Loading...
HomeMy WebLinkAboutRES 2003-50 - Board TRUCKEE DONNER Public Utility District RESOLUTION NO. 2003-50 RESOLUTION OF THE BOARD OF DIRECTORS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT,ACTING AS THE LEGISLATIVE BODY OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD), AUTHORIZING THE SALE AND ISSUANCE OF SPECIAL TAX BONDS OF SAID COMMUNITY FACILITIES DISTRICT, APPROVING DOCUMENTS RELATING THERETO AND AUTHORIZING AND DIRECTING CERTAIN RELATED ACTIONS WHEREAS, the Board of Directors (hereinafter sometimes referred to as the "legislative body of the Community Facilities District" or the "Board"), of the Truckee Donner Public Utility District has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) (the "Community Facilities District") pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the "Act"); and WHEREAS, based upon a resolution adopted by the legislative body of the Community Facilities District on October 14, 2003 and an election held on October 14, 2003 authorizing the issuance of bonds by the Community Facilities District, the Community Facilities District is now authorized to issue bonds in one or more series,pursuant to the Act, in an aggregate principal amount not to exceed$15,000,000; and WHEREAS, the legislative body of the Community Facilities District intends to accomplish the financing of the purchasing, constructing, expanding, improving or rehabilitating certain public improvements and appurtenances and appurtenant work in connection with the foregoing(the"Facilities")through the issuance of bonds designated as the "Truckee Donner Public Utility District Community Facilities District No. 03-1 (Old Greenwood) Special Tax Bonds"(the"Bonds"); and WHEREAS, the Community Facilities District has determined all requirements of the Act for the issuance of the Bonds have been satisfied; and WHEREAS, in connection with the authorization, sale and issuance of the Bonds and the acquisition and construction of the facilities, forms of the following documents have been presented to this Board for approval: 1. the Trust Indenture, dated as of December 1, 20039 by and between BNY Western Trust Company of California, as trustee (the "Trustee"), and the Community Facilities District(the"Indenture"); 2. the Continuing Disclosure Agreement, dated as of December 1, 2003 by and between MuniFinancial, as dissemination agent (the "Dissemination Agent"), and the Community Facilities District(the "Continuing Disclosure Agreement"); 3. the Preliminary Official Statement relating to the Bonds (the "Preliminary Official Statement"); and 4. the Bond Purchase Agreement relating to the Bonds (the "Bond Purchase Agreement") by and between the Community Facilities District and UBS Financial Services Inc. (the"Underwriter"); NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT,ACTING AS THE LEGISLATIVE BODY OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO. 03-1 (OLD GREENWOOD), DOES HEREBY RESOLVE, DETERMINE,AND ORDER AS FOLLOWS: Section I. The above recitals, and each of them, are true and correct. Section 2. The proposed forms of the Indenture and the Continuing Disclosure Agreement are hereby approved; and the President of the Board of Directors (the "President") and the District Clerk(the "Clerk") are hereby authorized and directed for and in the name and on behalf of the Community Facilities District to execute, acknowledge and deliver to the respective other parties, the Indenture and the Continuing Disclosure Agreement in substantially said forms, with such additions thereto, completions thereof and/or changes therein as the officers executing the same may approve as necessary or desirable (consistent with the provisions of this Resolution and with form of the Bond Purchase Agreement approved pursuant hereto), such approval to be conclusively evidenced by the execution and delivery thereof. Section 3. The issuance of the Bonds pursuant to the Indenture in an aggregate principal amount (not in excess of $15,000,000) approved by the General Manager of the Truckee Donner Public Utility District (the "General Manager") as being necessary to fund the various funds and accounts created by the Indenture in the amounts specified in the Preliminary Official Statement (or as determined by the General Manager), and to pay the costs of issuing the Bonds and the other costs described in the Preliminary Official Statement, is hereby authorized. The Bonds shall mature on the dates and in the amounts, and bear interest at the rates, set forth in the Bond Purchase Agreement to be executed on behalf of the Community Facilities District in accordance with Section 8 hereof. The sum of(i)the aggregate principal amount of the Bonds so authorized plus (ii)the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act on property within the Community Facilities District or a special assessment levied on such property (as shown in the report of California Municipal Statistics, Inc. which appears as Table 2 in the Preliminary Official Statement) does not exceed one-third of the value of the property within the Community Facilities District that will be subject to the Special Tax, as such value is estimated in an appraisal prepared for the Community Facilities District by Christopher T. Donaldson, MAI, CCIM, of Brown, Chudleigh, Schuler, Donaldson and Associates (a copy of which is set forth in Appendix B to the Preliminary Official Statement). 2 Section 4. In connection with the issuance of the Bonds, the President and the Clerk are hereby authorized and directed for and in the name and on behalf of the Community Facilities District to execute, acknowledge and deliver to the respective other parties such additional agreements, as the officers executing the same may approve (including, but not limited to an Investment Agreement, as defined in the Indenture) as necessary or desirable to provide reductions in the yields of Bonds or additional debt service relief or cash flow savings or increased payments to the Community Facilities District, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. The form of the Bonds, as set forth in the form of the Indenture (as the Indenture may be modified pursuant to Section 2 hereof), is hereby approved; and the President and the Clerk are hereby authorized and directed to execute them by manual or facsimile signature in the name and on behalf of the Community Facilities District. Section 6. The proposed form of the Preliminary Official Statement is hereby approved with such changes thereto as may be approved by the General Manager in order to make such Preliminary Official Statement final as of its date, except for the omission of certain information, as permitted by Section 240.15c2-12(b)(1) of Title 17 of the Code of Federal Regulations (the "Rule"); and the distribution of the Preliminary Official Statement in connection with the sale of the Bonds, with such changes included, is hereby authorized. The General Manager is authorized and directed to execute and deliver a certificate relating to compliance with the Rule. The President and the General Manager are each authorized and directed, jointly and severally, to execute and deliver to the Underwritors a final Official Statement in substantially the form of the Preliminary Official Statement hereby approved with such changes as may be approved by the officer executing said document as necessary or desirable, such approval to be conclusively evidenced by the execution and delivery thereof. Section 7. In accordance with the provisions of Section 53360.4,the Board hereby finds and determines that a negotiated sale of the Bonds to the Underwritors in accordance with the terms of the Bond Purchase Agreement will result in a lower overall cost to the Community Facilities District than a sale conducted pursuant to Section 53360 of the Act. Section 8. The proposed form of the Bond Purchase Agreement and the sale of the Bonds pursuant thereto are hereby approved, provided that (a) the aggregate purchase price of the Bonds(exclusive of any original issue discount) shall not be less than ninety-eight and sixty hundredths percent (98.60%) of the original aggregate principal amount of the Bonds, (b) the average annual rate of interest on the Bonds shall not exceed seven percent (7%), (c) the final maturity of the Bonds shall be not later than September 1, 2033 and (d) the maturity dates and purchase price of and interest rates applicable to the Bonds shall have been approved by a pricing committee consisting of the General Manager, the Assistant General Manager, and the Administrative Services Manager with the advice of Fieldman, Rolapp & Associates; and, subject to such approval, the President and the Clerk are hereby authorized and directed to evidence the Community Facilities District's acceptance of the offer made by said Bond Purchase Agreement by executing and delivering to the Underwritors said Bond Purchase Agreement in said form with such changes therein as the officers executing the same may approve as necessary or desirable, such approval to be conclusively evidenced by the execution and delivery thereof. 3 Section 9. In the event the General Manager is unavailable to execute and deliver any of the documents that the President is authorized and directed to execute and deliver pursuant to the terms of this Resolution, then any other member of this Board is hereby authorized and directed to do so. Section 10. The President and the General Manager and other officers of the Truckee Donner Public Utility District are hereby authorized and directed, jointly and severally, to execute and sign any and all approvals, certificates, statements, requests, requisitions and orders of the Community Facilities District in connection with the issuance of the Bonds; and any action specifically authorized or directed by this Resolution to be undertaken by any of such officers may be undertaken by either of the others with the same force and effect as if it had been undertaken by the officer specifically authorized or directed to do so. Section 11. If any section, paragraph or provision of this Resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any remaining provisions of this Resolution. Section 12. This Resolution shall take effect from and after its adoption. ADOPTED and APPROVED by the Board of Directors of the Truckee Donner Public Utility District on this 191h day of November,2003 by the following vote: AYES: Directors Aguera, Hemig and Van Gundy NOES: Director Sutton RECUSED: Director Maass ABSENT: None ABSTAIN: None TRUCKEE D NNER PUBLIC UTILITY DISTRICT J on Hemig, President ATTEST- Peter L. Holzmeiste , District Clerk 4 TRUST INDENTURE THIS TRUST INDENTURE,dated as of December 1,2003,governs the terms of the Special Tax Bonds of Truckee Donner Public Utility District Community Facilities District No.03-1(Old f Greenwood). I RECITALS. WHEREAS,the Board of Directors(hereinafter sometimes referred to as the`legislative body of the District")of the Truckee Donner Public Utility District has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)(the"District")pursuant to the TRUST INDENTURE terms and provisions of the Mello-Roos Community Facilities Act of 1982,as amended,being Chapter 2.5,Part 1,Division 2,Title 5,of the Government Code of the State of California(the "Act");and Between WHEREAS,based upon a resolution adopted by the legislative body of the District on October 14,2003 and an election held on October 14,2003 authorizing the levy of a special tax and TRUCKEE DONNER PUBLIC UTILITY DISTRICT the issuance ofbonds by the District,the District is now authorized to issue bonds in one or more 6 COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) series,pursuant to the Act,in an aggregate principal amount not to exceed$15,000,000;and i i WHEREAS,the legislative body of the District intends to accomplish the financing of the And cost of purchasing,constructing,expanding,improving or rehabilitating certain improvements,and all appurtenances and appurtenant work in connection with the foregoing(collectively,the "Facilities")and(ii)the incidental expenses incurred and to be incurred in connection with financing ti the Facilities,including costs associated with the creation of the Community Facilities District and BNY WESTERN TRUST COMPANY OF CALIFORNIA, the issuance ofbonds and the establishment and replenishment ofa bond reserve fund(the as Trustee "Incidental Expenses"),through the issuance ofbonds in an aggregate principal amount of $ designated as the"Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Special Tax Bonds"(the"Bonds");and TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) WHEREAS,the District has determined all requirements of the Act for the issuance of the SPECIAL TAX BONDS Bonds have been satisfied; NOW,THEREFORE,in order to establish the terms and conditions upon and subject to Dated as of December 1,2003 which the Bonds are to be issued,and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof,and for other valuable consideration,the receipt of which is hereby acknowledged,the District and BNY Western Trust Company of California,as Trustee,hereby covenant and agree,for the benefit of the Owners of the Bonds which may be issued hereunder from time to time,as follows: ARTICLE I DEFINITIONS Section 1.1. Definitions. Unless the context otherwise requires,the following terms shall have the following meanings: �f �yy 1 DOCSO1000985v4\22925.0009 DOCSOC\1000985v4\22925.0009 C\ "Act"means the Mello-Roos Community Facilities Act of 1982,as amended,Sections 53311 (i) U.S.Export-import Bank("Eximbank")-direct obligations or fully et seq.of the California Government Code. guaranteed certificates of beneficial ownership, "Acquisition and Construction Fund"means the fund by such name created and established (ii) Farmers Home Administration("FmHA")-certificates of beneficial pursuant to Section 3.1. ownership, "Acquisition and Disclosure Agreement"means the Acquisition and Disclosure Agreement, (iii) Federal Financing Bank, dated as of October 1,2003,by and between the PUD,on behalf of itself and the District,and the Developer,as the same may be amended from time to time pursuant to the provisions thereof and (iv) Federal Housing Administration Debentures("FHA"), consistent with the provisions of this Indenture. (v) General Services Administration-participation certificates, "Administrative Expenses"means the administrative costs incurred by the District or the PUD on behalf of the District with respect to the calculation,levy,and collection of the Special (vi) Government National Mortgage Association("GNMA"or"Ginnie Mae")- Taxes,including all attorneys'fees and other costs related thereto,the fees and expenses of the GNMA-guaranteed mortgage-backed bonds and GNMA-guaranteed pass-through Trustee,any fees for credit enhancement for the Bonds which are not otherwise paid as Costs of obligations, Issuance,any costs related to the District's compliance with State and federal laws requiring continuing disclosure of information concerning the Bonds and the District and arbitrage rebate,and (vii) U.S.Maritime Administration-guaranteed Title XI financing,and any other costs otherwise incurred by the District or the PUD on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of (viii) U.S.Department of Housing and Urban Development("HUD")-project the District hereunder. notes,local authority bonds,new communities debentures(U.S.government guaranteed debentures),and U.S.Public Housing Notes and Bonds(U.S.government guaranteed public "Administrative Expense Account"means the account by such name in the Special Tax Fund housing notes and bonds); created and established pursuant to Section 3.1. (c) Bonds,debentures,notes or other evidence of indebtedness issued or guaranteed by "Administrative Expense Cap"means the amount of$25,000,with such amount escalating any of the following non-full faith and credit U.S.government agencies(stripped securities are only by 2%per Bond Year beginning September 2,2004,provided that the District may,in its sole permitted if they have been stripped by the agency itself): discretion,fund Administrative Expenses,without limitation,from any other funds available to the District,including the Surplus Fund. (i) Federal Home Loan Bank System-senior debt obligations, "Alternative Penalry Account"means the account by such name created and established in (ii) Federal Home Loan Mortgage Corporation("FHLMC"or"Freddie Mac")- the Rebate Fund pursuant to Section 3.1. participation certificates and senior debt obligations, "Annual Debt Service"means the principal amount of any Outstanding Bonds payable in a (iii) Federal National Mortgage Association("FNMA"or"Fannie Mae")- Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any mortgage-backed securities and senior debt obligations, Outstanding Bonds in such Bond Year,if the Bonds are retired as scheduled. (iv) Student Loan Marketing Association("SLMA"or"Sallie Mae")-senior debt "Authorized Investments"means any of the following which at the time of investment are obligations, legal investments under the laws of the State for the moneys proposed to be invested therein: v Resolution Funding Corp.("REFCORP")obligations,and (a) Direct obligations of the United States of America(including obligations issued or (vi) Farm Credit System Corp.-Consolidated system-wide bonds and notes; .,—held in book-entry form on the books of the Department of the Treasury,and CATS and TIGRS)or ligations the principal of and interest on which are unconditionally guaranteed by the United States (d) Money market funds registered under the Federal Investment Company Act of 1940, America("Direct Obligations"); whose shares are registered under the Securities Act of 1933,and having a rating by Standard& (b) Bonds,debentures,notes or other evidence of indebtedness issued or guaranteed by Poor's of AAAm-G,AAAm or AAm,and,if rated by Moody's,rated Aaa,Aa I or A32(including any of the following federal agencies and provided such obligations are backed by the full faith and those of the Trustee and its affiliates or funds for which the Trustee or affiliates provide investment credit of the United States of America(stripped securities are only permitted if they have been advisory or other management services); stripped by the agency itself): (e) Certificates of deposit secured at all times by collateral described in(a)and/or(b) above.Such certificates must be issued by commercial banks,savings and loan associations or 2 3 DOCSOC\1000985v4122925.0009 DOCSOC\.1000985v4\22925.0009 "Independent Financial Consultant"means a financial consultant or firm of such consultants provided that,if such Bonds are to be redeemed prior to the maturity thereof,notice of such generally recognized to be well qualified in the financial consulting field,appointed and paid by the redemption shall have been given as provided in this Indenture;and District,who,or each of whom: (c) Bonds which have been surrendered to the Trustee for transfer or exchange pursuant (a) is in fact independent and not under the domination of the District or the PUD; i to Section 2.9 or for which a replacement has been issued pursuant to Section 2.10. (b) does not have any substantial interest,direct or indirect,in the District or the PUD; "Person"means natural persons,firms,corporations,partnerships,associations,trusts,public bodies and other entities. (c) is not connected with the District or the PUD as a member,officer or employee of the "Prepayment"means money received by the PUD or the District as a complete or partial District or the PUD,but who may be regularly retained to make annual or other reports to the District prepayment of Special Taxes permitted pursuant to the RMA. or the PUD. "Prepayment Account"means the Account by such name created and established in the "Indenture"means this Trust Indenture,together with any Supplemental Indenture entered Special Tax Fund pursuant to Section 3.1. into pursuant to Article VI. "Principal Account"means the Account by such name created and established in the Special "Interest Account"means the account by such name created and established in the Special Tax Fund pursuant to Section 3.1. Tax Fund pursuant to Section 3.1. "Principal Office of the Trustee"means the office of the Trustee located in San Francisco, "Interest Payment Date"means each March 1 and September 1,commencing March 1,2004; California(provided that for purposes of redemption,payment,surrender,cancellation,exchange or provided,however,that,if any such day is not a Business Day,interest up to,but not including,the transfer of Bonds such term shall mean the office of the Trustee located in Los Angeles,California) Interest Payment Date will be paid on the Business Day next following such date. or such other office or offices as the Trustee may designate from time to time,or the office of any successor Trustee where it principally conducts its business of serving as trustee under indentures "Investment Agreement"means one or more agreements for the investment of funds of the pursuant to which municipal or governmental obligations are issued. District complying with the criteria therefor as set forth in subsection(g)of the definition of Authorized Investments herein. "Project"means the public facilities described in the Resolution of Formation,including all engineering,planning and design services and other incidental expenses related to such facilities and "Maximum Annual Debt Service"means the maximum amount of the Annual Debt Service other facilities,if any,authorized by the qualified electors within the District from time to time. for any Bond Year prior to the final maturity of the Bonds. I "Project Account"means the Account by such name created and established in the "Moody's"means Moody's Investors Service,its successors and assigns. Acquisition and Construction Fund pursuant to Section 3.1. "National Repositories"means any Nationally Recognized Municipal Securities Information "Project Costs"means the amounts necessary to finance the Project,to create and replenish Repository for purpose of the Rule. any necessary reserve accounts,to pay the initial and annual costs associated with the Bonds, including,but not limited to,remarketing,credit enhancement,Trustee and other fees and expenses "Net Taxes"means,for each Fiscal Year,Gross Taxes(exclusive of any penalties and relating to the issuance of the Bonds and the formation of the District,and to pay any other interest accruing with respect to delinquent Special Tax installments)minus amounts(not in excess "incidental expenses"of the District,as such term is defined in the Act. of the then current Administrative Expense Cap)set aside to pay Administrative Expenses and minus the portion of any Prepayment that not required to be deposited in the Special Tax Fund pursuant to "PUD"means the Truckee Donner Public Utility District. Section 3.2. "Rating Agency"means either Moody's or Standard&Poor's,or both,as the context "Outstanding"or"Outstanding Bonds"means all Bonds theretofore issued by the District, requires. except: "Rebate Account"means the Account by such name created and established in the Rebate (a) Bonds theretofore cancelled or surrendered for cancellation in accordance with Fund pursuant to Section 3.1. Section 10.1; "Rebate Fund"means the fund by such name created and established pursuant to Section 3.1. (b) Bonds for payment or redemption of which moneys shall have been theretofore deposited in trust(whether upon or prior to the maturity or the redemption date of such Bonds), "Rebate Regulations"means any final,temporary or proposed Regulations promulgated under Section 148(f)of the Code. 8 9 DOCSOC\1000985v4\22925.0009 DOCSOCA000985v4\22925.0009 i "Record Date"means the fifteenth day of the month preceding an Interest Payment Date, "Surplus Fund"means the Fund by such name created and established pursuant to regardless of whether such day is a Business Day. Section 3.1. "Redemption Account"means the account by such name created and established in the "Tax Certificate"means the certificate by that name to be executed by the District on the Special Tax Fund pursuant to Section 3.1. Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Regulations"means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Term Bonds"means the Bonds maturing September 1,2033. "Representation Letter"means the representation letter or letters from the District to DTC. "Trustee"means BNY Western Trust Company of California,a banking association organized and existing under the laws of the United States,at its principal corporate trust office in "Reserve Account"means the account by such name created and established in the Special San Francisco,California,and its successors or assigns,or any other bank or trust company which Tax Fund pursuant to Section 3.1. may at any time be substituted in its place as provided in Sections 7.2 or 7.3 and any successor thereto. "Reserve Requirement"means,as of any date of calculation by the District,an amount equal to the lowest of(i)10%of the original proceeds of the Bonds,less original issue discount,if any, "Underwriter"means the institution or institutions,if any,with whom the District enters into plus original issue premium,if any,or(ii)Maximum Annual Debt Service,or(iii)125%of the a purchase contract for the sale of the Bonds. average Annual Debt Service. ARTICLE 11 "Resolution of Formation"means the resolution adopted by the Board of Directors of the PUD on October 14,2003,pursuant to which the PUD formed the District. GENERAL AUTHORIZATION AND BOND TERMS "RMA"means the Rate and Method of Apportionment of Special Taxes approved by the Section 2.1. Amount,Issuance,Purpose and Nature of Bonds.Under and pursuant to qualified electors of the District at an election conducted on October 14,2003,a copy of which is the Act,the Bonds in the aggregate principal amount of$ shall be issued for the purpose attached hereto as Exhibit C. of financing the Project.The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption "Sinking Fund Payment"means the annual payment in those years indicated in thereof solely from the Net Taxes and the other amounts in the Special Tax Fund(other than amounts Section 4.1(b)to be deposited in the Redemption Account to redeem a portion of the Term Bonds in in the Administrative Expense Account of the Special Tax Fund). accordance with the schedule set forth herein to retire the Term Bonds. Section 2.2. Type and Nature of Bonds.Neither the faith and credit nor the taxing "Six-Month Period"means the period of time beginning on the Delivery Date of each issue power of the PUD,the State of Califomia or any political subdivision thereof other than the District of Bonds and ending six consecutive months thereafter,and each six-month period thereafter until is pledged to the payment of the Bonds. Except for the Special Taxes,no other taxes are pledged to the latest maturity date of the Bonds(and any obligations that refund an issue of the Bonds). the payment of the Bonds.The Bonds are not general or special obligations of the PUD nor general obligations of the District,but are limited obligations of the District payable solely from certain "Special Tax Administrator"means such person or firm as may be designated by the Board amounts deposited by the District in the Special Tax Fund(exclusive of the Administrative Expense of Directors to administer the calculation and collection of the Special Taxes,or any successor Account),as more fully described herein.The District's limited obligation to pay the principal of, person or entity acting in such capacity. premium,if any,and interest on the Bonds from amounts in the Special Tax Fund(exclusive of the Administrative Expense Account)is absolute and unconditional,free of deductions and without any "Special Taxes"means the taxes authorized to be levied by the District in accordance with abatement,offset,recoupment,diminution or set-off whatsoever.No Owner of Bonds may compel the RMA,as the RMA may be amended from time to time(if and to the extent such amendment is the exercise of the taxing power by the District(except as pertains to the Special Taxes)or the PUD ,,consistent with the covenant set forth in Section 5.2(g)). or the forfeiture of any of their property.The principal of and interest on the Bonds and premiums "Special Tax Fund"means the fund by such name created and established pursuant to upon the redemption thereof,if any,are not a debt of the PUD,the State of California or any of its oection 3.1. political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge,charge,lien,or encumbrance upon any of the "Standard&Poor's"means Standard&Poor's Ratings Services,a division of The District's property,or upon any of its income,receipts or revenues,except the Net Taxes and other McGraw-Hill Companies,its successors and assigns. amounts in the Special Tax Fund(exclusive of the Administrative Expense Account)which are, under the terms of this Indenture and the Act,set aside for the payment of the Bonds and interest "Supplemental Indenture"means any supplemental indenture entered into in accordance with thereon;and neither the members of the legislative body of the District or the Board of Directors of the provisions hereof amending or supplementing this Indenture. 10 11 DOCSOC.1000985v4`:22925.0009 DOCSOO 1000985v4Q2925.0009 premium,if any,and interest on the Bonds to the extent of the sum or sums so paid.No person other (i) The Truckee Donner Public Utility District Community Facilities District than an Owner,as shown in the Bond Register,shall receive a certificated Bond evidencing the No.03-1(Old Greenwood)Special Tax Fund(the"Special Tax Fund")(in which there shall be obligation of the District to make payments of principal,premium,if any,and interest pursuant to established and created an Interest Account(and a Capitalized Interest Subaccount therein),a this Indenture.Upon delivery by DTC to the Trustee of written notice to the effect that DTC has Principal Account,a Redemption Account,a Prepayment Account,a Reserve Account and an determined to substitute a new nominee in place of Cede&Co.,and subject to the provisions herein Administrative Expense Account); with respect to record dates,the word"Cede&Co."in this Indenture shall refer to such new minee of DTC. (ii) The Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Rebate Fund(the"Rebate Fund")(in which there shall be established a (c) The delivery of the Representation Letter by the District and the Trustee shall not in Rebate Account and an Alternative Penalty Account); any way limit the provisions of Section 2.12(b)hereof or in any other way impose upon the District or the Trustee any obligation whatsoever with respect to persons having interests in the Bonds other (iii) The Truckee Donner Public Utility District Community Facilities District than the Owners,as shown on the Bond Register.The Trustee shall take all action necessary for all No.03-1(Old Greenwood)Surplus Fund(the"Surplus Fund");and representations in the Representation Letter with respect to the Trustee to be complied with at all times. (iv) The Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Acquisition and Construction Fund(the"Acquisition and Construction (d) DTC may determine to discontinue providing its services with respect to the Bonds at Fund")(in which there shall be established a Costs of Issuance Account and a Project Account). any time by giving written notice to the District and the Trustee and discharging its responsibilities with respect thereto under applicable law. The amounts on deposit in the foregoing funds,accounts and subaccounts shall be held by the Trustee and the Trustee shall invest and disburse the amounts in such funds,accounts and The District,in its sole discretion and without the consent of any other person,may terminate subaccounts in accordance with the provisions of this Article III and shall disburse investment the services of DTC with respect to the Bonds if the District determines that either DTC is unable to earnings thereon in accordance with the provisions of Section 3.11 hereof. discharge its responsibilities with respect to the Bonds or a continuation of the requirement that all Outstanding Bonds be registered in the Bond Register in the name of Cede&Co.,or any other (b) The proceeds of the sale of the Bonds received by the Trustee on behalf of the nominee of DTC,is not in the best interest of the beneficial owners of such Bonds. District shall be deposited and transferred as follows: Upon the discontinuation or termination of the services of DTC with respect to the Bonds (i) S25,000 shall be deposited in the Administrative Expense Account of the pursuant to the foregoing after which no substitute securities depository willing to undertake the Special Tax Fund for the disbursement in accordance with Section 3.3 below; functions of DTC hereunder can be found which,in the opinion of the District,is willing and able to undertake such functions upon reasonable and customary terms,the District is obligated to deliver (ii) $ shall be deposited in the Interest Account of the Special Tax Bond certificates,as described in this Indenture and the Bonds shall no longer be restricted to being Fund for disbursement in accordance with Section 3.4 below; registered in the Bond Register in the name of Cede&Co.as nominee of DTC,but may be registered in whatever name or names DTC shall designate to the Trustee in writing,in accordance with the (iii) $ shall be deposited in the Costs of Issuance Account of the provisions of this Indenture. Acquisition and Construction Fund for disbursement in accordance with Section 3.10 below; (e) Notwithstanding any other provisions of this Indenture to the contrary,as long as any (iv) $ shall be deposited to the Project Account of the Acquisition Bond is registered in the name of Cede&Co.,as nominee of DTC,all payments with respect to and Construction Fund for disbursement in accordance with Section 3.10 below;and principal or,premium,if any,and interest on such Bond and all notices with respect to such Bond (v) $ shall be deposited in the Reserve Account of the Special Tax Fund shall be made and given,respectively,in the manner provided in the Representation Letter. (equaling the initial Reserve Requirement)to be disbursed in accordance with Section 3.7 below. ARTICLE III The Trustee may,in its discretion,establish a temporary fund or account in its books and CREATION OF FUNDS AND APPLICATION OF REVENUES AND GROSS TAXES records to facilitate such transfers. Section 3.1. Creation of Funds;Application of Proceeds. Section 3.2. Deposits to and Disbursements from Special Tax Fund.The Trustee shall, on each date on which the Special Taxes are received from the PUD or the District,deposit the (a) There is hereby created and established and shall be maintained by the Trustee the Special Taxes in the Special Tax Fund in accordance with the terms of the Indenture to be held by the following funds and accounts: Trustee,provided that any Prepayment shall be deposited in the funds and accounts(and in the respective amounts)specified in the certificate of the Special Tax Administrator delivered to the Trustee in connection with the delivery of the Prepayment to the Trustee.The Trustee shall transfer 16 17 DOCSOC\1000985v4\22925.0009 DOCSOC\1000985AC2925.0009 the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the (a) To the Interest Account,an amount such that the balance in the Interest Account shall following Sections,in the following order of priority,to: be equal to the installment of interest due on the Bonds on said Interest Payment Date and any installment of interest due on a previous Interest Payment Date which remains unpaid.Moneys in (a) The Administrative Expense Account, the Interest Account shall be used for the payment of interest on the Bonds as the same become due after the application for such purpose of moneys on deposit in the Capitalized Interest Subaccount of (b) The Interest Account, the Interest Account.On any date on which Bonds are to be redeemed from moneys on deposit in the Prepayment Account,the Trustee shall withdraw from the Capitalized Interest Subaccount and (c) The Principal Account, transfer to the Prepayment Account the amount,if any,directed to be so transferred in the certificate (d) The Redemption Account, of the Special Tax Administrator delivered to the Trustee in connection with the delivery of the Prepayment giving rise to such redemption. (e) The Reserve Account, (b) To the Principal Account,an amount such that the balance in the Principal Account (f) The Rebate Fund,and on September I of each year,commencing September 1,2005 shall equal the sum of(i)the principal payment due on the Bonds maturing on such September 1,(ii)the Sinking Fund Payment due on any (g) The Surplus Fund. Outstanding Bonds on such September 1,and(iii)any principal payment due on a previous September 1 which remains unpaid. Moneys in the Principal Account shall be used for the payment At the maturity of all of the Bonds and,after all principal and interest then due on the Bonds of the principal of such Bonds as the same become due at maturity or pursuant to the Sinking Fund then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid Payment schedules set forth in Section 4.1(b)hereof and in any Supplemental Indenture. in full,moneys in the Special Tax Fund and any accounts therein may be used by the District for any In addition to the transfers to the Interest Account and Principal Account described in the lawful purpose. first paragraph of this Section,the Trustee shall also transfer thereto such portions of a Prepayment as Section 3.3. Administrative Expense Account of the Special Tax Fund. In addition to may be directed to be so transferred in the certificate of the Special Tax Administrator delivered to bond proceeds deposited therein,the Trustee shall,commencing in Fiscal Year 2004-2005,not less the Trustee in connection with the Prepayment. often than annually transfer from the Special Tax Fund and deposit in the Administrative Expense Section 3.5. Redemption Account of the Special Tax Fund. Account from time to time amounts necessary to make timely payment of Administrative Expenses upon the written direction of the District;provided,however,that the total amount of the deposits (a) After making the deposits to the Interest Account and the Principal Account of the into the Administrative Expense Account in any Bond Year shall not exceed the Administrative Special Tax Fund pursuant to Section 3.4 above,and in accordance with the District's election to call Expense Cap until such time as(i)there has been deposited in the Interest Account and the Principal Bonds for optional redemption as set forth in Section 4.1(a)hereof the Trustee shall transfer from the Account an amount,together with any amounts already on deposit therein,that is sufficient to pay Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and the interest and principal on all Bonds due in such Bond Year and(ii)there has been deposited in the sufficient to pay the principal and the premiums,if any,payable on the Bonds called for optional Reserve Account the amount,if any,required in order to cause the amount on deposit therein to equal redemption;provided,however,that amounts in the Special Tax Fund(other than the Administrative the Reserve Requirement. In addition to the foregoing,the Trustee shall also deposit in the Expense Account therein)may be so deposited in the Redemption Account and applied to optionally Administrative Expense Account the portion of any Prepayment directed to be deposited in the redeem Bonds only if immediately following such transfer and redemption the amount in the Reserve certificate of the Special Tax Administrator delivered to the Trustee in connection with such Account will equal the Reserve Requirement.The Trustee shall also transfer from the Acquisition Prepayment. and Construction Fund and deposit in the Redemption Account moneys in the amounts and at the Section 3.4. Interest Account and Principal Account of the Special Tax Fund.The times provided in Section 3.10. principal of and interest due on the Bonds until maturity,other than principal due upon redemption, (b) Moneys set aside in the Redemption Account shall be used solely for the purpose of shall be paid by the Trustee from the Principal Account and the Interest Account,respectively. For redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal ,,,.a a purpose of assuring that the payment of principal of and interest on the Bonds will be made when of and premium,if any,on the Bonds to be redeemed upon presentation and surrender of such Bonds; the Trustee shall make the transfers described below from the Special Tax Fund on each Interest provided,however,that in lieu or partially in lieu of such call and redemption,moneys deposited in yment Date first to the Interest Account and then to the Principal Account;provided,however,that the Redemption Account as set forth above may be used to purchase Outstanding Bonds in the to the extent that deposits have been made in the Interest Account or the Principal Account from the manner hereinafter provided. Purchases of Outstanding Bonds maybe made by the District at public proceeds of the sale of an issue of the Bonds,the transfer from the Special Tax Fund need not be or private sale as and when and at such prices as the District may in its discretion determine but only made;and provided,further,that,if amounts in the Special Tax Fund are inadequate to make the at prices(including brokerage or other expenses)not more than par plus accrued interest,plus,in the foregoing transfers then any deficiency shall be made up by an immediate transfer from the Reserve case of moneys set aside for an optional redemption,the premium applicable at the next following Account: call date according to the premium schedule established pursuant to Section 4.1(a)hereof.Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the 18 19 DOCSOC\1000985v4\22925.0009 DOCSOC\1000985v4\22925.0009 Trustee,(i)to the Interest Account or the Principal Account to pay the principal of,including Sinking (d) Upon the filing of a Certificate of the General Manager stating that the Acquisition Fund Payments,and interest on the Bonds when due in the event that moneys in the Special Tax and Disclosure Agreement has been terminated and that the Community Facilities District has Fund and the Reserve Account are insufficient therefor,(ii)to the Reserve Account in order to determined to close the Proceeds Account,the Trustee shall(i)if and to the extent so directed in such replenish the Reserve Account to the Reserve Requirement,and(iii)to the Administrative Expense Certificate,retain in the Proceeds Account the amount specified in such Certificate for payment of Account to pay Administrative Expenses to the extent that the amounts on deposit in the the cost of any Facility that is substantially complete,(ii)if the amount in excess of the amount Administrative Expense Account are insufficient to pay Administrative Expenses. In the event retained pursuant to the preceding clause(i)is equal to or greater than$25,000,transfer the portion <o•gexpended amounts remain on deposit in the Surplus Fund after the foregoing transfers,if any,the of such excess amount equal to the largest integral multiple of$5,000 that is not greater than such ±rict shall apply such unexpended amounts to,in its sole discretion,either(i)pay Project Costs, excess amount to the Redemption Account and apply the same to the redemption of Bonds,and to reduce the next fiscal year's Special Tax levy by depositing such amount in the Special Tax (iii)after making the transfer,if any,required to be made pursuant to the preceding clause(ii), fund,or(iii)for any other lawful purpose of the District. transfer all of the amount in excess of the amount retained pursuant to the preceding clause(i)to the Interest Account and apply the same to pay interest on the Bonds. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the District for any lawful purpose in the manner described in this Section. In the event that Section 3.11. Investments.Moneys held in any of the• Ards,accounts and subaccounts the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt under this Indenture shall be invested at the written direction of an Authorized Representative of the service on any Outstanding Bonds,upon the written direction of the District,the Trustee will District in accordance with the limitations set forth below only in Authorized Investments which segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of shall be deemed at all times to be apart of such funds,accounts and subaccounts.Any investment the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable earnings,gains or losses resulting from such Authorized Investments.shall be credited or charged to from gross income under Section 103 of the Code(other than bonds the interest on which is a tax the fund,account or subaccount from which such investment was made. Moneys in the funds, preference item for purposes of computing the alternative minimum tax of individuals and accounts and subaccounts held under this Indenture may be invested by the Trustee on the written corporations under the Code)or in Authorized Investments at a yield not in excess of the yield on the direction of the District,from time to time,in Authorized Investments subject to the following Bonds unless,in the opinion of Bond Counsel,investment at a higher yield will not adversely affect restrictions: the exclusion from gross income for federal income tax purposes of interest on the Bonds. (a) Moneys in the Interest Account,the Principal Account and the Redemption Account Section 3.10. Acquisition and Construction Fund. shall be invested only in Authorized Investments which will by their terms mature,or in the case of an Investment Agreement are available for withdrawal without penalty,on such dates so as to ensure (a) The moneys in the Acquisition and Construction Fund shall be applied exclusively to the payment of principal of,premium,if any,and interest on the Bonds as the same become due. pay the Project Costs and Costs of Issuance.Amounts for Project Costs or Costs of Issuance shall be Notwithstanding anything herein to the contrary,amounts in the Capitalized Interest Subaccount on disbursed by the Trustee from the Project Account or the Costs of Issuance Account,as the case may the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax be,pursuant'to a requisition signed by an Authorized Representative of the District substantially in Certificate. the form of Exhibit B hereto,which must be submitted in connection with each requested disbursement. (b) Moneys in the Acquisition and Construction Fund shall be invested in Authorized Investments which will by their terms mature,or in the case of an Investment Agreement are (b) Upon the earlier of September 1,2004 or its receipt of a Certificate of the General available without penalty,as close as practicable to the date the District estimates the moneys Manager that all or a specified portion of the amount remaining in the Costs of Issuance Account is represented by the particular investment will be needed for withdrawal from the Acquisition and no longer needed to pay Costs of Issuance,the Trustee shall transfer all or such specified portion of Construction Fund.Notwithstanding anything herein to the contrary,amounts in the Acquisition and said amount to the Administrative Expense Account. Construction Fund on the Delivery Date for the Bonds shall not be invested at yields greater than those set forth in the Tax Certificate. (c) Upon receipt of a Certificate of the General Manager(i)stating that the portion of the Facilities to be financed from the Proceeds Account has been completed and that all costs of such (c) One-half of the amount in the Reserve Account may be invested only in Authorized Facilities have been paid,or(ii)stating that such portion of the Facilities has been substantially Investments which mature not later than two years from their date of purchase,and one-half of the completed and that all remaining costs of such portion of the Facilities have been determined and amount in the Reserve Account may be invested only in Authorized Investments which mature not specifying the amount to be retained therefor,the Trustee shall(A)if the amount remaining in the more than five years from the date of purchase;provided that such amounts may be.invested in an Proceeds Account(less any such retention)is equal to or greater than$25,000,transfer the portion of Investment Agreement to the final maturity of Bonds so long as such amounts may be withdrawn at such amount equal to the largest integral multiple of$5,000 that is not greater than such amount to any time,without penalty,for application in accordance with Section 3.7 hereof;and provided that the Redemption Account,to be applied to the redemption of Bonds,and(B)after making the no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall transfer,if any,required to be made pursuant to the preceding clause(A),transfer all of the amount mature later than the final maturity date of the Bonds.Notwithstanding anything herein to the remaining in the Proceeds Account(less any such retention)to the Interest Account,to be applied to contrary,amounts in the Reserve Fund on the Delivery Date for the Bonds shall not be invested at the payment of interest on the Bonds. yields greater than those set forth in the Tax Certificate. 