the Bonds. In the
absence of bad faith, the Fiscal Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished
to the Fiscal Agent and conforming to the requirements of this Agreement; but
in the case of any such certificates or opinions by which any provision hereof are specifically required to be furnished to the Fiscal Agent, the Fiscal Agent shall be under a duty to
examine the same to determine whether or not they conform to the requirements of this Agreement. Except as provided above in this paragraph, Fiscal Agent shall be protected and shall
incur no liability in acting or proceeding, or in not acting or not proceeding, in good faith, reasonably and in accordance with the terms of this Agreement, upon any resolution, order,
notice, request, consent or waiver, certificate, statement, affidavit, or other paper or document which it shall in good faith reasonably believe to be genuine and to have been adopted
or signed by the proper person or to have been prepared and furnished pursuant to any provision of this Agreement, and the Fiscal Agent shall not be under any duty to make any investigation
or inquiry as to any statements contained or matters referred to in any such instrument. The Fiscal Agent shall not be liable for any error of judgment made in good faith unless it shall
be proved that the Fiscal Agent was negligent in ascertaining the pertinent facts. No provision of this Agreement shall require the Fiscal Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Fiscal Agent shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement unless such Owners shall have offered to the Fiscal
Agent reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Fiscal Agent may become
the owner of the the Bonds with the same rights it would have if it were not the Fiscal Agent. The Fiscal Agent 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, and its liability shall be limited to the proper accounting for such
funds as it shall actually receive. In order to perform its duties and obligations hereunder, the Fiscal Agent may employ such persons or entities as it deems necessary or advisable.
The Fiscal Agent shall not be liable for any of the acts or omissions of such persons or entities employed by it in -45-
good faith hereunder, and shall be entitled to rely, and shall be fully protected in doing so, upon the opinions, calculations, determinations and directions of such persons or entities.
Section 7.03. Information. The Fiscal Agent shall provide to the Authority such information relating to the Bonds and the funds and accounts maintained by the Fiscal Agent hereunder
as the Authority shall reasonably request, including but not limited to quarterly statements reporting funds held and transactions by the Fiscal Agent. Section 7.04. Notice to Fiscal
Agent. The Fiscal Agent may rely and shall be protected in acting or refraining from acting upon any notice, resolution, request, consent, order, certificate, report, warrant, bond or
other paper or document believed in good faith by it to be genuine and to have been signed or presented by the proper party or proper parties. The Fiscal Agent may consult with counsel,
who may be counsel to the Authority, with regard to legal questions, and the opinion of such counsel counsel shall be full and complete authorization and protection in respect of any
action taken or suffered by it hereunder in good faith and in accordance therewith. The Fiscal Agent shall not be bound to recognize any person as the Owner of a Bond unless and until
such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under this Agreement the
Fiscal Agent shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect
thereof be herein specifically prescribed) may, in the absence of willful misconduct on the part of the Fiscal Agent, be deemed to be conclusively proved and established by an Officer's
Certificate, and such certificate shall be full warrant to the Fiscal Agent for any action taken or suffered under the provisions of this Agreement or any Supplemental Agreement upon
the faith thereof, but in its discretion the Fiscal Agent may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable.