24 25 DOCSOC\1000985v4\22925.0009 DOCSOC\1000985v4\22925.0009 (d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the amount of the Bonds to be redeemed.The notice to the Trustee shall be given at least 60 but no more type described in clause(a)of the definition thereof which by their terms will mature,as nearly as than 90 days prior to the redemption date,or such shorter period as shall be acceptable to the Trustee. practicable,on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.8 hereof or in Authorized Investments of the type described in clause(d)of the (b) Mandatory Sinkine Fund Redemption.The Term Bonds shall be called before definition thereof. maturity and redeemed,from the Sinking Fund Payments that have been deposited into the Redemption Account,on September 1,20_,and on each September I thereafter prior to maturity,in (e) In the absence of written investment directions from the District,the Trustee shall accordance with the schedule of Sinking Fund Payments set forth below.The Bonds so called for invest solely in Authorized Investments specified in clause(d)of the definition thereof redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Bond equal to the principal amount thereof,plus accrued interest to the redemption The Trustee shall sell,or present for redemption,any Authorized Investment whenever it date,without premium,as follows: may be necessary to do so in order to provide moneys to meet any payment or transfer to such funds and accounts or from such funds and accounts.For the purpose of determining at any given time the Redemption Date balance in any such funds and accounts,any such investments constituting a part of such funds and (September 1) Principal Amount accounts shall be valued at their cost,except that amounts in the Reserve Account shall be valued at the market value thereof and marked to market at least annually. In making any valuations of investments hereunder,the Trustee may utilize computerized securities pricing services that may be available to it,including those available through its regular accounting system,and rely thereon. Notwithstanding anything herein to the contrary,the Trustee shall not be responsible for any loss (maturity) from investments,sales or transfers undertaken in accordance with the provisions of this Indenture. The Trustee or an affiliate may act as principal or agent in connection with the acquisition or If during the Fiscal Year immediately preceding one of the redemption dates specified in(b) disposition of any Authorized Investments and shall be entitled to its customary fee therefor. Any above the District purchases Term Bonds,at least 45 days prior to the redemption date the District Authorized Investments that are registrable securities shall be registered in the name of the Trustee or shall notify the Trustee as to the principal amount purchased and the amount of Bonds so purchased its nominee. shall be credited at the time of purchase,to the extent of the full principal amount thereof,to reduce For investment purposes,the Trustee may commingle the funds and accounts established such upcoming Sinking Fund Payment for the Term Bonds.All Bonds purchased pursuant to this hereunder(other than the Rebate Fund)but shall account for each separately. subsection shall be cancelled pursuant to Section 10.1 hereof. The Trustee or any of its affiliates may act as sponsor,advisor or manager in connection with In the event of a partial redemption of Term Bonds,other than as a result of Sinking Fund any investments made by the Trustee hereunder. Payments,each of the remaining Sinking Fund Payments for the Term Bonds that were partially redeemed,as described above,will be reduced,as nearly as practicable,on a pro rats basis in ARTICLE IV increments of$5,000. REDEMPTION OF BONDS (c) Special Mandatory Redemption From Prepayments.The Bonds are subject to special mandatory redemption on any Interest Payment Date from amounts on deposit in the Prepayment Section 4.1. Redemption of Bonds. Account,in integral multiples of$5,000,in whole or in part as hereinafter provided,at the following redemption prices,expressed as a percentage of the principal amount to be redeemed,together with (a) Optional Redemption. Subject to the limitations set forth below,the Bonds may be accrued interest to the date of redemption: redeemed,at the option of the District from any source of funds on any Interest Payment Date on or after September 1,20_,in whole,or in part in the order of maturity selected by the District and by Redemption Dates Redemption Prices lot within a maturity,at the following redemption prices,expressed as a percentage of the principal March 1,2004 through 1,20_ 103% amount to be redeemed,together with accrued interest to the date of redemption: 1,20 and 1,20 102 1,20 and 1,20 101 Redemption Dates Redemption Prices 1,20_and thereafter 100 September 1,20_and March 1,20 102% September 1,20_and March 1,20_ 101 The Trustee shall select Bonds for redemption pursuant to the provisions of this subsection September 1,20_and thereafter 100 from the maturities of all Bonds so that the ratio of Outstanding Bonds to the Bonds initially issued shall be approximately the same in each maturity.The particular Bonds of each maturity to be In the event the District elects to redeem Bonds as provided above,the District shall give redeemed shall be selected by lot in whatever manner the Trustee chooses. written notice to the Trustee of its election to so redeem,the redemption date and the principal 26 27 DOCS00 1000985v4\22925.0009 DOCS00.1000985v4'•22925.0009 (i) Private Activity.The District will take no action or refrain from taking any parcels of land and improvements existing in the District as of the July I preceding the reduction,the action or make any use of the proceeds of the Bonds or of any other moneys or property which would maximum amount of the Special Tax which may be levied on then existing Developed Property(as cause the Bonds to be"private activity bonds"within the meaning of Section 141 of the Code; defined in the RMA)in each Bond Year will equal at least 110°/o of the sum of the estimated Administrative Expenses and Annual Debt Service in that Bond Year on all Bonds to remain { (ii) Arbitrage.The District will make no use of the proceeds of the Bonds or of Outstanding after the reduction is approved,(ii)the District finds that any reduction made under such any other amounts or property,regardless of the source,or take any action or refrain from taking any conditions will not adversely affect the interests of the Owners of the Bonds and(iii)the District --ion which will cause the Bonds to be"arbitrage bonds"within the meaning of Section 148 of the receives both(A)a certificate of the Developer specifying the development activity that the e; Developer expects will take place within the District in each Fiscal Year until all such development i is complete,which specification shall be sufficiently detailed to permit the preparation of the (iii) Federal Guaranty.The District will make no use of the proceeds of the Bonds certificate required pursuant to(B)hereof,and(B)a certificate from one or more Independent or take or omit to take any action that would cause the Bonds to be"federally guaranteed"within the Financial Consultants which,when taken together,in the determination of the District,certify that meaning of Section 149(b)of the Code; (1)on the basis of the parcels of land and improvements existing in the District as of the July 1 ' i preceding the proposed reduction and(2)on the basis of the future development activity described in (iv) Information Reporine.The District will take or cause to be taken all the certificate of the Developer described in(A)hereof,the maximum amount of the Special Tax necessary action to comply with the informational reporting requirement of Section 149(e)of the which may be levied each Fiscal Year on all property within the District that is subject to the levy of Code; the Special Taxes will equal at least 110%of the sum of the estimated Administrative Expenses and Annual Debt Service in each applicable Bond Year on all Bonds subsequent to the proposed (v) Hedge Bonds.The District will make no use of the proceeds of the Bonds or reduction.For purposes of estimating Administrative Expenses for the foregoing calculations,the any other amounts or property,regardless of the source,or take any action or refrain from taking any Independent Financial Consultant or Special Tax Administrator shall compute the Administrative action that would cause the Bonds to be considered"hedge bonds"within the meaning of Section Expenses for the current Fiscal Year and escalate that amount by two percent(2%)in each 149(g)of the Code unless the District takes all necessary action to assure compliance with the subsequent Fiscal Year. requirements of Section 149(g)of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds;and (h) Covenant to Defend..The District covenants that in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the Maximum Special Tax (vi) Miscellaneous.The District will take no action and will refrain from taking below the levels specified in Section 5.2(g)above or to limit the power of the District to levy the any action inconsistent with its expectations stated in the Tax Certificate and will comply with the Special Taxes for the purposes set forth in Section 5.2(b)above,it will commence and pursue legal covenants and requirements stated therein and incorporated by reference herein,including payment action in order to preserve its ability to comply with such covenants. of amounts required to pay the District's pro rata share of any rebate amounts owing to the United States on the Bonds. Section 5.3. Continuing Disclosure and Reporting Requirements.The District covenants to comply with the terms of the Continuing Disclosure Agreement executed by it on the (vii) Other Tax Exempt Issues.The District will not use proceeds of other tax Delivery Date with respect to compliance with Rule 15c2-12,provided the failure of the District to exempt securities to redeem any Bonds without first obtaining the written opinion of Bond Counsel comply with the terms of said Continuing Disclosure Agreement shall not constitute an event of that doing so will not impair the exclusion from gross income for federal income tax purposes of default under Article VIII hereof. interest on the Bonds. (g) Reduction of Maximum Special Taxes.The District hereby finds and determines ARTICLE VI that,historically,delinquencies in the payment of special taxes authorized pursuant to the Act in AMENDMENTS TO INDENTURE community facilities districts in California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and Section 6.1. Supplemental Indentures or Orders Not Requiring Bondowner Consent. interest on the outstanding indebtedness of such community facilities districts.For this reason,the The District and Trustee may from time to time,and at any time,without notice to or consent of any District hereby determines that a reduction in the Maximum Special Tax(as defined in the RMA) of the Bondowners,enter into Supplemental Indentures for any of the following purposes: authorized to be levied on parcels in the District below the levels provided in this Section 5.2(g) would interfere with the timely retirement of the Bonds.The District determines it to be necessary in (a) to cure any ambiguity,to correct or supplement any provisions herein which may be order to preserve the security for the Bonds to covenant,and,to the maximum extent that the law inconsistent with any other provision herein,or to make any other provision with respect to matters permits it to do so,the District hereby does covenant,that it will take no action that would or questions arising under this Indenture or in any additional resolution or order,provided that such discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the action is not materially adverse to the interests of the Bondowners; Special Tax,including the initiation of proceedings to reduce the Maximum Special Tax rates for the District,unless,in connection therewith,(i)the District receives a certificate from one or more (b) to add to the covenants and agreements of and the limitations and the restrictions Independent Financial Consultants which,when taken together,certify that,on the basis of the upon the District contained in this Indenture,other covenants,agreements,limitations and restrictions 32 33 DOCSOC\1000985v4\22925.0009 DOCSOC\1000985v4\22925.0009 i to be observed by the District which are not contrary to or inconsistent with this Indenture as common control with the District shall be disregarded and shall be treated as though they were not theretofore in effect or which further secure Bond payments; Outstanding for the purpose of any such determination. (c) to modify,amend or supplement this Indenture in such manner as to permit the Upon the adoption of any Supplemental Indenture and the receipt of consent to any such qualification hereof under the Trust Indenture Act of 1939,as amended,or any similar federal statute Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of hereafter in effect,or to comply with the Code or regulations issued thereunder,and to add such other the Outstanding Bonds in instances where such consent is required pursuant to the provisions of this terms,conditions and provisions as may be permitted by said.act or similar federal statute,and which Section,this Indenture shall be,and shall be deemed to be,modified and amended in accordance shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding;or therewith,and the respective rights,duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds shall thereafter be determined,exercised and enforced hereunder, (d) to modify,alter or amend the RMA in any manner so long as such changes do not subject in all respects to such modifications and amendments. reduce the maximum Special Taxes that may be levied in each year on property within the District to , an amount which is less than that permitted under Section 5.2(g)hereof,or Section 6.3. Notation of Bonds;Delivery of Amended Bonds.After the effective date of any action taken as hereinabove provided,the District may determine that the Bonds may bear a (e) to modify,alter,amend or supplement this Indenture in any other respect which is not notation,by endorsement in form approved by the District,as to such action,and in that case upon materially adverse to the Bondowners. demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and Section 6.2. Supplemental Indentures or Orders Requiring Bondowner Consent. designate for that purpose,a suitable notation as to such action shall be made on such Bonds.If the Exclusive of the Supplemental Indentures described in Section 6.1,the Owners of not less than a District shall so determine,new Bonds so modified as,in the opinion of the District,shall be majority in aggregate principal amount of the Bonds Outstanding shall have the right to consent to necessary to conform to such action shall be prepared and executed,and in that case upon demand of and approve the execution and delivery by the District of such Supplemental Indentures as shall be the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the deemed necessary or desirable by the District for the purpose of waiving,modifying,altering, office of the Trustee or at such additional offices as the Trustee may select and designate for that amending,adding to or rescinding,in any particular,any of the terms or provisions contained in this purpose,without cost to each Owner of Outstanding Bonds,upon surrender of such Outstanding Indenture;provided,however,that nothing herein shall permit,or be construed as permitting,(a)an Bonds. extension of the maturity date of the principal,or the payment date of interest on,any Bond,(b)a reduction in the principal amount of,or redemption premium on,any Bond or the rate of interest ARTICLE VII thereon,(c)a preference or priority of any Bond over any other Bond,or(d)a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such TRUSTEE Supplemental Indenture,without the consent of the Owners of all Bonds then Outstanding. Section 7.1. Duties,Immunities and Liabilities of Trustee. BNY Western Trust If at any time the District shall desire to adopt a Supplemental Indenture,which pursuant to Company of California shall be the Trustee for the Bonds unless and until another Trustee is the terms of this Section shall require the consent of the Bondowners,the District shall so notify the appointed by the District hereunder.The Trustee shall,prior to an event of default and after curing Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture.The Trustee all events of default which may have occurred perform such duties and only such duties as are shall,at the expense of the District,cause notice of the proposed Supplemental Indenture to be specifically set forth herein. Upon the occurrence and upon the continuance of an event of default, mailed,by first class mail,postage prepaid,to all Bondowners at their addresses as they appear in the the Trustee shall exercise such of the rights and powers vested in it by this Indenture,and use the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture same degree of care and skill in their exercise,as a reasonable corporate trustee would exercise or and shall state that a copy thereof is on file at the office of the Trustee for inspection by all use as trustee under a trust indenture.The District may,at any time,appoint a successor Trustee Bondowners.The failure of any Bondowners to receive such notice shall not affect the validity of satisfying the requirements of Section 7.2 below for the purpose of receiving all money which the such Supplemental Indenture when consented to and approved by the Owners of not less than a District is required to deposit with the Trustee hereunder and to allocate,use and apply the same as majority in aggregate principal amount of the Bonds Outstanding as required by this Section. provided in this Indenture. Whenever at any time within one year after the date of the first mailing of such notice,the Trustee " ill receive an instrument or instruments purporting to be executed by the Owners of a majority in The Trustee is hereby authorized to and shall mail or cause to be mailed by first class mail, negate principal amount of the Bonds Outstanding,which instrument or instruments shall refer to postage prepaid,or wire transfer in accordance with Section 2.5 above,interest payments to the j .a proposed Supplemental Indenture described in such notice,and shall specifically consent to and Bondowners,to select Bonds for redemption,and to maintain the Bond Register.The Trustee is approve the adoption thereof by the District substantially in the form of the copy referred to in such hereby authorized to pay the principal of and premium,if any,on the Bonds when the same are duly notice as on file with the Trustee,such proposed Supplemental Indenture,when duly adopted by the presented to it for payment at maturity or on call and redemption,to provide for the registration of District,shall thereafter become apart of the proceedings for the issuance of the Bonds.In transfer and exchange of Bonds presented to it for such purposes,to provide for the cancellation of determining whether the Owners of a majority of the aggregate principal amount of the Bonds have Bonds all as provided in this Indenture,and to provide for the authentication of Bonds,and shall consented to the adoption of any Supplemental Indenture,Bonds which are owned by the District or perform such other duties expressly assigned to or imposed on it as provided in this Indenture; by any person directly or indirectly controlling or controlled by or under the direct or indirect provided,however,that no other duties of the Trustee shall be implied or imposed upon the Trustee I 34 35 DOCS00 1000985v4122925.0009 DOCSOC\1000985v4\22925.0W9 ` rl (c) by depositing with the Trustee or another escrow bank appointed by the District,in forthwith and shall not be reissued.The Trustee shall destroy such Bonds,and,upon request of the trnst,noncallable Federal Securities,in which the District may lawfully invest its money,in such District,furnish to the District a certificate of such destruction. amount as will be sufficient,together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund(exclusive of the Administrative Expense Account)and available for such Section 10.2. Execution of Documents and Proof of Ownership.Any request,direction, purpose,together with the interest to accrue thereon,to pay and discharge the principal of,premium, consent,revocation of consent,or other instrument in writing required or permitted by this Indenture if any,and interest on such Bond,as and when the same shall become due and payable; to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an t,at the election of the District,and notwithstanding that any Outstanding Bonds shall not have instrument in writing for that purpose,or by the bank,trust company or other depository for such m surrendered for payment,all obligations of the District under this Indenture and any Bonds.Proof of the execution of any such instrument,or of any instrument appointing any such Supplemental Indenture with respect to such Bond shall cease and terminate,except for the attorney,and of the ownership of Bonds shall be sufficient for the purposes of this Indenture(except obligation of the Trustee to pay or cause to be paid to the Owner of any such Bond not so as otherwise herein provided),if made in the following manner: surrendered and paid,all sums due thereon and except for the covenants of the District contained in Section 5.2(f)or any covenants in a Supplemental Indenture relating to compliance with the Code. (a) The fact and date of the execution by any Owner or his or her attorney of any such Notice of such election shall be filed with the Trustee not less than ten days prior to the proposed instrument and of any instrument appointing any such attorney,may be proved by a signature defeasance date,or such shorter period of time as may be acceptable to the Trustee. In connection guarantee of any bank or trust company located within the United States of America.Where any with a defeasance under(b)or(c)above,there shall be provided to the District a verification report such instrument is executed by an officer of a corporation or as§ociation or a member of a partnership from an independent nationally recognized certified public accountant stating its opinion as to the on behalf of such corporation,association or partnership,such signature guarantee shall also sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and constitute sufficient proof of his authority. discharge the principal of,premium,if any,and interest on all Outstanding Bonds to be defeased in accordance with this Section,as and when the same shall become due and payable,and an opinion of (b) As to any Bond,the person in whose name the same shall be registered in the Bond Bond Counsel(which may rely upon the opinion of the certified public accountant)to the effect that Register shall be deemed and regarded as the absolute owner thereof for all purposes,and payment of the Bonds being defeased have been legally defeased in accordance with this Indenture and any or on account of the principal of any such Bond,and the interest thereon,shall be made only to or applicable Supplemental Indenture.If a forward supply contract is employed in connection with an upon the order of the registered Owner thereof or his or her legal representative.All such payments advance refunding to be effected under(c)above,(i)such verification report shall expressly state that shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest the adequacy of the amounts deposited with the bank under(c)above to accomplish the refunding thereon to the extent of the sum or sums to be paid.Neither the District nor the Trustee shall be relies solely on the initial escrowed investments and the maturing principal thereof and interest affected by any notice to the contrary. income thereon and does not assume performance under or compliance with the forward supply contract,and(ii)the applicable escrow agreement executed to effect an advance refunding in Nothing contained in this Indenture shall be construed as limiting the Trustee or the District accordance with(c)above shall provide that,in the event of any discrepancy or difference between to such proof,it being intended that the Trustee or the District may accept any other evidence of the the terms of the forward supply contract and the escrow agreement,the terms of the escrow matters herein stated which the Trustee or the District may deem sufficient.Any request or consent agreement shall be controlling. of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Trustee or the District in pursuance of such request or consent. Upon a defeasance,the Trustee,upon request of the District,shall release the rights of the Owners of such Bonds and execute and deliver to the District all such instruments as may be Section 10.3. Unclaimed Moneys.Anything in this Indenture to the contrary desirable to evidence such release,discharge and satisfaction.In the case of a defeasance hereunder notwithstanding,any money held by the Trustee in trust for the payment and discharge of any of the of all Outstanding Bonds,the Trustee shall pay over or deliver to the District any funds held by the Outstanding Bonds which remain unclaimed for a period ending at the earlier of two Business Days Trustee at the time of a defeasance,which are not required for the purpose of paying and discharging prior to the date such funds would escheat to the State or two years after the date when such the principal of or interest on the Bonds when due.The Trustee shall,at the written direction of the Outstanding Bonds have become due and payable,if such money was held by the Trustee at such District,mail,first class,postage prepaid,a notice to the Bondowners whose Bonds have been date,or for a period ending at the earlier of two Business Days prior to the date such funds would defeased,in the form directed by the District,stating that the defeasance has occurred. escheat to the State or two years after the date of deposit of such money if deposited with the Trustee after the date when such Outstanding Bonds become due and payable,shall be repaid by the Trustee ARTICLE% to the District,as its absolute property and free from trust,and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the MISCELLANEOUS payment of such Outstanding Bonds;provided,however,that,before being required to make any such payment to the District,the Trustee at the written request of the District or the Trustee shall,at Section 10.1. Cancellation of Bonds.All Bonds surrendered to the Trustee for payment the expense of the District,cause to be mailed by first-class mail,postage prepaid,to the registered upon maturity or for redemption shall be upon payment therefor,and any Bond purchased by the Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the District as authorized herein and delivered to the Trustee for such purpose shall be,cancelled Trustee a notice that said money remains unclaimed and that,after a date named in said notice,which 40 41 DOCS00100098 SA,22925.0009 DOCS001000985v4\22925.0009 dar., date shall not be less than 30 days after the date of the mailing of such notice,the balance of such Section 10.10.Execution in Counterparts.This Trust Indenture may be executed in any money then unclaimed will be returned to the District. number of counterparts and each of such counterparts shall for all purposes be deemed to be an original;and all such counterparts shall together constitute but one and the same instrument. Section 10.4. Provisions Constitute Contract.The provisions ofthis Indenture shall constitute a contract between the District and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit,action or proceeding to enforce any right or exercise any remedy shall be brought or taken and,should said suit,action or proceeding be abandoned,or be determined adversely to the Bondowners or the Trustee,then the District,the Trustee and the Bondowners shall be restored to their former positions,rights and remedies as if such suit,action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Indenture shall be irrepealable,but shall be subject to modifications to the extent and in the manner provided in this Indenture,but to no greater extent and in no other manner. Section 10.5. Future Contracts.Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Gross Taxes which is subordinate to the pledge hereunder,or which is payable from the general fund of the District or from taxes or any source other than the Gross Taxes and other amounts pledged hereunder. Section 10.6. Further Assurances.The District will adopt,make,execute and deliver any and all such further resolutions,instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture,and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture. Section 10.7. Severability.If any covenant,agreement or provision,or any portion thereof,contained in this Indenture,or the application thereof to any person or circumstance,is held to be unconstitutional,invalid or unenforceable,the remainder of this Indenture and the application of any such covenant,agreement or provision,or portion thereof,to other persons or circumstances, shall be deemed severable and shall not be affected thereby,and this Indenture,the Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8. Notices.Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed,first class,postage prepaid,or personally delivered to the General Manager,11570 Donner Pass Road,Truckee,California 96160,and all notices to the Trustee in its capacity as Trustee shall be mailed,first class,postage prepaid,or personally delivered the Trustee,BNY Western Trust Company of California, Section 10.9. General Authorization.The President of the Board of Directors,the District Clerk and the General Manager are hereby respectively authorized to do and perform from time to time any and all acts and things consistent with this Trust Indenture necessary or appropriate to carry the same into effect. 42 43 DOCSOC\,1000985v4,22925.0p09 D0CS0CA000985v4`,22925.0009 OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL IN WITNESS WHEREOF,Truckee Donner Public Utility District Community Facilities TAXES AND OTHER AMOUNTS PLEDGED UNDER THE INDENTURE BUT ARE NOT A District No.03-1(Old Greenwood)has caused this Bond to be dated as of the Dated Date,to be DEBT OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT,THE STATE OF signed on behalf of the District by the President of the Board of Directors of the Truckee Donner CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF Public Utility District,acting as the legislative body of Truckee Donner Public Utility District ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. Community Facilities District No.03-1(Old Greenwood)by his facsimile signature and attested by the facsimile signature of the Clerk of the Truckee Donner Public Utility District. . • This Bond shall not become valid or obligatory for any purpose until the certificate of hentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED,RECITED AND DECLARED that all acts,conditions and things required by law to exist,happen and be performed precedent to and in the issuance of this Bond do exist,have happened and have been performed in due time,form and manner as required by President of the Board of Directors of the law,and that the amount of this Bond,together with all other indebtedness of the District,does not Truckee Donner Public Utility District,acting exceed any debt limit prescribed by the laws or Constitution of the State of California. as the legislative body of Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood) ATTEST: District Clerk of the Truckee Donner Public Utility District [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] 1 This is one of the Bonds described in the within-defined Indenture. 1 Dated: 12003 BNY WESTERN TRUST COMPANY OF CALIFORNIA,as Trustee By: Authorized Signatory A-4 A-5 DOCS001000985A\22925.0009 DOCS001000985A\22925.0009 [FORM OF LEGAL OPINION] EXHIBIT B The following is a true copy of the opinion rendered by Stradling Yocca Carlson&Rauth,a TRUCKEE DONNER PUBLIC UTILITY DISTRICT Professional Corporation,in connection with the issuance of,and dated as of the date of the original COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) delivery of,the Bonds. A signed copy is on file in my office. REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUI NCE BNY Western Trust Company of California,Trustee,is hereby requested to pay from the [specify one of the Costs of Issuance Account or the Project Account]of the Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Acquisition and Construction Fund,established by the Trust Indenture between the Trustee and Truckee Donner District Clerk of the Truckee Donner Public Public Utility District Community Facilities District No.03-1(Old Greenwood),dated as of Utility District December 1,2003,the amount specified and to the payee named below for payment of[Describe Type of Costs]. Payee: [FORM OF ASSIGNMENT] Address: Purpose: Amount: S For value received the undersigned do(es)hereby sell,assign and transfer unto The amount is due and payable under purchase order,contract or other authorization and has not formed the basis of any prior request for payment.The conditions to the release of this amount from the Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Acquisition and Construction Fund are satisfied. (typewrite name,address and social security or federal tax identification number) There has not been filed with nor served upon the District notice of any lien,right to lien or the within-registered Bond and hereby irrevocably constitute(s)and appoint(s) attachment upon,or stop notice or claim affecting the right to receive payment of the amount attorney, specified above which has not been released or will not be released simultaneously with the payment to transfer the same on the Bond Register of the Trustee with full power of substitution in the of such amount,other than materialmen's or mechanic's liens accruing by mere operation of law. premises. Dated: TRUCKEE DONNER PUBLIC UTILITY DISTRICT Dated: COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) Signature Guaranteed: By: Note: Signature(s)must be guaranteed by an eligible guarantor institution. Authorized Officer .ote: The signature(s)on this assignment must correspond with the name(s)as written on the face of the within-registered Bond in every particular,without alteration or enlargement or any change whatsoever. A-6 B-1 DOCS00 100098 5vC2292 5.0009 DOCSOC\1000985vC22925.0009 TRUCKEE DONNER PUBLIC UTILITY DISTRICT Reports,Semi-Annual Reports and notices of Listed Events with respect to the portion of the COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) Property owned by such Major Developer and its Affiliates. SPECIAL TAX BONDS a "Bond Counsel"means an attorney or a firm of attorneys whose experience in matters DEVELOPER CONTINUING DISCLOSURE AGREEMENT relating to the issuance of obligations by the states and their political subdivisions and the tax- exempt status of the interest thereon is recognized nationally. This Continuing Disclosure Agreement,dated as of December 1,2003(the"Disclosure •eement"),is made and entered into by and between Old Greenwood LLC,a "Community Facilities District"means the Truckee Donner Public Utility District .cited liability company(the"Developer"),and MuniFinancial,as dissemination agent(the Community Facilities District No.03-1(Old Greenwood). "Dissemination Agent")in connection with the issuance by Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)(the"Issuer")of its Special "Development Plan" means, with respect to a Major Developer, the specific Tax Bonds(the"Bonds"). The Bonds are issued pursuant to the Mello-Roos Community improvements such Major Developer intends to make,or cause to be made,to the portion of the Facilities Act of 1982, as amended(the"Act")a Trust Indenture (the"Indenture"), dated Property owned by such Major Developer in order for such portion of the Property to reach the December 1,2003,by and between the Truckee Donner Public Utility District,on behalf of the Planned Development Stage,the time frame in which such improvements are intended to be Issuer,and BNY Western Trust Company(the"Trustee"). made and the estimated costs of such improvements. As of the date hereof,the Development Plan for the Property owned by the Developer and its Affiliates is described in the Official The Developer and the Dissemination Agent covenant and agree as follows: Statement under the caption "THE DEVELOPMENT AND PROPERTY OWNERSHIP — Development Plan." SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered for the benefit of the Bond Owners and Beneficial Owners of the "Dissemination Agent"means MuniFinancial,acting in its capacity as the Dissemination Bonds and in order to assist the Participating Underwriter in complying with Rule 15c2-12(b)(5) Agent hereunder,or any successor Dissemination Agent designated in writing by the Developer of the Securities and Exchange Commission, and which has filed with the Issuer a written acceptance of such designation. SECTION 2. Definitions. In addition to the definitions set forth in the Indenture or "Event of Bankruptcy"means,with respect to a Person,that such Person files a petition parenthetically defined herein,which apply to any capitalized terms used in this Disclosure or institutes a proceeding under any act or acts,state or federal,dealing with or relating to the Agreement unless otherwise defined in this Section,the following capitalized terms shall have subject or subjects of bankruptcy or insolvency,or under any amendment of such act or acts, the following meanings: either as a bankrupt or as an insolvent,or as a debtor,or in any similar capacity,wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt,or is to be discharged "Affiliate" of another Person means (a) a Person directly or indirectly owning, from any or all of such Person's debts or obligations,or offers to such Person's creditors to effect controlling,or holding with power to vote,25%or more of the outstanding voting securities of a composition or extension of time to pay such Person's debts or asks,seeks or prays for such other Person,(b)any Person 25%or more of whose outstanding voting securities are reorganization or to effect a plan of reorganization,or for a readjustment of such Person's debts, directly or indirectly owned,controlled,or held with power to vote,by such other Person,and(c) or for any other similar relief,or if any such petition or any such proceedings of the same or any Person directly or indirectly controlling,controlled by,or under common control with,such similar kind or character is filed or instituted or taken against such Person and the same shall other Person;for purposes hereof,control means the power to exercise a controlling influence remain undismissed for a period of sixty days,or if a receiver of the business or of the property over the management or policies of a Person,unless such power is solely the result of an official or assets of such Person is appointed by any court,or if such Person makes a general assignment position with such Person. for the benefit of such Person's creditors. "Annual Report"means any Annual Report provided pursuant to,and as described in, "Financing Plan"means,with respect to a Major Developer,the method by which such Sections 3 and 4 of this Disclosure Agreement. Major Developer intends to finance its Development Plan,including specific sources of finding for such Development Plan. As of the date hereof,the Financing Plan for the Developer and its "Annual Report Date"means the date that is eight months after the end of Developer's Affiliates is described in the Official Statement under the caption"THE DEVELOPMENT AND fiscal year,which fiscal year currently ends The first Annual Report Date shall be PROPERTY OWNERSHIP—Development Plan." 1,2004. "Financial Statements"means,with respect to a Major Developer,the full financial "Assumption Agreement" means an agreement between a Major Developer, or an statements,special purpose financial statements,project operating statements or other reports Affiliate thereof,and the Dissemination Agent containing terms substantially similar to this reflecting the financial position of each entity,enterprise,fund,account or other person(other Disclosure Agreement,whereby such Major Developer or Affiliate agrees to provide Annual than a financial institution acting as a lender in the ordinary course of business)identified in such 1 2 O1dGmwd,TruckeeDeveprDisclsrAg=t CDA.doc O1dGrnwd,TruckeeDeveprDisclsrAgrmnt CDA.doc Major Developer's Development Plan or its Financing Plan as a source of funding for such Major "Property Owner"means any Person that owns a fee interest in any portion of the Developer's Development Plan,which statements shall be prepared in accordance with generally Property that was,as of the date of this Disclosure Agreement,owned by the Developer. accepted accounting principles,as in effect from time to time,and which statements may be audited or unaudited;provided that,if such financial statements or reports are otherwise prepared "Repository"means each National Repository and each State Repository. as audited financial statements or reports,then"Financial Statements"means such audited financial statements or reports. "Rule"means Rule 15c2-12(b)(5)adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. "Independent Financial Consultant" means a financial consultant or special tax consultant or firm of such consultants generally recognized to be well qualified in the financial "Semi-Annual Report"means any Semi-Annual Report provided pursuant to,and as consulting or special tax consulting field,appointed and paid by the Developer,who is not described in,Sections 3 and 4 of this Disclosure Agreement. controlled by either the Issuer or Developer,does not have any substantial interest(direct or indirect)in the Issuer or Developer and is not a member,officer or employee of the Issuer or "Semi-Annual Report Date"means the date that is two months after the end of Developer,but who may be regularly retained to make annual or other reports to the Issuer or Developer's fiscal year,which fiscal year currently ends The first Semi-Annual Developer. Report Date shall be 1,2004. "Listed Event" means any of the events listed in Section 5(a) of this Disclosure "State Repositoty"means any public or private repository or entity designated by the Agreement. State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date of this Disclosure Agreement,there is no "Major Developer"means,as of any date,any Property Owner,including the Developer, State Repository. which owns a portion of the Property which has not reached the Planned Development Stage and the sum of the Maximum Special Tax then applicable to which,plus the Maximum Special Tax SECTION 3. Provision of Annual Reports and Semi-Annual Reports. then applicable to all portions of the Property that have not reached the Planned Development Stage and that are owned b Affiliates of such Pro (er Not later than five(m business days prior al each Annual Report Date,the g y Property Owner,is equal to or greater than 20% Developer shall provide to the Dissemination Agent an Annual Report which is consistent with of the total Maximum Special Tax then.applicable to all of the Property. the requirements of Section 4 hereof and which is in a form suitable for filing with the "National Repository" means any Nationally Recognized Municipal Securities Repositories. The Annual Report may be submitted as a single document or as separate Information Repository for purposes of the Rule. The Nationally Recognized Municipal documents comprising a package and may cross-reference other information as provided in Securities Information Repository for purposes of the Rule are identified in the Securities and Section 4 of this Disclosure Agreement;provided that the Financial Statements of the Developer Exchange Commission website located at http://www.sec.gov/info/municipal/nnnsir.htm. (if required)may be submitted separately from the balance of the Annual Report and later than the date required above for the filing of the Annual Report if the audited Financial Statements are "Official Statement"means the Official Statement,dated 2003,relating to not available by that date. Not later than five business days after its receipt of the foregoing the Bonds. material from the Developer,the Dissemination Agent shall provide a copy thereof to each Repository and the Participating Underwriter. The Developer shall provide a written "Participating Underwriter"means UBS Financial Services Inc. certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The "Person"means an individual,a corporation,a partnership,an association,a joint stock Dissemination Agent may conclusively rely upon such certification of the Developer and shall company,a trust,a limited liability company,any unincorporated organization or a government have no duty or obligation to review such Annual Report. or political subdivision thereof. (b) Not later than five(5)business days prior to each Semi-Annual Report Date,the "Planned Development Stage"means the stage of development of the land in the Developer shall provide to the Dissemination Agent a