Section 7.05. Compensation, Indemnification. The Authority shall pay to the Fiscal Agent from time to time reasonable compensation for all services rendered as Fiscal Agent under this
Agreement, and also all reasonable expenses, charges, counsel fees and other disbursements, including those of their attorneys, agents and employees, incurred in and about the performance
of their powers and duties under this Agreement, but the Fiscal Agent shall not have a lien therefor on any funds at any time held by it under this Agreement. The Authority further agrees,
to the extent permitted by applicable law, to indemnify and save the Fiscal Agent, its officers, employees, directors and agents harmless against any costs, expenses, claims or liabilities
whatsoever, including without limitation fees and expenses of its attorneys, which it may incur in the the exercise and performance of its powers and duties hereunder which are not due
to its negligence or willful misconduct. The obligation of the Authority under this Section shall survive resignation or removal of the Fiscal Agent under this Agreement and payment
of the Bonds and discharge of this Agreement, but any monetary obligation of the Authority arising under this Section shall be limited solely to amounts on deposit in the Administrative
Expense Fund. -46-
ARTICLE VIII MODIFICATION OR AMENDMENT OF THIS AGREEMENT Section 8.01. Amendments Permitted. This Agreement and the rights and obligations of the Authority and of the Owners of the Bonds
may be modified or amended at any time by a Supplemental Agreement pursuant to the affirmative vote at a meeting of Owners, or with the written consent without a meeting, of the Owners
of at least sixty percent (60%) in aggregate principal amount of the Bonds then Outstanding, exclusive of Bonds disqualified as provided in Section 8.04. No such modification or amendment
shall (i) extend the maturity of any Bond or reduce the interest rate thereon, or otherwise alter or impair the obligation of the Authority to pay the principal of, and the interest
and any premium on, any Bond, without the express consent of the Owner of such Bond, or (ii) permit the creation by the Authority of any pledge or lien upon the Special Taxes superior
to or on a parity with the pledge and lien created for the benefit of the Owners of the Bonds (except as otherwise permitted by the Act, the laws of the State of California or this Agreement),
or (iii) reduce the percentage of Bonds required for the amendment hereof. Any such amendment may not modify any of the rights or obligations of the Fiscal Agent without its written
consent. This Agreement and the rights and obligations of the Authority and of the Owners may also be modified or amended at any time by a Supplemental Agreement, without the consent
of any Owners, only to the extent permitted by law and only for any one or more of the following purposes: (A) to add to the covenants and agreements of the Authority in this Agreement
contained, other covenants and agreements thereafter to be observed, or to limit or surrender any right or power herein reserved to or conferred upon the Authority; (B) to make modifications
not adversely affecting any Outstanding series of Bonds of the Authority in any material respect; (C) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting
or supplementing any defective provision contained in this Agreement, or in regard to questions arising under this Agreement, as the Authority or the Fiscal Agent may deem necessary
or desirable and not inconsistent with this Agreement, and which shall not adversely affect the rights of the Owners of the Bonds; (D) to make such additions, deletions or modifications
as may be necessary or desirable to assure exemption from gross federal income taxation of interest on the Bonds; and (E) in connection with the issuance of Parity Bonds under and pursuant
to Section 2.14. Section 8.02. Owners' Meetings. The Authority may at any time call a meeting of the Owners. In such event the Authority is authorized to fix the time and place of said
meeting and to provide for the giving of notice thereof, and to fix and adopt rules and regulations for the conduct of said meeting. -47-
Section 8.03. Procedure for Amendment with Written Consent of Owners. The Authority and the Fiscal Agent may at any time adopt a Supplemental Agreement amending the provisions of the
Bonds or of this Agreement or any Supplemental Agreement, to the extent that such amendment is permitted by Section 8.01, to take effect when and as provided in this Section. A copy
of such Supplemental Agreement, together with a request to Owners for their consent thereto, shall be mailed by first class mail, by the Fiscal Agent to each Owner of Bonds Outstanding,
but failure to mail copies of such Supplemental Agreement and request shall not affect the validity of the Supplemental Agreement when assented to as in this Section provided. Such Supplemental
Agreement shall not become effective unless there shall be filed with the Fiscal Agent the written consents of the Owners of at least sixty percent (60%) in aggregate principal amount
of the Bonds then Outstanding (exclusive of Bonds disqualified as provided in Section 8.04) and a notice shall have been mailed as hereinafter in this Section provided. Each such consent
shall be effective only if accompanied by proof of ownership of the Bonds for which such consent is given, which proof shall be such as is permitted by Section 9.04. Any such consent
shall be binding upon the Owner of the Bonds giving such consent and on any subsequent Owner (whether or not such subsequent Owner has notice thereof) unless such consent is revoked
in writing by the Owner giving such consent or a subsequent Owner by filing such revocation with the Fiscal Agent prior to the date when the notice hereinafter in this Section provided
for has been mailed. After the Owners of the required percentage of Bonds shall have filed their consents to the Supplemental Agreement, the Authority shall mail a notice to the Owners
in the manner hereinbefore provided in this Section for the mailing of the Supplemental Agreement, stating in substance that the Supplemental Agreement has been consented to by the Owners
of the the required percentage of Bonds and will be effective as provided in this Section (but failure to mail copies of said notice shall not affect the validity of the Supplemental
Agreement or consents thereto). Proof of the mailing of such notice shall be filed with the Fiscal Agent. A record, consisting of the papers required by this Section 8.03 to be filed
with the Fiscal Agent, shall be proof of the matters therein stated until the contrary is proved. The Supplemental Agreement shall become effective upon the filing with the Fiscal Agent
of the proof of mailing of such notice, and the Supplemental Agreement shall be deemed conclusively binding (except as otherwise hereinabove specifically provided in this Article) upon
the Authority and the Owners of all Bonds at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside
such consent in a legal action or equitable proceeding for such purpose commenced within such sixty-day period. Section 8.04. Disqualified Bonds. Bonds owned or held for the account
of the Authority, excepting any pension or retirement fund, shall not be deemed Outstanding for the purpose of any vote, consent or other action or any calculation of Outstanding Bonds
provided for in this Article VIII, and shall not be entitled to vote upon, consent to, or take any other action provided for in this Article VIII; provided, however, that the Fiscal
Agent shall not be deemed to have knowledge that any Bond is owned or held by the Authority unless the Authority is the registered Owner or the Fiscal Agent has received written notice
that any other registered Owner is an Owner for the account of the Authority. Section 8.05. Effect of Supplemental Agreement. From and after the time any Supplemental Agreement becomes
effective pursuant to this Article VIII, this Agreement shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations under this Agreement
of the Authority and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and
all the terms and -48-
conditions of any such Supplemental Agreement shall be deemed to be part of the terms and conditions of this Agreement for any and all purposes. Section 8.06. Endorsement or Replacement
of Bonds Issued After Amendments. The Authority may determine that Bonds issued and delivered after the effective date of any action taken as provided in this Article VIII shall bear
a notation, by endorsement or otherwise, in form approved by the Authority, as to such action. In that case, upon demand of the Owner of any Bond Outstanding at such effective date and
presentation of his Bond for that purpose at the Principal Office of the Fiscal Agent or at such other office as the Authority may select and designate for that purpose, a suitable notation
shall be made on such Bond. The Authority may determine that new Bonds, so modified as in the opinion of the Authority is necessary to conform to such Owners' action, shall be prepared,
executed and delivered. In that case, upon demand of the Owner of any Bonds then Outstanding, such new Bonds shall be exchanged at the Principal Office of the Fiscal Agent without cost
to any Owner, for Bonds then Outstanding, upon surrender of such Bonds. Section 8.07. Amendatory Endorsement of Bonds. The provisions of this Article VIII shall not prevent any Owner
from accepting any amendment as to the particular Bonds held by him, provided that due notation thereof is made on such Bonds. -49-
ARTICLE IX MISCELLANEOUS Section 9.01. Benefits of Agreement Limited to Parties. Nothing in this Agreement, expressed or implied, is intended to give to any person other than the Authority,
the Fiscal Agent and the Owners, any right, remedy, claim under or by reason of this Agreement. Any covenants, stipulations, promises or agreements in this Agreement contained by and
on behalf of the Authority shall be for the sole and exclusive benefit of the Owners and the Fiscal Agent. Section 9.02. Successor is Deemed Included in All References to Predecessor.