Semi-Annual Report which is consistent mmunity Facilities District owned by the Developer and its Affiliates that the Developer the requirements of Section 4 hereof and which is in a form suitable for filing with the .ends to achieve with respect thereto. As of the date hereof,the Planned Development stage of Repositories. The Semi-Annual Report may be submitted as a single document or as separate the Developer is the construction of approximately 74 detached cabins and 72 attached cottages documents comprising a package and may cross-reference other information as provided in in the Community Facilities District. Section 4 of this Disclosure Agreement. Not later than five(5)business days after its receipt of the foregoing material from the Developer,the Dissemination Agent shall provide a copy thereof "Property"means the parcels within the boundaries of the Community Facilities District to each Repository and the Participating Underwriter. The Developer shall provide a written subject to Special Taxes. certification with each Semi-Annual Report furnished to the Dissemination Agent to the effect that such Semi-Annual Report constitutes the Semi-Annual Report required to be furnished by it 3 4 OldGrnwd,TruckeeDeveprDisclsrAgmun CDA.doc O1dGrnwd,TruckeeDeveprDisclsrAgnnnt CDA.doc SECTION 6. Assumption of Obligations. If a portion of the Property owned by the Agreement(and the Dissemination Agent shall agree to any amendment so requested by the Developer, or any Affiliate of the Developer, is conveyed to a Person that, upon such Developer,so long as such amendment does not adversely affect the rights or obligations of the conveyance,will be a Major Developer,the obligations of the Developer hereunder with respect Dissemination Agent),and any provision of this Disclosure Agreement may be waived,provided to the Property owned by such Major Developer and its Affiliates may be assumed by such that(a)if the amendment or waiver relates to Sections 3(a),4 or 5(a)hereof,such amendment or Major Developer or by an Affiliate thereof. In order to effect such assumption,such Major waiver is made in connection with a change in legal requirements,change in law or change in the Developer or Affiliate shall enter into an Assumption Agreement. identity, nature, or status of the Developer or the type of business conducted; (b) the undertakings herein,as proposed to be amended or waived,would,in the opinion of Bond SECTION 7. Termination of Reporting Obligation. The Developer's obligations Counsel approved by the Issuer and the Participating Underwriter,have complied with the .eunder shall terminate(except as provided in Section 12)upon the earliest to occur of(a)the requirements of the Rule at the time of the primary offering of the Bonds,after taking into legal defeasance,prior redemption or payment in full of all the Bonds,(b)the date on which account any amendments or interpretations of the Rule,as well as any change in circumstances; those portions of the Rule which require this written undertaking are held to be invalid by a court and(c)the amendment or waiver either(i)is approved by the Bond Owners in the same manner of competent jurisdiction in a non-appealable action, have been repealed retroactively or as provided in the Indenture for amendments to the Indenture with the consent of Bond Owners, otherwise do not apply to the Bonds,(c)the first date on which no Property Owner is a Major or(ii)does not,in the opinion of the Issuer or Bond Counsel,materially impair the interests of Developer,(d)the first date on which the Developer(i)is no longer a Major Developer and(ii) the Bond Owners or Beneficial Owners of the Bonds. has no obligations hereunder with respect to any property because such obligations have been assumed by one or more Major Developers or Affiliates thereof pursuant to an Assumption SECTION 10.Additional Information. Nothing in this Disclosure Agreement shall be Agreement or(e)the date as of which both of the following have occurred:(1)the Board of the deemed to prevent the Developer from disseminating any other information,using the means of Issuer has adopted a resolution to the effect that the Issuer does not intend to issue any additional dissemination set forth in this Disclosure Agreement or any other means of communication,or bonds payable from Special Taxes applicable to property in the Community Facilities District including any other information in any Annual Report or Semi-Annual Report or notice of and(2)the Issuer has received a certificate from an Independent Financial Consultant to the occurrence of a Listed Event,in addition to that which is required by this Disclosure Agreement. effect that the aggregate amount of the Maximum Special Tax applicable to the Developed If the Developer chooses to include any information in any Annual Report or Semi-Annual Property in the Community Facilities District is not less than 1.1 times the Maximum Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required Debt Service on bonds payable from Special Taxes applicable to property in the Community by this Disclosure Agreement,the Developer shall have no obligation under this Agreement to Facilities District then outstanding. The Developer's obligations under this Disclosure update such information or include it in any future Annual Report or Semi-Annual Report or Agreement with respect to a Person that purchased Property from the Developer and that became notice of occurrence of a Listed Event. a Major Developer as a result thereof shall terminate upon the earliest to occur of(w)date on which such Person is no longer a Major Developer,(x)the date on which the Developer's SECTION 11.Default. In the event of a failure of the Developer or the Dissemination obligations with respect to such Person are assumed under an Assumption Agreement entered Agent to comply with any provision of this Disclosure Agreement,the Dissemination Agent may into pursuant to Section 6,(y)the date on which all Special Taxes applicable to the portion of the (and,at the written request of the Participating Underwriter or the Owners of at least 25%of the Property owned by such Major Developer and its Affiliates are prepaid in full and(z)the date aggregate principal amount of Outstanding Bonds,and upon being indemnified to its reasonable described in clause(e)of the preceding sentence;provided however,until the occurrence of any satisfaction against the costs,expenses and liabilities to be incurred in compliance with such of the events described in clauses(w)through(z),the Developer's obligations hereunder with request,shall),or the Participating Underwriter or any Bond Owner or Beneficial Owner of the respect to each other Major Developer,if any,shall remain in full force and effect. Upon the Bonds may,take such actions as may be necessary and appropriate,including seeking mandate occurrence of any such termination prior to the final maturity of the Bonds,the Developer shall or specific performance by court order,to cause the Developer or the Dissemination Agent,as cause the Dissemination Agent to give notice of such termination in the same manner as for a the case may be,to comply with its obligations under this Disclosure Agreement. A default Listed Event under Section 5(c). under this Disclosure Agreement shall not be deemed an event of default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Developer SECTION 8. Dissemination Agent. The Developer may,from time to time and with the or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to prior written consent of the Issuer,discharge the Dissemination Agent with or without appointing compel performance. a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty(30) days'written notice to the Developer and the Issuer. If at any time there is no other designated SECTION 12.Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent,the Developer shall be the Dissemination Agent. If the Dissemination Dissemination Agent shall not have any responsibility for the content of any Annual Report, Agent is an entity other than the Developer,the Developer shall be responsible for paying the Semi-Annual Report or notice of a Listed Event. The Dissemination Agent shall have only such fees and expenses of such Dissemination Agent for its services provided hereunder. duties as are specifically set forth in this Disclosure Agreement,and the Developer agrees to indemnify and save the Dissemination Agent,its officers,directors,employees and agents, SECTION 9. Amendment: Waiver. Notwithstanding any other provision of this harmless against any loss,expense and liabilities which it may incur arising out of or in the Disclosure Agreement,the Developer and the Dissemination Agent may amend this Disclosure exercise or performance of its powers and duties hereunder,including the reasonable costs and 9 10 OldGmwd,TmckeeDeveprDisclsrAgrtnnt CDA.doc OldGmwd,TmckeeDeveprDisclsrAgrmnt CDA.doc expenses(including attorneys fees)of defending against any claim of liability,but excluding Owners and Beneficial Owners from time to time of the Bonds,and shall create no rights in any losses, expenses and liabilities due to the Dissemination Agent's negligence or willful other person or entity. misconduct or the negligence or willful misconduct of any of its officers,directors,employees and agents. The obligations of the Developer under this Section shall survive resignation or SECTION 15.Assignability. The Developer shall not assign this Disclosure Agreement removal of the Dissemination Agent and payment of the Bonds. or any right or obligation hereunder except to the extent permitted to do so under the provisions of Section 6 hereof. The Dissemination Agent may,with prior written notice to the Developer The Dissemination Agent will not,without the Developer's prior written consent,settle, and the Issuer,assign this Disclosure Agreement and the Dissemination Agent's rights and compromise or consent to the entry of any judgment in any pending or threatened claim,action obligations hereunder to a successor Dissemination Agent. or proceeding in respect of which indemnification may be sought hereunder unless such settlement,compromise or consent includes an unconditional release of the Developer and its SECTION 16.Merger. Any person succeeding to all or substantially all of the Affiliates from all liability arising out of any such claim,action or proceedings. A request by the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent Dissemination Agent for the Developer's written consent shall be answered within a reasonable without the filing of any paper or any further act. amount of time to allow the Dissemination Agent to act in a timely manner. If any claim,action or proceeding is settled with the consent of the Developer or if there is a judgment(other than a SECTION 17.Severability. In case anyone or more of the provisions contained herein stipulated final judgment without the approval of the Developer)for the plaintiff in any such shall for any reason be held to be invalid,illegal or unenforceable in any respect,such invalidity, claim,action or proceeding,with or without the consent of the Developer,the Developer agrees illegality or unenforceability shall not affect any other provision hereof. to indemnify and hold harmless the Dissemination Agent to the extent described herein. SECTION 18.Governing Law. The validity,interpretation and performance of this SECTION 13.Notices. Any notices or communications to or among any of the parties to Disclosure Agreement shall be governed by the laws of the State of California. this Disclosure Agreement may be given as follows: SECTION 19.Counterparts. This Disclosure Agreement may be executed in several Issuer: Board of Directors counterparts,each of which shall be an original and all of which shall constitute but one and the { Truckee Donner Public Utility District,as legislative body same instrument. of Truckee Donner Public Utility District Community [OLD GREENWOOD LLC SIGNATURE BLOCK Facilities District No.03-1(Old Greenwood) P.O.Box 309 TO COME] 1 Truckee,California 96160 Attn:General Manager Dissemination Agent: MuniFinancial By: 27358 Via Industria,Suite 110 Its: Temecula,CA 92590 Attn: MUNIFINANCIAL,as Dissemination Agent Developer: Old Greenwood LLC c/o East West Partners 10164 Donner Pass Rd.,Suite 3 By: Truckee,CA 96161 Its: Attn: rticipating Underwriter: UBS Financial Services Inc. !' 777 South Figueroa Street,50"'Floor Los Angeles,CA 90017 Attn: Public Finance i I SECTION 14.Beneficiaries. This Disclosure Agreement shall inure solely to the benefit 1 of the Issuer,the Dissemination Agent,the Developer,the Participating Underwriter and Bond 11 12 OldOmwd,TruckeeDeveprDisclsrAgrmnt CDA.doc O1dGmwd,TmckeeDeveprDisclsrAgmutt CDA.doc I i TRUCKEE DONNER PUBLIC UTILITY DISTRICT (b) The Bonds shall be substantially in the form described in,shall be issued and COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) secured under the provisions of,and shall be payable and be subject to redemption as provided SPECIAL TAX BONDS in,a Trust Indenture(the"Indenture"),dated December 1,2003,by and between the District and x BNY Western Trust Company(the"Trustee"). BOND PURCHASE AGREEMENT (c) The Underwriter has previously distributed to potential purchasers of the Bonds — the Preliminary Official Statement for the Bonds,dated ,2003(which Preliminary Official Statement,together with its cover page and all appendices thereto,is herein referred to 2003 as the"Preliminary Official Statement"and which,as amended with the prior approval of the Underwriter and executed by the Community Facilities District,will be referred to herein as the "Official Statement"). Such distribution of the Preliminary Official Statement by the Board of Directors Underwriter subsequent to its receipt of a certificate from the Community Facilities District Truckee Donner Public Utility District,as legislative deeming the Preliminary Official Statement final for purposes of Rule 15c2-12 of the Securities body of Truckee Donner Public Utility and Exchange Commission("Rule 15c2-12"). The Community Facilities District hereby ratifies District Community Facilities District the use by the Underwriter of the Preliminary Official Statement and authorizes the Underwriter No.03-1(Old Greenwood) to use and distribute the Official Statement,the Indenture,the Community Facilities District P.O.Box 309 Continuing Disclosure Agreement, dated as of December 1, 2003, by and between the Truckee,California 96160 Community Facilities District and MuniFinancial, as Dissemination Agent (the "District Continuing Disclosure Agreement"),this Bond Purchase Agreement,any other documents or Gentlemen: contracts to which the Community Facilities District is a party,and all information contained UBS Financial Services Inc.(the"Underwriter"),acting not as a fiduciary or agent for therein, and all other documents, certificates and statements furnished by the Community you,but on behalf of itself,offers to enter into this Bond Purchase Agreement with Truckee Facilities District to the Underwriter in connection with the transactions contemplated by this Donner Public Utility District Community Facilities District No.03-1 (Old Greenwood)(the Bond Purchase Agreement, in connection with the offer and sale of the Bonds by the "Community Facilities District")which,upon acceptance,will be binding upon the Community Underwriter. Facilities District and the Underwriter. This offer is made subject to its acceptance by the (d) At 8:00 A.M.,Pacific Daylight Time,on ,2003,or at such earlier Community Facilities District on the date hereof, and it is subject to withdrawal by the time or date as shall be agreed upon by the Underwriter and the Community Facilities District Underwriter upon notice delivered to the Community Facilities District at any time prior to the (such time and date being herein referred to as the"Closing Date"),the Community Facilities acceptance by the Community Facilities District. Capitalized terms that are used in this offer and District will deliver(i)to The Depository Trust Company in New York,New York,the Bonds in not otherwise defined herein shall have the respective meanings ascribed to them in the Indenture definitive form(all Bonds being in book-entry form registered in the name of Cede&Co.and (as hereinafter defined). having the CUSIP numbers assigned to them printed thereon),duly executed by the officers of 1. Purchase,Sale and Delivery of the Bonds. the District as the officials of the Community Facilities District as provided in the Indenture,and (ii)to the Underwriter,at the Newport Beach,California offices of Stradling Yocca Carlson& (a) Subject to the terms and conditions,and in reliance upon the representations, Rauth,a Professional Corporation("Bond Counsel"),the documents herein mentioned;and the warranties and agreements set forth herein, the Underwriter agrees to purchase from the Underwriter shall accept such delivery and pay the purchase price of the Bonds in same day Community Facilities District, and the Community Facilities District agrees to sell to the funds(such delivery and payment being herein referred to as the"Closing"). Underwriter,all(but not less than all)of the Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Special Tax Bonds(the"Bonds")in the aggregate (e} The Underwriter agrees to make a bona fide public offering of the Bonds at the initial o principal amount specified in Exhibit A hereto. The Bonds shall be dated the Closing Date(as offering prices set forth in the Official Statement,which prices may be changed from time hereinafter defined), bear interest from said date (payable semiannually on March I and to time by the Underwriter after such offering. September 1 in each year,commencing March 1,2004)at the rates per annum,and mature on the 2. Reuresentations. Warranties and Aereements of the Community Facilities dates and in the amounts set forth in Exhibit A hereto. The purchase price for the Bonds shall be District. The Community Facilities District represents,warrants and covenants to and agrees $ (representing the principal amount of the Bonds, less an Underwriter's with the Underwriter that: discount of$ and[less net original issue discount][plus net original issue premium] of$ (a) The District is duly organized and is validly existing under the Constitution and laws of the State as a public utility district,has full legal right,power,and authority to execute, 2 O1dGmwd.BondPurchaseAereernnt(3).dod"`23°_'P09 OldGmwd.BondPur chaseAereemnt(3)doc'"`^'"_'DOG deliver and perform its obligations under the Acquisition and Disclosure Agreement,dated as of and the taking of any and all action as may be necessary to carry out,give effect to and October 1,2003(the"Acquisition Agreement")between Old Greenwood LLC,a consummate the transactions contemplated by, each of said Community Facilities District limited liability company(the"Developer")and the District and to carry out all transactions Documents(including,without limitation,the collection of the Special Tax);and the Community contemplated by the Acquisition Agreement. Facilities District has been validly formed,the Special Tax has been approved and its levy authorized,and(assuming due authorization,execution and delivery by other parties thereto, (b) The District has duly adopted a resolution forming the Community Facilities where necessary)the Community Facilities District Documents and the Bonds will constitute the District(the"Resolution of Formation")and an ordinance authorizing the levy of a special tax on valid, legal and binding obligations of the Community Facilities District enforceable in the taxable property within the Community Facilities District(the"Special Tax Ordinance")and accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, all other ordinances and resolutions referred to in the Resolution of Formation and the Special moratorium and other laws affecting the enforcement of creditors'rights in general and to the Tax Ordinance. The District has caused to be recorded in the real property records of the County application of equitable principles; of Nevada a Notice of Special Tax Lien(the"Notice of Special Tax Lien")(such ordinances and resolutions and Notice of Special Tax Lien being collectively referred to herein as the (f) The Community Facilities District is not in breach of or default under any "Formation Documents"). Each of the Formation Documents remains in full force and effect as applicable law or administrative rule or regulation of the United States or the State of California, of the date hereof and has not been amended. or of any department,division, agency or instrumentality of either of them,or under any applicable court or administrative decree or order,or under any loan agreement,note,resolution, (c) The Community Facilities District is duly organized and validly existing as a indenture,contract,agreement or other instrument to which the Community Facilities District is community facilities district under the Mello-Roos Community Facilities Act of 1982, as a party or is otherwise subject or bound,a consequence of which could be to materially and amended(the"Act")and the laws of the State of California and has,or at the Closing Date will adversely affect the performance by the Community Facilities District of its obligations under have,as the case may be,full legal right,power and authority(i)to execute,deliver and perform the Community Facilities District Documents or the Bonds;and compliance with the provisions its obligations under this Bond Purchase Agreement,the Indenture and the District Continuing of each thereof will not conflict with or constitute a breach of or default under any applicable law Disclosure Agreement, and to carry out all transactions contemplated by each of such or administrative rule or regulation of the United States or the State of California,or of any agreements,(ii)to issue,sell and deliver the Bonds to the Underwriter pursuant to the Indenture department,division,agency or instrumentality of either of them,or under any applicable court as provided herein, and(iii)to cant'out, give effect to and consummate the transactions or administrative decree or order,or a material breach of or default under any loan agreement, contemplated by the Formation Documents and the Official Statement and by the Indenture,this note,resolution,indenture,contract,agreement or other instrument to which the Community Bond Purchase Agreement,the District Continuing Disclosure Agreement and the Acquisition Facilities District is a party or is otherwise subject or bound; Agreement(collectively,the"Community Facility District Documents"); (g) Except for compliance with the"blue sky"or other states securities law filings,as (d) The Community Facilities District has complied,and at the Closing Date will be to which the Community Facilities District makes no representations,all approvals,consents, in compliance,in all material respects,with the Act and the Community Facilities District authorizations,elections and orders of or filings or registrations with any State governmental Documents;and any immaterial compliance therewith by the Community Facilities District,if authority,board,agency or commission having jurisdiction which would constitute a condition any,will not impair the ability of the Community Facilities District to carry out,give effect to or precedent to,or the absence of which would materially adversely affect,the performance by the consummate the transactions contemplated by the foregoing. From and after the date of issuance Community Facilities District of its obligations hereunder,or under the Community Facilities of the Bonds,the Community Facilities District will continue to comply with the Act and the District Documents or the Bonds,have been obtained and are in full force and effect; covenants of the Community Facilities District contained in the Community Facilities District Documents; (h) The Special Tax has been duly and lawfully authorized and may be levied and collected under the laws of the State of California;and,when levied,the Special Tax will (e) The District has duly and validly: (i)taken or caused to be taken,all proceedings constitute a valid and legally binding continuing lien on the properties on which it levied; necessary under the Act and the Constitution and laws of the State of California in order to form ,,,,.4be Community Facilities District,to authorize the levy of a special tax(the"Special Tax")on 0) Until the date which is twenty-five(25)days after the"end of the underwriting taxable property within the Community Facilities District pursuant to the Rate and Method of period"(as hereinafter defined),if any event shall occur of which the Community Facilities aportionment of Special Tax approved pursuant to the Resolution of Formation(the"Rate and District becomes aware,as a result of which it may be necessary to supplement the Official Method of Apportionment"),to cause the Special Tax to be secured by a continuing lien on each Statement in order to make the statements in the Official Statement,in light of the circumstances parcel of Taxable Property(as defined in the Rate and Method of Apportionment)and to existing at such time,not misleading,the Community Facilities District shall forthwith notify the authorize the sale and issuance of the Bonds,(ii)authorized and approved the execution and Underwriter of such event and shall cooperate fully in furnishing any information available to it delivery of the Community Facilities District Documents,(iii)authorized the preparation and for any supplement to the Official Statement necessary so that the statements therein,as so delivery of the Preliminary Official Statement and the Official Statement,and(iv)authorized and supplemented,will not be misleading in light of the circumstances existing at such time;and the approved the performance by the Community Facilities District of its obligations contained in, Community Facilities District shall promptly furnish to the Underwriter a reasonable number of 3 4 OldGrnwd.BondPurchaseAereemnt(3)Aoc23523��;—'4)O 01dGrnwd.BondPurchaseAereernnt(3)AM4;42?z,z4-4,e ' statements expressly summarize certain provisions of the Bonds, the Indenture, the other with their respective terms,subject to laws relating to bankruptcy,insolvency,or other laws agreements and the opinion of such firm concerning the exclusion from gross income for federal affecting the enforcement of creditors'rights generally and the application of equitable principles income tax purposes and exemption from State of California personal income taxes of interest on if equitable remedies are sought;(iv)the District adopted.the resolutions and ordinances forming e the Bonds,are accurate in all material respects; the Community Facilities District, confirming the Special Tax, approving the Community Facilities District Documents and authorizing the sale and issuance of the Bonds at meetings of (5) The opinion of Stradling Yocca Carlson& Rauth, a Professional the Board which were called,held and conducted pursuant to law and with all public notice rpoation,dated the Closing Date and addressed to the Community Facilities District and to required bylaw and at which a quorum was present and acting throughout,and such resolutions Underwriter,to the effect that,without having undertaken to determine independently the and ordinances are now in full force and effect and have not been amended,modified or aracy or completeness of the statements contained in the Official Statement,but on the basis rescinded;(v) to the best of such counsel's knowledge,after due inquiry,there are no actions, of their participation in conferences with representatives of the Community Facilities District, suits,proceedings,inquiries,or investigations,at law or in equity,before or by any court, each Developer,the Appraiser and others,and their examination of certain documents,nothing governmental agency,public board,or body,pending or threatened against the District or the has come to their attention which has led them to believe that the Official Statement contains any Community Facilities District,for which the District or the Community Facilities District has untrue statement of a material fact or omits to state a material fact required to be stated therein or been served,to restrain or enjoin the formation of the Community Facilities District,the issuance necessary to make the statements therein,in light of the circumstances under which they were of the Bonds,the collection or application of the Special Tax,or the payment of principal of and made,not misleading(except that no opinion or belief need be expressed as to any financial interest on the Bonds,or in any way contesting the validity of the Bonds or the other District statements or other financial, statistical or engineering data or forecasts, numrbers, charts, Documents or this Bond Purchase Agreement;(vi)the execution and delivery of the Community estimates,projections,assumptions,or expressions of opinion,any information about valuation, Facilities District Documents and the approval of the Official Statement,and compliance with appraisals,absorption,archeological or environmental matters,or any information about The the provisions thereof and hereof,under the circumstances contemplated thereby,do not and will Depository Trust Company or the book-entry-only system); not in any material respect conflict with or constitute on the part of the District or the Community Facilities District a breach of or default under any agreement or other instrument to (6) A certificate, dated the Closing Date and signed by an authorized which either is a party or by which either is bound or any existing law,regulation,court order or representative of the Community Facilities District,ratifying the use and distribution by the consent decree to which either is subject;(vii)the Special Tax constituting the security for the Underwriter of the Preliminary Official Statement and the Official Statement in connection with Bonds has been duly and lawfully levied under and pursuant to the Act and constitutes valid and the offering and sale of the Bonds and certifying that(i)the representations and warranties of the legally binding liens on the properties on which it has been levied;and(viii)to the best of such Community Facilities District contained in Section 2 hereof are true and correct in all material counsel's knowledge, without conducting an independent investigation, the information respects on and as of the Closing Date with the same effect as if made on the Closing Date contained in the Official Statement relating to the District,the Community Facilities District,the except that all references therein to the Preliminary Official Statement shall be deemed to be Special Tax and the Bonds(except for the financial statements and other financial,statistical or references to the Official Statement;(ii)to the best of his or her knowledge,no event has engineering data or forecasts, numbers, charts, estimates, projections, assumptions, or occurred since the date of the Official Statement affecting the matters contained therein which expressions of opinion,any information about valuation,appraisals,absorption,archeological or should be disclosed in the Official Statement for the purposes for which it is to be used in order environmental matters,the Appendices thereto,or any information about The Depository Trust to make the statements and information contained in the Official Statement not misleading in any Company or the book-entry-only system,as to which no view need be expressed)is correct in all material respect,and the Bonds and the Community Facilities District Documents conform as to material respects and does not contain any untrue or misleading statement of a material fact or form and tenor to the descriptions thereof contained in the Official Statement;and(iii)the omit a material fact required to be stated therein or necessary to make the statements therein,in Community Facilities District has complied with all the agreements and satisfied all the light of the circumstances under which they were made,not misleading; conditions on its part to be performed or satisfied under the Community Facilities District Documents and the Official Statement at or prior to the Closing Date; (8) An opinion, dated the date of the Closing and addressed to the Underwriter,of Nossaman,Guthner,Knox&Elliott,LLP,counsel to the Underwriter,in such (7) An opinion,dated the Closing Date and addressed to the Underwriter,of form as may be acceptable to the Underwriter and counsel to the Underwriter,including an Dennis W.De Cuir,A Law Corporation,Special Counsel for the District,dated the Closing Date opinion that the Bonds are not subject to the registration requirements of the Securities Act of and addressed to the Underwriter,to the effect that(i)the District was duly organized and is 1933,as amended. validly existing under the Constitution and laws of the State as a public utility district;(ii) the District has full legal right,power, and authority to execute and deliver, on behalf of the (9) The District Continuing Disclosure Agreement,in substantially the form Community Facilities District, the Community Facilities District Documents, (iii) the set forth in APPENDIX E of the Official Statement; Community Facilities District have been duly authorized,executed,and delivered by the District on behalf of the Community Facilities District and,assuming due authorization and execution by (10) The Developer Continuing Disclosure Agreement, in substantially the any other applicable parties thereto,the Community Facilities District Documents constitute the form set forth in APPENDIX F of the Official Statement; valid and binding obligations of the Community Facilities District,enforceable in accordance 9 10 01dGmwd.BondPurchaseAereemn1(3).doc2352'9' OC OldGrnwd.HondPurchaseAereemnt OWoc""'"_'.DOG arm (11) A certificate of the Developer,dated the Closing Date,in substantially the (15) A certificate of the Trustee,dated the Closing Date,in form and substance form attached hereto as Exhibit B; reasonably acceptable to the Underwriter; (12) An opinion of Hefner,Start&Marois,counsel to the Developer,dated the (16) An opinion,dated the Closing Date and addressed to the Underwriter and date of the Closing and addressed to the Community Facilities District and the Underwriter,in the Community Facilities District,of counsel to the Trustee in form and substance acceptable to form and substance acceptable to the Underwriter and Underwriter's Counsel in substantially the the Community Facilities District and the Underwriter; form set forth in Exhibit C hereto; (17) A certificate of Fieldman,Rolapp&Associates,the District's Financial (13) A certificate,dated the Closing Date,of MuniFinancial("MuniFinancial") Advisor,dated the date of the Closing,to the effect that while the Financial Advisor has not to the effect that(i)the Special Tax,if collected in the maximum amounts permitted pursuant to independently verified or undertaken an independent investigation of the information in the the Rate and Method of Apportionment,will generate in each Fiscal Year at least 110%of the Preliminary Official Statement and the Official Statement,based on its participation in the debt service payable with respect to the Bonds in the calendar year that begins in such Fiscal preparation and review of the Preliminary Official Statement and Official Statement, no Year,based on such assumptions and qualifications as shall be acceptable to the Community information has come to its attention which would lead it to believe that the information Facilities District and the Underwriter;(ii)all information supplied by MuniFinancial to the contained in the Preliminary Official Statement and Official Statement is as of the date of Appraiser,as hereinafter defined,is true and correct as of the date of the Official Statement and delivery of the Bonds,not true or correct in all material respects,or that the Preliminary Official as of the Closing Date,based on such assumptions as may have been supplied to such firm by the Statement and the Official Statement contains any untrue statement of a material fact or omits to Appraiser,(iii)the information contained in the Appraisal with respect to taxes and tax rates state a material fact where necessary to make a statement not misleading in light of the applicable,and projected to be applicable,to the property in the Community Facilities District is circumstances under which it was made. consistent with such information provided by MuniFinancial to the Appraiser;(iv)the statements concerning the Rate and Method of Apportionment and the statistical and financial data set forth (18) Evidence satisfactory to the Underwriter that no ad valorem taxes, in the tables and discussion in the Official Statement which were derived from information assessments,special taxes or Special Tax applicable to the property within Community Facilities supplied by MuniFinancial for use in the Official Statement and in APPENDIX A thereto are District are delinquent;and true,correct and complete in all material respects and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the (19) Such additional legal opinions, certificates, instruments and other statements therein,in light of the circurnstances under which they were made,not misleading and documents as the Underwriter may reasonably request to evidence the truth and accuracy,as of no events or occurrences have been ascertained by MuniFinancial or have come to its attention the date hereof and as of the Closing Date,of the statements and information contained in the that would substantially change such information set forth in the Official Statement; (v) Preliminary Official Statement and the Official Statement,of the Community Facilities District's MuniFinancial has the full power and authority to enter into and perform its duties under the representations and warranties contained herein,and of the Developer's representations and District Continuing Disclosure Agreement and the Developer Continuing Disclosure Agreement warranties set forth in their certificates hereto and the due performance or satisfaction by the (collectively,the"Continuing Disclosure Agreements"); and(vi) the Continuing Disclosure Community Facilities District at or prior to the Closing of all agreements then to be performed Agreements have been duly authorized,executed and delivered by MuniFinancial and constitute and all conditions then to be satisfied by the Community Facilities District in connection with the the valid and binding obligation of MuniFinancial in accordance with their respective terms. transactions contemplated hereby and by the Official Statement. (14) A letter from Brown,Chudleigh,Schuler,Donaldson&Associates(the If the Community Facilities District shall be unable to satisfy the conditions to the "Appraiser"),dated the Closing Date and addressed to the Community Facilities District and the obligations of the Underwriter to purchase,accept delivery of and pay for the Bonds contained in Underwriter,to the effect that the Appraiser has prepared the appraisal report with respect to the this Bond Purchase Agreement,or if the obligations of the Underwriter to purchase,accept property located within the Community Facilities District dated as of November 3,2003(with an delivery of and pay for the Bonds shall be terminated for any reason permitted by this Bond effective value date of November 1,2003)(the"Appraisal")and that:(a)the Appraisal was Purchase Agreement,this Bond Purchase Agreement shall terminate and neither the Underwriter ,.,..,ipcluded in the Preliminary Official Statement and the Official Statement with its permission, nor the Community Facilities District shall be under any further obligation hereunder,except that neither the Appraisal nor the information in the Official Statement referring to it contains any the respective obligations of the Community Facilities District and the Underwriter set forth in true statement of a material fact or omits to state a material fact necessary in order to make the Section 5 and Section 6 hereof shall continue in full force and effect. statements therein,in light of the circumstances under which they were made,not misleading,(c) 4. Conditions of the Community Facilities District's Obligations. The Community in its opinion,the assumptions made in the Appraisal referred to in the Official Statement are reasonable,and(d)no events or occurrences have been ascertained by the Appraiser or have Facilities District's obligations hereunder are subject to the Underwriter's performance of its come to the Appraiser's attention that would materially change the opinion set forth in the obligations hereunder,and are also subject to the following conditions: Appraisal; 11 12 OldGmwd.BondPurchaseAEreemnt(31.doc^°`'""_' OldGmwd.BondPurchaseAEreemnt(3).doc23 !.DOC EXHIBIT B 6. All information concerning the Developer,the ownership of the Developer,and TRUCKEE DONNER PUBLIC UTILITY DISTRICT the Developer's property within the Community Facilities District submitted in COMMUNITY FACILITIES DISTRICT NO.03-1 writing by,or on behalf of,the Developer to the Underwriter,the Community (OLD GREENWOOD) Facilities District,Bond Counsel or Disclosure Counsel in connection with the SPECIAL TAX BONDS preparation of the Preliminary Official Statement and the Official Statement,to the Appraiser in connection with preparation of the Appraisal,and to the Special " Tax Consultant in connection with the Rate and Method of Apportionment was,to CERTIFICATE OF DEVELOPER the best of my knowledge,true,complete,and correct at the time given. In connection with the issuance and sale of the above-captioned bonds,and pursuant to 7. The statements relating to the Developer,the ownership of the Developer and the the Bond Purchase Agreement,dated ,2003,by and between Truckee Donner Public Developer's property within the Community Facilities District contained in the Utility District Community Facilities District No.03-1 (Old Greenwood)and the Underwriter Official Statement do not contain any untrue statement of a material fact or omit named therein(the"Bond Purchase Agreement"),the undersigned hereby certifies,represents, to state a material fact required to be stated therein or necessary to make the warrants and covenants,on behalf of Old Greenwood LLC(the"Developer")that: statements therein,in light of the circumstances under which they were made,not 1. The undersigned is,and at all pertinent times mentioned herein has been,the misleading. authorized representative of the Developer, and is authorized to make this g. No proceedings are pending or,to the best knowledge of the undersigned,after certification on behalf of the Developer. due inquiry,threatened in which the Developer may be adjudicated as bankrupt or 2. Capitalized terms that are not defined herein shall have the meanings ascribed to discharged from any and all of its debts or obligations or granted an extension of them in the Bond Purchase Agreement. time to pay its debts or a reorganization or readjustment of the debts. 3. The Developer is a duly organized and validly existing a limited liability company 9. No action,suit,proceeding,inquiry,or investigation,at law or in equity,before or in good standing under the laws of the State of and is a wholly- by any court,regulatory agency,public board or body,is pending or,to the best owned subsidiary of East West Resort Development V,L.P.,L.L.L.P.,a Delaware knowledge of the Developer,threatened in any way seeking to restrain or to limited partnership,limited liability partnership. enjoin the development of the property within the Community Facilities District. The Developer agrees to indemnify and hold harmless the Underwriter and each 4. The Developer has full power and authority to execute,deliver,and perform its 10. person, if any, who controls(as such term is defined in Section 15 of the obligations under the and the Acquisition and Disclosure Agreement,dated as of Securities Act of 1933, as amended) the Underwriter against any and all j October 1, 2003 between the Developer and the District (the "Acquisition Agreement"), the Developer Continuing Disclosure Agreement, dated as of judgments,losses,claims,damages,liabilities and expenses(i)arising out of any December 1,2003,between the Developer and MuniFinancial,as dissemination statement or information in the Preliminary Official Statement or in the Official agent(the"Developer Continuing Disclosure Agreement")and the Development Statement,relating to the Developer,the ownership of the Developer and the Agreement, dated as of August 14, 2002 (the "Development Agreement"), Developer's property within the Community Facilities District as described in the between the Developer and the Town of Truckee(collectively,the"Developer Official Statement,that is or is alleged to be untrue or incorrect in any material Documents"),the Developer Documents have been duly authorized,executed, respect or the omission or alleged omission therefrom of any statement or and delivered by the Developer and,assuming due authorization,execution and information that should be stated therein, or that is necessary,to make the delivery by the other parties thereto,as applicable,constitute legal,valid,and statements therein not misleading in any material respect,and(ii)to the extent of binding agreements of the Developer, enforceable in accordance with their the aggregate amount paid in settlement of any litigation commenced or respective terms,subject to laws relating to bankruptcy,insolvency,or other laws threatened arising from a claim based upon any such untrue statement or omission affecting the enforcement of creditors'rights generally and the application of if such settlement is effected with the written consent of the Developer. In case equitable principles if equitable remedies are sought. any claim shall be made or action brought against the Underwriter or any controlling person based upon the Official Statement for which indemnity may be 5. I have reviewed the contents of the Preliminary Official Statement and the sought against the Developer,as provided above,the Underwriter shall promptly contents of the Official Statement.I have reviewed the contents of this Certificate notify the Developer in writing setting forth the particulars of such claim or action and have conferred with our counsel for the purpose of discussing the meaning of and the Developer shall assume the defense thereof,including the retaining of its contents. counsel reasonably acceptable to the Underwriter and the payment of all expenses. Notwithstanding the Developer's election to appoint counsel to B-1 B-2 I represent the indemnified party in an action,the indemnified party shall have the be necessary for the construction of improvements within the Community right to employ separate counsel(including local counsel),and the Developer Facilities District,there is no consent,approval,authorization,or other order of, shall bear the reasonable fees,costs and expenses of such separate counsel if(i) or filing with,or certification by,any regulatory authority having jurisdiction over the use of counsel chosen by the Developer to represent the indemnified party the Developer except as such have been obtained and are in full force and effect, would present such counsel with a conflict of interest;(ii)the actual or potential for the consummation by the Developer of the actions contemplated to be defendants in,or targets of,any such action include both the indemnified party consummated by the Developer under the Official Statement. and the Developer and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which 13. To the best knowledge of the undersigned,after due inquiry,the Developer is not are materially different from or additional to those available to the Developer;(iii) in violation of any provision of,or in default under,its operating agreement or the Developer shall not have employed counsel reasonably satisfactory to the any material agreement,lease,or other contract,the violation of or default under indemnified party to represent the indemnified party within a reasonable time which would materially and adversely affect the business, properties,assets, after notice of the institution of such action;or(iv)the Developer shall authorize liabilities,or conditions(financial or other)of the Developer. the indemnified party to employ separate counsel at the expense of the Developer. The Developer will not,without the prior written consent of the indemnified 14. The Developer has never failed to comply with an obligation to file an annual parties,settle or compromise or consent to the entry of any judgment with respect disclosure report with the appropriate information repositories as required under to any pending or threatened claim,action,suit or proceeding in respect of which Securities and Exchange Commission Rule 15c2-12. indemnification or contribution may be sought hereunder(whether or not the indemnified parties are actual or potential parties to such claim or action)unless 15. Other than as described in the Official Statement, to the knowledge of the such settlement,compromise or consent includes an unconditional release of each Developer,(i)no public debt secured by a special tax or assessment on the indemnified party from all liability arising out of such claim,action,suit or Developer's land in the Community Facilities District exists or is in the process of proceeding. being authorized,and(ii)no assessment district or community facilities district exists or is in the process of being formed,in each case which would include any 11. Promptly after receipt by any Indemnified Party of notice of any complaint or the portion of the Developer's land within the Community Facilities District. commencement of any action or proceeding in connection with any matter for which the Developer is obligated to indemnify an Indemnified Party as set forth in 16. None of the parcels of land within the Community Facilities District owned by the the preceding paragraph,the Indemnified Party shall notify the Developer in Developer is delinquent in the payment of any taxes or assessments writing of such complaint or of the commencement of such action or proceeding 17. The execution and delivery by the Developer of the Developer Documents and the and,if the Developer so elects or is requested by the Indemnified Party,the performance of its obligations thereunder do not and will not result in violation of Developer shall assume the defense of such action or proceeding,including the any provision of,or in default under,the Developer's operating agreement or any employment of counsel reasonably satisfactory to the Indemnified Party and the material agreement,lease,or other contract to which the Developer is a party or payment of the fees and disbursements of such counsel,in which event the by which it or its properties are bound. Developer shall not be obligated to pay the reasonable fees and disbursements of separate counsel for the Indemnified Party in such action. In the event,however, Dated: 2003 that an Indemnified Party's legal counsel has determined that defenses may be available to an Indemnified Party that are different from or in addition to those [OLD GREENWOOD LLC SIGNATURE BLOCK available to the Developer or that there is or could reasonably be expected to be a TO COME] conflict of interest by reason of the Developer and an Indemnified Party having common counsel in any action or proceeding,then the Indemnified Party may employ separate counsel to represent or defend it in any such action or proceeding in which such Indemnified Party may become involved or is named as defendant and the Developer shall pay the reasonable fees and disbursements of such separate counsel. 