Whenever in this Agreement or any Supplemental Agreement either the Authority or the Fiscal Agent is named or referred to, such reference shall be deemed to include the successors or
assigns thereof, and all the covenants and agreements in this Agreement contained by or on behalf of the Authority or the Fiscal Agent shall bind and inure to the benefit of the respective
successors and assigns thereof whether so expressed or not. Section 9.03. Discharge of Agreement. The Authority shall have the option to pay and discharge the entire indebtedness on
all or any portion of the Bonds Outstanding in any one or more of the following ways: (A) by well and truly paying or causing to be paid the principal of, and interest and any premium
on, such Bonds Outstanding, as and when the same become due and payable; (B) by depositing with the Fiscal Agent, in trust, at or before maturity, money which, together with the amounts
then on deposit in the funds and accounts provided for in Sections 4.04 and 4.05 is fully sufficient to pay such Bonds Outstanding, including all principal, interest and redemption premiums;
or (C) by irrevocably depositing with the Fiscal Agent, in trust, cash and Federal Securities in such amount as the Authority shall determine as confirmed by Bond Counsel or an independent
certified public accountant will, together with the interest to accrue thereon and moneys then on deposit in the fund and accounts provided for in Sections 4.04 and 4.05, be fully sufficient
to pay and discharge the indebtedness on such Bonds (including all principal, interest and redemption premiums) at or before their respective maturity dates. If the Authority shall have
taken any of the actions specified in (A), (B) or (C) above, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given as in
this Agreement provided or provision satisfactory to the Fiscal Agent shall have been made for the giving of such notice, then, at the election of the Authority, and notwithstanding
that any Bonds shall not have been surrendered for payment, the pledge of the Special Taxes and other funds provided for in this Agreement and all other obligations of the Authority
under this Agreement with respect to such Bonds Outstanding shall cease and terminate. Notice of such election shall be filed with the Fiscal Agent. Notwithstanding the foregoing, the
obligation of the Authority to pay or cause to be paid to the Owners of the Bonds not so surrendered surrendered and paid all sums due thereon, all amounts owing to the Fiscal Agent
pursuant to Section 7.05, and otherwise to assure that no action is taken or failed to be taken if such action or failure adversely affects the exclusion of interest on the Bonds from
gross income for federal income tax purposes, shall continue in any event. -50-
Upon compliance by the Authority with the foregoing with respect to all Bonds Outstanding/any funds held by the Fiscal Agent after payment of all fees and expenses of the Fiscal Agent,
which are not required for the purposes of the preceding paragraph, shall be paid over to the Authority and any Special Taxes thereafter received by the Authority shall not be remitted
to the Fiscal Agent but shall be retained by the Authority to be used for any purpose permitted under the Act. Section 9.04. Execution of Documents and Proof of Ownership by Owners.
Any request, declaration or other instrument which this Agreement may require or permit to be executed by Owners may be in one or more instruments of similar tenor, and shall be executed
by Owners in person or by their attorneys appointed in writing. Except as otherwise herein expressly provided, the fact and date of the execution by any Owner or his attorney of such
request, declaration or other instrument, or of such writing appointing such attorney, may be proved proved by the certificate of any notary public or other officer authorized to take
acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him
the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer. Except as otherwise herein expressly provided, the
ownership of registered Bonds and the amount, maturity, number and date of holding the same shall be proved by the registry books. Any request, declaration or other instrument or writing
of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the Authority or the Fiscal Agent in good faith and in accordance
therewith. Section 9.05. Waiver of Personal Liability. No director, Councilmember, officer, official, agent or employee of the Authority, the City or the District shall be individually
or personally liable for the payment of the principal of, or interest or any premium on, the Bonds; but nothing herein contained shall relieve any such director, Councilmember, officer,
official, agent or employee from the performance of any official duty provided by law. Section 9.06. Notices to and Demands on Authority and Fiscal Agent. Any notice or demand which
by any provision of this Agreement is required or permitted to be given or served by the Fiscal Agent to or on the Authority may be given or served by being deposited postage prepaid
in a post office letter box addressed (until another address is filed by the Authority with the Fiscal Agent) as follows: Temecula Public Financing Authority c/o City of Temecula 43200
Business Park Drive Temecula, CA 92590 Attn: Treasurer Any notice or demand which by any provision of this Agreement is required or permitted to be given or served by the Authority to
or on the Fiscal Agent may be given or served by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Fiscal Agent with the Authority)
as follows (provided that any such notice shall not be effective until actually received by the Fiscal Agent): -51-
U.S. Bank National Association 633 W. Fifth Street, 24* Floor Los Angeles, CA 90071 Attention: Corporate Trust Services Reference: Temecula CFD 03-02 (Roripaugh Ranch) Section 9.07.
State Reporting Requirements. The following requirements shall apply to the Bonds, in addition to those requirements under Section 5.17: (A) Annual Reporting. Not later than October
30 of each calendar year, beginning with the October 30 first succeeding the date of the Bonds, and in each calendar year thereafter until the October 30 following the final maturity
of the Bonds, the Treasurer shall cause the following information to be supplied to CDIAC: (i) the principal amount of the Bonds Outstanding; (ii) the balance in the Reserve Fund; (iii)
the balance, if any, in the Capitalized Interest Account; (iv) the number of parcels in the District which are delinquent in the payment of Special Taxes, the amount of each delinquency,
the length of time delinquent and when foreclosure was commenced for each delinquent parcel; (v) the balances in the accounts within the Improvement Fund; and (vi) the assessed value
of all parcels in the District subject to the levy of the Special Taxes as shown in most recent equalized roll. The annual reporting shall be made using such form or forms as may be
prescribed by CDIAC. (B) Other Reporting. If at any time the Fiscal Agent fails to pay principal and interest due on any scheduled payment date for the Bonds, or if funds are withdrawn
from the Reserve Fund to pay principal and interest on the Bonds, the Fiscal Agent shall notify the Treasurer of such failure or withdrawal in writing. The Treasurer shall notify CDIAC
and the Original Purchaser of such failure or withdrawal within 10 days of such failure or withdrawal. (C) Special Tax Reporting. The Treasurer shall file a report with the Authority
no later than January 1, 2007, and at least once a year thereafter, which annual report shall contain: (i) the amount of Special Taxes collected and expended with respect to the District,
(ii) the amount of Bond proceeds collected and expended with respect to the District, and (iii) the status of the Project. It is acknowledged that the Special Tax Fund and the Special
Tax Prepayments Account are the accounts into which Special Taxes collected on the District will be deposited for purposes of Section 50075.l(c) of the California Government Code, and
the funds and accounts listed in Section 4.01 are the funds and accounts into which Bond proceeds will be deposited for purposes of Section 53410(c) of the California Government Code,
and the annual report described in the preceding sentence is intended to satisfy the requirements of Sections 50075.1(d), 50075.3(d) and 53411 of the California Government Code. (D)
Amendment. The reporting requirements of this Section 9.07 shall be amended from time to time, without action by the Authority or the Fiscal Agent (i) with respect to subparagraphs (A)
and (B) above, to reflect any amendments to Section 53359.5(b) or Section 53359.5(c) of the Act, and (ii) with respect to subparagraph (C) above, to reflect any amendments to Section
50075.1, 50075.3, 53410 or 53411 of the California Government Code. Notwithstanding the foregoing, any such amendment shall not, in itself, affect the Authority's obligations under the
Continuing Disclosure Agreement. The Authority shall notify the Fiscal Agent in writing of any such amendments which affect the reporting obligations of the Fiscal Agent under this Agreement.
-52-
(E) No Liability. None of the Authority and its officers, agents and employees, the Treasurer or the Fiscal Agent shall be liable for any inadvertent error in reporting the information
required by this Section 9.07. The Treasurer shall provide copies of any of such reports to any Bondowner upon the written request of a Bondowner and payment by the person requesting
the information of the cost of the Authority to produce such information and pay any postage or other delivery cost to provide the same, as determined by the Treasurer. The term "Bondowner"
for purposes of this Section 9.07 shall include any beneficial owner of the Bonds. Section 9.08. Partial Invalidity. If any Section, paragraph, sentence, clause or phrase of this Agreement
shall for any reason be held illegal or unenforceable, such holding shall not affect the validity of the remaining portions of this Agreement. The Authority hereby declares that it would
have adopted this Agreement and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issue of the Bonds pursuant thereto irrespective of the
fact that any one or more Sections, paragraphs, sentences, clauses, or phrases of this Agreement may be held illegal, invalid or unenforceable. Section 9.09. Unclaimed Moneys. Anything
contained herein to the contrary notwithstanding, any moneys held by the Fiscal Agent in trust for the payment and discharge of the principal of, and the interest and any premium on,
the Bonds which remains unclaimed for two (2) years after the date when the payments of such principal, interest and premium have become payable, if such moneys was held by the Fiscal
Agent at such date, shall be repaid by the Fiscal Agent to the Authority as its absolute property free from any trust, and the Fiscal Agent shall thereupon be released and discharged
with respect thereto and the Owners shall look only to the Authority for the payment of the principal of, and interest and any premium on, such Bonds. Section 9.10. Applicable Law. This
Agreement shall be governed by and enforced in accordance with the laws of the State of California applicable to contracts made and performed in the State of California. Section 9.11.