12. The Developer is fully qualified by all necessary permits, licenses, and certifications,to conduct its business as it is presently being conducted and, except as may be required under blue sky or other securities laws of any state,and except for such licenses,certificates,approvals,variances,and permits which may B-3 B-4 c PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER 2003 S F NEW ISSUE-BOOK-ENTRY-ONLY NO RATING c M 1 Corporation, MATURITY H s under the opinion o(Srregainp yucca Carlson j Routh a Projes and Corporal e,Newport Beach,California liBond with cenail SCHEDULE* ail under existing st qutire ents described rulings and judicialdecisions,and assuming discount), on representations and compliance wish income covenants and requirements described oses and is not n netn,interest(anderen ort rid issue discount)on the Bonds+s excluded from gross income for federal a income nd ccorporations.In the furtherrpo rimonlo((Bo.1 orpuun seniereslt(a d o8 n¢!issue discal ount)on the Bonive minimum ds is exempt from State o(Califorma —mil income tar and lire ift erence between the issue price of a Bond(thefirst pnee at which a substantial Date Principal Interest E amount aft e Bonds a a maturity is to be sold to thepublic)and the stated redemption price at maturitywith respect to the Bond oconstitutes original issue discount.See"TAXMATTERS"'herein with respect to tar consequences relating to the Bonds (September 1) Amount Rate Price T n x S o' TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) SPECIAL TAX BONDS o.2s E2 o -...red:Date of Delivery Due:September 1,as shown on the inside page The Truckce Donner Public Utility District Community Facilities District No.03.1(Old Greenwood)Special Tax Bonds(the "Bonds')are being issued and delivered to finance various public improvements needed to develop property located within Community Facilities District No.03-1(Old Greenwood)(the"District').The District has been formed by Truckee Dormer Public Utility District w ("TDPUD")and is located in the Town of Truckee(the"Town'),County of Nevada,Califomia. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Ana of 1982,as amended $ .L (Sections 53311 H gam.of the Government Code of the State of California),and pursuant to a Trust Indenture,dated as of December 1, 2003(the"Indenture"),by and between the District and BNY Westem Trust Company,as trustee(the"Trustm').The Bonds are special obligations of the District and are payable solely from revenues derived from certain annual Special Taxes(as defined herein)to be I'r' levied on and collected from the owners of the taxable land within the District and from certain other funds pledged under the Indenture, all as further described herein.The Special Taxes are to be levied according to the rate and method of apportionment approved by the $ Board of Directons of TDPUD and the qualified electors within the District. Sat"SOURCES OF PAYMENT FOR THE BONDS- d Special Taxes."The Board of Directors of TDPUD is the legislative body of the District. Ed The Bonds are issuable in fully registered form and when issued will be registered in the name of Cede&Co.,as nominee of v 3 The Depository Trust Company,New York,New York("DTC').Individual purchases maybe made in principal amounts of$5,000 and o integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their `-°'Q beneficial ownership of the Bands but will receive credit balances on the books of their respective nimiroes.The Bonds will not be c Lr transferable or exchangeable except for transfer to anothernrominm of DTC or as otherwise described herein Interest on the Bonds will - E�'m be payable on March 1,2004 and semiannually thereafter on each March I and September 1.Principal of and interest on the Bonds will be paid by Me Trustee to DTC for subsequent disbursement to DTC Participants who are obligated to remit such payments to the $ %Term Bond due September 1,20 Price: beneficial owners of the Bonds.Sat"THE BONDS-Description of the Bonds"and"-Book-Entry-Only S herein. P �'-O ly stem"y $ %Term Bond due September 1,20 Price: Neither the faith and credit nor the taxing power of TDPUD,the County of Neuda,the State of California or any political — o,i a subdivision thereojis pledged to the payment of the Bonds.Ewept far the Special Tares,no other tares are pledged to the payment of E s 3 the Bonds.The Bonds are special tax obligations ofthe District payable solelyfrom amounts derived from certain annual Special Tares 3_2 (as defined herein)and other amounts held under the Indenture as more fully described herein. The Bonds are subject to optional redemption,special mandatory redemption and mandatory sinking fund redemption prior to z 6 maturity as set forth herein.Sat"THE BONDS-Redemption"[Herein. y "Z CERTAIN EVENTS COULD AFFECT THE ABILITY OF THE DISTRICT TO PAY THE PRINCIPAL OF AND 9 INTEREST ON THE BONDS WHEN DUE.THE PURCHASE OF THE BONDS INVOLVES SIGNIFICANT RISKS,AND THE BONDS ARE NOT SUITABLE INVESTMENTS FOR ALL INVESTORS. SEE THE SECTION OF THIS OFFICIAL STATEMENT ENTITLED"SPECIAL RISK FACTORS"FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT s'S SHOULD BE CONSIDERED,IN ADDITION TO THE OTHER MATTERS SET FORTH HEREIN,IN EVALUATING THE INVESTMENT QUALITY OF THE BONDS. Y L B c This cover page contains certain information for general reference only.It is not intended to be a summary of the security or z terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an o F informed investment decision. 3 c MATURITY SCHEDULE c c = (See Inside Cover Page) cThe Bonds are offered when,as and if issued and accepted by the Underwriter,subject to approval as to their legality by e Shadling Yocca Carlson&Routh,a Professional Corporation,Bond Counsel,and subject to certain other conditions.Certain legal matters will be passed on for TDPUD and the District by Dennis W.De Cuir,A Law Corporation,Roseville,California.for the y E Developer by its counsel Hefner,Stark&Marois LLP,Sacramento,California,and for the Underwriter by its counsel Nossaman, — Sit Guth=,Knox&Elliot LLP,Irvine,California.It is anticipated that the Bonds in book-entry form will be available for delivery to DTC - E2�s X in New York,New York,on or about December ,2003. it,�'- UBS FINANCIAL SERVICES c O o Dated:December 2003 s° Preliminary,subject to change. ..`� •Preliminary,subject to change. a E a DOCSSF410700\22925.0009 DOCSSF410700\22925.0009 .,+awwr TRUCKEE DONNER PUBLIC UTILITIES DISTRICT Except where otherwise indicated,all information contained in this Official Statement has been provided BOARD OF DIRECTORS by TDPUD and the District. No dealer,broker,salesperson or other person has been authorized by TDPUD,the District,the Trustee or the Underwriter to give any information or to make any representations in connection with Joseph R.Aguera the offer or sale of the Bonds other than those contained herein and,if given or made,such other information or J.Ron Hemig representations must not he relied upon as having been authorized by TDPUD,the District,the Trustee or the James A.Maass Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor Patricia S.Sutton shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make Nelson Van Gundy such an offer,solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or Owners of the Bonds. Statements contained in this Official Statement which involve estimates,forecasts or matters of opinion,whether or DISTRICT STAFF not expressly so described herein,are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement: Peter L.Holzmeister,General Manager Stephen Hollabaugh,Assistant General Manager and Electric Utility Manager The Underwriter has reviewed the information in this Official Statement in accordance with,and as a part Raymond Edward Taylor,Water Utility Director of,its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this Mary Chapman,Administrative Services Manager and Treasurer transaction,but the Underwriter does not guarantee the accuracy of completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall,under any circumstances,create any BOND COUNSEL implication that there has been no change in the affairs of TDPUD,the District or any other parties described herein since the date hereof.All summaries of the Indenture or other documents are made subject to the provisions of such Stradling Yocca Carlson&Rauth,A Professional Corporation documents respectively and do not purport to be complete statements of any oral]of such provisions.Reference is Newport Beach,California hereby made to such documents on file with TDPUD for further information in connection therewith. Certain statements included or incorporated by reference in this Official Statement constitute"forward- looking statements"within the meaning of the United States Private Securities Litigation Reform Act of 1995, FINANCIAL ADVISOR TO THE DISTRICT Section 21E of the United States Securities Exchange Act of 1934,as amended,and Section 27A of the United States Securities Act of 1933,as amended.Such statements are generally identifiable by the terminology used such Fieldman Rolapp&Associates as"plan,""expect,""estimate,"`project,""budget"or other similar words. Such forward-looking statements Irvine,California include, but are not limited to,certain statements contained in the information under the captions"THE COMMUNITY FACILITIES DISTRICT"and"THE DEVELOPMENT AND PROPERTY OWNERSHIP." THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SPECIAL TAX CONSULTANT SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS,PERFORMANCE MuniFinancial OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, Temecula,California PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS, THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. IN CONNECTION WITH THE OFFERING OF THE BONDS,THE UNDERWRITER MAY REAL ESTATE APPRAISER OVERALLOT OR EFFECT TRANSACTIONS WHiCH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN Brown,Chudleigh,Schuler,Donaldson&Associates THE OPEN MARKET. SUCH STABILIZING,IF COMMENCED,MAY BE DISCONTINUED AT ANY Park City,Utah TIME. I THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,AS AMENDED,IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT.THE BONDS HAVE TRUSTEE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. BNY Western Trust Company San Francisco,California I DOCSSF410700\22925.0009 DOCSSF41070v6\22925.0009 i i S The District TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) Formation Proceedings. The District has been formed by the Truckee Donner Public Utility District SPECIAL TAX BONDS ("rDPUD")pursuant to the Act.The Act was enacted by the California legislature to provide an alternative method of financing certain public capital facilities and services,especially in developing areas of the State of California(the "State"). Any local agency(as defined in the Act)may establish a community facilities district to provide for and INTRODUCTION finance the cost of eligible public facilities and services. Generally,the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act,a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such This introduction is not a summary of this Official Statement.It is only a brief description of and guide to,and district to repay such indebtedness.The Board of Directors of TDPUD(the`Board of Directors")acts as the legislative is qualified by,more complete and detailed information contained in the entire Official Statement and the documents body of the District. summarized or described herein.A full review should be made of the entire Official Statement.The sale and delivery of Bonds(as defined below)to potential investors is made only by means of the entire Official Statement. All Pursuant to the Act,the Board of Directors adopted the necessary resolutions stating its intent to establish the capitalized terms used in this Official Statement and not defined shall have the meanings set forth in Appendix D- District,to authorize the levy of Special Taxes on taxable property within the boundaries of the District,and to have the "SUMMARY OF INDENTURE—Definitions." District incur bonded indebtedness. Following public hearings conducted pursuant to the provisions of the Act,the Board of Directors adopted resolutions establishing the District and calling special elections to submit the levy of the The purpose of this Official Statement,which includes the cover page,the table of contents and the attached Special Taxes and the incurring of bonded indebtedness to the qualified voters of the District.On October 14,2003,at appendices(collectively,the"Official Statement"),is to provide certain information concerning the issuance of the an election held pursuant to the Act,the landowners who comprised the qualified voters of the District,authorized the $ Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood) District to incur bonded indebtedness in the aggregate principal amount not to exceed$15,000,000 and approved the Special Tax Bonds(the"Bonds'. The proceeds of the Bonds will be used to construct and acquire various public rate and method of apportionment of the Special Taxes for the District to pay the principal of and interest on the bonds improvements needed with respect to the proposed development within Truckee Donner Public Utility District of the District which is set forth in Appendix A hereto(the"Rate and Method"). Community Facilities District No.03-1(Old Greenwood)(the"District"),to fund the Reserve Account securing the Bonds,to fund capitalized interest on the Bonds and to pay costs of issuance of the Bonds. The District.The District consists of approximately 616.2 gross acres and is located south of Interstate 80 in the eastern portion of the Town of Truckee,California(the"Town"). The District has an shape with mostly level The Bonds are authorized to be issued pursuant to Mello-Roos Community Facilities Act of 1982,as amended topography.The land in the District is fully entitled and subject to a Development Agreement,dated August 14,2002, (Sections 53311 St:Nji:of the Government Code of the State of California)(the"Act")and a Trust Indenture(the between the Developer(defined below)and the Town.The District is expected to be developed into a mountain resort "Indenture"),dated December 1,2003,by and between the District and BNY Western Trust Company(the"Trustee"). community consisting of 99 single family lots,74 fractional interest detached cabins, 72 fractional interest attached The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes(as defined herein)and all motleys cottages and four whole ownership log-home style cabins. On-site amenities are expected to include a Jack Nicklaus in the funds and accounts under the Indenture other than the Rebate Fund and the Administrative Expense Account. Signature Design 18-hole championship golf course and proshop as well as a recreation pavilion featuring swim,tennis and fitness facilities. The development in the District will be known as "Old Greenwood." See"THE Forward Looking Statements DEVELOPMENT AND PROPERTY OWNERSHIP—Development Plan." Certain statements included or incorporated by reference in this Official Statement constitute"forward-looking The Developer. The owner and master developer of the land in the District is Old Greenwood,LLC(the statements"within the meaning of the United States Private Securities Litigation Reform Act of 1995,Section 21 E of "Developer"),a land holding wholly-owned subsidiary of East West Resort Development V,L.P.,L.L.L.P.,a Delaware the United States Securities Exchange Act of 1934,as amended,and Section 27A of the United States Securities Act of limited partnership,limited liability limited partnership("EWRDV"). East West Partners,the appointed manager of 1933,as amended. Such statements are generally identifiable by the terrninology used such as"plan,""expect," EWRDV,has been responsible for the development of over$1 billion of residential and commercial real estate.Such "estimate,""project,""budget"or other similar words.Such forward-looking statements include,but are not limited to, development has included recreational communities in California and Colorado that are similar to the development certain statements contained in the information under the caption"THE COMMUNITY FACILITIES DISTRICT"and proposed in the District. East West Partners,through EWRDV and its subsidiaries,is currently developing several "THE DEVELOPMENT AND PROPERTY OWNERSHIP." projects in the vicinity of the District. The investor limited partner of the EWRDV is a subsidiary of Crescent Real Estate Equities Company,one of the largest publicly held Real Estate Investment Trusts in the United States. See THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH "THE DEVELOPMENT AND PROPERTY OWNERSHIP—The Developer." FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS,PERFORMANCE OR ACHIEVEMENTS Development Status. Other than six cul-de-sacs to serve the fractional interest cabins and cottages,all on-site DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,PERFORMANCE OR and off-site infrastructure improvements needed for development are complete. The remaining cul-de-sacs will be ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE built as needed to keep pace with development and will cost approximately$2.3 million according to Developer DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING estimates. All 99 single family lots are complete and 86 are in escrow for sale to individual owners,with escrows STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT, expected to close by the end of 2003.Construction has begun on the first 10 fractional interest detached cabins and the first 7 fractional interest attached cottages. Sales and marketing activity with respect to the cabins and cottages is expected to commence in January 2004 with first sales shortly thereafter. The golf course and recreation pavilion are expected to be open for use by July4,2004.See"THE DEVELOPMENT AND PROPERTY OWNERSHIP- Development Plan." Preliminary,subject to change. i 2 DOCSSF410700'22925.0009 1 DOCSSF41070v4Q2925.0009 III Appraisal. Brown,Chudleigh,Schuler,Donaldson and Associates,Park City,Utah(the"Appraiser"),has Description of the Bonds conducted an appraisal(the"Appraisal")of the land within the District and has concluded,based upon the assumptions and limiting conditions contained in the Appraisal,that,as of November 1,2003,the value of land within the District The Bonds will be issued and delivered as fully registered Bonds,registered in the name of Cede&Co.as that is subject to the Special Tax levy was$85,000,000.The Appraisal allocates$37 million of the total value to the 99 nominee of The Depository Trust Company,New York,New York("DTC"),and will be available to actual purchasers single family lots and four existing whole ownership log home-style cabins,and allocates the remaining$48 million to of the Bonds(the"Beneficial Owners")in the denominations of$5,000 or any integral multiple thereof,under the the fractional interests in the cabins and cottages. See"THE DEVELOPMENT AND PROPERTY OWNERSHIP- book-entry system maintained by DTC,only through brokers and dealers who are or act through DTC Participants as Appraisal"and APPENDIX B-"COMPLETE APPRAISAL." described herein.Beneficial Owners will not be entitled to receive physical delivery of the Bonds.In the event that the book-entry-only system described herein is no longer used with respect to the Bonds,the Bonds will be registered and Sources of Payment for the Bonds transferred in accordance with the Indenture.See"THE BONDS—Book-Entry-Only System"herein. Net Taxes.Under the Indenture,the District has pledged to repay the Bonds from the Net Taxes and amounts Principal of,premium,if any,and interest on the Bonds is payable by the Trustee to DTC. Disbursement of on deposit in the certain funds and accounts established under the Indenture other than the Rebate Fund and the such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Administrative Expense Account. Owners is the responsibility of DTC Participants. In the event that the book-entry-only system is no longer used with respect to the Bonds,the Beneficial Owners will become the registered owners of the Bonds and will be paid principal The Net Taxes are the primary security for the repayment of the Bonds.In the event that the Net Taxes are not and interest by the Trustee,all as described herein.See"THE BONDS—Book-Entry-Only System"herein. paid when due,the only sources of funds available to pay the debt service on the Bonds are certain amounts held by the Trustee,including amounts held in the Reserve Fund.See"SOURCES OF PAYMENT FOR THE BONDS—Reserve The Bonds are subject to optional redemption,extraordinary mandatory redemption and mandatory sinking Fund." fund redemption as described herein. For a more complete descriptions of the Bonds and the basic documentation pursuant to which they are being sold and delivered,see"THE BONDS"and APPENDIX D-"SUMMARY OF Net Taxes are derived from the payment of annual Special Taxes that are levied in accordance with the Rate INDENTURE"herein. and Method. Pursuant to the Rate and Method,only residential parcels in the District are subject to the Special Tax levy.Therefore,the golf course and other amenity facilities in the District will not be subject to the Special Tax levy. Tax Matters See"APPENDIX A-RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." In the opinion of Stradling Yocca Carlson&Rauth,a Professional Corporation,Newport Beach,California Foreclosure Proceeds. The District has covenanted for the benefit of the owners of the Bonds that it(i)will ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming certain continence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate representations and compliance with certain covenants and requirements described herein,interest(and original issue delinquent Special Taxes on such parcels is greater than S7,500 by the October 1 following the close of each Fiscal discount)on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax Year in which such Special Taxes were due and(ii)will commence judicial foreclosure proceedings against all parcels preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations.In with delinquent Special Taxes by the October 1 following the close of each Fiscal Year in which it receives Special the further opinion of Bond Counsel,interest(and original issue discount)on the Bonds is exempt from State of Taxes in an amount which is less than 95%of the total Special Tax levied for such Fiscal Year,and(iii)will diligently California personal income tax.See"TAX MATTERS"herein. pursue such foreclosure proceedings until the delinquent Special Taxes are paid;provided that,notwithstanding the foregoing,the District may elect to defer foreclosure proceedings on any parcel which is owned by a delinquent Set forth in APPENDIX G is the form of opinion of Bond Counsel expected to be delivered in connection with property owner whose property is not,in the aggregate,delinquent in the payment of Special Taxes for a period of three the issuance of the Bonds. For a more complete discussion of such opinion and certain tax consequences incident to years or more or in an amount in excess of$12,000 so long as(1)the amount in the Reserve Account of the Special the ownership of the Bonds,see"TAX MATTERS"herein. Tax Fund is at least equal to the Reserve Requirement,and(2)the District is not in default in the payment of the principal of or interest on the Bonds.The District may,but shall not be obligated to,advance funds from any source of Professionals Involved in the Offering legally available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement or to avoid a default in payment on the Bonds. See"SOURCES OF PAYMENT FOR THE BONDS—Proceeds of UBS Financial Services is the Underwriter of the Bonds. BNY Western Trust Company,San Francisco, Foreclosure Sales"herein." There is no assurance that the property within the District can be sold for the appraised California,will act as Trustee under the Indenture.All proceedings in connection with the issuance and delivery of the value or assessed values described herein,or for a price sufficient to pay the principal of and interest on the Bonds in Bonds are subject to the approval of Bond Counsel. Fieldman Rolapp&Associates is acting as Financial Advisor to the event of a default in payment of Special Taxes by the current or future landowners within the District. See TDPUD in connection with the Bonds.Certain legal matters will be passed on for TDPUD and the District by Dennis "SPECIAL RISK FACTORS—Land Values"and APPENDIX B-"COMPLETE APPRAISAL"herein. W.De Cuir,A Law Corporation,Roseville,California,for the Developer by its counsel,Hefner,Stark&Marois LLP, .00-1 Sacramento,California,and for the Underwriter by its counsel Nossaman,Guthner,Knox&Elliot LLP,Irvine, EXCEPT FOR THE SPECIAL TAXES,NO OTHER TAXES ARE PLEDGED TO THE PAYMENT California("Underwriter's Counsel"). Other professional services have been performed by MuniFinancial,Temecula, IE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF TDPUD NOR California,as Special Tax Consultant,and Brown,Chudleigh,Schuler,Donaldson&Associates,Park City,Utah,as sRAL OBLIGATIONS OF THE DISTRICT,BUT ARE SPECIAL OBLIGATIONS OF THE DISTRICT Appraiser. PAYABLE SOLELY FROM NET TAXES AND AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. For information concerning the respects in which certain of the above-mentioned professionals,advisors, counsel and agents may have a financial or other interest in the offering of the Bonds,see"FINANCLAL INTERESTS" herein. 3 4 DOCSSF41070v612925.0009 DOCCSSF41070v6212925.0009 ' w,.iru..um...ww.,.<,wF.,W...,....a�....u, µ.,x.-�.d..w,.. ....._...... .... DTC is a limited-purpose trust company organized under the New York Banking law,a"banking Principal of and interest on the Bonds will be made to DTC(or such other nominee as may be requested by an organization"within the meaning of the New York Banking Law,a member of the Federal Reserve System,a"clearing authorized representative of DTC). DTC's practice is to credit Direct Participants'accounts upon DTC's receipt of • corporation"within the meaning of the New York Uniform Commercial Code,and a"clearing agency"registered funds and corresponding detail information from the District or the Trustee on the date in accordance with their pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by participants("Direct Participants")deposit with DTC.DTC also facilitates the settlement among Direct Participants of standing instructions and customary practices,as is the case with securities held for the accounts of customers in bearer securities transactions,such as transfers and pledges,in deposited securities through electronic computerized book- form or registered in"street name,"and will be the responsibility of such Participant and not of DTC,the Trustee,or elow'`anges in Direct Participants'accounts,thereby eliminating the need for physical movement of securities the District,subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of %. Direct Participants include securities brokers and dealers,banks,trust companies,clearing corporations, principal and interest to Cede&Co.(or such other nominee as may be requested by an authorized representative of a air other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock DTC)is the responsibility of the District or the Trustee,disbursement of such payments to Direct Participants shall be Exchange,Inc.,the American Stock Exchange,Inc.,and the National Association of Securities Dealers,Inc.Access to the responsibility of DTC,and disbursement of such payments to the Beneficial Owners shall be the responsibility of the DTC system is also available to others such as securities brokers and dealers,banks,and trust companies that clear Direct and Indirect Participants. through or maintain a custodial relationship with a Direct Participant,either directly or indirectly("Indirect Participants").The Rules applicable to DTC and its Direct and Indirect Participants are on file with the Securities and DTC may discontinue providing its services or securities depository with respect to the Bonds at any time by Exchange Commission. giving reasonable notice to the District or the Trustee. Under such circumstances,in the event that a successor securities depository is not obtained,Bonds are required to be printed and delivered. Purchases of Bonds under the DTC system must be made by or through Direct Participants,which will receive credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond(`Beneficial The District may decide to discontinue use of the system of book-entry transfers through DTC(or a successor Owner")is in turn to be recorded on the Direct and Indirect Participants'records.Beneficial Owners will not receive securities depository).In that event,Bonds will be printed and delivered and will be governed by the provisions of the written confirmation from DTC of their purchase,but Beneficial Owners are expected to receive written confirmations Indenture with respect to payment of principal and interest and rights of exchange and transfer. providing details of the transaction,as well as periodic statements of their holdings,from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the The District cannot and does not give any assurances that DTC participants or others will distribute payments Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of with respect to the Bonds received by DTC or its nominee as the registered Owner,or any redemption or other notices, Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, to the Beneficial Owners,or that they will do so on a timely basis,or that DTC will service and act in the manner except in the event that use of the book-entry system for the Bonds is discontinued. described in this Official Statement. To facilitate subsequent transfers,all Bonds deposited by Direct Participants with DTC are registered in the The information in this section concerning DTC and DTC's book-entry system has been obtained from sources name of DTC's partnership nominee,Cede&Co.or such other name as may be requested by an authorized that the District believes to be reliable,but the District takes no responsibility for the accuracy thereof representative of DTC.The deposit of Bonds with DTC and their registration in the name of Cede&Co.or such other nominee do not effect any change in beneficial ownership.DTC has no knowledge of the actual Beneficial Owners of In the event that the book-entry system described above is no longer used with respect to the Bonds,the the Bonds;DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are principal of the Bonds is payable upon surrender thereof at the corporate trust office of the Trustee. Interest on the credited,which may or may not be the Beneficial Owners.The Direct or Indirect Participants will remain responsible Bonds is payable on each Interest Payment Date to the registered owner thereof as of the close of business on the for keeping account of their holdings on behalf of their customers. Record Date immediately preceding each Interest Payment Date,such interest to be paid by check of the Trustee, mailed by first-class mail to the registered owner at his address as it appears on the Register(or at such other address as Conveyance of notices and other communications by DTC to Direct Participants,by Direct Participants to is famished to the Trustee in writing by the registered owner). A registered owner of$1,000,000 or more in principal Indirect Participants,and by Direct Participants and Indirect Participants to Beneficial'Owners will be governed by amount of Bonds may be paid interest by wire transfer in immediately available funds to an account in the United arrangements among them,subject to any statutory or regulatory requirements as may be in effect from time to time. States if the registered owner makes a written request of the Trustee no later than the applicable Record Date. The Beneficial Owners of Bonds may wish to take certain steps to augment transmission to them of notices of significant principal of and interest on the Bonds shall be payable in lawful money of the United States of America. events with respect to the Bonds,such as redemptions,tenders,defaults,and proposed amendments to the security documents.Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners,or in the alternative,Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Redemption notices shall be sent to Cede&Co. If less than all of the Bonds within a maturity are being redeemed,DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede&Co.(nor such other DTC nominee)will consent or vote with respect to the Bonds. Under its usual procedures,DTC mails an Omnibus Proxy to the District as soon as possible after the record date.The Omnibus Proxy assigns Cede&Co.'s consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). 9 10 DOCSSFA 107N6\22925.0009 DOCSSF41070v6-12925.0009 Debt Service Schedule for the Bonds* SOURCES OF PAYMENT FOR THE BONDS Period Ending General Provisions (September 1) Principal Interest Debt Service Pursuant to the Indenture,the Bonds are equally secured by a first pledge of the Net Taxes and by other amounts held in the Special Tax Fund other than the Administrative Expense Account. "Net Taxes"means,for each Fiscal Year,Gross Taxes(exclusive of any penalties and interest accruing with respect to delinquent Special Tax installments)minus amounts(not in excess of the currant Administrative Expense Cap)set aside to pay Administrative Expenses and minus the portion of any prepayment of Special Taxes not required to be deposited in the Special Tax Fund pursuant to the Indenture. "Gross Taxes"means the amount of all Special Taxes received by the District,together with the proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture for the delinquency of Special Taxes remaining after the payment of all the costs related to such foreclosure actions,including,but not limited to,all legal fees and expenses,court costs,consultant and title insurance fees and expenses. "Special Taxes"means the taxes authorized to be levied by the District in accordance with the Rate and Method,as the Rate and Method may be amended from time to time. "Administrative Expense Cap"means the amount$25,000,with such amount escalating by 2%per Bond Year beginning September 2,2004,provided that the District may,in its sole discretion,fund Administrative Expenses, without limitation,from any other funds available to the District,including the Surplus Fund. Special Taxes The Special Tax is exempt from the tax rate limitations of California Constitution Article XIIIA because, pursuant to Section 4 of Article XIIIA,the Special Tax was authorized by a two-thirds vote of the qualified electors of the Community Facilities District.Consequently,the District has the power and is obligated,pursuant to the covenants contained in the Indenture,to assure the levy of the Special Tax,including without limitation,the enforcement of delinquent Special Taxes.The Special Tax thus levied and collected will be used to pay the principal of and interest on the Bonds and the Administrative Expenses due or coming due and to replenish the Reserve Account,if necessary. Because the Special Tax levy is limited to the maximum rates set forth in the Rate and Method,no TOTALS assurance can be given that,in the event of Special Tax delinquencies,the receipts of the Special Tax will,in fact,be in sufficient amounts in any given year to pay debt service on the Bonds and all other obligations of the *Preliminary,subject to change. District. The Board of Directors,as legislative body of the District,shall fix and levy the Special Tax in an amount sufficient,together with other amounts on deposit in the Special Tax Fund,to pay(a)the principal(including Sinking Fund Payments)of and interest on the Bonds when due,(b)to the extent permitted by law,the Administrative Expenses,and(c)any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve Requirement.See"APPENDIX A—RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The Special Tax shall be payable and be collected in the same manner and at the same time and in the same installments as the general taxes on real property are payable,and have the same priority,become delinquent at the same time and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the ad valorem taxes on real property.However,the Board of Directors may,by resolution,provide for any other appropriate method of collection of the Special Tax,including direct billing to property owners. Although the Special Tax will constitute a lien on the taxed parcels of land within the District,the Special Tax does not constitute a personal indebtedness of the owners of property within the District.There is 11 12 DOCSSF\410701,6\22925.0009 DOCSSF\4107016\22925.0009 THE COMMUNITY FACILITIES DISTRICT General Description of the District The District consists of approximately 616.2 gross acres located south of Interstate 80 in the eastern portion of the Town of Truckee,California.The District has an irregular shape with mostly level topography. Description of Authorized Facilities The facilities authorized to be acquired by the District with the proceeds of the Bonds consist of various public improvements described in Table 1 below. These facilities represent certain of the public improvements needed to complete the planned development within the District.The Town is requiring that certain of these facilities be installed as a condition of development.Other than six cul-de-sacs,all public improvements to be financed with proceeds of the Bonds are complete. TABLE [DISTRICT MAP] ESTIMATED COSTS OF PUBLIC IMPROVEMENTS TO BE FINANCED BY THE DISTRICT Portion to be Paid Public Improvement Total Cost with Bond Proceeds Water facilities"l $4,991,000 $4,234,000 Electric facilities 2,937,000 2,472,000 Fiber"' 615,000 362,000 Roadways 3,857,000 2,000,000 Storm drain facilities 1,534,000 757,000 Other costs"' 200.000 200,000 $14,134,000 $10,025,000 Source:The District ...Water facilities include payment for water source distribution system which may include-facilities outside the District. i2t Incls fiber optic cables and conduits. (3) Incl es costs of forming the District. Taxpayers Currently,all land in the District is owned by the Developer. However,86 of the 99 single family lots are in escrow for sale to individual owners and such escrows are expected to close by the end of 2003. The initial Special Tax levy in fiscal year 2004-05 is expected to total$616,936. Assuming the 86 single family lots close escrow as described above,the Developer would be responsible for$358,936 of the fiscal year 2004-05 Special Tax levy,or 58.18%of the total,while individual owners would collectively be responsible for$258,000,or 41.82%of the total. Prior to the actual levy of the fiscal year 2004-05 Special Tax,the Developer expects to have sold more single family lots and completed initial sales of fractional interests in the cabins and cottages in the District. individual owners would thereby be allocated a higher percentage of the total Special Tax levy. For example,if absorption occurs according to the schedule set forth in the Appraisal,by the time the fiscal year 2004-05 Special Tax is levied,all single family lots will have sold and 13 fractional interest cabins or cottages will have sold. In such a case the Developer would be responsible for$227,336'of the fiscal year 2004-05 Special Tax levy,or 44.95%of the total,while individual owners would be collectively responsible for$339,600 or 55.05%of the total. There can be no guarantee,however, that all 86 single family lots currently subject to sales contracts will close escrow or that additional sales will occur as projected in the Appraisal. 17 18 DOCSSF141070v6122925.0009 DOCSSF41070v6,22925.0009 w�rt+w Estimated Direct and Overlapping Indebtedness Expected Tax Burden Within the District's boundaries are numerous overlapping local agencies providing public services.Some of Table 3 below sets forth an estimated property tax bill for a typical single family non-fractional interest home these local agencies have outstanding bonds which are secured by taxes and assessments on the parcels within the in the District and a typical fractional interest cabin or cottage in the District. With respect to the fractional interest District and others have authorized but unissued bonds which,if issued,will be secured by taxes and assessments cabins and cottages,the total annual Special Tax levy for any individual unit will be allocated among the fractional levied on parcels within the District.The approximate amount of the direct and overlapping debt secured by such taxes owners of such unit in the planner described under"THE DEVELOPMENT AND PROPERTY OWNERSHIP— and assessment on the parcels within the District for fiscal year 2003-04 is shown in Table 2 below(the"Debt Development Plan—Fractional Interest Cabins and Cottages." Report").The Debt Report has been derived from data assembled and reported to the District by California Municipal Statistics,Inc.. Neither the District,TDPUD nor the Underwriter has independently verified the information in the TABLE 3 Debt Report or guarantees its completeness or accuracy. SAMPLE PROPERTY TAX BILL TABLE 2 PROJECTED FOR FISCAL YEAR 2004-2005 DIRECT AND OVERLAPPING LAND SECURED DEBT Single Family Non-Fradional Fractional interest 2003-041 peal Secured Assessed Valuation:$14,724,689 Inferesi Homes Cabins and Cottages DBtECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Aoolicable" Debt 930/03 Estimated Assessed ValuationSale Price I�� S1,200,000 $1,200,000 Tahoe-Tmekee Joint Unified School District 0.161% $20,021 Ad Valorem Basis $1,200,000 $1,200,000131 Tahoe-Truckee Joint Unified School District School Facilities Improvement District No.1 0.332 70,002 Truckee Donner Public Utility District Commuany Facilities District No.03-1(Old Greenwood) 100. !r' TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT S90,023 Ad Valorem Property Taxes t-1 Base Property Tax Rate $12,000 $12,000 OVERLAPPING GENERAL FUND OBLIGATION DEBT: Unified School District A or Elementary School Lease 62 62 Nevada County Certificates of Panicipation 0.149% $29,688 Unified School District B or High School Bond 44 44 Nevada County Superintendent of Schools Certificates of Participation 0.149 454 Tahoe Truckee 1998 A(School)or Hospital 26 26 Sierra Joint Community College District Certificates of Participation 0.033 1,516 Tahce Truckee Unified School District 91 91 Tahoe-Truckee Joint Unified School District Certificates of Participation 0.166 21,857 Tahoe Truckee R.Unified SFID#1,2001 283 283 Town of Truckee General Fund Obligations 0.546 32,787 Subtotal Ad Valorem Taxes $12,508 $12,508 Truckee Donner Public Utility District Certificates of Participation -0.567 10,603 TOTAL OVERLAPPING GENERAL FUND OBLIGATION DEBT S%.905 Special Taxes,Assessments,and Charges COMBINED TOTAL DEBT S186,928"' Truckee Recreation-Pool-Voter Approved-Parcel Charge 32 32 Tahoe/Truckee Joint Unified Tax Voter Approved-Parcel Charge 80 80 Ratios la 2003-04 Assessed Valuation: The District 3�00 33.400 Direct Debt_..._........_._..._.._..........._........_..._.._..._.