Conflict with Act. In the event of a conflict between any provision of this Agreement with any provision of the Act as in effect on the Closing Date, the provision of the Act shall prevail
over the conflicting provision of this Agreement. Section 9.12. Conclusive Evidence of Regularity. Bonds issued pursuant to this Agreement shall constitute conclusive evidence of the
regularity of all proceedings under the Act relative to their issuance and the levy of the Special Taxes. Section 9.13. Payment on Business Day. In any case where the date of the maturity
of interest or of principal (and premium, if any) of the Bonds or the date fixed for redemption of any Bonds or the date any action is to be taken pursuant to this Agreement is other
than a Business Day, the payment of interest or principal (and premium, if any) or the action need not be made on such date but may be made on the next succeeding day which is a Business
Day with the same force and effect as if made on the date required and no interest shall accrue for the period from and after such date. Section 9.14. Counterparts. This Agreement may
be executed in counterparts, each of which shall be deemed an original. -53-
IN WITNESS WHEREOF, the Authority caused this Fiscal Agent Agreement to be executed all as of March 1,2006. TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC
FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH) Executive Director U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer 20009.01 :J7220
-54-
IN WITNESS WHEREOF, the Authority caused this Fiscal Agent
Agreement to be executed all as of March 1,2006. TEMECULA PUBLIC FINANCING AUTHORITY, for and on behalf of TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02
(RORIPAUGH RANCH) By: Executive Director U. S. BANK NATIONAL ASSOCIATION, as Fiscal Agent By: Authorized Officer 20009.01 :J7220 -54-
No. EXHIBIT A FORM OF BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF RIVERSIDE TEMECULA PUBLIC FINANCING AUTHORITY COMMUNITY FACILITIES DISTRICT NO. 03-02 (RORIPAUGH RANCH)
2006 SPECIAL TAX BOND INTEREST RATE MATURITY DATE September 1, BOND DATE April 27, 2006 CUSIP REGISTERED OWNER: PRINCIPAL AMOUNT: DOLLARS The Temecula Public Financing Authority (the
"Authority") for and on behalf of the Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) (the "District"), for value received, hereby promises
to pay solely from the Special Tax (as hereinafter defined) to be collected in the District or amounts in the funds and accounts held under the Agreement (as hereinafter defined), to
the registered owner named above, or registered assigns, on the maturity date set forth above, unless redeemed prior thereto as hereinafter provided, the principal amount set forth above,
and to pay interest on such principal amount from the Bond Date set forth above, or from the most recent interest payment date to which interest has been paid or duly provided for, semiannually
on March 1 and September 1, commencing September 1,2006, at the interest rate set forth above, until the principal amount hereof is paid or made available for payment. The principal
of this Bond is payable to the registered owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the Principal Office (as defined
in the Agreement referred to below) of U.S. Bank National Association (the "Fiscal Agent"). Interest on this Bond shall be paid by check of the Fiscal Agent mailed on each interest payment
date to the registered owner hereof as of the close of business on the 15th day of the month preceding the month in which the interest payment date occurs (the "Record Date") at such
registered owner's address as it appears on the registration books maintained by the Fiscal Agent, or (i) if the Bonds are in book-entry-only form, or (ii) otherwise upon written request
filed with the Fiscal Agent prior to any Record Date by a registered owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds
to the depository for the Bonds or to an account in the United States designated by such registered owner in such written request, respectively. This Bond is one of a duly authorized
issue of bonds approved by the qualified electors of the District pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, Sections 53311, et seq., of the California
Government Code (the "Mello-Roos Act") for the purpose of financing certain public facilities within and in the vicinity of the District (the "Project") and to eliminate a lien on property
in the District, and is one of the first series A-l
of such bonds designated "Temecula Public Financing Authority Community Facilities District No. 03-02 (Roripaugh Ranch) 2006 Special Tax Bonds" (the "Bonds") in the aggregate principal