__..._.._.........._.._.. -% - Subtotal Special Taxes&Assessments $3,112 $3,512 Total Direct Combined Total Debt.................................................................._.................I.27% Total $15,620 $16,020 tat STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/03:$0 Total Effective Tax Rate 1.30% 1.33% Based on 2002-03 ratios Based on average sales price of units in the District provided by the Developer- '" Excludes Bonds to be soli '''Based on 2003-04 rates. 131 Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and tar allocation bonds and iron-bonded capital lease obligations. "'Represents sales pace of entire unit,not price of individual fractional interest in a unit. Source:California Municipal Statistics,Inc. - '°'Total levy will be allocated among the individual fractional interest owners,all as described under"THE DEVELOPMENT AND PROPERTY OWNERSHIP—Development Plan—Fractional Interest Cabins and Cottages." Sources: MuniFinancial. 19 20 DOCSSF410700',22925.0009 DOCSS17,41070v6\22925.0009 sales revenue of approximately$26,600,000. Marketing activities are ongoing with respect to the remaining Cottages,all on-site and off-site infrastructure improvements needed for developnnent are complete. The 13 Lots.The Developer expects to sell all remaining Lots by March 2004. i remaining cul-de-sacs will be built as needed to keep pace with development and will cost approximately$2.3 million according to Developer estimates. Pursuant to the Rate and Method,the Lots will be subject to the levy of Special Taxes. Marketing efforts with respect to the Cabins and Cottages is expected to commence in January 2004. Fractional Interest Cabins and Cottages. The Developer plans to build 74 detached cabins(the The Developer expects to complete initial sales of fractional interests in the Cabins and Cottages in 2004 and "Cabins")and 72 attached cottages(the"Cottages")in the District.instead of selling each Cabin or Cottage to complete sales in 2011. "�'"vidual owners,upon completion,each Cabin and Cottage will be transferred to a homeowners association. homeowners association will,in turn,sell 17 fractional ownership interests in each Cabin and Cottage to Pursuant to the Rate and Method,the Cabins and Cottages will be subject to the levy of Special Taxes. .vidual owners.The resulting 1/1 7th interest will entitle such owner to 21 days occupancy in the applicable The homeowners association,as the owner of record for each Cabin and Cottage,will receive the Special Tax Cabin or Cottage. Of such 21 days,one week will be"permanent week." Permanent weeks of various bill from the County and bill each fractional interest owner for such owner's share of the total Special Tax fractional owners will never be scheduled as consecutive weeks. The remaining 14 days to which each levy. The homeowners association will then satisfy the Special Tax levy from amounts received from the fractional owner is entitled will be available on a first come first served basis and need not be used in week individual fractional interest owners. If any fractional interest owner fails to remit payment,the homeowners blocks. Additionally,as part of the sales price of each fractional interest,a fractional owner will have association will be under no obligation to pay such owner's portion of the Special Tax. In such a membership privileges in the Tahoe Mountain Club,as described below under"—Tahoe Mountain Club." circumstance,the homeowners association may use reserves to pay the delinquent amounts and may subsequently foreclose on the delinquent owner's fractional interest. The Cabins and Cottages will be a mix of 2,3 and 4-bedroom units with a variety of amenities. Descriptions of the Cabins and Cottages along with estimated fractional interest prices are set forth in Table 5 Log Cabin-Stile Homes. Four partially completed log home-style cabins were included in the below. Developer's original purchase of the land in the District(the"Existing Cabins"). The Developer has since completed the Existing Cabins and plans to sell them to an entity related to East West Partners by the end of TABLE 5 the year. Although long-term plans for the four Existing Cabins are tentative,East West Partners does not expect to resell the Existing Cabins in the near future. The Existing Cabins are located away from the other DESCRIPTION OF FRACTIONAL INTEREST CABINS AND COTTAGES developing areas within the District. Pursuant to the Rate and Method,the Existing Cabins will be subject to the levy of Special Taxes. 2 Bedroom 3 Bedroom Cottage 3 Bedroom Cabin 4 Bedroom Cabin Cottage Golf Course and Other Recreational Amenities. Old Greenwood will feature the only Jack Nicklaus Square Footage 1,250 1,750 2,500 3,000 Signature Design 18-hole golf course in the Lake Tahoe area(the"Golf Course").The Golf Course will be a Bed/Bath 2/2.5 313.5 3/3.5 4/4.5 full championship course with a length Sleeps 6 8 8 12 P P of over 7,500 yards. The Developer expects the Golf Course to be Garage 1 Car 2 Car 2 Car 2 Car open for play annually in the months of May through October depending on snow and other weather Pool Table No No Yes Yes conditions.The Golf Course will include 12,500 square feet for pro shop/club houselcart bam facilities,a golf Hot Tub No No Yes Yes academy with an associated teaching facility,a short game practice area and a double-ended driving range. Currently,half of the holes are complete and fully-grassed,with the exception of the putting greens.The other Finishes holes are in various stages of development All the major water features of the Golf Course are complete.The Entry Slate Slate Slate Slate foundation for the proshop has been poured and walls are estimated by the Developer to be half complete.The Floors Carpet Carpet Hickory Hickory Developer expects the Golf Course to open for play by July 4,2004. Kitchen Granite Tile Granite Tile Granite Slab Granite Slab Electronics Standard Standard Plasma/Surround Plasma/Surround Old Greenwood will also feature an 18,000 square foot recreation pavilion featuring swim facilities, Bathrooms tennis courts and fitness equipment(the"Pavilion"), The Pavilion is flamed with roof trusses in place. The Master 5 Piece 5 Piece 5 Piecerroilet Room 5 Piece/Toilet Room Developer expects the Pavilion to be open for use by July 4,2004. Bath#2 3 Piece 5 Piece 3 Piece 4 Piece Bath#3 n/a 3 Piece 3 Piece 3 Piece Other on-site amenities at Old Greenwood are expected to include maintained nature trails and a fly Bath#4 n/a n/a .. n/a Bath 4-3 Piece fishing instruction and practice area. Powder 2 Piece 2 Piece 2 Piece 2 Piece Average Fractional Share $66,175 $92,647 $132,353 $158,824 As described below under"—Tahoe Mountain Club,"all fractional interest owners in Old Price 1/17' Greenwood will be members of the Tahoe Mountain Club. Additionally,owners of Lots will be given the Average Unit Price $1,125,000 $1,575,000 '$2,250,000 $2,700,000 option to purchase membership. Members will have access to priority tee times at the Golf Course and have full use of the Pavilion and other on-site amenities at Old Greenwood. Source:Developer. According to the Rate and Method,Special Taxes will not be levied on nonresidential parcels. Construction has commenced on 10 Cabins and 7 Cottages.Foundations,utilities and earthwork have Therefore,the Golf Course,the Pavilion and the other recreational amenities at Old Greenwood described been completed on all 10 Cabins. Roofing and paving work are underway.The first Cabin is expected to be under this sub-caption will not be subject to the levy of Special Taxes. completed in May 2004. Foundations for the 7 Cottages have been poured and utility stubs are in place.The first Cottage is expected to be completed in June 2004, Other than six cul-de-sacs to serve the Cabins and 25 26 DOCSSF4107W6\22925.0009 DOCSSF410700\22925.0009 ti C r 8 N v1 O O V1 V N ' M 00 ,b„C, OON 00 O O�V V,N MSC lD OOo t` N 0 E C+O�O_ M N NQ`�TN O RD r O Tahoe Mountain Club.East West Partners has created a private club membership concept for a family of resort properties and amenities located in the vicinity of the District. The club is referred to as the Tahoe Mountain Club.A separate ownership entity of EWRDV,Tahoe Club Company,LLC,funds the development of and operates the amenities for Tahoe Mountain Club. The benefits of the Tahoe Mountain Club are considered by the Developer to be a key marketing tool r v v a in the sales of product at Old Greenwood. Membership in the Tahoe Mountain Club is included with the purchase of fractional interests in Cabins or Cottages but must be purchased separately by the owners of Lots. Facilities offered to members of the Tahoe Mountain Club are located both on-site at Old Greenwood and off- p N N O � CnO V'ct O\v 00 site.All club facilities are in the vicinity of Old Greenwood.On-site privileges at Old Greenwood include:(i) N a = ^ = E special privileges at the Golf Course,including priority tee times,(ii)private access to the Pavilion,(ili)access to the golf academy,short game area and driving range located at the Golf Course,and(iv)access to fly fishing instruction and practice area. Off-site privileges include:(i)special privileges at the existing 18-hole ^ e o o Y ry S Coyote Moon Golf Course in the Town,including priority tee times,(ii)preferred reservations at the Wild o : Ili V' r+o— Goose Restaurant located on the north shore of Lake Tahoe,(iii)valet ski storage and member privileges in the ro - Alpine Club at the Village-at-Northstar,and(iv)access to Schaffer's Camp,a members-only,on-mountain restaurant at the Northstar-at-Tahoe ski resort estimated to be completed in 2005. .° The amenities on-site within Old Greenwood(such as the Golf Course and the Pavilion)will be available to members of the Tahoe Mountain Club who have purchased property outside of the District in other related projects.Thus,a portion of the costs associated with construction of such amenities will be shared by w -g y a the other projects,all as described under"—Finance Plan."In particular,when complete,the land underlying N c N h a @° the Golf Course,the Pavilion and the other on-site amenities at Old Greenwood will be transferred to the Tahoe Mountain Club for a price of$5 million. The appraised value set forth in the Appraisal assumes such payment will be made by June 2004,as described under"—Appraisal." Finance Plan. The full development of the property within the District requires the expenditure ofc000 substantial amounts. Table 6 below has been provided by the Developer to indicate its present projection of the sources and uses associated with the development of the District. There can be no assurance that the F y Vv� va— N� G c y 5L Developer will have timely access to the sources of funds(as shown in Table 6 below)which will be necessary y v to complete the proposed development. There can also be no assurance that there will be no substantial e ;z changes in the sources and uses of funds shown below.Table 6 reflects the Developer's current projections of g P e P I 0 MO O M d a O�N�O N N� N O G 2 C m costs associated with developing the property within the District. Many factors beyond the Developer's 1 0 _oc o r v v o.s control,or a decision by the Developer to alter its current plans,may cause the Developer's actual sources and uses of funds to differ from the projections in Table 6. Table 6 is presented to show that expected revenues w - = c make the development proposed feasible and not to guarantee a particular cash flow to the Developer. o a F����,g — _n'.°c 3 r F" 70 33�� Cz-1 m >CD c > F O J> L° C ? C 0 F E E E 0 v T O 9?gig�3 QQ iy y S .E U c W ar u c �'• a c A-'ct v �` .sHC m3 rr O Eye.= ,_ � N W x Q.�U c€ out c•� U v: =c u_ o=nm� .? Q G E y c'�d O O ¢=x1= G 27 zmt o E U a nC a`u 7�n`UC F z c__- _=v DOCSSF41070v6\.2925.0009 reduction in land values increases the likelihood that in the event of a delinquency in payment of Special Taxes Hazardous Substances a foreclosure action will result in inadequate funds to repay the Bonds when due. One of the most serious risks in terms of the potential reduction in the value of a parcel is a claim with Completion of construction of any proposed structures on the vacant land within the District is subject regard to a hazardous substance. In general,the owners and operators of a parcel may be required by law to to the receipt of approvals from a number of public agencies concerning the layout and design of such remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The structures,land use,health and safety requirements and other matters.The failure to obtain any such approval Federal Comprehensive Environmental Response,Compensation and Liability Act of 1980,sometimes ' td adversely affect the planned development of such land. The Development Agreement,however,vests referred to as"CERCLA"or the"Superfund Act,"is the most well-known and widely applicable of these laws, in development rights on the Developer and restricts the Town from modifying development approvals, but California laws with regard to hazardous substances are also stringent and similar. Under many of these as described under "THE DEVELOPMENT AND PROPERTY OWNERSHIP — Development laws,the owner or operator is obligated to remedy a hazardous substance condition of property whether or not Agreement." the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore,should any of the taxed parcels be affected by a hazardous substance,is to reduce the marketability Under current State law,it is generally accepted that proposed development is not exempt from future and value of the parcel by the costs of remedying'the condition,because the purchaser,upon becoming owner, land use regulations until building permits have been issued and substantial work has been performed and will become obligated to remedy the condition just as is the seller. substantial liabilities have been incurred in good faith reliance on the permits.Because future development of vacant property in the District could occur over many years,if at all,the application of future land use Further,it is possible that liabilities may arise in the future with respect to any of the parcels resulting regulations to the development of the vacant land could cause significant delays and cost increases not from the existence,currently,on the parcel of a substance presently classified as hazardous but which has not currently anticipated,thereby reducing the development potential of the vacant property and the ability or been released or the release of which is not presently threatened,or may arise in the future resulting from the willingness of,owners of such land to pay Special Taxes when due or causing land values of such land within existence,currently on the parcel of a substance not presently classified as hazardous but which may in the the District to decrease substantially from those in the Appraisal. future be so classified. Further,such liabilities may arise not simply from the existence of A hazardous substance but from the method of handling it.All of these possibilities could significantly affect the value of a Endangered Species parcel that is realizable upon a delinquency. The Developer is not aware of any threatened or endangered species on property in or adjacent to the Neither TDPUD nor the Developer has knowledge of any hazardous substances being located on the District. Any action by the State or federal governments to protect species located on or adjacent to the property within the District. The Assessment discussed under`THE DEVELOPMENT AND PROPERTY property within the District could negatively impact the ability of the owners of that land to complete OWNERSHIP—Environmental Compliance"revealed no evidence that incidents involving hazardous or development.This,in turn,could reduce the likelihood of timely payment of the Special Taxes levied against potentially hazardous materials have impacted the District. such that land and would likely reduce the value of such land and the potential revenues available at the foreclosure sale for delinquent Special Taxes.See"—Failure to Develop Land"above. Parity Taxes and Special Assessments Natural Disasters Property within the District is subject to the lien of several overlapping public agencies. See`THE COMMUNITY FACILITIES DISTRICT—Estimated Direct and Overlapping Indebtedness." The District,like all California communities,may be subject to unpredictable seismic activity,fires, flood,or other natural disasters.In the event of a severe earthquake,fire,flood or other natural disaster,there The Special Taxes and any penalties thereon will constitute a lien against the lots and parcels of land may be significant damage to both property and infrastructure in the District. on which they will be annually imposed until they are paid.Such lien is on a parity with all special taxes and special assessments levied by TDPUD and other agencies and is co-equal to and independent of the lien for The EIR references several faults in the vicinity of the District,including the Dog Valley Fault which general property taxes regardless of when they are imposed upon the same property.The Special Taxes have was the source of an earthquake in 1966 measuring 6+on the Richter scale. However,according to the EIR, priority over all existing and future private liens imposed on the property except,possibly,for liens or security no faults in the area have been designated as Alquist-Priolo Special Study Zones,a designation used by the interests held by the Federal Deposit Insurance Corporation.See"—Bankruptcy and Foreclosure"below. State to identify significant hazard zones along faults.The EIR also states that a geotechnical report issued in 1988 concluded that the most likely seismic hazard on the site of Old Greenwood is ground shaking,with other Neither TDPUD nor the District has control over the ability of other public agencies and hazards such as lateral spreading,lurch cracking and liquefaction unlikely. districts to issue indebtedness secured by special taxes or assessments payable from all or a portion of the property within the District. In addition,the landowners within the District may,without the The Developer has implemented an extensive Timber Harvest Management Plan as well as defensible consent or knowledge of TDPUD,petition other public agencies to issue public indebtedness secured by space and fire prevention measures(also called a shaded fuel break)to lessen the possibility of a fire jumping special taxes or assessments.Any such special taxes or assessments may have a lien on such property on to or from the development in Old Greenwood. a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for property within the District described herein. A natural disaster could result in a substantial portion of the property owners being unable or unwilling to pay the Special Taxes when due.In addition,the value of land in the District could be diminished Disclosures to Future Purchasers in the aftermath of such a natural disaster,reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. The willingness or ability of an owner of a parcel to pay the Special Tax even if the value of the parcel is sufficient may be affected by whether or.not the owner was given due notice of the Special Taxes at the time the owner purchased the parcel,was informed of the amount of the Special Tax on the parcel should the 33 34 DOCSSF410700\22925.0009 DOCSSF41070v6\22925.0009 Special Tax be levied at the maximum tax rate and the risk of such a levy and,at the time of such a levy,has of more than 2%per fiscal year.No assurance can be given that a parcel could actually be sold for its assessed the ability to pay it as well as pay other expenses and obligations.TDPUD has caused a notice of the Special value. Tax lien to be recorded in the Office of the Recorder for the County against each parcel.While title companies normally refer to such notices in title reports,there can be no guarantee that such reference will be made or,if The Appraiser has estimated,on the basis of certain definitions,assumptions and limiting conditions made,that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a contained in the Appraisal,that as of November 1,2003 the value of the land Nithin the District was property within the District or lending of money thereon. $85,000,000. The Appraisal is based on the assumptions as stated in APPENDIX B—"COMPLETE APPRAISAL."The Appraisal does not reflect any possible negative impact which could occur by reason of The Act requires the subdivider(or its agent or representative)of a subdivision to notify a prospective future slow or no growth voter initiatives,any potential limitations on development occurring due to time purchaser or long-term lessor of any lot,parcel,or unit subject to a Mello-Roos special tax of the existence and delays,the presence of hazardous substances within the District,the listing of endangered species or the maximum amount of such special tax using a statutorily prescribed form. California Civil Code determination that habitat for endangered or threatened species exists within the District,or other similar Section I IO2.6b requires that in the case of transfers other than those covered by the above requirement,the situations. The Appraiser has conditioned the Appraisal on the specific condition that there are no seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a environmental issues which would slow or thwart development of the District. format prescribed by statute. Failure by an owner of the property to comply with the above requirements,or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax,could Prospective purchasers of the Bonds should not assume that the land within the District could be sold adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. for the appraised amount described above at a foreclosure sale for delinquent Special Taxes.In arriving at the estimates of value,the Appraiser assumes that any sale will be unaffected by undue stimulus and will occur Non-Cash Payments of Special Taxes following a reasonable marketing period,which is not always present in a foreclosure sale.See APPENDIX B for a description of other assumptions made by the Appraiser and for the definitions and limiting conditions Under the Act,the Board of Directors as the legislative body of the District may reserve to itself the used by the Appraiser. right and authority to allow the owner of any taxable parcel to tender a Bond in full or partial payment of any installment of the Special Taxes or the interest or penalties thereon. A Bond so tendered is to be accepted at No assurance can be given that any bid will be received for a parcel with delinquent Special Taxes par and credit is to be given for any interest accrued thereon to the date of the tender. Thus,if Bonds can be offered for sale at foreclosure or,if a bid is received,that such bid will be sufficient to pay all delinquent purchased in the secondary market at a discount,it may be to the advantage of an owner of a taxable parcel to Special Taxes. pay the Special Taxes applicable thereto by tendering a Bond. Stich a practice would decrease the cash flow available to the District to make payments with respect to other Bonds then outstanding;and,unless the FDIC/Federal Government Interests in Properties practice was limited by the District,the Special Taxes paid in cash could be insufficient to pay the debt service due with respect to such other Bonds.In order to provide some protection against the potential adverse impact The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be on cash flows which might be caused by the tender of Bonds in payment of Special Taxes,the Indenture limited with regard to properties in which the Federal Deposit Insurance Corporation(the"FDIC"),the Drug includes a covenant pursuant to which the District will not authorize owners of taxable parcels to satisfy Enforcement Agency,the Internal Revenue Service,or other federal agency has or obtains an interest. In the Special Tax obligations by the tender of Bonds unless the District shall have first obtained a report of an event that any financial institution making any loan which is secured by real property within the District is Independent Financial Consultant certifying that doing so would not result in the District having insufficient taken over by the FDIC,and prior thereto or thereafter the loan or loans go into default,then the ability of the Net Taxes to pay the principal of and interest on all Outstanding Bonds when due. District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. Payment of the Special Tax Is Not a Personal Obligation of the Owners The FDIC's policy statement regarding the payment of state and local real property taxes(the"Policy An owner of a taxable parcel is not personally obligated to pay the Special Tax. Rather,the Special Statement")provides that property owned by the FDIC is subject to state and local real property taxes only if Tax is an obligation which is secured only by a lien against the taxable parcel.If the value of a taxable parcel those taxes are assessed according to the property's value,and that the FDIC is immune from real property is not sufficient,taking into account other liens imposed by public agencies,to secure fully the Special Tax,the taxes assessed on any basis other than property value. According to the Policy Statement,the FDIC will pay District has no recourse against the owner. its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the Land Values institution's affairs,unless abandonment of the FDIC's interest in the property is appropriate.The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law,to the extent the The value of the property within the District is a critical factor in determining the investment quality interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of the Bonds. If a property owner is delinquent in the payment of Special Taxes,the District's only remedy is fines or penalties and will not pay nor recognize hens for such amounts. If any property taxes(including commence foreclosure proceedings in an attempt to obtain funds to pay the Special Taxes. Reductions in interest)on FDIC-owned property are secured by a valid lien(in effect before the property became owned by ,roperty values due to a downturn in the economy,physical events such as earthquakes,fires or floods,stricter the FDIC),the FDIC will pay those claims. The Policy Statement further provides that no property of the land use regulations,delays in development or other events will adversely impact the security underlying the FDIC is subject to levy,attachment,garnishment,foreclosure or sale without the FDIC's consent.in addition, Special Taxes.See"THE COMMUNITY FACILITIES DISTRICT—Estimated Value-to-Lien Ratios"herein. the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current The Policy Statement states that the FDIC generally will not pay non ad valorem taxes,including owner,adjusted annually by an amount determined by the Nevada County Assessor,not to exceed an increase special assessments,on property in which it has a fee interest unless the amount of tax is fixed at the time that 35 36 DOCSSF41070v6\22925.0009 DOCSSF41070v6\22925.0009 purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the LEGAL OPINION further opinion of Bond Counsel,interest on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that,with respect to corporations,interest on the Bonds may be included as an adjustment The legal opinion of Stradling Yocca Carlson&Rauth,a Professional Corporation approving the in the calculation of alternative minimum taxable income which may affect the alternative minimum tax validity of the Bonds in substantially the form set forth as Appendix G hereto,will be made available to liability of corporations.In addition,the difference between the issue price of a Bond(the first price at which purchasers at the time of original delivery. A copy of the legal opinion for the Bonds will be provided with a substantial amount of the Bonds of a maturity is to be sold to the public)and the stated redemption price at each definitive bond. �r`-t rity with respect to the Bond constitutes original issue discount. Original issue discount accrues under a :rant yield method,and original issue discount will accrue to a Bondowner before receipt of cash LITIGATION butable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond Owner's basis in the applicable Bond. The amount of original issue discount No litigation is pending or threatened concerning the validity of the Bonds or the pledge of Net Taxes that accrues to the owner of the Bond is excluded from gross income of such owner for federal income tax to repay the Bonds and a certificate of the District to that effect will be furnished to the Underwriter at the time purposes,is not an item of tax preference for purposes of the federal alternative minimum tax imposed on of the original delivery of the Bonds. Neither the District nor TDPUD is aware of any litigation pending or j individuals and corporations,and is exempt from State of California personal income tax. threatened which questions the existence of the District or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Bonds. Bond Counsel's opinion as to the exclusion from gross income of interest on the Bonds(and original issue discount)is based upon certain representations of fact and certifications made by the District and others NO RATING and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986,as amended(the"Code"),that must be satisfied subsequent to the issuance of the Bonds to assure that The District has not made and does riot contemplate making application to any rating agency for the interest on the Bonds(and original issue discount)will not become includable in gross income for federal assignment of a rating of the Bonds. income tax purposes. Failure to comply with such requirements of the Code might cause the interest on the Bonds(and original issue discount)to be included in gross income for federal income tax purposes retroactive UNDERWRITING to the date of issuance of the Bonds.The District has covenanted to comply with all such requirements. The Bonds are being purchased by UBS Financial Services(the"Underwriter").The Underwriter has The amount by which a Bond Owner's original basis for determining loss on sale or exchange in the agreed to purchase the Bonds at a price of$ (being$ aggregate principal amount applicable Bond(generally,the purchase price)exceeds the amount payable on maturity(or on an earlier call thereof,less Underwriter's discount of$ ). The purchase agreement relating to the Bonds date)constitutes amortizable Bond premium,which must be amortized under Section 171 of the Code;such provides that the Underwriter will purchase all of the Bonds if any are purchased.The obligation to make such amortizable Bond premium reduces the Bond Owner's basis in the applicable Bond(and the amount of tax- purchase is subject to certain terms and conditions set forth in such purchase agreement,the approval of certain exempt interest received),and is not deductible for federal income tax purposes. The basis reduction as a legal matters by counsel and certain other conditions. result of the amortization of Bond premium may result in a Bond Owner realizing a taxable gain when a Bond is sold by the Owner for an amount equal to or less(under certain circumstances)than the original cost of the The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the Bond to the Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment, offering price stated on the cover page hereof. The offering price may be changed from time to time by the computation and collateral consequences of amortizable Bond premium. Underwriter. Bond Counsel's opinions may be affected by actions taken(or not taken)or events occurring(or not FINANCIAL INTERESTS occurring)after the date hereof. Bond Counsel has not undertaken to determine,or to inform any person, whether any such actions or events are taken or do occur.The Indenture and the Tax Certificate relating to the The fees being paid to the Underwriter,Underwriter's Counsel and Bond Counsel are contingent upon Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided the issuance and delivery of the Bonds and the fees being paid to the Financial Adviser are partially contingent with respect thereto. Bond Counsel expresses no opinion as to the exclusion from gross income for federal upon the issuance and delivery of the Bonds.From time to time,Bond Counsel represents the Underwriter on income tax purposes of interest(and original issue discount)with respect to any Bond if any such action is matters unrelated to the Bonds. taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson&Rauth,a Professional corporation. PENDING LEGISLATION Although Bond Counsel has rendered an opinion that interest(and original issue discount)on the The District is not aware of any significant pending legislation which would have material adverse Bonds is excluded from gross income for federal income tax purposes provided that the District continues to consequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds when comply with certain requirements of the Code,the ownership of the Bonds and the accrual or receipt of interest due. (and original issue discount)with respect to the Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences.Accordingly,before purchasing any of the Bonds,all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Bonds. A copy of the proposed forth of opinion of Bond Counsel is attached hereto as APPENDIX G. 41 42 DOCSSF141070v6\22925.0009 DOCSSF410700\22925.0009 ADDITIONAL INFORMATION APPENDIX A The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete,and reference is made to such documents for full and complete statements and their provisions. A Special Tax applicable to each Assessor's Parcel in the Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)[herein"CFD No.03-1"]shall be levied and collected according The execution and delivery of this Official Statement by the President of the Board of Directors and to the tax liability determined by the Board of Directors or its designee,through the application of the the General Manager of TDPUD has been duly authorized by the Board of Directors acting in its capacity as appropriate amount or rate for Taxable Property,as described below. All of the property in CFD No.03-1, the legislative body of the District. unless exempted by law or by the provisions of Section G below,shall be taxed for the purposes,to the extent, and in the manner herein provided,including property subsequently annexed to the CFD unless a separate Rate TRUCKEE DONNER PUBLIC UTILITY and Method of Apportionment is adopted for the annexation area. DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) A. DEFINITIONS By: The terms hereinafter set forth have the following meanings: President of the Board of "Acre"or"Acreage"means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map,or if Directors the land area is not shown on an Assessor's Parcel Map,the land area shown on the applicable Final Map or other parcel map recorded with the County. "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, By: (commencing with Section 53311),Division 2 of Title 5 of the California Government Code. General Manager of Truckee Donner Public Utility District "Administrative Expenses"means any or all of the following: the fees and expenses of any fiscal agent or trustee(including any fees or expenses of its counsel)employed in connection with any Bonds,and the expenses of the TDPUD carrying out its duties with respect to CFD No.03-1 and the Bonds,including,but not limited to,levying and collecting the Special Tax,the fees and expenses of legal counsel,charges levied by the County Auditor's Office,Tax Collector's Office,and/or Treasurer's Office,costs related to annexing property into the CFD,costs related to property owner inquiries regarding the Special Tax,amorous needed to pay rebate to the federal government with respect to the Bonds,costs associated with complying with any continuing disclosure requirements for the Bonds and the Special Tax,and all other costs and expenses of the TDPUD in any way related to the establishment or administration of the CFD. "Administrator"means the person or firm designated by the TDPUD to administer the Special Tax according to this Rate and Method of Apportionment of Special Tax. "Affordable Unit"means any Unit within CFD No.03-1 which,in the sole discretion of the Town,is either deed-restricted to maintain the affordability of the Unit or is determined by the Administrator to have been planned,designed and/or built to he an affordable unit. "Assessor's Parcel"or"Parcel"means a lot or parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. "Assessor's Parcel Map"means an official map of the County Assessor designating parcels by Assessor's Parcel number. "Association Property"means any property within the CFD that is owned by a homeowners association, ! excluding Association Property under the pad or footprint of a Unit. i "Board of Directors"or"Board"means the Board of Directors of the Truckee Donner Public Utility District. 43 A-1 DOCSSF,41070v6122925.0009 DOCSSF4107006 22925.0009 I_ on the Expected Maximum Special Talc Revenues. In addition,the Administrator shall review Final Maps to of The Land Use/Entillement Changes are being proposed by the same land owner,the ensure they reflect the number of residential lots that was anticipated in the Tentative Map. Administrator shall determine the required prepayment(pursuant to Step 3.b)by analyzing the combined impact of all of the proposed Land Use/Entitlement Changes. If,prior to the Final Bond Sale,a change to the Expected Land Uses(a"Land Use/Entitlement Change")is Notwithstanding the foregoing,if the Administrator analyzes the combined impacts of proposed that will result in a reduction in the Expected Maximum Special Tax Revenues,no action will be multiple Land Use/Entitlement Changes,and the Town subsequently does not approve weeded pursuant to this Section D as long as the reduction in Expected Maximum Special Tax Revenues does one or more of the Land Use/Entitlement Changes that was proposed,the Administrator reduce debt service coverage on outstanding Bonds below the amount committed to in the Bond shall.once again apply the three steps set forth above to determine the combined impact ments.Upon approval of the Land Use/Entitlement Change,the Administrator shall update Attachment 1 of those Land Use/Entitlement Changes that were approved simultaneously by the Town. ..now the reduced Expected Maximum Special Tax Revenues,and the reduced Expected Maximum Special Tax Revenues shall be the amount used to determine the amount of the Final Bond Sale. If,based on the comprehensive analysis,the Administrator determines that there is a reduction in Expected Maximum Special Tax Revenue,and the Land Use/Entitlement If a Land Use/Entitlement Change is proposed after the Final Bond Sale,the following steps shall be applied: Changes are not all being proposed by the same land owner,the Administrator shall consider the proposed Land Use/Entitlement Changes individually to determine the Step 1: By reference to Attachment 1(which will be updated by the Administrator each time a required prepayment from each owner. Land Use/Entitlement Change has been processed according to this Section D),the Administrator shall identify the Expected Maximum Special Tax Revenues for CFD No. 03-1; E. METHOD OF LEVY OF THE SPECIAL TAX Step 2: The Administrator shall calculate the Maximum Special Tax revenues that could be Each Fiscal Year,the Administrator shall determine the Special Tax Requirement to be collected in that Fiscal collected from property in the CFD if the Land Use/Entitlement Change is approved; Year,and the Special Tax shall be levied according to the steps outlined below. Step 3: if the amount determined in Step 2 is higher than that calculated in Step 1,the Land Step 1 The Special Tax shall be levied Proportionately on each Parcel of Developed Property Use/Entitlement Change may be approved without further action. If the revenues within the CFD up to 100%of the Maximum Special Tax for each Parcel for such Fiscal calculated in Step 2 are less than those calculated in Step 1,and if: Year until the amount levied on Developed Property is equal to the Special Tax Requirement prior to applying any Capitalized Interest that is available in the CFD (a) The landowner does not withdraw the request for the Land Use/Entitlement accounts. Change that was submitted to the Town;or Step 2: If additional revenue is needed after Step 1,and after applying Capitalized Interest to the (b) Before approval of the Land Use/Entitlement Change,the landowner requesting Special Tax Requirement,the Special Tax shall be levied Proportionately on each the Land Use/Entitlement Change does not prepay a portion of the Special Tax Assessor's Parcel of Undeveloped Property within the CFD,up to 1001/o of the Maximum for the CFD in an amount that corresponds to the lost Maximum Special Tax Special Tax for Undeveloped Property for such Fiscal Year determined pursuairi to revenue,as determined by applying the steps set forth in Section H below;or Section C; (c) The Land Use/Entitlement Change proposes that a Parcel of Single Family Step 3: If additional revenue is needed after applying the first two steps,the Special Tax shall be Detached Property or Single Family Attached Property be developed as another levied Proportionately on each Parcel of Association Property within the CFD,up to land use(other than Public Property),and the landowner requesting the Land 100%of the Maximum Special Tax for Undeveloped Property for such Fiscal Year Use/Entitlement Change fails to submit a written request to the TDPUD to determined pursuant to Section C; designate the Parcel as Taxable Other Property,thereby maintaining the Expected Maximum Special Tax Revenues for the Parcel; Step 4: If additional revenue is needed after applying the first three steps,the Special Tax shall be levied Proportionately on each Assessor's Parcel of Excess Public Property,exclusive then,the amount of the prepayment detemuned in Step 3.b shall be allocated on a per- of property exempt from the Special Tax pursuant to Section G below,up to 100%of the acre basis and included on the next property tax bill for all Assessor's Parcels within the Maximum Special Tax for Undeveloped Property for such Fiscal Year determined property affected by the Land Use/Entitlement Change. The amount allocated to each pursuant to Section C. Assessor's Parcel shall be added to and,until paid,shall be a part of,the Maximum Special Tax for the Assessor's Parcel. F. COLLECTION OF SPECIAL TAX If multiple Land Use/Entitlement Changes are proposed at one time(which may include approval of multiple Final Maps at one time),the Administrator may consider the The Special Taxes for CFD No.03-1 shall be collected in the same manner and at the same time as ordinary ad combined effect of all the Land Use/Entitlement Changes to determine if there is a valorem property taxes,provided,however,that prepayments are permitted as set forth in Section H'below and reduction in Expected Maximum Special Tax Revenues that necessitates implementation provided further that the TDPUD may directly bill the Special Tax,may collect Special Taxes at a different of Step 3.b or 3.c. If,based on this comprehensive analysis,the Administrator time or in a different manner,and may collect delinquent Special Taxes through foreclosure or other available determines that there is a reduction in Expected Maximum Special Tax Revenue,and all methods.The Special Tax for Fractional Units may be billed either directly to individual fractional owners or A-6 A-7 DOCSSF410700\22925.0009 DOCSSF,4107ov6\22925.0009 to a homeowners association,which shall then bill the individual fractional owners;non-payment of Special "Remaining Facilities Costs"means the Public Facilities Requirements(as defined above),minus Taxes billed by the homeowners association shall result in interest and penalties,and the fractional ownership public facility costs funded by Outstanding Bonds(as defined above),developer equity,and/or any shall be subject to foreclosure proceedings as set forth in the Bond covenants. other source of funding. The Special Tax shall be levied and collected until principal and interest on Bonds have been repaid,costs of The Special Tax obligation applicable to an Assessor's Parcel in the CFD may be prepaid and the obligation of constructing or acquiring authorized facilities from Special Tax proceeds have been paid, and all the Assessor's Parcel to pay the Special Tax permanently satisfied as described herein,provided that a administrative expenses have been reimbursed.However,in no event shall a Special Tax be levied after Fiscal prepayment may be made only if there are no delinquent Special Taxes with respect to such Assessor's Parcel Year 2039-2040. at the time of prepayment. An owner of an Assessor's Parcel intending to prepay the Special Tax obligation shall provide the TDPUD with written notice of intent to prepay.Within 30 days of receipt of such written notice,the TDPUD or its designee shall notify such owner of the prepayment amount for such Assessor's G. EXEMPTIONS Parcel. Prepayment must be made not less than 75 days prior to any redemption date for Bonds to be redeemed with the proceeds of such prepaid Special Taxes. The Prepayment Amount shall be calculated as Notwithstanding any other provision of this Rate and Method of Apportionment of Special Tax,no Special follows:(capitalized terms as defined below): Tax shall be levied on up to 30.31 Acres of Public Property. A separate amount of public acreage may be exempted each time property annexes into CFD No.03-1,and such additional exemption shall only apply to Bond Redemption Amount property within the annexation area.A Special Tax may be levied on Excess Public Property pursuant to Step plus Remaining Facilities Amount 4 of Section E;however,a public agency may require that the special tax obligation on land conveyed to it that plus Redemption Premium would be classified as Excess Public Property be prepaid pursuant to Section H below. plus Defeasance Requirement plus Administrative Fees and Expenses In addition,no Special Tax shall be levied in any Fiscal Year on(i)Golf Course Property,(ii)Rental Property, less Reserve Fund Credit (iii)Affordable Units,or(iv)Other Property unless the Parcel is determined to be Taxable Other Property. equals Prepayment Amount As of the proposed date of prepayment,the Prepayment Amount shall be determined by application of the H. PREPAYMENT OF SPECIAL TAX following steps: The following definitions apply to this Section H: Step 1. Compute the total Maximum Special Tax that could be collected from the Assessor's Parcel prepaying the Special Tax in the Fiscal Year in which prepayment would be "Outstanding Bonds"means all Previously Issued Bonds which remain outstanding,with the received by the TDPUD or,in the event of a prepayment pursuant to Step 3.b in Section following exception:if a Special Tax has been levied against,or already paid by,an Assessor's Parcel D,compute the amount by which the Maximum Special Tax revenues would be reduced making a prepayment,and a portion of the Special Tax will be used to pay a portion of the next by the Land Use/Entitlement Change and use the amount of this reduction as the figure principal payment on the Bonds that remain outstanding(as determined by the Administrator),that for purposes of this Step 1. next principal payment shall be subtracted from the total Bond principal that remains outstanding,and the difference shall be used as the amount of Outstanding Bonds for purposes of this prepayment Step 2. Divide the Maximum Special Tax from Step i by the then-current Expected Maximum formula. Special Tax Revenues for the CFD. "Previously Issued Bonds"means all Bonds that have been issued on behalf of the CFD prior to the Step 3. Multiply the quotient computed pursuant to Step 2 by the Outstanding Bonds to compute date of prepayment. the amount of Outstanding Bonds to be retired and prepaid(the"Bond Redemption Amount'). "Public Facilities Requirements"means either$9,850,000 in 2003 dollars,which shall increase on January 1,2004,and on each January I thereafter by the percentage increase,if any,in the Step 4. Compute the current Remaining Facilities Costs(if any). construction cost index for the San Francisco region for the prior twelve(12)month period as published in the Engineering News Record or other comparable source if the Engineering News Step S. Multiply the quotient computed pursuant to Step 2 by the amount determined pursuant to �„a�.... Record is discontinued or otherwise not available,or such lower number as shall be determined by the Step 4 to compute the amount of Remaining Facilities Costs to be prepaid(the TDPUD as sufficient to fund improvements that are authorized to be funded by the CFD.The Public "Remaining Facilities Amount"). Facilities Requirements shown above may be adjusted or a separate Public Facilities Requirements identified each time property annexes into CFD No.03-1;at no time shall the added Public Facilities Step 6. Multiply the Bond Redemption Amount computed pursuant to Step 3 by the applicable Requirement for that annexation area exceed the amount of public improvement costs that are redemption premium,if any,on the Outstanding Bonds to be redeemed(the"Redemption expected to be supportable by the Maximum Special Tax revenues generated within that annexation Premium"). area. Step 7. Compute the amount needed to pay interest on the Bond Redemption Amount starting with the first Bond interest payment date after which the prepayment has been received A-8 A-9 DOCSSF4107W6122925.0009 DOCSSF,4107ov6\22925.0009 i APPENDIX C COUNTY OF NEVADA Labor Force,Employment and Unemployment GENERAL INFORMATION CONCERNING THE TOWN OF TRUCKEE Annual Averages from 1998 through 2002 This appendix sets forth general information about the Town of Truckee("Truckee')including Unemployment information with respect to its finances. Thefollowing information concerning Truckee,the Countv of Nevada Year Area Labor Force Employment Unemployment Rate and the State of California(the"State')is included only for general background purposes.It 1998 Nevada 42,950 40,620 2,330 5.4 t intended to suggest that the Bonds are payable from anv source other than the Net Taxes and amounts in California 16,342,950 15,340,620 962,330 5.4 din funds and accounts created by the Indenture. United States 137,673,000 13,463:000 6,210:000 4.5 1999 Population Nevada 43,860 42,080 1,780 4.1 California 1096,500 15,731,700 864,800 - 5.2 The January 2003 population for the Truckee community was estimated to be 14,850. Truckee has United States 139,368,000 133,488,000 5,880,000 42 experienced steady growth over the past decade.Population has increased by 158.8%since 1980,compared to 2000 a 65.6%increase for the State of California(the"State")for the same time period. A summary of Truckee's, Nevada 90,800 45,600 5,200 4.9 California 17,090,800 16,245,600 845,200 4.9 the County's and the State's population growth is shown below. United States 140,863,000 135,208 5,655,000 4.0 . 