amount of $51,250,000. The creation of the Bonds and the terms and conditions thereof are provided for by resolution adopted by the Board of Directors of the Authority on February 28,
2006 (the "Resolution"), and the Fiscal Agent Agreement, dated as of March 1, 2006, between the Authority and the Fiscal Agent (the "Agreement") and this reference incorporates the Resolution
and the Agreement herein, and by acceptance hereof the owner of this Bond assents to said terms and conditions. Pursuant to and as more particularly provided in the Resolution and in
the Agreement, additional bonds may be issued by the Authority from time to time secured by a lien on funds held under the Agreement on a parity with the lien securing the Bonds. The
Resolution is adopted and the Agreement is entered into under and this Bond is issued under, and all are to be construed in accordance with, the laws of the State of California. Pursuant
to the Mello-Roos Act, the Agreement and the Resolution, the principal of and interest on this Bond are payable solely from the annual special tax authorized under the Mello-Roos Act
to be collected within the District (the "Special Tax") and certain funds held under the Agreement. Interest on this Bond shall be payable from the interest payment date next preceding
the date of authentication hereof, unless (i) it is authenticated on an interest payment date, in which event it shall bear interest from such date of authentication, or (ii) it is authenticated
prior to an interest payment date and after the close of business on the Record Date preceding such interest payment date, in which event it shall bear interest from such interest payment
date, or (iii) it is authenticated prior to the Record Date preceding the first interest payment date, in which event it shall bear interest from the Bond Date set forth above; provided,
however, that if at the time of authentication of this Bond, interest is in default hereon, this Bond shall bear interest from the interest payment date to which interest has previously
been paid or made available for payment hereon. Any tax for the payment hereof shall be limited to the Special Tax, except to the extent that provision for payment has been made by the
Authority, as may be permitted by law. The Bonds do not constitute obligations of the Authority for which the Authority is obligated to levy or pledge, or has levied or pledged, general
or special taxation other than described hereinabove. The City of Temecula has no liability or obligations whatsoever with respect to the Bonds or the Agreement. The Bonds maturing on
or after September 1,2015 are subject to redemption prior to their stated maturity on any interest payment date occurring on or after September 1, 2014, as a whole or in part among maturities
as provided in the Agreement, at a redemption price (expressed as a percentage of the principal amount of the Bonds to be redeemed), as set forth below, together with accrued interest
thereon to the date fixed for redemption: Redemption Dates Redemption Prices September 1, 2014 and March 1, 2015 102% September 1, 2015 and March 1, 2016 101 September 1, 2016 and any
interest payment 100 date thereafter The Bonds maturing on September 1, 2026, are subject to mandatory sinking payment redemption in part on September 1, 2017 and on each September 1
thereafter to maturity, by lot, at a redemption price equal to the principal amount thereof to be A-2
redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking Payments 2017 $1,205,000
2018 1,270,000 2019 1,340,000 2020 1,415,000 2021 1,490,000 2022 1,570,000 2023 1,660,000 2024 1,750,000 2025 1,845,000 2026 (maturity) 1,945,000 The Bonds maturing on September 1, 2036,
are subject to mandatory sinking payment redemption in part on September 1, 2027 and on each September 1 thereafter to maturity, by lot, at a redemption price equal to the principal
amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, from sinking payments as follows: Redemption Date (September 1) Sinking
Payments 2027 $2,050,000 2028 2,165,000 2029 2,280,000 2030 2,405,000 2031 2,540,000 2032 2,680,000 2033 2,825,000 2034 2,980,000 2035 3,145,000 2036 (maturity) 3,320,000 The Bonds are
also subject to redemption from the proceeds of Special Tax Prepayments and any corresponding transfers from the Reserve Fund pursuant to the Agreement, on any Interest Payment Date,
among maturities as specified in the Agreement and by lot within a maturity, at a redemption price (expressed as a percentage at the principal amount of the Bonds to be redeemed), as