2001 CITY OF TRUCKEE AND NEVADA COUNTY POPULATION Nevada 46,270 44,570 1,700 3.0 FROM 1980 TO 2003 California 17,362,300 16,435.200 927,100 5.3 United States 141,815,000 135,073,000 6,742.000 4.8 Town of Truckee Nevada County State of California 2002 Nevada 48,500 46,300 2,200 4.5 Annualized Annualized Annualized California 17,404,600 16,241,800 1,162,800 6.7 Percent - Percent Percent United States 144,863,000 136,485,000 8,378,000 5.8 Change Change Change Year Number Over Interval Number Over Interval Number Over Interval Source:California State Employment Development Department 1980.......................... 5,696 -- 51,645 -- 23,668,145 -- 1990.......................... 9,318 11.8 85,933 59.5 31,711,00 z5.6 The following is a summary of average employment by industry in Nevada County during 1998 1995.......................... 11,318 11.8 85,933 9.5 31,711,000 6.6 1996.......................... 11,451 1.2 86,823 1.0 31,962,000 0.8 through 2002. This does not include self-employed persons,volunteer workers,unpaid family workers, 1997.......................... 11,880 3.6 87,744 1.1 32.452,000 1.5 farmers,private household workers,or persons involved in labor-management disputes. 1998.......................... 12,197 2.6 88,790 1.2 32,862,000 1.3 1999.......................... 12,452 2.0 89,644 1.0 33,417,000 1.7 t EMPLOYMENT BY INDUSTRY IN NEVADA COUNT]'tr1 2000.......................... 13,914 10.5 92,278 2.9 34.088.000 2.0 2001........................... 14,296 2.7 94,030 1.9 34.758.000 2.0 I 1998 1999 2000 2001 2002 2002.......................... 14,746 3.1 95,286 1.3 35,037.000 0.8 2003.......................... 14,850 1.0 95,700 0.7 35,591.000 1.7 Wage and Salary EmploymenCl: Agriculture................................................... 130 150 90 80 100 Source: 1980 and 1990 figures from U.S.Census.Other figures from the California State Department of Finance. Construction................................................ 1,820 2,370 1710 2,880 3,300 Manufacturing............................................. 2,590 2,560 2.540 2,430 1,800 Transportation,Utilities............................... 700 600 580 650 500 Employment Wholesale Trade.......................................... 590 670 690 610 500 Retail Trade................................................. 5,880 6,120 6,260 6.310 4,300 Finance,Insurance,Real Estate................... 1,290 1,310 1,410 1,500 2,200 The District is part of the Nevada County Labor Market reported on periodically by the State Services....................................................... 7,360 7,810 8,350 8,670 11,000 Department of Employment Development. As of December 2002,this labor market had a total civilian Government,Federal................................... 470 460 480 430 400 employment of 48,500. Government,State and Local...................... 4,480 4,600 4,850 5,090 5,400 Total......................................................... 25,340 26,660 27,970 28,720 29,500 Services account for approximately 37%of all wage and salary workers in the Nevada County Labor Market. The next largest major categories of wage and salary employment are retail trade,government, u1 Columns may not add to totals due to independent rounding. construction and manufacturing. t�1 Based on place of wolk. Source:State Department of Employment Development. C-1 C-2 DOCSSFW1070v6\22925.0009 DOCSSFl41070v6\22925.0009 t{f ..maw. E M i f Commercial Activity Income The following table indicates the history of taxable transactions for the County for the years 1997 The following table,based on data reported in the annual publication"Survey of Buying Power" through 2001. published by Sales and Marketing Management,summarizes the total EBI and the median household EBI for the County,the State and the nation for the.years 1998 through 2002- COUNTY OF NEVADA gg TAXABLE TRANSACTIONS TOTAL EFFECTIVE BUYING INCOME N (in thousands of dollars) (in Thousands) 1 1997 1998 1999 2000 2001 Year County of Nevada State of California United States Retail Stores: Apparel Stores $ 15,097 S 17,196 $ 19,942 $ 20.939 $ 20,869 1998 1,520,772 551,999,317 4,621,491,730 General Merchandise Stores 64,843 66,645 70,330 73.671 76,513 1999 1,612,432 590,376,663 4,877,786,658 Specialty Stores 55,386 60,804 75,490 85.948 89,031 2000 1,823,279 652,190,282 5,230,824,904 Food Stores 68,885 70,354 79,612 81.008 94,709 2001 1,823,619 650,521,407 5,303,481,498 Packaged Liquor 1,977 2,231 2.446 2A81 2,174 2002 1,986,273 647,879,427 5,340,682,818 Eating/Drinking Places 65,719 68,150 72,807 79.551 79,410 Home Furnishings& Appliances 23,185 23,364 28,528 33,806 36,098 Source:"Survey of Buying Power,"Sales&Marketing Management. Building Materials&.Farm Implements 84,828 88,956 114,353 120,381 128,151 The following table compares the median household effective buying income for the County,the State Auto Dealers&Auto Supplies 84,583 98,205 98,743 103,266 109,341 and the nation. Service Stations 54,852 50,945 56,616 62,173 61,009 Retail Store Total $519,355 $536,041 $618,867 $662.224 $ 697,305 MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME Business and Personal Services 32,915 - 37,320 43,312 49.776 49,508 All Other Outlets 208.812 204,778 249,589 285,050 273,109 Year County of Nevada State of California United States Total All Outlets $761,122 $778,139 $911,768 $997,050 $1,019,922 Numberofpermits 4,084 4,088 3,919 3,931 4,093 1998 35,433 _ 37,091 35,377 1999 37,275 39,492 37,233 Source:State Board of Equalization. 2000 41,696 44,464 39,129 2001 40,849 43,532 38,365 2002 41,790 42,484 38,035 Largest Employers Source:"Survey of Buying Power,"Sales&Marketing Management. The following is a list of the largest employers for the Town of Truckee. Transportation Largest Employers Truckee is served directly by Interstate 80,the major northerly highway between San Francisco and Name of Company Product(s) New York City. This freeway connects Truckee with Sacramento and San Francisco to the West and Reno, Boreal Ski and Snowboard Recreation Services Nevada to the east.State Route 89 heads north to the Feather River Canyon and south to Lake Tahoe. Booth Creek Resorts Recreation Services Sierra West Bancorp Financial Holding Corporate Offices Greyhound provides interstate bus service from Truckee.The Tahoe Area Regional Transit("TART") Tahoe Donner Association Recreation Services is a locally financed bus service which connects all of the resorts on the north and west shores of Lake Tahoe. Tahoe Forest Hospital Hospitals TART also provides service to the major ski areas including Squaw Valley and Alpine Meadows. rce:Sierra Economic Development District"Nevada Countv Economic&Social Indicator Review 2002". The Union Pacific Railroad main line passes through Truckee,connecting the area with San Francisco to the west and all points east.Airport facilities are available at Truckee and Reno.The Reno airport is served by most major carriers with flight to virtually everywhere in the nation and several international destinations. Educational Facilities There are five elementary schools,three of which encompass grades K-3,one K-5 and one 4-5,one middle school for grades 4-6 and one intermediate school for grades 6-8,two high schools,and one continuation high school within the Tahoe Truckee Unified School District. C-3 C-4 6 DOCSSFM1070v6%22925.0009 .. D0CSSF'A107W622925.0009 4d APPENDIX G Taxes,neither the faith and credit nor the taxing power of the PUD,the State of California,or any of its political subdivisions is pledged for the payment thereof FORM OF OPINION OF BOND COUNSEL (2) The Indenture has been duly executed and delivered by the Board on behalf of the District. The Indenture creates a valid pledge of,and the Bonds are secured by the Net Taxes and the amounts on [Delivery Date] deposit in certain funds and accounts established under the Indenture,as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms,except as the same may be limited by - bankruptcy,insolvency,reorganization,moratorium,fraudulent conveyance or transfer or other similar laws i of Directors affecting creditors'rights generally and by the exercise of judicial discretion in accordance with general ,kee Donner Public Utility District principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in - 11570 Donner Pass Road the State of California;provided,however,we express no opinion as to the enforceability of the covenant of ,Truckee,California 96160 the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to indemnification,penalty,contribution,choice of law,choice of form or waiver provisions contained Re: S Truckee Donner Public Utility District Community Facilities District No.03-1 therein. (Old Greenwood)Special Tax Bonds (3) Under existing statutes,regulations,dings and judicial decisions,interest(and original issue discount)on the Bonds is excluded from gross income for federal-income tax purposes and is not an item of Dear Members of the Board of Directors: I' tax preference for purposes of calculating the federal alternative nunimurn tax unposed on individuals and We have examined the Constitution and the laws of the State of California,a certified record of the corporations;however,it should be noted that,with respect to corporations,such interest(and original issue proceedings of the Truckee Donner Public Utility District(the"PUD")taken in connection with the formation discount)will be included as an adjustment in the calculation of alternative minimum taxable income,which of Community Facilities District No.03-1(Old Greenwood)of the Truckee Donner Public Utility District(the may affect the alterative numm int tax liability of corporations. "District")and the authorization and issuance of the District's Special Tax Bonds in the aggregate principal amount of S (the"Bonds")and such other information and documents as we consider necessary to (4) Interest on the Bonds is exempt from State of California personal income tax. render this opinion. In rendering this opinion,we have relied upon certain representations of fact and (n The difference between the issue price n a Bond(the first price p which a substantial amount certifications made by the District,the initial purchasers of the Bonds and others.We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by of the Bonds of a maturity are be sold to the public)and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues trader a constant yield US. method,and original issue discount will accrue to a Bond owner before receipt of cash attributable to such The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982,as excludable income.The amount of original issue discount deemed received by a Bond owner will increase the amended(comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of Bond owner's basis in the applicable Bond. Original issue discount that accrues for the Bond owner is California),Resolution No._,adopted by the Board of Directors of the PUD acting in its capacity as the excluded from the gross income of such owner for federal income tax purposes,is not an item of tax legislative body of the District(the"Board")on (the"Resolution"),and a Trust indenture(the preference for purposes of calculating the federal alternative minimum tax imposed on individuals or "Indenture"),dated as of December 1,2003,by and between the District and BNY Western Tntst Company corporations(as described in paragraph(3)above)and is exempt from State of California personal income tax. �. (the"Trustee").All capitalized terms not defined herein shall have the meaning set forth in the Indenture. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange The Bonds are dated their date of delivery and mature on the dates and in the amounts set forth in the in the applicable Bond(generally the purchase price)exceeds the amount payable on maturity(or on an earlier Indenture. The Bonds bear interest payable semiannually on each March 1 and September 1,commencing on call date)constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; March 1,2004,at the rates per annum set forth in the Indenture.The Bonds are registered Bonds in the form such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond(and the amount of set forth in the Indenture,redeemable in the amounts,at the times and in the manner provided for in the tax-exempt interest received),and is not deductible for federal income tax purposes. The basis reduction as a Indenture result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less(under certain circumstances)than the original cost of the Based upon our examination of the foregoing,and in reliance thereon and on all matters of fact as we Bond to the owner. deem relevant under the circumstances,and upon consideration of applicable laws,we are of the opinion that: The opinion expressed in paragraphs 3 and 5 above as to the exclusion from p p p grap () () gross income For (1) The Bonds have been duly and validly authorized by the District and are legal,valid and federal income tax purposes of interest(and original issue discount)on the Bonds is subject to the condition binding limited obligations of the District,enforceable in accordance with their terms and the terms of the that the District complies with all requirements of the Internal Revenue Code of 1986,as amended(the Indenture,except to the extent that enforceability may be limited by bankruptcy,insolvency,reorganization, "Code"),that must be satisfied subsequent to the issuance of the Bonds to assure that such interest(and moratorium,fraudulent conveyance or transfer or other laws affecting creditors'rights generally and by the original issue discount)will not become includable in gross income for federal income tax purposes.Failure to exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases comply with such requirements of the Code might cause interest(and original issue discount)on the Bonds to and by limitations on remedies against public agencies in the State of California. The Bonds are limited be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. obligations of the District but are not a debt of the PUD,the State of California or any other political The District has covenanted to comply with all such requirements. Except as set forth in paragraphs(3),(4), subdivision thereof within the meaning of any constitutional or statutory limitation,and,except for the Net (5)and(6)above,we express no opinion as to any tax consequences related to the Bonds. G-1 G-2 DOCSSF\4107OW22925.0009 DOCSSFW 107W5\22925.0009 Certain agreements,requirements and procedures contained or referred to in the Indenture,the Tax Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted,under the circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the exclusion from gross income for federal income tax purposes of interest(and original issue discount)on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson&Rauth,a Professional Corporation. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. We express no opinion herein as to the accuracy,completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to'advise the Owners of the Bonds with respect to matters contained in the Official Statement or other offering material. The opinions expressed herein are based upon an analysis of existing statutes,regulations,rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken(or not taken)or events occurring(or not occurring)after the date hereof. Our engagement as Bond Counsel with respect to the Bonds terminates upon the issuance of the Bonds and we have not undertaken to determine,or to inform any person,whether such actions or events are taken(or not taken)or do occur(or do not occur). Respectfully submitted, i I I G-3 DOC SSFA 1070v622925.0009 BROWN,CHUDLEIGH,SCHULER,DONALDSON AND ASSOCIATES REAL ESTATE APPRAISALS-MARKET STUDIES LAWRENCE E.BROWN,MAI,CRE(1942.1990) WALTER H.CHUDLEIGH,III,MAI GREGORY S.SCHULER CHRISTOPHER T.DONALDSON,MAI,CCIM WILLIAM J.KRANSTOVER DEAN A.MYERS D.TYLER DUSTMAN WAYNETURNER PETER A.CHUDLEIGH JESSICA STEVENS KYLE BAMFORD APPRAISAL November 3,2003 Community Facilities District No.03-01 (Truckee Donner Public Utility District) Truckee,California Mr.Lary Rolapp Fieldman,Rolapp&Associates 2100 Main Street,Suite 210 Irvine,CA 92614 Reference: Appraisal of the Community Facilities District No.03-01(Truckee Donner Public Utility District),Truckee,California.Our File No.346. Dear Mr.Rolapp: PREPARED FOR In response to your request we have personally examined and appraised the Mello-Roos Community Facilities District(CFD)No.03-01,Truckee Donner PUD,on which the Mr.Larry Rolapp CFD will levy special taxes,located in Truckee,California.The purpose of this appraisal is to Fieldman,Rolapp&Associates set forth our opinion relative to the market value of the fee simple interest in the single-family 2100 Main Street,Suite 210 1 lots and fractional ownership units located within the CFD and subject to a continuing lien for Irvine,California 92614 the CFD special tax and special assessment liens.This project is referred to as the Old Greenwood development.It is our understanding that the intended use of this appraisal is for bond financing purposes and that the intended users are the parties related to issuing and purchasing the bonds. This appraisal has been prepared subject to the Uniform Standards of PREPARED BY Professional Appraisal Practice(USPAP);and the Financial Institution's Reform,Recovery, and Enforcement Act of 1989(FIRREA),Chapter 12 Code of Federal Regulations Part 34 Christopher T.Donaldson,MAI,CCIM (12CFR34). In addition,the appraisal has been prepared subject to the Code of Professional Brown,Chudleigh,Schuler,Donaldson and Associates Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. This 1500 E.Kearns Boulevard,Suite E-303 appraisal is also intended to comply with the California Debt Advisory Commission(CDAC) Park City,Utah 84060 guidelines published in 1994. MOUNTAIN STATES OFFICE.15M E.KEARNS,SUITE E-303.PARK CITY,UTAH MR),(635)64942M NORTH WEST OFFICE.50 SW RNE STREET,SUITE,00.PORTIAND,OREGON 97204(503)274-0211 NORTHEAST OFFICE:24 GLENWOOD AVENUE NO 6 NORWALK,CONNECTICUT 06654.(203)$57.4124 WESTERN REGIONAL OFFICE.7«CARDLEYAVENUE,SUITE100.MEDFORD,OREGON97501.6124.(541)772-6566 FACSIMILE(511)7736314 .rvf+ditl� The subject of this appraisal is the specific portions of the Mello-Roos Community a As of the date of value,86 of the 99 saleable single-family lots were reported to Facilities District(CFD)No.03-01,on which the CFD will levy special taxes.The value be under binding contract to purchase.The values stated herein specifically conclusions stated herein assume completion of the CFD improvements as of the current date assume these are valid contracts and will close by year-end 2003. of value,November 1,2003. Based upon the studies and examinations made,it is our opinion that the market There are extraordinary assumptions inherent in the value conclusion stated values of the fee simple interest in the Mello-Roos Community Facilities District No.03-01 herein,which are as follows: (Truckee Donner PUD),subject to the assumptions and limiting conditions stated herein,as of November 1,2003,are as follows: • Our analysis assumes completion of all CFD and private improvements necessary for development of the proposed project will be completed in a timely and workmanlike manner per the specifications and descriptions provided by the Market Value-CFD No.03-01 As Is"Assuming CFD Reimbursement developer. EIGHTY FIVE MILLION DOLLARS • Our analysis assumes that the Truckee Donner Public Utilities District bonds are issued per the terms and specifications outlined in the CFD report. $85.0 LIM • The taxable property created within the boundaries of the Truckee Donner PUD Community Facilities District is integrated into a master-planned development, The value conclusion stated above is for the entire Community Facilities District which includes substantial amenities that are not taxable.It is noted that the No.03-01(Truckee Donner PUD).As requested,we have separated the total value in an values stated herein are achievable only with the inclusion of the non-taxable allocation to Zone 1 and Zone 2 of the district.This allocation is made to indicate the value golf course and common amenities being constructed concurrently with the attributable to the single-family lots and existing cabins in Zone 1 and the fractional units in taxable property. Zone 2.Based on the analysis presented herein,we have concluded the value of the CFD attributable to Zone 1 is approximately$36,300,000,and the value attributable to Zone 2 is • The cost of the amenities,including the golf course,to be constructed within the $48,700,000. district boundaries is to be shared with a related entity of the developer(Tahoe Club Company),which will offer these amenities to other projects off-site from The following is a detailed report containing the property description,market data, the district. Our analysis has allocated the amenity cost attributable to the and value analyses,which form the primary basis of our value conclusions. subject's taxable property and specifically assumes that the cost contributions will be made by the developer's related entities to ensure completion of all proposed amenities. Respectfully submitted, • The Tahoe Club Company,a related entity of the developer,has committed to a BROWN,CHUDLEIGH,SCHULER,DONALDSON $5,000,000 payment to purchase the land which contains the amenities on-site AND ASSOCIATES comprised of approximately 325 acres.This payment is scheduled to take place in June 2004 and is incorporated into our analysis.It is reasonable to assume this payment is made given the substantial investment in the golf course and amenities already made by Tahoe Club Company on this land. Christopher T.Donaldson,MAI,CCIM • The value of the fractional interest units stated herein assumes the subject Califomia State-Certified General Appraisal finalizes an agreement with some type of internal exchange network to facilitate Licerlae No.AG011161 EKpires 05/20/05 greater marketability of the property. CTD:kf • The report,analysis and conclusions stated herein rely heavily upon information ! provided by others,including the district,the developers and other consultants involved in the project.The reliability of our conclusions is directly related to the accuracy and reasonableness of the information we have been provided. • Our analysis specifically assumes final plat maps will be granted for the various land areas to be platted with individual units. I i i SCOPE OF APPRAISAL 6. The property itself was analyzed in terms of the overall economics of the development including,but not limited to,the following: The scope of this appraisal has the primary function of researching pertinent Marketability of the proposed product details and developing an opinion as to the market value of the fee simple interest in the Cost of development and construction subject property assuming completion of all CFD and private improvements in a timely and 7. Information was assembled in regard to the sales of similar land parcels ..,,workmanlike manner.In order to establish the value opinion,the three traditional valuation considered useful in the determination of land value for the subject,as follows: pproaches were considered in this appraisal.These include the cost,sales comparison,and income valuation methods.In addition,the income approach includes a developmental or Principals involved in the transactions County records discounted cash flow analysis.The resultant opinion of value is stated"free and clear'of any Representatives of local real estate agencies existing or proposed financing.The extent of the process for the preparation of the appraisal Local real estate appraisers report included the following: 8. The subject property and,where possible,the comparable properties were physically inspected,with pertinent differences noted.In addition, 1. Discussions in order to accurately identify the,appraisal problem and the the appraisers have delineated the market boundaries of the subject and objective of the assignment; visited the major thoroughfares in order to analyze the land use characteristics of the surrounding area; 2. A preliminary study was conducted in order to determine what information 9. Based on the market data gathered,an opinion is formulated as to the would be required and the sources of the information;i.e.,development consultants, title companies, real estate agencies, planning highest and best use of the subject property both as if vacant and as representatives,etc.; improved; 3. General data relating to the subject region,and specific data relating to 10. The results of the various valuation approaches utilized are examined, the immediate subject area and the property itself were then assembled. and a reconciliation,or correlation of final value concluded;and, Sources of this information include the following: 11. A complete appraisal in a self-contained report is presented, with • Subject property ownership and management personnel supporting information subsequently categorized and placed into ourjob • Representatives of City and County government offices I file. • Area Chamber of Commerce representatives • State government agencies; i.e., population and economic research divisions; 4. An in-depth analysis of the demographic trends in the subject region was conducted.This information is necessary in forming conclusions as to the intermediate and long-term growth prospects and economic stability of the region; 5. A market overview was conducted,with information assembled pertaining to prevailing market conditions affecting real estate similar to the subject within the Lake Tahoe region,as well as on a national basis.In addition, an extensive analysis of the trade area in which the subject operates was performed; �+rw„ The subject was purchased by East West Partners as an entitled development LEGAL DESCRIPTION parcel.The previous owner of the subject had a development plan in place and approved by the town of Truckee.The plan consisted of a resort development of approximately 235 cabin- The subject of this appraisal is the 616.20 acres per the Nevada County style single-family residences scattered throughout the subject's 900 acres known as the Assessors plat.The following table summarizes the Assessors parcel numbers assigned by Featherstone Resort.Subsequent to East West Partners acquisition of the subject,a revised the Nevada County Assessor. development plan was conceived by East West known as Old Greenwood which included a golf course, club facilities, and a combination of clustered single family lots, fractional ownership single family residences and fractional ownership cottages.Through the town of Acres Assessors Parcel No. Truckee Planning Department,the revised plan was approved.East West Partners is donating 285.62 19-370-08 the 300.47 acres north of the development parcel to the Truckee Donner Land Trust 77.69 19-430-14 Conservancy Organization.The developer has elected to utilize bond financing offered by 79.36 19-430-15 California's Mello-Roos Community Facilities Act of 1982,as amended(the"Act")to fund 78.87 19-430-16 certain infrastructure at the subject development.For the purposes of the bond financing and 78.45 19-430-17 this appraisal,the subject is referred to as Community Facilities District No.03-1,Truckee 16.21 19-430-23 Donner Public Utilities District. 616.20 As of the date of value,86 of the 99 single-family lots were under binding sales contract.We have retained a list of the buyers and lot numbers in our files.The contract prices We have recognized slight differences in acreage between the survey and the are discussed herein.There have been no other transfers of the subject property within the last assessor's information.The difference is negligible in relation to the scope of the subject three years. development and has no impact on the value conclusions stated herein.The subject is located Tahoe Club Company is a related entity to the subject developer.This company within the town limits of Truckee,California 96161. oversees development and operations of the Tahoe Mountain Club,which offers the amenities to their various developments in the Lake Tahoe area.Tahoe Club Company is scheduled to make a land payment of$5,000,000 to Old Greenwood at the completion of the golf course PROPERTY HISTORY and swim/tennistfitness pavilion in approximately June 2004. For this payment, Tahoe Mountain Club will acquire an estimated 325 acres that comprise the land for the golf course, The subject parcels are under the ownership of Truckee Land LLC,which is a pro shop,swim/tennis/fitness pavilion and related facilities. holding company of East West Partners,the subject developer.East West Partners acquired the subject land as part of a larger land acquisition,which included an additional 300.47 acres north of the proposed subject development and Interstate 80.Thus,the total land area of the subject acquisition was 900.46 acres.East West Partners purchased the subject property from Truckee Sierra Resorts Inc.and Ken Inc.for a consideration of$20,000,000 on May 5,2001, per Nevada County records.An additional 16.21 acres to the south end of the project was acquired on January 25,2002 for consideration of$500,000. _5_ -C, The Lake,Tahoe Basin has a very sensitive environment,which has led to monitor growth and create guidelines for growth.These guidelines have evolved into very significant government regulation of development.Tourism generates the majority of income in stringent planning policies and have resulted,in some cases,to a finite amount of allowable the area,as it is the'primary industry.In particular,the six major casinos in Stateline,Nevada development within the various planning areas around the lake.The requirements and adjacent to the east of South Lake Tahoe generate significant tourism traffic in the area. guidelines of the planning process are onerous to development due to the complexity of Following is a discussion of some of the unique aspects of the area. environmental issues.This extensive regulation has created significant barriers to entry for . .. Environmental future development. Lake Tahoe Basin is a sensitive alpine environment with the lake containing very Transportation/Access pure water.The entire basin has been categorized as to land capabilities,such as their The primary transportation linkages for South Lake Tahoe are U.S.Highway 50 tolerance for use as it relates to watersheds, unstable soil, runoff, erosion, and other connecting to the Sacramento area in the west and Carson City and Reno areas to the east. considerations.There are 14 watersheds surrounding the lake,and development within these U.S.Highway 50 links with State Highway 89 in the west going north along the west side of watersheds is finite in terms of the total allowable impervious coverage and building area. Lake Tahoe and connects with State Highway 28 in Nevada on the east side of the lake. Wastewater treatment has been one of the most significant factors influencing Interstate 80 provides access to the Truckee/North Lake Tahoe Region,specifically connecting planning in the Lake Tahoe Basin.Up until the late 1960s,most wastewater was discharged to Truckee and Reno.Interstate 80 continues west to Sacramento,California Central Valley and land leaching systems by small community treatment systems or individual septic tank leach San Francisco Bay Area.State Highways 267 and 89 provide access from Interstate 80 south fields.Due to the sensitivity of the water,government authorities mandated the export of all to the communities in the North Lake Tahoe Basin.The most popular mode of access to South sewage from the Tahoe Basin.These exportation facilities are situated in all areas surrounding Lake Tahoe is the automobile.Airline transportation is available at the South Lake Tahoe the lake and have eliminated many of the problems of lost wastewater leaching into the lake airport and the Truckee-Tahoe Airport,which serve small regional carriers and private flights. itself. I Most airport traffic comes through the Reno(rahoe International Airport.The airport has There is also no disposal of solid waste at the Tahoe Basin.The south shore actually experienced declines in passengers since 1998 attributed to fewer daily non-stop waste is generally transported to landfills in or near Gardnerville,Nevada or Alpine County. departures and connecting flights,as airline operators have found it difficult to run profitably out The north shore area has a landfill in Placer County. of the Renorrahoe Airport.Overall,2002 annual passengers at the airport decreased 8.5 Overall,the Lake Tahoe Basin has a sensitive alpine environment that has been percent from 2000 annual figures,while overall aircraft operations were up 3.8 percent over the addressed by regulations,which add significant barriers to new development. same time period.A portion of the decrease in passengers is due to the reduction of American Governmental Forces Airlines flights into the region. The environmental sensitivity of the Lake Tahoe Basin environment created contentious issues between the neighboring states of Nevada and California as to how to Tourism handle development.Development on one side of the state line impacted the environment and Tourism is the major industry in the lake Tahoe Basin and the North Lake Tahoe properties on the other side.In response to this,the Tahoe Regional Planning Agency(TRPA) Region.There are numerous recreational opportunities in the summer with the lake,hiking, was established by an Act of Congress on December 19,1980.This joint planning agency was biking and other activities,and skiing in the winter.In addition,there is the gaming attraction of created to enhance the efficiency and governmental effectiveness of the region in order tp six casinos in Stateline,Nevada on the south side of the lake. enforce a regional plan and implement ordinances to protect the area;this is governed by the Gaming Tahoe Regional Planning Compact.Since its inception,TRPA has created an extensive The majority of casino development and gaming is located in the South Shore of inventory of soils,watershed,and other environmental properties of the region in order to Lake Tahoe where there are six major casino operators and several smaller gaming establishments. Gaming in the North Shore area is much less developed with Incline Village -ir- -r4- offering the largest Casinos and Brockway also offering some gaming opportunities. Gaming percent of the Placer County population lives in unincorporated areas of the county,while 70 revenues for Tahoe North Shore for the year 2002 were $38,435,771 compared to percent of the Nevada County population lives in unincorporated areas of the county. $336,401,045 for the South Shore in 2002. Population Skier Days Nevada and Placer Counties offer a good quality of life and proximity to There are 24 ski resorts in the Lake Tahoe region,with the largest being increased employment opportunities as the region continues to grow as a recreation and Heavenly Valley Ski Resort in South Lake Tahoe.Squaw Valley ski area,which is famous for second home hot spot.The western portion of Nevada and Placer Counties offer good access hosting the 1960 Winter Olympics,is in the northwest area approximately halfway between and proximity to Sacramento,which has resulted in steady growth over the past 20 years,with Truckee and Tahoe City on Route 89.Heavenly Valley Ski Resort has over 4,800 acres of a 26.9 percent growth from 1990 to 2000,or approximately 2.7 percent per year. skiable terrain,with the summit just over 10,000 feet.Other major ski resort development Presented in the following table are population trends for Nevada County,Placer includes Northstar at Tahoe just south of the subject and Alpine Meadows and Sugar Bowl, County,and the state of California. both in Placer County.Kirkwood is located south of South Lake Tahoe in Alpine County.The Lake Tahoe area ski resorts generally experience between 1.5 and 2 million annual skier days. Po ulation Trends %Change 1990 2000 2002 2007 1990-2000 Conclusion Nevada County 78,510 92,033 94,377 100,586 17.2% Placer Coun 172 794 248,399 265 511 298 850 43.8% Overall,the Lake Tahoe Basin area represents an area of significant natural California 29 759,163 33,871,648 34,561,775 36,413,932 13.8% beauty,with tourism as its primary industry.There are a large number of recreational activities offered in the summer and winter,but the area is subject to seasonal fluctuations.The unique Source:U.S.Census Bureau,STBD Online environmental considerations of the area have led to strong governmental constraints on Households growth.This is significant as it relates to potential for new competition in relation to existing The number of households in Placer County has grown considerably from properties. 1990 to 2000,from 64,098 to 99,163,or a 45.7 percent increase.Much of this growth is attributed to suburban growth in the western portion of the county near Sacramento.Nevada County is a more rural-oriented community with a 2002 estimate of just over 38,000 Nevada and Placer Counties households.Household growth in Nevada County is projected to grow by approximately 8 The subject is located in the Town of Truckee,which is in the eastern portion of percent from 2002 to 2007.Overall,household growth in each county has been consistent with Nevada County just north of the Nevada/Placer Counties boundary.The majority of Nevada overall population trends and is expected to continue that trend.The following table shows County is located west of the subject on the western slope of the Sierra Nevada Mountain historic housing units for both counties. Range towards Sacramento.The subject has strong regional ties to Placer County to the south,due to the geographic constraints of the mountain terrain and area transportation Total Housing Units linkages. 1990 2000 2002 %Change 1990-2000 Nevada and Placer Counties are generally bound on the west by Sacramento Nevada County 37,352 44,282 45,296 18.6% and California's Central Valley,and on the east by the Sierra Nevada Mountains and the Placer County 77,881 107,302 114,148 37.8% Nevada state border.Interstate 80 provides the main access to the western portion of both Source:STBD Online. counties,with Lake Tahoe Basin access provided by State Highways 89 and 267.Nearly 40 -rs- -r�- Conclusion resort based community with significant opportunity for future development,particularly in Overall,the subject's immediate area comprised of Truckee and eastern Nevada relation to the more restricted Tahoe Basin just to the south. and Placer Counties has maintained a stable growth rate in both population and employment. Population This trend is expected to continue in the future with continued growth in tourism,construction As noted the town of Truckee has experienced growth over the last decade.The and services industries. following table,shows the trend in population growth in Truckee since 1990. Population in town of Truckee ruckee January Population %Change #Change The subject is located within the Town of Truckee town limits.Truckee lies just 1994 11,150 --- -- north of the Lake Tahoe Basin;however,due to its location on Interstate 80,which is a major 1995 11,800 5.8% 650 1996 12,050 2.1% 250 transportation link,and its proximity and recreational orientation,it is identified as a Lake 1997 12,600 4.6% 550 Tahoe community.Truckee is located on Interstate 80 near the California-Nevada State line. 1998 13,000 3.2% 400 Reno is located approximately 35 miles west of Truckee and provides the closest major airport. 1999 13,300 2.3% 300 2000 13,800 3.8% 500 Major metropolitan centers west of Truckee include Sacramento (100 miles) and San 2001 14,200 2.9% 400 Francisco(190 miles). 2ooz 14.700 3.5% 500 Historically,Truckee was a gateway through the Sierra Nevada mountain range 2003 14,850 1.0% 150 Annual Chan a 3.2% 411 during westward migration in the middle of the 18th century and the Gold Rush.Truckee was Source:California Department of Finance established as a community with the construction of the transcontinental railroad over Donner Pass,just west of Truckee.Early industry in Truckee included lumber and ice production. It is noted that Truckee was incorporated as a town in 1993.This was significant Today,the center of Truckee has maintained its historical identity with many early 1900s in addressing the population growth,land development and services for the area. buildings and facades intact.During the 1900s,the local economy of Truckee shifted from i Permit Authorized Construction production to winter recreation,which was accelerated by the 1960 Winter Olympics in nearby I The following table shows the total annual building permits authorized for both Squaw Valley.Over the later part of 20t"Century,Truckee began to establish itself as a residential and commercial construction in the town of Truckee. summer and winter recreation community and destination with golf course development, including the master planned community of Tahoe-Donner.This community of 6,200 single- family lots was once considered the single largest subdivision development in the country and Truckee Total Annual Building Permits includes amenities such as a community ski resort and championship golf course.Mild four- 2000 2001 2002 2003• season weather,abundant open space,proximity to Lake Tahoe,good transportation access, Residential 372 187 317 156 Commercial 28 7.50/ 62 33% 122 38% 83 550/ availability of excellent quality recreational amenities and the scenic alpine environment are Total 400 249 439 239 favorable aspects of the Truckee area which have attracted people to the area. In recent Source:Town of Truckee years,second homeowners have increasingly built homes in the Truckee area as recreational January through August amenities have been developed,the Tahoe Basin has become built out,and regulations In 2001,the building activity in Truckee was at a four-year low of 249 permits. regarding development have become an obstacle.Today,Truckee is a popular year-round -19- -20- Immediate Surroundings The Northstar-at-Tahoe Resort is also located in this valley and is the nearest The subject property is south of Interstate 80 in the eastern portion of the Town major ski and golf resort development to the subject and Truckee.This resort contains over of Truckee.The subject has direct access from Interstate 80 via a dedicated highway exit.The 3,000 acres of land owned in fee simple by resort operator Booth Creek Holdings.Northstar following is a description of the subject's immediate surroundings. was master-planned in 1972 with approval for over 3,000 homes,an 18-hole golf course and North an excellent quality alpine resort.Currently,there is significant development of single-family Immediately north of the subject is Interstate 80 which serves as the major ski-in/ski-out lots at the resort.Other significant development at the resort includes proposed transportation linkage to Truckee and the North Lake Tahoe Region and Sacramento, development of 1,450 on-mountain condominium and cottage units and 350 condominiums California's Central Valley and the San Francisco Bay Area to the west,and Reno to the east. and cottage units on a village base area land parcels recently purchased from Booth Creek Further north across Interstate 80 is primarily open space with scattered single-family Resorts by East West Partners.Approximately twelve miles south of Truckee,on Highway 267, development leading to Prosser Dam Road and further north to Prosser Lakeview Estates. is Lake Tahoe and the Lake Tahoe Basin community of King's Beach.Incline Village,Nevada Prosser Lakeview Estates is an established single-family home development with home prices is located approximately 20 minutes south from the subject. ranging from$250,000 to$800,000.Residents in this development are approximately 30 East percent second homeowners and 70 percent full-time.Just to the northwest across Interstate Immediately east of the subject is vacant,forested land leading to the Glenshire 60 is the proposed Gray's Crossing project,also being developed by East West Partners. community.Glenshire is primarily a community of full-time residents and is popular with Reno Gray's Crossing will have an 18-hole championship golf course and a variety of residential commuters.Glenshire offers 1/3-to 1-acre lots with amenities including a swimming pool, product.Further north is the Town of Truckee town boundary,and just over the boundary is clubhouse and tennis courts.Home prices in Glenshire range from$225,000 to$700,000. Prosser Reservoir.Further north,on Highway 89,in Sierra County are the communities of Further east is vacant land leading to the Reno metropolitan area. Loyalton,Portola and Sierraville. West South Immediately west of the subject is the recently completed realignment of Highway Immediately south of the subject is Olympic Heights,a small single-family 267 and junction with Interstate 80.This was a highway project,which was necessary to residential development with modest,older homes.Also south of the subject is the Union relieve vehicular congestion in central Truckee.This project is a major enhancement to all Pacific Railroad tracks and the Truckee River,both of which follow the Interstate 80 corridor traffic in central Truckee and greatly enhances the subject's access to the surrounding area. west to Reno.Further south is a mix of residential and commercial development including the Further west is the historic downtown area of central Truckee.This area is primarily developed Truckee River Regional Park,Ponderosa golf course and the Truckee-Tahoe Airport,which with retail shops,bars and restaurants.Further west is the Donner Pass Road business district. serves the north Lake Tahoe area.Also south of the subject is the Martis Valley in Placer This area is a mix of older and recent commercial development related to shopping and County.Much of the Martis Valley is currently privately owned vacant land,which is the focus services.Further west is Donner Memorial State Park located on the eastern shore of Donner of substantial future development planning. Significant development in the Martis Valley Lake.Donner Lake is a significant recreational amenity for the Truckee area,including boating, ` includes the Lahontan Golf Community,which was developed in the late 1990s.This is an 880- camping and swimming activities.Further west,Interstate 80 leads to Sacramento,California's acre,exclusive golf and amenity based second home community with approximately 500 lots, Central Valley and the San Francisco Bay Area. approximately one-half of which have been built with luxury homes.Prices for resale lots in this community range between$275,000 and$750,000.Further analysis of this subdivision will be covered later in this report. _41_ -22- SKI MARKET ANALYSIS to larger resorts in the Rocky Mountains.This is,in part,due to the superior ski experience in these other areas.Overall,the high altitude and location further inland provide these areas with The subject is being marketed as a second home community that offers year- better snow and better ski conditions than the wetter and warmer snow and ski season in the round recreational amenities.One of the key amenities offered at the subject is excellent Sierra Nevada.Recent trends in Tahoe area resort development have been toward greater access to alpine skiing in the Lake Tahoe region of the Sierra Nevada Mountains.The Lake capital improvements and resort development,including the following: .,, .Tahoe area is home to the largest concentration of ski resorts in North America with 15 resorts Squaw Valley rithin close range of the Lake Tahoe Basin,including world-class resorts such as Squaw Intrawest's development of 13 acres of a base area village approved for 640 total Valley and Heavenly.The presence of ski resorts is a major economic force in mountain units and$0 boutique retail shops,Phase I of which is complete(139 condos,17 shops). communities.Over the past ten years,the ski industry growth in the United States has been Heavenly stable,as evidenced by the following table of skier visits in the U.S.by market. $250 million redevelopment,including Marriott's Grand Residence and Timber Lodge,retail,and Heavenly gondola station development in 2002. U.S.Ski Industry Skier/Snowboarder Visits Northstar At Tahoe (In Millions) Recent acquisition by Booth Creek Ski Holdings and subsequent develppment of United States Northeast Southeast Midwest Pacific West Rocky Mountain Big Springs''ski-in/ski-out residential lots.East West Partners recent purchase of land and Season Skiers %Change Skiers skiers Skiers Skiers %Change Skiers development rights at the base area to include fractional ownership units and commercial 1992-93 54,032 6.3% 13,217 4,660 6,978 10,575 6.4% 18,602 space and on-mountain units. 1993-94 54,637 1.1% 13,718 5.808 7,364 10,244 -3.1% 17,503 1994-95 52,677 -3.6% 11,265 4,746 6,907 11,346 10.8% 18,412 Sugar Bowl 1995-96 53,983 2.5% 13,825 5,693 7,284 9,033 -20.4% 18,148 - $34 million dollar expansion including six new quad lifts,Mt.Judah entrance and 1996-97 52,520 -2.7% 12,407 4,231 7,137 9,841 8.9% 18,904 1997-98 54122 3.1% 12,712 4,343 6,707 11169 13.5% 19,191 lodge. 1998-99 52,089 -3.8% 12,299 4,261 6,005 11,084 -0.8% 13,439 Kirkwood 1999-00 52198 0.2% 12025 5191 6422 10451 -5.7% 16109 $250 million in base area and multi-family unit development since 1994. 2000-01 57,337 9.8% 13,697 5,458 7,580 11,277 7.9% 19,324 r 2001-02 54410 -5.1%1 12,188 4,994 6980 12126 7.5% 18123 2002-03 57,624 5.9% 14,232 5,844 8,250 10,602 -12.6% 18,696 As investment and development opportunities in higher profile Colorado and Utah Annual Chan e 92-93 to 02-03 0.6% 0.7% 2.3% 1.7% 0.0% 0.1% resorts are becoming exhausted due to lack of available land,-Tahoe area resorts are 97-98 to 02-03 1.3% 2.3% 6.1% 4.2% -1.0% -0.5% becoming attractive alternatives.The proximity of strong feeder and drive-in markets in Source:National Ski Areas Association Sacramento and San Francisco has spurred much of the recent capital investment in the Tahoe area resorts. The subject's sub-market of the Pacific West has had 0 percent growth over the last ten years,while the United States ski market has had modest growth of 0.6 percent over the same time period. Resorts in the Pacific West region are generally smaller in scope than resorts in the Rocky Mountains(Colorado,Utah,Wyoming,Idaho)and have experienced less investment of capital in base facilities,on-mountain improvements and real estate development compared Tahoe Area Resorts single family lots and condominiums,2.420 skiable acres with a vertical drop of over 2,200 As noted,there are 15 alpine ski resorts in the Lake Tahoe Region.These resorts feet,an18-hole golf course and a base area village.Summer activities at the resort include lift range from small community resorts to world-class resort destinations.The following table served mountain biking and hiking.Northstar is unique in the ski resort industry in that all of the contains an inventory of the area resorts,including the number of lifts and general location in land is privately owned by the resort owner and operator,Booth Creek Ski Holdings Inc.,which the Lake Tahoe region. purchased the resort in 1998.Typically,resorts in the U.S.are operated qn land leased from the USDA Forest Service,with only a small percentage of privately owned land available for Lake Tahoe Area Ski Resorts development.The private ownership situation at Northstar-at-Tahoe allows for large-scale Resort No.of Lifts Location development opportunities,as well as increased ski terrain.Currently,a second wave of SodaSprings 2 8 miles east of Truckee development is occurring in the form of ski-irbski-out single-family lots in the Big Springs area Boreal Ski Area 9 9 miles west of Truckee of the resort by Booth Creek.The most significant development proposed for Northstar-at- Sugar Bowl Ski Resort 12 10 miles west of Truckee Donner Ski Ranch 6 10 miles west of Truckee Tahoe is the result of a partnership between Booth Creek and East West Partners.These Tahoe Donner Downhill 4 Truckee entities entered into an agreement that was finalized in April 2003 and includes the following Squaw Valley USA 31 11 miles south of TruckeeNVest of Tahoe City plans for a new base area village and mountainside lot development. AI ine Meadows 14 13 miles south of Truckee Northstar-at-Tahoe 15 6 miles south of Truckee Granlibakken Ski Resort 2 South of Tahoe City Maximum construction of 1,800 base area units,including 350 units adjacent to Homewood Mountain Resort 8 5 miles south of Tahoe City the existing village. Mount Rose Ski Area 5 Reno area 122,300 square feet of commercial space. Diamond Peak 6 Incline Village Heavenly Ski Resort 29 South Lake Tahoe a 38,000 square foot conference and spa facility. Sierra-at-Tahoe 12 12 miles south of South Lake Tahoe Kirkwood 12 35 miles south of South Lake Tahoe Source:www.Skitahoe.com Conclusion. The Lake Tahoe region has the largest concentration of ski areas in North Of the Tahoe area resorts listed above,Squaw Valley represents the most major America,ranging from mostly small,family oriented resorts to an Olympic caliber venue. resort in the vicinity of the subject,famous for its vast and challenging terrain,as well as Overall,the Lake Tahoe area resorts have followed national trends in the stabilization of skier hosting the 1960 Winter Olympic alpine skiing events.The next tier of resorts in the subject's days over the last ten years.Recently,there has been a trend of intensive capital investment in vicinity is represented by Alpine Meadows,Sugar Bowl and Northstar-at-Tahoe,all of which the region's resort lodging, amenities and infrastructure, illustrated by the proposed are quality resorts oriented toward family skiing;however,they lack the sheer scope and development at Northstar-at-Tahoe by East West Partners.The subject's association with .,reputation of Squaw Valley and Heavenly in South Lake Tahoe.We have conducted a further Northstar-at-Tahoe is considered an excellent amenity, as Northstar-at-Tahoe is well analysis of Northstar due to its association as a subject property amenity. positioned as a quality resort with a strong future. Northstar-at-Tahoe Northstar-at-Tahoe is a master-planned community originally developed in the 1970's on the site of a former tree farm previously owned by the Fiber Board Company.The master-planned community at Northstar consists of over 1,500 existing private homes and -29- -30- i Balanced growth rates are also indicated by the increase in housing units Nevada Counties Population and Household Trends commensurate with population and household growth.The average change in value of median home prices for the California Counties from 1990 to 2000 was 25 percent,while the Nevada Po ulation Households County 1990 20oc 2002 2007 Pro'. %Cho a 1990 20M 2002 2007 %Change Counties experienced a 35.4 percent change in median home value.It should be noted that Douglas 27,836 412s9 43813 50377 49.3% 10572 16401 17631 zones ss.,% there is a key distinction between the California and Nevada communities in terms of the Washoe 254,673 339 486 355,073 395,419 33.3% 102,296 132,084 137,898 152,801 29.1% C,�city 40,435 52,457 54,651 60,343 39.7% 15,891 20,171 21,024 23.269 2e.9% economic forces contributing to growth.The state of Nevada does not have a personal state income tax.In addition,the prevalence of the gaming industry is a consideration(either positive S. ..:CIM,STDBonline,U.S.Census or negative)for potential home purchasers in the state of Nevada. It is anticipated that the subject will be a vacation community for the majority of The subject is located in Nevada County,which has experienced total population growth of 15,867 and household growth of 7,322 between 1990 and 2002.Population and the homebuyers and is being marketed as such.We have examined trends in vacant housing units in the area to understand the place of vacation homes in the area market.The following household growth are growing at similar rates,which indicates balanced and healthy growth. table shows vacant housing units in each area county by total number of vacant units and Overall,the area has experienced significant growth,which is projected to continue through vacant units as a percentage of the total housing inventory. 2007.Washoe County has the largest population in the Nevada region,containing the city of Reno. The number of housing units and median home values are also indications of Vacant Housing Units growth.The following table shows the total housing unit inventory in the Lake Tahoe region California Counties 1990 2000 2002 2007 counties and the change in median home value from 1990 to 2000. Nevada s 59a 18% 7 388 16.7% 7 214 15.9% 7 28s 15% Placer 13,774 18% 13,920 13.0% 14,985 13.1% 15 227 11.8% El Dorado 14,602 24% 12,339 17.3% 16 143 20.8% 16,266 19.4% California Counties ; Nevada Counties i Total Housing units Median Home Value Douglas 3 550 25% 2,605 13.7% 3,692 17.3% 3,841 15.7% (} -County 1990 2000 2002 2007 Pro. %Change 1990 2000 %Change Washoe 9,896 9% 11,824 8.2% 10,637 7.2% 10.874 6.6% ` Nevada 37,352 44,282 45,296 48,442 18.6% 154,717 199,205 28.8% 1 Placer 77,881 107,302 114,148 129,300 37.8% 169,037 207,521 22.e% Carson City 732 4% 1,112 5.2% 774 3.6% 805 3.3% El Dorado 61,449 156,299 161,743 175,956 16.0% 154,995 191,043 23.3% Source:CCIM,STDBonline,U.S.Census Average 25.0% Source:CCIM,STDBonline,U.S.Census { El Dorado,Douglas and Nevada Counties have the highest percentage of vacant Nevada Counties ' housing units,while Wahsoe County and Carson City have the lowest percentage at 3.3 Total Housing Units Median Home Value percent and 6.6 percent,respectively.This suggests that Washoe County and Carson City are -County 1990 2000 2002 2007 Pro. %Change 1990 2000 %Change Douglas 14,122 19,006 21,323 24527 34.6% 121,025 174,101 43.9% less resort oriented in terms of housing development, as second homes tend to be Washoe 112,195 143,908 148,535 163675 28.3% 111,239 149,216 34.1% concentrated near recreational amenities.This is consistent with the appraisers'observations Carson City 16,625 21,283 21,798 24,074 38.0% 98,257 127,231 28.2% i during the physical inspection of the market area. Average 35.4% I Source:CCIM,STDBonine,U.S.Census } i t 4 -3�- -36- 1 1 {t 3 Truckee Housing Units Summary Report j We have recapped the population and building permit data for the Town of Truckee from the previously presented Location Analysis. Population in the Town of Truckee Percent Change 1990 Census 2000 Census 1990 to 2000 January Population %Change #Change j Housing Unit Value 1994 11,150 - - $0-$69 999 17 207 1.118% 1995 11,800 5.8% 650 $60 000-$74 999 47 2.4% 1996 12,050 2.1% 250 $70 000-$79 999 1 25 0.7% d 1997 12,600 4.6% 550 $75 000-$99 999 333 9.3% f 1998 13,000 3.2% 400 $80 000-$89,999 45 1.3% 1999 13,300 2.3% 300 $90,000-$99 999 28 0.8% 2000 13,800 3.8% 500 $100 000-$149 999 877 45.1% 185 5.1% -79.0% 2001 14,200 2.9% 400 $150 000-$199 999 353 18.2% 884 24.7% 0.8% 2002 14,700 3.5% 500 $200,000-$299 999 204 10.5% 1,517 42.3% 642.4% 2003 1 14 850 1.0% 1 150 $300,000-$399 999 72 3.7% 578 16.1% 699.3% Annual Chan a 3.2% 411 $400,000-$499 999 25 1.3% 373 10.4% 1 381.8% $500,000 or more 14 0.7% 495 13.8% Source:California Department of Finance $500,000-$749 999 313 8.7% $750,000-$999,999 116 3.2% $1 000 000 or more 67 1.9% s I Truckee Total Annual Building Permits Median Home Value $137,925 $242,118 75.51/6 1 %Change a 2000 2001 2002 2003' 1990 2000 2002 2007 Census Census Est. Project 90-00 02-07 Residential 372 187 317 156 Population# 9,816 15,550 16,633 19,706 58.4% 16.7% Commercial 28 7.5% 62 33% 122 38% 83 55% Households 3,608 5,785 6,215 7,314 60.3% 17.7% Total 400 249 439 239 Housing Units t Total 8,761 11,885 1 1 11,950 1 13,061 1 1 35.7% 9.3% f Source:Town of Truckee Owner-Occupied 2,392 27% 4 336 36.5% 4,724 39.5% 5,743 44.0% 97.5% 21.6% January through August Renter-Occupied 1,216 14% 1,449 12.2% 1,491 12.5% 1,571 12.0% 22.6% 5.4% Vacant 5,154 59% 6,100 51.3% 5,735 48.0% 5,747 1 44.0% 11.3% 0.2% As noted previously,the Town Truckee was incorporated as a town in 1993,thus he most meaningful population figures are from 1993 forward.The following table summarizes several vital statistics for the town of Truckee,which were presented previously in separate This table indicates strong growth in Truckee in all categories presented.Most tables for the counties in the region. noteworthy is the large increase in owner-occupied homes valued at over$500,000 from 1990 to 2000.In 2000,there were 991 homes valued at over$500,000,compared to a total of 14 3 homes in the same value range in 1990.Homes in Lahontan represent a good portion of the homes in this category,as well as homes in the more recent phases of Northstar,which -s -38- s Of the neighborhoods described above,Lahontan and Tahoe Donner have been month.One factor of this high absorption rate was the timing of the development which developed as master-planned,amenity-based communities and are considered to share similar coincided with the high-tech stock surge related to the dot com boom in the Bay Area.It was characteristics with the subject.These developments are covered in further detail,including reported that approximately 75 percent of the buyers in Lahontan were from the Bay Area,with current lot listings,pricing trends. many of being dot com beneficiaries.Moreover,the 509 lots were initially sold to 330 owners, Tahoe Donner with some buyers purchasing up to three lots for future investment,etc.In the initial period of *" When first developed in the 1970s,Tahoe Donner was known as the largest lot sales at Lahontan,lots sold in the range of$375,000 to$2,250,000 with lowest lot sale at ubdivision in the United States.This project consists mainly of single-family homes,which $350,000..During the resale period,sale prices generally ranged from$350,000 to$1,000,000, have been developed over the last 30 years on lots ranging in size from 0.25 to 0.50 acres. with a low of$209,000.This is attributed to the recent downturn in economic conditions,as well Many of the lots are located adjacent to the 18-hole golf course;however,due to the sheer as the fact,that Lahontan is now an established community and perhaps the novelty and scope of the project,most of the lots are not on the golf course.Recent sales of lots in Tahoe marketing intensity has diminished somewhat.Currently,it is reported that there are100 resale Donner range from$100,000 to$200,000 for non-golf course lots with golf course frontage and lots on the market and seven finished homes.A search of the Tahoe Sierra MLS identified 80 mountain-view lots selling in the$220,000 to$350,000 range.All of the,lots available are in-fill Lahontan lot listings,as of September 5,2003 ranging from$229,000 to$2,195,000,with an lots scattered throughout the development.Prices for single-family homes vary due to the age average listing price of$508,261.A search of Lahontan lot sales over the past$6 months and quality of homes,generally ranging from$300,000 to$2,000,000.Recent lot sales in indicated 69 lot resales ranging from$375,000 to$1,500,000,with an average sale price of Tahoe Donner are analyzed in the Sales Comparison Approach section of this report.There is $467,532 per lot. a limited amount of multifamily development in Tahoe Donner;the most recently completed project in the summer of 2003 is Zurich Place.This project offers two-to four-bedroom cottage 'Future Development units ranging in size from 1,778 to 2,860 square feet,with pricing ranging from$439,000 to Future development in Truckee is encompassed under the Truckee General $869,000($246.91 to$303.85 per square foot).Overall,Tahoe Donner represents the first Plan,which was first adopted in 1996 and forecasts out to the year 2025.The following table amenity-based development of its kind in the Truckee area and is considered a desirable shows the estimated development potential in Truckee per the General Plan Update Briefing I community.Recent trends indicate construction of higher end homes on the in-fill lots.Tahoe Book dated April 2003. I Donner is not considered competitive with the subject due to its massive size and lack of identity and exclusivity.It does demonstrate a strong track record for demand of resort and amenity-based living in the Truckee area. Lahontan Lahontan has been discussed in detail throughout this appraisal report as it represents the first and most successful high end, amenity-based resort community. Lahnontan shares many characteristics with the subject in terms of exclusivity and its identity as the Amodem interpretation of a resort community.Lahontan varies from the subject in that it offers single family lots only and its amenity offerings do not extend outside the community, unlike the Tahoe Mountain Club benefits offered to owners at Old Greenwood,which will be discussed later in this report.As a real estate development project,Lahontan was extremely successful,having sold out all 509 lots in 40 months,for an absorption rate of 12.73 units per Estimated Development Potential in Truckee Northstar-at-Tahoe This ski area was originally master-planned and developed in 1972 on privately Area Units Downtown 830 owned land with approvals for a total of 3,300 dwelling units.Approximately one-half of the Tahoe Donner 1,357 allowable density at Northstar has been developed,providing the opportunity for vast real Donner Lake 497 estate development at the resort.The following events have been the recent highlights in real Glenshire-Devonshire 351 estate development at Northstar: Large Lot Subdivisions East of Tahoe Donner,Glenshire Area,Tahoe Boca 191 Residential Development Areas(Brockway Road,Northwoods Boulevard 1,711 Existing Residential Area In-fill(Sierra Meadows,Olympics Heights,Prosser,Pannonia • Booth Creek's 1998 auction of 32 lots for an average sales price of$212,000 per Ranchos Gateway,Armstrong) 777 lot in the Big Springs subdivision. Old Greenwood 306 Pc-1 50 0 Booth Creek's 1999 auction of 46 Big Springs lots for an average price of PC-2 Gra's Crossing) 600 $304,000 per lot. McIver Hill 50 • 2001:26 new lots sold in the Overlook at Big Springs for$333,000 to$751,000. ESTIMATED POTENTIAL UNITS 6,720 EXISTING UNITS 10,903 0 Recent marketing of 15 ski-in/ski-out lots in The Summit at Big Springs,with 12 BUILD-OUT POTENTIAL 17,623 lots under contract at$539,000 to$990,000. Source:Town of Truckee,General Plan Update Briefing Book,April 2003) • Construction of the Northstar Club in 2000,a base area fractional ownership Significant development potential in Truckee includes the previously discussed project(to be discussed in detail later). in-fill lots in Tahoe Donner,peripheral residential development areas,and Gray's Crossing, 1999:Development agreement between Booth Creek and East West Partners including future base area construction of 1,800 units,122,300 square feet of being planned and developed by East West Partners.According to the statistics provided in the commercial space,and a 38,000 square foot conference/spa facility. General Plan Update,Truckee is approximately at 62 percent of residential build-out capacity. There are significant development areas adjacent to the south of the town limits of Truckee in Current single family,condominium and lot listings are summarized below as the Martis Valley in Placer County.These developments will use Truckee services and provided by the on-site Northstar real estate offices of Sheridan-Williamson. influence traffic and commerce in Truckee proper.Development in the Martis Valley falls under the Martis Valley General Plan,which was first adopted in 1975 with a maximum number of Northstar-at-Tahoe Listings 12,000 residential units.This plan was later revised to a maximum of 8,600 residential dwelling Price units;a reduction of 28 percent from the original plan.It is anticipated that a large percentage Type No.of Listings Range Average ,--of this development will cater to second homebuyers.Other significant development in this Single Family Homes 22 $618 500 to$3 500 000 $1 403 113 Yea pertains to base area and on-mountain development at Northstar-at-Tahoe Resort. Condominiums/Cottages 16 $175 000 to$459 000 $ 319,125 Single Family Lots 12 $450,000 to$975,000 $ 638,667 Recent lot sales at Northstar are discussed in detail in the Sales Comparison Approach section of this report. Northstar is positioned for a transformation from an underdeveloped small family ski area to a freshly developed resort with an animated base area • Lower price points for the fractional interest provides for a broader market. • More consistent cash flow is realized by the broader market. Existing High-End/PRC Resorts • Higher profitability due to greater levels of ongoing sales. Before 1995 4 The locations of most fractional interest properties are in resorts of some type. 1996 6 -he primary difference in resorts as it relates to the type of buyer for fractional interest is 1997 13 ,ovation in a destination report typically traveled to by air,or regional resorts typically located within a three-hour drive time,with most owners arriving by automobile, lass 20 1999 33 Existing Fractional Interest Resorts 2000 44 According to Ragatz Associates,as of April 2003 approximately 138 fractional 2001 52 interest resorts were identified worldwide.Ragatz Associates indicates that approximately 48 of 2002 69 the total resorts are high-end fractional,27 are private residence clubs(PRCs),and 63 are 2003 1�Qtr. 75 more traditional fractional.The majority of these resorts(39 percent)are located in the United Source:Ragatz Associates,Traditional States,with the others in Canada,Mexico,the Caribbean,and other areas,including London Interests 5/03 and Fiji.The expansion and evolution of the fractional interest product market is evidenced by the fact that Ragatz Associates identifies 31 high-end PRC resorts in various'stages of The above table illustrates the rapid increase in supply for this evolving market planning throughout the world,with 21 being located in the United States.The following table over the past eight years.Ragatz Associates reports that the annual growth in the number of summarizes the rapid expansion in the supply of high-end fractional and private residence club high-end/PRC resorts averaged 15.2 percent between 1996 and 2002. (PRC)resorts. The majority of fractional interest resorts are in ski destinations,with beach locations being the second most common.Less than one-quarter of the fractional interest resorts are in golf and urban locations.The most substantial concentration of high-end/PRC resorts in the United States is in the state of Colorado,which accounts for the orientation towards ski destinations.The following table summarizes the locations of fractional interest resorts throughout the United States. -��- -52- Locations of Fractional Interest Resorts Fractional Units Supply/Ownership Traditional Traditional Avg.No. No.of Units No.of Owners No.of Weeks High- Fractional High- Fractional Weeks Owned Worldwide Worldwide Owned End/PRCs Interests Total End/PRCs Interests Total Traditional/Fractional 10 1,610 15,800 158,100 Arizona 5 1 6 Nevada 0 1 1 High-End/PRC 7 2,135 15,900 90 500 California 8 1 9 New Hampshire 1 4 5 Total 3,745 31,700 248,600 Colorado 21 6 27 New York 1 2 3 Delaware 0 1 0 North Carolina 2 0 2 Source:Ragatz Associates Florida 1 1 2 Oregon 3 5 8 Hawaii 0 2 2 Pennsylvania 0 1 1 Fractional Interest Product Characteristics Idaho 2 0 2 Rhode Island o 1 1 1 The previous table has indicated that there are approximately 3,745 fractional Indiana 0 1 1 South Carolina 2 8 10 Maine 2 0 2 Texas 1 3 a interest properties worldwide,with the majority being high-end or private residence club Maryland 0 3 3 Utah 1 1 2 projects.According to Ragatz Associates,the average size of a traditional fractional interest Massachusetts, 0 2 2 Vermont 2 4 s resort is 25 units,and the average size of a high-end/PRC resort is 29 units.However,they Michigan 2 5 7 Virginia 1 0 1 Minnesota 0 1 1 Washington 0 a a note that if projects that are under construction are planned and completed,the average high- Missouri 1 3 4 Wyoming 3 0 3 end/PRC resort will contain 49 units,which is a substantial increase in total project size.It is Montana 0 3 3 noted that the subject's Old Greenwood development is proposing 72 attached cottages and Source:Ragatz Associates 74 freestanding cabins.This does represent a substantially larger scope development than has been typical of the market in the past.However,it is noted that the trend is towards a larger The above table indicates that California is a distant third behind Colorado in development size.Also,the resort locations do not have sites available for larger scope terms of total number of fractional interest resorts.It is noted that some of these are in the projects such as the subject.The following table summarizes the unit characteristics of the subject's Lake Tahoe Basin area,which will be discussed later in this section of the report.In existing resorts. terms of the distribution of ownership represented by the resorts,there are approximately 31,700 owners of fractional interest product worldwide,representing nearly 250,000 weeks of Fractional Interest Unit Characteristics shared ownership.The following table summarizes the average number of weeks owned and Unit Configuration Average Unit Sizes.Ft. number of units and shares owned worldwide. Traditional Traditional Fractional High-End/PRO Fractional High-End/PRC Studio 4.7 6.5 465 565 1 Bedroom 28.1 15.8 755 820 2 Bedroom 44.6 39.0 1 165 1,470 3 Bedroom 1 22.4 29.0 1,790 1 2,075 4 Bedroom 1 0.2 9.7 N/A 3,290 Source:Ragatz Associates -53- -54- LAKE TAHOE AREA FRACTIONAUTIMESHARE ANALYSIS Lake Tahoe Area Fractional/Timeshare Product Summary The preceding section of this market analysis was intended to provide an Year Total Total Total Shares overview of the fractional interest market on a national basis with some comparisons to the Identification Built #of Units Share Size %Sold Shares Shares Sold Available subject.This section is intended to analyze the competitive product and market characteristics Fractional Interests Product Northstar Club 2000 18 1/7 94% 134 126 8(Developer .,*—of the subject's specific market area,which is the Lake Tahoe Basin.The subject's Old Northstar-at-Tahoe 7 Weeks hold-backs) California ,reenwood development is situated in the town of Truckee along Interstate 80 at the northern Tonopalo under 19 1/7 45% 133 60 73 end of the Lake Tahoe area.The Lake Tahoe area is a well-established vacation area for Tah North Lake Blvd. Const. 7 Weeks Tahoe Vista,CA Northern California,and most specifically,the Sacramento and San Francisco Bay Area Marriott Grand Residence 12f02 189 1/4 86% 756 650 106 1001 Park Avenue 13 Weeks regions.The city of San Francisco and general Bay Area population is within a 3.5-hour driving South Lake Tahoe time from the subject and Lake Tahoe Basin.Thus,the subject's specific market area can be Kirkwood Mountain Club 12/99 40 6.5 W 100% 210 210 0 bt' j / p Kirkwood Mountain Resort 13 8 .5 Weeks Kirkwood CA characterized as a drive-to regional market, as opposed to many ski area or beach Trendwest South Tahoe 4102& 59 1/13 9.3% 750 70 680 destinations,which require more extensive travel and are characterized as destination resorts. 180 Elks Point Road 4103 4 Weeks — —Zephyr Cove,NV The subject's proximity to this huge drive-to'market and population centers of the Bay Area and Total-Fractional Interest Product 56% 1,983 1,116 967 Sacramento is the primary key to its likely success.As discussed previously in the Location Timeshare Projects Analysis section of this report,there are over 9,000,000 people considered to be within a 3.5- Marriott Timberlodge 12/02 135 1/50 29% 6,750 1,958 4,792 4100 Lake Tahoe Blvd. (Phase 1) 1 Week (Phase 1) hour driving distance, representing a huge potential market, particularly given the well- South Lake Tahoe established desirability of the Lake Tahoe area for recreational activities,including skiing,the Hyatt a iIncline Lodge 9/99 60 ay 1 11//5 ek 70% 3,060 2,142E79673 lake,and other recreational activities. Incline Village,NV Embassy Vacation Resort 4197 142 1/51 � 7.242 5.279 901 Ski Run Boulevard 1 Week South Lake Tahoe Existing Fractional/Timeshare Projects Total-Timeshare Projects 55% 17,052 9,379 There are eight projects in the Lake Tahoe area that are selling fractional Grand Total 19,035 10,495 8,540 Subject-Old Greenwood Under 72r74 1/17 — 2,482 — 438 interests or weekly timeshares.As discussed previously,there has been a concerted effort 1-80 @ Prosser Village Exit Const. 3 Weeks among developers of fractional projects to distance themselves from timeshare in terms of Truckee nomenclature.However,the projects are all competing for vacation customers from the same The above table indicates that the eight fractional or timeshare projects in the feeder markets,and thus represent competition that should be evaluated and reviewed in Lake Tahoe area have all been constructed since 1997,with most having been constructed relation to the subject.The following table summarizes the existing supply of competitive within the last three years.The table shows that overall these projects are 55 to 56 percent projects in the Lake Tahoe area. sold out.Following is a brief discussion of the subject and its characteristics,as well as a brief discussion of each of the competitive projects in the Tahoe region as they compare to the subject.More specific comparisons with regards to pricing and unit size are conducted in the Sales Comparison Approach section of this report. Old Greenwood-Subject marketability of their product.As of the date of appraisal,the two exchange organizations being The subject's Old Greenwood fractional product is to be contained in two different considered are www.WoddsFinestResorts.com and Interval International. types of improvements.There will be 74 freestanding cabin units with sizes ranging from 2,470 Accessibility to the subject is a key factor in its marketability.The subject enjoys square feet in a three-bedroom unit to 2,985 square feet in a four-bedroom unit.These cabins immediate access to Interstate 80,which is one of the two primary transportation linkages represent a unique product type in the market,as none of the competitive projects discussed between Lake Tahoe and the Sacramento/Bay Area markets.Overall,Interstate 80 is regarded herein have this type of freestanding detached product.Old Greenwood will also have 72 as a more efficient transportation linkage than U.S.Highway 50.These two routes converge in attached cottage units in buildings that have two or three units per building.These are also Sacramento,and Interstate 80 continues on to San Francisco.U.S.Highway 50 is not a limited unique in the market given their cottage or town home type of design,as opposed to stacked access highway and turns into two-lane transportation leading to South Lake Tahoe.The flat design.One of the distinguishing marketing factors for the subject will be its'amenities subject's connection to Interstate 80 also allows for a 25-minute drive to the Reno airport to the through the Tahoe Mountain Club.In addition to the onsite Jack Nicklaus Signature golf course east,which is another good accessibility characteristic as it relates to potential fly-in customers. and clubhouse with fitness center,pools and spas,the subject is also able to offer on-mountain Following is a discussion of the competitive fractional and timeshare projects in amenities at Northstar-at-Tahoe and the member's restaurant situated on the lakefront in the Lake Tahoe area. Tahoe Vista.These are additional amenities that allow the subject to address the primary Northstar Club factors that draw visitors to the Lake Tahoe area,which are the lake itself,skiing,and summer The Northstar Club is an 18-unit,three-story stacked flat condominium project golf, selling seven weeks,1/7 shares,in a private residence club concept.This project is located at The subject's use plan is based on the sale of 1/17 fractions,which allows the base of the ski lift in the Northstar-at-Tahoe Village area,providing it with excellent ski- owners three weeks of time on a 51-week year.The subject's use plan is well conceived from in/ski-out access. This project is regarded as among the more successful fractional both the developer's standpoint and a user's standpoint.Owners will buy an interest in a developments in the area.There is golf available to owners in this resort at the Northstar specific unit with 17 owners total for each unit.There are a total of 17 fixed weeks of ownership Resort golf course,which is a short drive from this project within the master-planned Northstar within a calendar year with eight fixed weeks established during the ski season and nine community.The developer reports price fluctuations for this project occurred.Pricing was established in the summer season.The fixed weeks will be spaced at least a week apart,and strong in the opening in 2000,but declined after the events of September 11,2001 and the by allowing owners to select a prime week,the developer is able to incorporate premiums into overall recessionary economy.In our opinion,this is among the most competitive projects to the various pricing structures.The remaining time is to be called float time.Float reservation the subject as it relates to location and price pants,which are discussed later.Re-sales have rules will be implemented which provide for equitable use of prime time and allow owners been occurring in this project,and the brokers for the re-sales report that,on average,there flexibility in terms of using available unreserved time and possibly attaching the float week to are approximately 10 percent of the units available for sale at any given time. one of their fixed weeks to allow for extended stays of two weeks.The amount of time,three Tonooalo weeks,and the flexibility of float time,are intended to target the drive-to market of the Northern This is most recent fractional project to be undertaken in the Lake Tahoe area.It California areas around Sacramento and San Francisco.This use plan is considered well is currently under construction and scheduled for completion by year-end 2003.This project is conceived and highly flexible for attracting these types of visitors to Lake Tahoe. considered highly desirable due its unique lakefront location.The building restrictions and Branding is a significant asset as it relates to marketability of timeshares,in development requirements of the Tahoe Regional Planning Agency(TRPA)have made it very particular,but fractional interests as well.East West Partners is a well-established resort difficult for lakefront projects to occur.It is our understanding this project was approximately developer known for good quality resorts.While they do not intend to affiliate with any type of five years in the planning and development process.The lakefront location also relates to a brand,they are likely to affiliate with an exchange organization to increase the flexibility and substantially higher price point for this project than any other projects in the South Tahoe area. -61- -62- Francisco/Oakland/San Jose area,there are 306,358 people earning an income in excess of Demographic Trend Summary Report $150,000,and 35,007 in the Sacramento area.This will represent the primary target market for the subject.This information illustrates there is a large viable marketplace within driving 2000 Census 2002 Estimate 2007 Projection San Francisco-Oakland-San Jose,CA DMA distance to the subject. Total Population 6,679,769 6,800,139 7,125,925 Total Households 2,443,380 2,480,324 2,577,122 Competitive Projects in Other Areas Households by Income: The subject's freestanding cabin product and the cottages represent a unique $0-$15,000 250,185 10.2% 330,486 13.3% 255,753 $15,000-$24,999 194,085 7.9% 189,436 7.6% 154,307 fractional product type in the Lake Tahoe area. East West Partners is an experienced $25 000-$34 999 212,493 8.7% 211,940 8.5% 184,874 developer,particularly in other areas of the country such as Beaver Creek,Bachelor Gulch, $35 000-$49 999 321,348 13.2% 223,361 9.0% 212,393 and Breckenridge,Colorado,and thus have carefully tailored the product type to be offered to $50 000-$74 999 472,732 19.3% 298'$98 12.0% 280,032 $75 000-$99 999 339,082 13.9% 291,343 11.7% 327,584 their perception of what the market wants in this area.The golf orientation of the subject $100,000-$149 999 366,314 15.0% 628,801 25.4% 776,344 property also represents a unique attribute in the market area.For the purposes of evaluating $150 000+ 289,223 11.8% 306,358 12.4% 385,836 pricing and absorption potential for the subject property,we have considered it appropriate to -Average HH Income $83 726 $87 866 $102 741 Median HH Income $62 333 $74 012 $90 947 research other resorts built by East West Partners,as well as other market areas which have Per Capita Income $30 564 $32 049 $37 293 golf-oriented product or similar freestanding product.These are summarized in the following Sacramento MSA table. Total Population 1,628,190 1,679,405 1,813,727 Fractional and Timeshare Absorption Rates Total Households 605,919 624,875 673,908 Households by Weeks Income: #of share % Sokv $0-$15 000 78,965 13.0% 106,006 17.0% 87,587 dentification units sae sold Mo unit Type unit Sq Ft. Price/Share Pnoe/Week Pnoa/SF East West Partner; 40 1M 100% 122 studio 436-602 $65,000 Avg. $25,000 $1,300 $15 000-$24 999 68,382 11.3% 65,708 10.5% 59,348 Hyatt Mountain Lodge 2BR/2BA 923-1,200 (Approx 1 Beaver Creek COI 3BR/3BA 1.318-1 353 $25 000-$34 999 74,799 12.3% 73,580 11.8% 73,206 East West Part 40 120 65% 37 studio 498 $'65,000 $25,000 $1,225 $35 000-$49 999 101 188 16.7% 69,630 11.1% 73,140 Hyatt Man Strm3tation 2BR12BA 097 (Approx Breckenrid CO 3BRf3BA 1550 $50 000-$74 999 126,173 20.8% 84,190 13.5% 87,636 Roaring Fork Club Cabins 18 1/681/4 100% 10 3BR13BA 2,400 $366.0001/6 $42,230 $917 Basaa,CO $550,000 1/4 $42,300 $75 000-$99 999 71,487 11.8% 71,876 11.5% 87,668 Jack Nicklaus Goff Course $100,000-$149,999 57,545 9.5% 118,879 19.0% 157,887 Teton Club 37 1/4-1126 57% 29 2BR12BA 1,450 $40,0001Week $40,000 $1,324 Jackson Hole W, Y 3BRr3BA 1,850 $1036 $150,000+ 27,818 4.6% 35,007 5.6% 47,437 Arnold Palmer Golf Course Average HH Income $59,829 $62,411 $70�0 BearVillage 61 1/10 25% 23 3BRf3BA 2045 $182.000 $35,000 $890 -A 48Rf4BA 2880 $632 Median HH Income $46,674 $49,075 $65,171 212 4 85% 31 Studio 377-587 $61,400-$e6,000 $4,723-$21,500 $651ss86 [T.Fran11S--i1gR.s.1 1BDn BA 695-1,082 $109,000.$163,000 $27,250-$40,750 $627-$602 Per Ca ita Income $22,361 $23,222 $26307 , 2BD12BA 1,190-1,606 $195,000.$350,000 s487so-$e7,5oo $sss-$871 Penthouse 2 470-3 693 $550 000-$820 000 $137 500-$205 000 $890-$880 Source:STDBonline Resort Nos.1 and 2 in the above table were ski area developments constructed The above table illustrates that as of 2002,the total population of these two by East West Partners and marketed with the Hyatt branding.The Hyatt Mountain Lodge in primary metropolitan areas is 8,479,544 people.The 10,000,000 population figure mentioned Beaver Creek,Colorado enjoyed excellent success with a high rate of absorption.The Beaver previously for the subject's market area also includes the Reno/Sparks area of Nevada and Creek area is well known for its upscale product,and the Hyatt Mountain Lodge was extremely some of the outlying areas of Northern California.The above table indicates that in the San well appointed with excellent quality build-out.It is in a destination resort area where there is -s^- -ss- good golfing availability in the summer months,but no golf course was specifically linked to this Resort No.6,the Grand Summit Resort located at The Canyons ski resort in property.This property had good timing to the market.The Hyatt Main Street Station in Park City,Utah,is a quarter-share project similar to that being developed in South Tahoe.The Breckenridge,Colorado has suffered from greater competition and more marketing difficulties, Park City market is also competitive with the Tahoe area as it relates to travel time,and the and has not enjoyed the same success as its Beaver Creek counterpart.Much of this was due San Francisco area as a feeder market.If you allow two hours on the front end of a 1.5 hour to the timing in the market,as well as pricing relative to the market.The experience of these flight to Salt Lake City and another hour on the back end for car rental and qrive time,Park City two resorts illustrates the difficulties and variances in marketing,which very often cannot be is an approximate 4.5 hour travel time,which is only one hour longer the 3.5 hour drive-time anticipated by the developer. from most of the Bay Area to Truckee.The Park City resorts market heavily in the San Resort No.3,the Roaring Fork Club Cabins,is regarded as the most similar Francisco Bay Area as one of its feeder markets.This project is located with ski-in/ski-out product type to that proposed for the subject.These log cabins are well located along the access to The Canyons ski resort.There is a golf course planned at the base area of the Roaring Fork River in Basalt,Colorado,approximately 12 miles down valley from Aspen.Their resort,which has not yet come to fruition due to the financial problems of the developer. proximity to Aspen puts them in the destination resort category.In addition to the similarity in Overall,the subject property appears to have all the necessary components to product type,these cabins are also situated on a Jack Nicklaus golf course,similar to the achieve good successful marketing in comparison to local developments,as well as national subject development.A total of 18 of the 48 cabins were offered with fractional ownership,with developments. three of the cabins offering 1/6 shares and 15 of the cabins offering quarter-shares.One of the unique characteristics of the project is that an$80,000 membership requirement to the Roaring Absorption Fork Country Club was required.This club has 375 regular members and 125 national Absorption projections are very difficult to make based on comparisons to other members,and golf definitely enhances the prospects of the summer months for this area. resorts given the wide variations in product type and amenities,as well as type of location and While the area has developed more of a two-season market,it is not as fully developed as the feeder markets,as discussed previously.The following table summarizes the absorption Lake Tahoe area. experienced by the different resorts in the Tahoe area and national resorts we have surveyed. Resort No.4,the Teton Club,is located in Jackson Hole,Wyoming and offers The absorption has been compared on the basis of weeks sold per month.This comparison is golf privileges at the adjacent Teton Pines Golf Course designed by Arnold Palmer.The golfing necessary to mitigate the differences in share size. privileges here are not as substantial as those offered at the subject.This project does allow for good ski and golf access,making it similar to the subject in this respect.They offer a different type of flexibility in their share offerings in that a buyer may purchase between two and 12 weeks of time.The amenities package at this project is considered good and consistent with the subject. Resort No.5,The Club at Big Bear Village in Big Bear Lake,California,has been researched due its California market orientation and the fact that it is located near a much ,arger drive-to market,which is the Southern California market area within five hours driving time,which includes the entire Los Angeles Basin and San Diego.The population of this drive- to market is over 20,000,000 people.While golf is not a significant part of this project,it is a good year-round resort with skiing at Big Bear,as well as Big Bear Lake for summer activities. -69- -70- THE LAND Acres Assessor's Parcel No. Location 285.62 1970-08 The subject is located south of Interstate 80 in the eastern portion of the town of 77.69 19430-14 Truckee,Nevada County,California. 