set forth below, together with accrued interest to the date fixed for redemption: Redemption Dates Redemption Prices Any interest payment date from September 103% 1, 2006 to and including
March 1, 2014 September 1, 2014 and March 1, 2015 102 September 1, 2015 and March 1, 2016 101 September 1, 2016 and any interest payment 100 date thereafter The Bonds are subject to
mandatory redemption on any Interest Payment Date, in part, at a redemption price equal to the principal amount thereof to be redeemed, together A-3
with accrued interest to the date of redemption, without premium, from amounts transferred from the Improvement Fund to the Bond Fund pursuant to the Agreement. Notice of redemption
with respect to the Bonds to be redeemed shall be given to the registered owners thereof, in the manner, to the extent and subject to the provisions of the Agreement. This Bond shall
be registered in the name of the owner hereof, as to both principal and interest. Each registration and transfer of registration of this Bond shall be entered by the Fiscal Agent in
books kept by it for this purpose and authenticated by its manual signature upon the certificate of authentication endorsed hereon. No transfer or exchange hereof shall be valid for
any purpose unless made by the registered owner, by execution of the form of assignment endorsed hereon, and authenticated as herein provided, and the principal hereof, interest hereon
and any redemption premium shall be payable only to the registered owner or to such owner's order. The Fiscal Agent shall require the registered owner requesting transfer or exchange
to pay any tax or other governmental charge required to be paid with respect to such transfer or exchange. No transfer or exchange hereof shall be required to be made (i) fifteen days
prior to the date established by the Fiscal Agent for selection of Bonds for redemption, (ii) with respect to a Bond after such Bond has been selected for redemption, or (iii) between
a Record Date and the succeeding interest payment date. Exchanges may only be made for Bonds in authorized denominations, as provided in the Agreement. The Agreement and the rights and
obligations of the Authority thereunder may be modified or amended as set forth therein. The Agreement contains provisions permitting the Authority to make provision for the payment
of the interest on, and the principal and premium, if any, of the Bonds so that such Bonds shall no longer be deemed to be outstanding under the terms of the Agreement. The Bonds are
not general obligations of the the Authority, but are limited obligations payable solely from the revenues and funds pledged therefor under the Agreement. Neither the faith and credit
of the Authority or the State of California or any political subdivision thereof is pledged to the payment of the Bonds. This Bond shall not become valid or obligatory for any purpose
until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Fiscal Agent. Unless this Bond is presented by an authorized representative
of The Depository Trust Company to the Fiscal Agent for registration of transfer, exchange or payment, and any Bond issued is registered in the name of Cede & Co. or such other name
as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. IT IS HEREBY CERTIFIED, RECITED RECITED AND DECLARED that all acts, conditions and
things required by law to exist, happen and be performed precedent to and in the issuance of this Bond have existed, happened and been performed in due time, form and manner as A-4
required by law, and that the amount of this Bond does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, Temecula Public
Financing Authority has caused this Bond to be dated the Bond Date set forth above, to be signed by the facsimile signature of its Executive Director and countersigned by the facsimile
signature of its Secretary. TEMECULA PUBLIC FINANCING AUTHORITYExecutive Director ATTEST Secretary A-5
FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the Resolution and in the Agreement which has been authenticated on . U.S. Bank National Association,
as Fiscal Agent By: Authorized Signatory A-6
ASSIGNMENT For value received the undersigned hereby sells, assigns and transfers unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within-registered
Bond and hereby irrevocably constitute(s) and appoints(s) attorney, to transfer the same on the registration books of the Fiscal Agent with full power of substitution in the premises.
Dated: Signature Guaranteed: Signature: Note: Signature(s) must be guaranteed by an eligible Note: The signature(s) on this Assignment must guarantor. correspond with the name(s) as
written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. A-7