79.36 19.430-15 .� 78.87 19430-16 and Area 78.45 19-430-17 16.21 19-430-23 The total area of the subject is 616.20 acres,according to the parcels shown in the 616.20 Nevada County Assessor's maps. The acreage, per a survey prepared by SCO Planning and Engineering dated August 2003,is different at 603.57 acres.The taxable portions of the subject are the single-family lots,fractional unit land and existing cabin The above indication of 616.20 acres is the figure attributable to the Truckee Donner lots.The subject's land area per the survey is detailed in the following table by land use CFD.The difference in acreage between the survey and assessor's plats is considered type. negligible in relation to the scope of the project and has no impact on the value conclusions stated herein. Parcel Land Uselldentification Size Acres D1-135 Existind cabins 1.43' F-1-F19 Cabin Lots-Phase 1 6.26 Shape and Topography F,G,N Cottage 23.67` The subject parcel has an irregular,triangular shape,with the subject becoming wider to L,P,0 Future Cabin Lots 17.78` the south boundary.The topography of the site is mostly level with some gently sloping R1-R99 Lots 52.82` and undulating areas.Reference is made to the plat map on the facing page,which C,D,U Utilities/Roads 30.31 depicts the subject site. T Future development 8.05 A,13,J,K,O,S Common areas 104.16 Zoning Subtotal 244.48 E Fitness Center/Pro Shop 15.03 The subject site is zoned under the jurisdiction of the Town of Truckee Development H Golf course 302.74 Code,dated September 2,2001.The subject site includes three different zoning I Golf course 19.87 districts:REC,RR 0.1 and RS 2.0.The REC,which is a Recreation District per the M Golf course 1724 Truckee Development Code,is defined as follows:The REC zoning district is applied to areas appropriate for active recreational activities that would be compatible with natural R Maintenance building . resource areas. Allowed uses include camping, fishing, skiing, golfing, clustered Subtotal 359.09 lodging,residences and support services.The REC zoning district is consistent with the Total Acres 603.57 Open Space Recreation,Residential,and Tahoe Donner PC land use classifications of the General Plan.The RR 0.1 zoning is defined as Rural Residential,1 dwelling unit per Taxable property(for CFD 10 acres.The RS 2.0 zoning is a single-family residential zoning with an allowable density of 2 units per acre.The following table shows the zoning by subject acreage. The subject's land area per the Nevada County Assessors plats is shown in the following table. zone Acreage REC 285.62 RR 0.1 314.37 RS 2.0 16.21 7 5_ -76- xr�aw,. The subject is a master-planned development that has been approved by the Town of The easements noted above are not considered to be detrimental or detract from the Truckee and is an allowed use under the current zoning regulations. utility of the subject land.No other adverse easements or encroachments were reported or observed which would adversely affect the subject land.As will be noted in the Development Agreement Development Agreement Summary, there are public trails integrated into the development plan. Based on the underlying zoning of the subject discussed above,the town of Truckee entered into the Old Greenwood Planned Development;Development Agreementwith the subject Truckee Land LLC,which was recorded with the Nevada County Recorder Environmental Analysis on August 23, 2002. This development agreement is 28 pages plus extensive attachments.We have reviewed a copy of this development agreement and retained it We have reviewed an Environmental Impact Report prepared by Pacific Municipal in our files.It is considered too extensive to incorporate as part of this appraisal report. Consultants dated February 2002,which has been retained in the appraisers'files.This We have provided a summary of the development agreement as a separate section report addressed several aspects of the subject site's suitability for development.We after The Land section of this report. have specifically reviewed the sections of the report pertaining to the following environmental issues: Utilities Soil analysis • Seismic hazards(earthquakes) All public utilities are available to the subject site.Utility suppliers are listed as follows: Presence of hazardous materials on site Electricity................................ Truckee Donner Public Utilities Groundwater resources Natural Gas............................ Southwest Gas Water....................................... Truckee Donner Public Utility District There were no items of concern at the subject site related to the above list.Based on a Sewer..................................... Truckee Donner Sanitation District review of the Environmental Impact Report provided,the subject site is considered Telephone............................... SBC/Pacific Bell suitable for the proposed development by East West Partners with no adverse Cable Television..................... USA Media environmental conditions. Flood Hazard Identification Access The subject is located in Zone C,defined as an area outside the 500-year flood plain, The main access point to the subject site will be from Old Airport Road on the north end according to Flood Insurance Rate Map Panel No.0602100507B,dated January 1, of the subject site.This road is an extension of the Prosser Village Interstate 80 1983. highway exit ramp.Secondary access to the subject will be near the south boundary of the site from Highland Avenue in the Olympic Heights subdivision. Easements/Encroachments Streets We have reviewed a title report of the subject prepared by Placer Title Company dated May 2,2001.Schedule B of the report identified the following easements: Airport Road is the access road to the subject site from the Interstate 80 Prosser Village exit ramp.Airport Road is a two-lane,asphalt-paved road that becomes Fairway • Multiple right-of-way easements in favor of utility companies and pipelines,both Drive once inside the subject development. overhead and underground. A right-of-way easement in favor of Old Truckee Airport Road. Highland Avenue is an asphalt-paved, residential street in the Olympic Heights • An access easement in favor of Jahn R.Duttweiler. subdivision south of the subject site. Notice of consent to use land,executed by the Hoffman Foundation,a Califomia nonprofit corporation. Conclusion The subject site is a large tract of land that is well located with generally level topography and good access to surrounding thoroughfares with all utilities available. -77- 8- DESCRIPTION OF IMPROVEMENTS Single Family Lots Prior to the acquisition of the subject by East West Partners, several The subject has actually been platted with 100 single-family lots.However,there are improvements from the previous development,Featherstone Resort,had been completed.The certain regulations and requirements related to employee and affordable housing that following description of improvements for the Truckee Donner PUD is based on an inspection change at the 100-lot threshold,which will not apply if the subject sells only 99 lots. Therefore,our analysis has included only the 99 saleable lots.While there may be of the existing improvements during various phases of construction,a review of building plans some type of opportunity for development of the 100th lot in the future,it has not been `or the proposed cabins and cottages prepared by Zehren and Associates,Inc.,and marketing considered in our analysis. material and other information provided by the subject developer,East West Partners. w The 99 single-family lots represent the largest residential component of the subject development.Improvements to the lots consists of the following infrastructure: General Description • Asphalt paved roads with concrete curb and gutter Old Greenwood is a proposed residential,golf course based community with a mix of Storm drains and sidewalks residential product types,including 99 single family lots,74 fractional ownership cabins Utility extensions to the lot and 72 fractional ownership cottage units. Construction of the infrastructure and golf The lots range in size from 0.35 to 0.93 acres(15,246 to 40,511 square feet),with an course improvements began in Spring 2003.The project is intended as a high-end c second homes with a championship quality,Jack Nicklaus Signature average lot size of 0.534 acres(23,261 square feet).The lots are situated with premier community locations on the subject site and offer three different view orientations:golf course Design golf course,and other recreational amenities,including a fitness,swimming and views,open space views and combination golf course/ski area views.The table on the tennis center. following page shows the individual lot sizes and view orientations. Existing Improvements Existing improvements at the subject from the previous developer include four single- family units.The cabins are wood frame structures with log siding exteriors and asphalt shingle roofs.The cabins have excellent quality interior finishes,including slate flooring, vaulted ceilings,rustic wood trim and stone fireplaces.Other existing improvements at the subject include the welcome center gatehouse,which is 272 square feet of finished interior space with a drive-through port-au-couchere for controlled entry to the I community. The following table summarizes the building area of the existing cabin improvements. Existing Cabin Summary Size(Sq.Ft. Identification Bedrooms/Baths Upper Level Main Level Total Cabin 2/2.5 244 1,725 1,969 Cabin B 313.5 761 1,540 2.301 Cabin C 414.5 1,258 1,724 2,982 Cabin D 4/4.5 ----- 2,902 The subject lots vary in terms of desirability based on size, location within the development,and view.These differences are reflected in the lot pricing.It is noted that Lot Acres S.Ft. View Lot Acres S.Ft. View as of the date of appraisal,86 of the 99 lots were under binding sales contract for R1 0.48 21,000 Golf R51 0.58 25,124 Golf/Ski Area View purchase.The details of the lot sales will be discussed at length later in this report. R2 0.48 21,000 Golf R52 0.79 34,213 Golf/Ski Area View R3 0.50 21.709 Golf R53 0.68 29,759 Golf/Ski Area View R4 0.52 22,447 Golf R54 0.97 42,394 Golf/Ski Area View R5 0.53 23.035 Golf R55 0.79 34,425 Golf/Ski Area View Amenities R6 0.50 21,688 Open Space R56 0.68 29,436 Golf R7 0.49 21,127 Open Space R57 0.77 33,383 Golf Golf Course R8 0.47 20,627 Open Space R58 0.80 34,637 Golf The golf course at the subject had been graded and shaped as of the date of R9 0.46 19,883 Open Space R59 0.83 35,943 Golf inspection.The golf course will represent the only Jack Nicklaus Signature Design Rio 0.45 19671 Open S ace R60 0.85 36947 Golf course in the Lake Tahoe area with several water features set amongst large R11 0.46 20,196 Open Space R61 0.78 33,462 Golf Ponderosa pines with some views oriented toward the Northstar-at-Tahoe Ski Resort. R13 0.47 20 500 Open Space R6z 0.67 33 782 Golf The golf course will also feature a double-ended driving range and short game practice R13 0.47 20,500 Open Space R63 0.67 28,987 Golf 9 9 9 9 R14 0.50 21,633 Open Space R64 0.52 22,457 Golf area and a teaching academy.The golf course will be operated from a clubhouse/pro R15 0.50 21,606 Open Space R65 0.35 15,384 Golf shop building approximately 12,500 square feet in size.This building will have mountain R16 0.49 21 542 Golf R66 0.62 26,981 Golf architecture typical of the local environment,including wood timber accents,local stone R17 0.53 23,171 Golf R67 0.55 23,863 Golf and asphalt shingle roofing.There will also be a golf maintenance facility located on the R18 0.55 23,789 Golf R68 0.41 17,747.Golf west side of the subject property consisting of three buildings totaling 22,000 square R19 0.49 21,226 Golf R69 0.41 18,000 Golf feet. These buildings will be steel structures with wood siding. R20 0.49 21,469 Golf R70 0.41 18,000 Golf R21 0.52 21,752 Golf R71 0.41 22,276 Golf The followingis a summary of the Old Greenwood golf course specifications R22 0.52 22,752 Golf R72 0.51 22,276 Golf ry 9 P R23 0.44 18,989 Golf R73 0.60 25,972 Golf R24 0.42 18,491 Golf R74 0.41 33,685 Golf Old Greenwood Golf Course Summary R25 0.46 20,001 Golf R75 0.61 1 27,838 Golf R26 0.52 22,587 Golf R76 0.68 28,308 Golf Yardage From Tee R27 0.52 22,611 Golf R77 0.45 19,551 Golf Hole Nicklaus Gold Blue White Par R28 0.43 18,900 Golf R78 0.70 30,424 Golf 1 475 433 368 308 4 R29 0.55 23,814 Golf R79 0.66 28,330 Golf 2 600 550 485 466 5 R30 0.60 26,126 Golf R80 0.50 22,161 Golf 3 177 163 142 114 3 R31 0.59 25,736 Golf R81 0.49 21,541 Golf 4 379 346 304 239 4 R32 0.53 22,931 Golf R82 0.49 21,305 Golf 5 484 453 391 330 4 R33 0.52 22,845 Golf R83 0.47 20,624 Golf 6 1 576 540 479 425 5 R34 0.53 23,142 Golf R84 0.43 18,883 Golf 7 199 170 1 154 122 3 R35 0.47 20,431 Golf R85 0.42 18,127 Open Space 8 356 328 299 266 4 R36 0.37 16,054 Golf R86 0.43 18,894 Open Space 9 461 421 --272 343 4 R37 0.51 22,234 Golf/Ski Area View R87 0.39 17,014 Open Space Subtotal 3,707 3,414 2,994 2,613 36 R38 0.38 16,718 Golf/Ski Area View R88 0.40 17,400 Open Space 10 612 548 489 447 5 R39 0.42 18,188 GolVSki Area View R89 0.38 16,561 Open Space 11 352 322 283 228 4 R40 0.53 22,916 Golf/Ski Area View R90 0.44 19,009 Open Space 12 567 542 474 421 5 R41 0.63 27,505 Golf/Ski Area View R91 0.44 19,009 Open Space 13 505 453 403 356 4 R42 0.70 30,650 Golf/Ski Area View R92 0.38 16,632 Open Space 14 492 460 395 357 4 R43 0.71 30,967 Golf/Ski Area View R93 0.44 19,168 Open Space 15 210 178 146 124 3 144 0.86 37.442 Golf/Ski Area View R94 0.44 19,131 Open Space 16 407 371 339 305 4 45 0.93 40,307 Golf/Ski Area View R93 0.41 17,860 Open Space 17 233 212 187 164 3 A46 0.70 30,450 Golf/Ski Area View R96 0.42 18,328 Open Space 18 457 419 371 319 4 R47 0.54 23,403 Golf/Ski Area View R97 0.43 18 542 Open Space Subtotal 3,835 3,505 3,087 2,721 36 R48 0.42 18,389 Golf/Ski Area View R98 0.43 18,542 O en S ace Total 7 542 6 919 6 081 5 3L. 72 R49 0.39 17,145 Golf/Ski Area View R99 0.42 18 093 O en S ace R50 0.40 17,485 Golf/Ski Area View Totals 2,316,907 The golf course will be the focal point of the subject development,with the majority of Average 1 7-1 A031 the lots and cabins and some of the cottages fronting on the golf course. -85- -86- well as the single-family lots,attached cottages and cabin units.While legally permissible uses Legally Permissible as if vacant are related to the underlying zoning,the development agreement now takes The subject value as if improved is being evaluated based on the parameters set precedence in determining the highest and best use. forth in the development agreement summarized previously. Financially Feasible Financially Feasible Financially feasible uses for the subject site as if vacant require an evaluation of The subject improvements represent a viable development project as evidenced ...the surrounding land uses and the suitability of the subject property for the land uses exhibiting by the analysis herein.The mix of product uses associated with recreational amenities appears ie greatest demand for development in the immediate area.There is evidence of new to be providing a financially feasible use. construction of single-family lots and homes throughout the Truckee area.This is evidenced in " Maximally Productive existing subdivisions,as well as the recently completed Lahontan subdivision.In addition,there The proposed use of the subject property as a mix of fractional interest attached is a limited supply of potential development parcels due to the relatively strict planning process and detached product,as well as single-family lots,golf course and other amenities appears to in the town of Truckee and surrounding Tahoe area.Given the success of developments such represent the maximally productive use of the subject based on the existing development as Lahontan in the subject's immediate area and ongoing sales evident of single-family homes agreement. and condominiums in the area,it is our opinion that the subject development represents a Conclusion-As If Improved financially feasible use. The proposed use of the subject site,which has infrastructure and construction Maximally Productive underway,is considered to represent the highest and best use as if improved. The determination of the maximally productive use for the subject property primarily involves the same considerations as those discussed previously for financially feasible uses.It is beyond the scope of this appraisal to actually investigate achievable net operating income for the various types of uses and mix of uses that could possibly be allowed on a site the size of the subject.Based on the most probable uses of the subject,it is our opinion that the maximally productive use of the subject site as if vacant would be for some I type of recreational oriented residential development. Conclusion-As If Vacant As mentioned above,it is our opinion that some type of recreational oriented residential development would represent the highest and best use of the subject site as if vacant. As If Improved Physically Possible The subject site was determined previously to have physically possible characteristics for a wide range of uses. _91_ _92_ ASSESSED VALUATION AND TAXES The above assessed value for the subject essentially reflects the acquisition price 2002-2003 of the land by East West Partners and does not reflect any substantial improvements which The subject property is assessed by the Nevada County Assessor's Office.Taxes have occurred in 2003.The estimate of taxes for the lots,cottages and cabins will be in the state of California are subject to Proposition 13,with assessments based on the most discussed later in the discounted cash flow section of the Developmental Analysis section of recent transaction price at the time of purchase,with increases in taxes limited to 2 percent per this report.We have utilized the effective tax rate calculated for the subject which includes the year.The property is reassessed at such time in the future that it is sold.The general tax levy negligible amount of special assessments.This is calculated as follows: $216,881.44 1 determined by state law is$1.00 per$100.00 of assessed value of a property.In addition,the $20,445,831.00=.0106. property is subject to taxes related to local schools,hospital and fire districts. As of the date of value,the subject's total tax rate was$1.0568 per$100.00 of assessed value.In addition to the tax rate,there are special assessments related to voter bonded assessments related to the additional school assessments,snow removal,etc.The following table summarizes the subject's current assessed valuation and taxes,which is based on the parcels as they were platted by the assessor as of December 31,2002.Reassessment will occur based on a date of assessment of December 31,2003,based on final plat maps approved and in place as of that date of value. Parcel No. Assessed Value Taxes Special Assessments 19-370-07 $6,490,260 $68,687.06 $80.00 19-370-08 7,110,420 75,254.90 112.00 19-430-14 1,680,246 17,844.82 88.00 19-430-15 1,716,456 18,227.50 88.00 19-430-16 1,705.848 18,115.40 88.00 19-430-17 1,696,770 18 019.46 88.00 $20,400,000 $216,194.14 $48.20 19-040-73 557.00 13.88 8.00 19-040-74 252.00 10.66 8.00 19-050-48 557.00 13.88 8.00 19-050-49 252.00 10.66 8.00 *� 19-060.59 557.00 13.88 8.00 19-240-09 252.00 22.66 8.00 19 430-23 43 404.00 646.68 188.00 $45,831.00 $732.30 236.00 Grand Total $20,445,831 $216,881.44 $284.20 _93_ -94- COMPARABLE LOT SALE NO.1 COMPARABLE LOT SALE NO.2 Location Location Lahontan Tahoe-Donner Lodgetrail Road Northwoods Drive Truckee North of Truckee zription High-end golf community featuring a Tom Weiskopf 27-hole golf course, clubhouse, children's camp, Description Large scale master-planned development consisting open space and mountain views. of single-family homes and condominiums with golf course and ski resort. Year Completed 1997 Year Completed 1970s No.of Lots 509 No.of Lots 6,200 Lot Size .5 to 1.92 Acres Lot Size .25 to.5 Acres ,Utilities Available to lot Lot Sales Data Lot Sales Data(Re-sales) Date of Sales March 2003 to August 2003 Date of Sales May 2002 to July 2003 Average Lot Size Sold 1.04 Acres Average Lot Size Sold .46 Acres Average Lot Sale price $459,357 Average Lot Sale Price $220,000 Number of Lots Sold 7 Number of Lots Sold 6 Absorption 12.73 lots per month in initial offering September Absorption NIA 1996 to January 2000 Recent Lot Sales or Listings Recent Lot Sales or Listings Identfication Lot Size Sale Price Sale Date Identification Lot Size Sale Price Sale Date 11833 Chalet Road .5 Acres $185,000 7/03 7725 Lahontan Drive 1.5 Acres $418,000 8/03 13158 Sky View Loop .255 Acres $245,000 6103 877 Lahontan Drive .75 Acres $310,000 8/03 11512 Chalet Road 5 Acres $245.000 10/02 604 E.J.Brickell .75 Acres $275,000 7/03 355 Elias Baldwin 1.5 Acres $695,000 6/03 Comments Comments At one time,Tahoe-Donner was reportedly the largest subdivision in the United States. We have reviewed six lot sales in Tahoe-Donner,with specific information on three of This is a highly successful 906-acre exclusive golf community located south of the these sales noted above.Of the six sales reviewed,there were four golf course lots with subject near Northstar Resort.The developer sold 509 lots in 40 months.The sales an average price of$236,250 per lot,and two non-golf course lots with an average price analyzed above represent some of the most recent resales.This project had excellent of$187,500 per lot.This community has a mix of older cabin homes and new,good timing with regards to the dot corn boom,drawing 75 percent of buyers from the Bay ' quality homes. area.Resale lot values have declined slightly from the original sale prices.Currently, 100 lots are for sale. -9s- -99- COMPARABLE LOT SALE NO.3 COMPARABLE LOT SALE NO.4 Location Location Northstar-at-Tahoe Pine Forest at Truckee Truckee Comstock Drive (North of Interstate 80,West of Route 89) Description Recent phase of mountainside single-family lots offered at Northstar-at-Tahoe ski resort,a master- Description 236-acre wooded subdivision;no golf course. planned community. Year Completed 2002 Year Completed Recent phases 2002-2003 No.of Lots 63(65 Phase II Summer 2004,ten on waiting list) No.of Lots N/A;future phases are being planned Lot Size .3 to 1.1 Acres,Average 0.6 Acres Lot Size 0.33 to 0.50 Acres Lot Sales Data Lot Sales Data Date of Sales October 2002 to September 2003 Date of Sales June 2003 to September 2003 Average Lot Size Sold 0.54 Acres(23,540 square feet) Average Lot Size Sold .44 Acres Average Lot Sale Price $176,017 Average Lot Sale Price $685,000 Number of Lots Sold 12 Number of Lots Sold 5 Absorption 1.1 Absorption N/A Recent Lot Sales or Listings Recent Lot Sales or Listings Identfication Lot Size Sale Price Sale Date Identficaton Lot Size Sale Price Sale Date Lot#71 0.46 Acres $165,000 8/03 #3 Summit Drive .50 Acres $796,500 9/03 Lot#56 0.92 Acres $225,000 3/03 #7 Summit Drive .50 Acres $990,000 9/03 Lot#69 0.46 Acres $182,000 12/02 1736 Grouse Ridge Road .33 Acres $525,000 8/03 Comments Comments This is a non-amenitized single-family lot development west of the subject.It is located The lot sales data summarized above are the most recent as the Northstar resort.The in a heavily wooded area with good access to the highway and Truckee. sales on Summit Drive represent the only ski-in/ski-out lots of the summarized sales. -too- -ro1- Quality of Surrounding Development generate strong pre-sales.This value fits well within the range of value indicated by the At completion,the subject will represent a high quality development with a variety comparables and is considered the best indication of market value for the subject lots.It is of residential products and facilities. noted that the current inventory of unsold lots includes some of the most premium lots at the Lot Sale No.1 has been developed with craftsman quality homes that integrate subject with the highest asking prices.These lots are some of the largest in size,with golf the local mountain character, including native stone and rustic timbers. The quality of course frontage and excellent views of the Northstar ski resort.The inventory of unsold lots is »v:lopment in Lahontan thus far is second to none and is considered superior to that summarized in the following table. osed for the subject,with the exception of the custom homes on the single family lots. The development in Tahoe-Donner and Northstar(Lot Sale Nos.2 and 3)ranges Unsold Lot Inventory and Pricing greatly between the early homes built in the 1970s to newer development in the in-fill lots and recent on-mountain phases.The newer development observed is of excellent quality.Overall, Available Lots Net Asking Price 32 $498 750 the variety of the surrounding development is considered inferior to the subject,which will 3s 688 750 represent all new,excellent quality development at completion. 40 707,750 Lot Sale No.4 is being developed with good quality homes, similar to the 41 674,500 42 707,750 development anticipated at the subject. 43 688,750 47 636,500 Conclusion 48 707,750 49 660,250 In concluding a value for the subject lots,several factors have been considered 52 641,250 and discussed.By nature,these factors are subjective and it is difficult to conduct quantitative 53 617,500 analysis on this basis.As a result,we have utilized the technique of bracketing to establish an 54 522,500 55 555.750 appropriate range of value for the 99 subject lots.The following table shows the position of the Total $8,307,750 1 ' subject lots relative to the comparables. I Average $639,000 Sale No. Average Sale Price Relative Position 3 $685 800 Superior The higher pricing of these lots should result in a value conclusion higher than 1 459,357 slightly Superior Subject the average contract price to date for the 86 lots.It is noted the current asking prices for the 2 220,000 Inferior unsold lots averages$673,000,and the net asking price reflects a 5 percent discount off the 4 176,017 Greatly Inferior asking.Founders club member discounts are no longer available.Therefore,our conclusion of average lot value for the subject is$350,000 per lot.The aggregate retail value of the 99 The above table shows the subject being bracketed on the high end by Lot Sale subject lots can be concluded as follows: Nos.1 and 3 and on the low end by Lot Sale Nos.2 and 4.This bracketing suggests the value of the subject lots is in the range of$220,000 to$459,357.In concluding a value for the subject 99 Lots @$350,000/Lot=$34,650,000 lots,we have also given primary consideration to the current contracts on 86 of the 99 subject lots.The average net contract price indication is$308,000 based on various discounts off of the asking prices,which averaged$347,000 for the same lots.This represents an 11.2 percent discount,which is somewhat high as it includes Founder Members discounts utilized to -tos -10- Mello-Roos Bond Adjustment SALES COMPARISON APPROACH-DEVELOPMENT LAND SALES Typically,an adjustment for a property's encumbrance by Mello-Roos bonds is required to compensate for the bond costs in the lot pricing. None of the comparable The sales comparison approach is a methodology by which an analysis of land subdivisions analyzed previously had Mello-Roos bond assessments.However,we have not sales similar to the subject is conducted in order to arrive at a market value of the subject. applied this adjustment for the subject lots.This is due to the fact that 86 percent of the lots Given the extent to which the subject property has been improved and1planned as of the date have sold with the bonds in place.This clearly suggests that it would not be appropriate to of appraisal,we consider the residual analysis,which is detailed in the Developmental Analysis apply the bond adjustment,as there is obviously no market resistance to the bond costs section of this report,a more reliable approach in valuing the subject property.Furthermore, associated with the subject lots.This is due to the high price range and second home nature of the fractional product offering at the subject is difficult to address and quantify within the the lots. limitations of the sales comparison approach.Finding land sales of partially completed master- planned developments is difficult and adjusting for differences would be highly subjective,in addition to requiring detailed knowledge of the sale,which is often unavailable.Finally,the land residual analysis applied later in this report is more relied upon by investors for a development such as that proposed for the subject property.In summary,the sales comparison approach is considered a secondary analysis in determining the market value of the subject property and has been conducted as a cross check to the subject's market value by the cost approach and residual analysis contained herein. Typical units of comparison in the sales comparison approach are price per acre or price per unit.Our analysis will utilize price per acre as the unit of comparison.We have conducted a survey of subdivision development land sales in the subject's market area for the purposes of comparison to the subject land.Our research indicated that there is a lack of recent, large scope development land sales in the Truckee area with entitlements and infrastructure in place,and thus the land sales utilized in this analysis represent older land sales data.It is noted that the subject development is the most recent and significant large scope development currently in progress in the Truckee area.The following land sales summary includes the most pertinent land sales relative to the subject as if it were raw land including land sales related to the Lahontan acquisition. Due to the lack of meaningful land sales that would relate to a bulk sale of the lots and units proposed for the subject,as well as the subject's completed infrastructure and amenities,the sales comparison approach is not considered applicable.This section is intended to provide an indication of raw land values in the area but does not provide any conclusions of value by this approach. -108- -ros- square feet,with an average of 2,474 square feet,similar to the size of the subject cabins, COST APPROACH which average 2,539 square feet.Overall,the range of value indicated by the home sales analyzed is$243.84 to$520.08 per square foot,with an average of$333.50 per square foot. The cost approach has been reviewed as it relates to the current construction On a whole dollar basis,the average sold price indication from the six sales is$825,837.50.In status of the entire subject development,as well as the individual components of value in the our opinion,the price per square foot of the subject's existing cabins should fall within the property.The following table summarizes the subject's development budget. "idle of this range of value,near the average.Therefore,our value conclusion for the four ng subject cabins is$325.00 per square foot.The value calculation for the four cabins is Development Budget/Expenditures as follows: Old Greenwood,LLC Actual&Budget Cabin Value Through Year-End 2003 Remaining Identification Size(Sq.Ft. Per S.Ft.Value Rounded Development Costs: Total Budget Project to Date Difference Cabin A 1,969 $325.00 $640 000 Capitalized Project Costs: Cabin B 2,301 325.00 750,000 Land Acquisition $16,957,263(1) $16,957,263 $ 0 Cabin C 2,982 325.00 970,000 Architectural Fees 1,718,430 1,003,312 715,118 Cabin D 2 902 325.00 9 00 000 Professional Services 1,368,200 817,434 550,766 Total $3 300 000 EIR&Land Planning 1,136,275 800,573 335,702 Average Cabin Value $825,000 Site Work&Infrastructure(2) 22,333,767 19,125,755 3,208,012 Tap Fees,Permits&Taxes 6,876,375 1,152,050 5,724,325 Building Construction Costs 74,482,296 5,969,911 68,512,385 Furniture,Fixtures&Equipment 13,280,674 1,427,674 11,853,000 The cabins at the subject are planned to be sold in a sale/leaseback situation by Project Management Fees 11,275,260 3,762,260 7,513,000 year-end 2003.This will be addressed in our developmental analysis. Le al/Financial Expenses 3,173,040 1,688,040 1,485,000 Marketing Fractional 43,085,795 2,865,795 40,200,000 Marketing Lots 1,200,000 1,200,000 0 Marketing Tmr&Founders 500,000 500,000 0 Club Amenities Old Greenwood Allocation(3) 8,687,000 17,343,498(4) 8,687,00 Total Development Costs $206,074,375 $74,613,565 $131.460,810 (1)Reflects a$5,000,000 reimbursement made from Tahoe Mountain Club for the golf course. (2)Excludes future Old Greenwood building. (3)Based on allocation of cost a$3,500 per fractional share,2,482 shares at$3,500 per share. (a)Includes amenity cost contributions from Tahoe Club Company. The above table indicates that the cost expended or scheduled for the entire subject development as of year-end 2003 is$74.613,565,rounded to$74,600,000.However, no profit is recognized in this figure.If profit is estimated at 12 percent of cost,then the cost approach value for the project at year-end is approximately$83,600,000.This includes soft costs and hard costs completed as of the date of value.As a crosscheck to some of the line items in the developer's cost budget,we have reviewed cost figures from the Marshall Valuation Service Cost Manual.A partial list of these costs compared to the developer's budget Construction Company,to build its fractional units.This builder has extensive local experience is shown in the following table. in the Lake Tahoe area.Company representatives report they have built 14 homes in the nearby Lahontan subdivision with costs ranging from$350 to$1,200 per square foot.Most Cost Approach Per Marshall Valuation Service Cost Manual homes are costing in the$350 to$500 per square foot range.Costs of homes in the Tahoe Truckee Donner PUD Donner subdivision are reported to be ranging from$200 to$300 per square foot.Given these S.Ft. Cost/Sq.Ft. Total ranges,it appears the estimated costs for the subject at$238 to$240 per square foot are Golf Facility reasonable for use in our analysis. Pro Shop 5,243 $110.94 $ 581,658 We have reviewed costs for other fractional development,as well.The Marriott Cart Storage 7,257 50.015, 362,923 Cart Accessory Building 3 257 50.01: 362 ego Grand Residence is a completely different type of product than the subject and yet costs were Maintenance Building 22,000 54.35� 1,195 700 similar at$269 per square foot.The developer of the Roaring Fork Cabins project discussed Old Greenwood House 50,000 148.76. 7,438,000 previously in the Lake Tahoe Area Fractional/Timeshare Market Analysis section of this report Pool/Tennis/Fitness Building 17,000 101,40. 1,723,800 includes pool&6 tennis courts 7 reported a cost of approximately$300 per square foot.This property is superior to the product Cabins 196,170 236.00. 46,296120 proposed for the subject,and thus also supports the cost estimates for the subject's fractional Cottages 109,080 236.00. 25 742,880 units. Golf Course&Practice Course 18 holes 300 000/hole,. 5,400,000 Subtotal $89,073,901 We have not applied the cost approach in our analysis for the subject.Rather, Roads and Infrastructure 29 000lineal feet @ 340/lineal foot 9,860,000 the cost analysis discussed previously has served as an affirmation of the budgeted Third Party Reports 0 5i° 2,346,682 construction and development costs prepared by the developer.It is noted that the cost Marketing 20% 30 86 937 Total $11 ,86 30 analysis indication of approximately $83,600,000 is generally supported by the value conclusion determined by the developmental analysis presented later in this report. Country Club,Section 11,Page 25,D,Good z Golf Cart Storage,Section 17,Page 15,D,Excellent .Country Club,Section 11,Page 25,D,Good Storage Warehouse,Section 14,Page 26,S,Excellent .Country Club,Section 11,Page 25,D,Excellent .Health Club,Section 11,Page 25,D,Good ,'M&S Residential Handbook .Very Good Quality,Page 15,Very Good .With Climate Adjustments °Golf Course Section 67 Page 1 The above table supports the cost estimates for many of the subject's , provements.It should be considered that the subject developer,East West Partners,has nsive experience and success in developing resort projects and their figures are reliable. The cost of constructing the fractional cottage and cabin units has been estimated at$240 per square foot for the cottages and$238 per square foot for the cabins. The cottages are attached product, and the cabins are essentially upscale tract home development.This is due to the fact there are only four floor plans(actually only two because they are mirror image).The subject developer has retained a local contractor,the Robert Marr -116- -117- FRACTIONAL/TIMESHARE COMPARABLE NO.4 FRACTIONAL/TIMESHARE COMPARABLE NO.5 Identification Identification Marriott Timberlodge Hyatt Sierra Lodge 4100 Lake Tahoe Boulevard 989 Incline Way South Lake Tahoe,California Incline Village,Nevada j perty Description Property Description Year Built Phase I-December 2002 Year Built Fall 1999 No.of Units 135-Phase I,130 units to be built in 2 future phases,4-story No.of Units 60(Three floor plans in three-story) stacked Project Amenities Casino, spa, fitness center, outdoor pool, pier and beach, Project Amenities Heated pool and spa,fitness center,owner's lockers,owner meeting rooms,long-term storage lounge Unit Amenities Good quality build-out and appliances,washer/dryer Unit Amenities Average quality build-out.Fully furnished.No washer/dryer. Parking Subterranean and surface Parking Subterranean Fractional Interest/Timeshare Data Fractional InterestlTimeshare Data Fractional Share 1 week Fractional Share 1 week Total Shares Available 3,060(based on 51 weeks) Total Shares Available 6,750 in Phase I,13,250 total(based on 50 weeks sold) Ownership/Use Plan Fixed week Ownership/Use Plan Individual fixed weeks %Shares Sold 70%sold or under contract %Shares Sold 29%sold or under contract(approximately 1,958 shares) Absorption Approximately 2,142 units(36 shares/month since 9198) Absorption 75 shares/month since 6/01 Pricing Pricing Season Unit Type Size SF Weeks/Share Price/Share Week PricelSF Season Unit Type Size SF Weeks/Share Price/Share Price/SF 12 Summer 2BR/2BA 925-1 075 1 $20 000-$35,000 12 Summer 1 BR/lBA 838 1 $20,000430,000 $1 212 Avg. 16 Winter $20 000-$37,000 16 Winter 1 BR/1BA 838 1 $25 000-$30 000 24 Shoulder $13 000-$20 000 24Shoulder 1BR/1BA 838 1 $11500 Average, $21000 $1,071 Summer 2BR/2BA 1,185 1 $28000-$40000 $1121 Avg. Winter 2BR/2BA 1,185 1 $30000445000 Exchange Program Hyatt Vacation Club and Interval International Shoulder 2BRneA 1,185 1 $17,000 HOA Dues N/A Exchange Program Marriott Vacation Club and Interval InternationalMarket Data HOA Dues NIA Market Type Drive to regional market Buyer Profile San Francisco Bay area Market Data Comments Market Type Drive to regional market This project has undergone renovations and expansions.They experienced problems with Buyer Profile Mostly San Francisco Bay area construction,as well as registration for timeshare sales. Comments This property is part of the South Tahoe Redevelopment District described for Fractional/Timeshare Comparable No.3.Future phases will be built based on demand. -122- -123- FRACTIONALITIMESHARE COMPARABLE NO.6 FRACTIONAL/TIMESHARE COMPARABLE NO.7 Identification Identification Kirkwood Mountain Club Embassy Vacation Resort Kirkwood Mountain Resort 901 Ski Run Boulevard Kirkwood,California South Lake Tahoe,California Property Description Property Description Year Built 1999(December) Year Built 1997(Spring) No.of Units 40 three-story stacked No.of Units 142 units in Phase I.4-story stacked flat,Phase 11 is possible Project Amenities Ice-skating rink,health club,spa with 64 units. Unit Amenities Good quality interior build-out and appliances Project Amenities Outdoor pool&spa,fitness center,ski storage,restaurant/lounge Parking Subterranean Unit Amenities Average quality build-out,fully furnished,lock-off feature Parking Surface parking&valet Fractional Interest/Timeshare Data Fractional Share 1/8-1/4.1/8 interests are for studio units only Fractional Interest/Timeshare Data Total Shares Available 112 quarter shares,98 1/8 shares=210 total shares Fractional Share 1 week Ownership/Use Plan Deeded interest Total Shares Available 7,242 based on 51 weeks %Shares Sold 100%as of September 2003 Ownership/Use Plan Deeded 1/51 interest. Floating week based on priority Absorption 4.2 shares/month,42 weeks/month since 7/99 reservation system. Pricing-1/4 share interest %Shares Sold 70%(5,279 weeks) Absorption 58 shares(weeks)/month since 4/96.Includes a dormant 12 Unit Type Size SF Weeks/Share Price/Share PriceANeek Price/SF months during bankruptcy of Sunterra Corp. Studio&Studio/Loft 435-660 13 $59 000-$97,000 $4 538-$7 462 $541-$588 Pricing 1BR/2-3BA 776-1 192 13 $100 000-$170 000 $7,692-$13 077 $515-$570 2BR/2-3BA 1120-1,427 13 $160,000-$205,000 $12,308-$15769 $571-$574 UnitT a Size SF Weeks/Share Price/Share Price/Week PricelSF 2BR/2BA-Lockoff 1,172 1 $23 000 $23,000 $1,000 Exchange Program Interval International HOA Dues $1344158 per 1/8 share;$258-$398 per 1/4 share Exchange Program RCI HOA Dues N/A Market Data Market Data Market Type Drive to regional market Buyer Profile San Francisco Bay area Market Type Drive to destination;limited fly-in. Buyer Profile San Francisco Bay area and Northern California Comments This property has ski-in/ski-out access at the base of Kirkwood ski area. Comments This property is near the lakefront.The developer Sunterra Corporation declared bankruptcy in 2000,which disrupted sales. -124- -125- consider it necessary to apply a substantial downward ad1ustment to this comparable in Comparable Sale No.1 is the Northstar Club,which in our opinion does not have relation to the subject for location. a matching amenity package,and thus this sale is adjusted upwards for inferior amenities. Comparable Sale Nos.3 and 4 are adjacent properties within the South Tahoe Comparable Sale No.2 is adjusted downward slightly for its amenities related to Redevelopment Agency in South Lake Tahoe.They,have direct access to U.S.Highway 50, the pier,docking buoys and fleet of small watercraft available to recreate on Lake Tahoe. which encircles the lake on the south end,and are adjacent to the gondola serving the Comparable Sale Nos.3,4 and 5 are all branded,high quality projects with ,.,6:.3venly Valley ski area.They are within walking distance to Lake Tahoe,as well as walking excellent onsite amenities,which due to offsetting factors,are considered comparable to the :nce to the Stateline Casino District,which has several excellent quality high-rise casinos. subject and no adjustment is made. in our opinion,the subject does have desirable attribute being located in the golf course Comparable Sale Nos.6,7 and 8 are slightly inferior properties as they relate to community,but overall some downward adjustment is appropriate to these sales for their the quality and availability of amenities,and upward adjustments are applied to these sales. superior locational attributes. Physical Characteristics Comparable Sale Nos.5,7 and 8 are all located in proximity to Lake Tahoe but Quality:The subject cottages are proposed to be good quality,both interior and have similar drive time characteristics related to getting to skiing or other recreation at Lake exterior.All of the projects analyzed are fully furnished,as will be the subject. Tahoe.In our opinion,no adjustment is appropriate to these sales due to the various offsetting In our opinion,Comparable Sale No.1 is slightly inferior in quality in comparison factors related to the subject's accessibility,proximity to the lake and golf course. to the subject as it relates to overall build-out and case goods.Slight upward adjustment is Comparable Sale No.6 is located in Kirkwood,which is an approximate 40- applied to this sale. minute drive,in good weather,south of Lake Tahoe.This is a somewhat isolated location with Comparable Sale No.2 is of the very highest quality and most excellent build-out, typical access characteristics related to enjoying the recreational opportunities around Lake and thus downward adjustment is applied to this sale in comparison to the subject. Tahoe.This property is a ski-in/ski-out project,which is a favorable attribute,but overall it is Comparable Sale Nos.3,4,5,6 and 7 are regarded as generally similar in quality our opinion that a substantial upward adjustment should be made to this comparable in relation to the subject,requiring no adjustment. to the subject.The substantial difference is notable in comparing more traditional real estate Comparable Sale No.8 is a much more conventional type of development I ' values in Kirkwood to those of the Lake Tahoe area. c I onsisting of average quality appearance and design,as well as average quality interior,and in Amenities our opinion an upward adjustment is appropriate to this project. The subject's onsite amenities include six tennis courts,an owner's building with Unit Type/Size: The subject cottages are to be two- and three-bedroom fitness center,lounge,game rooms,etc.,and a large pool and spa.These are good quality configurations,with an average unit size of 1,515 square feet.We have compared the onsite amenities that are significant in attracting buyers and achievable sale prices.In addition competitive projects to the subject for the configuration and number of bedrooms,as well as to the onsite amenities,the Tahoe Mountain Club,which was described previously in the the unit size.Typically,with all other factors equal,a larger unit will sell on a lower price per Fractional Interest Market Analysis section of this report,indicates the other amenities which square foot,and vice versa.However,this conventional real estate wisdom is not always buyers at the subject become able to use.This includes the proposed on-mountain restaurant applicable as it relates to the fractional units.There is evidence in the marketplace whereby at the Northstar-at-Tahoe ski area,as well as the owner's lounge at the base of the Northstar- some of the larger units are,in fact,more desirable as it relates to penthouse location or at-Tahoe ski area.In addition,there are golf privileges available at the Coyote Moon Golf limited supply iii relation to demand for those units within a certain project.Nonetheless,it is Course in Truckee and the future Gray's Crossing Golf Course across the highway north of the our opinion that some adjustment should be applied for this unit size and configuration factor. subject, as well as reservation privileges at the Wild Goose restaurant situated on the lakefront.These are all favorable amenities. Comparable Sale Nos. 1 and 2 had larger unit sizes in comparison to the subject's cottage unit size,and some slight upward adjustment is applied to these sales for this Fractional Sales Adjustment Table attribute. Old Greenwood Cottages-Average Unit Size 1,516 Square Feet Comparable Sale Nos.3 through 8 are all substantially smaller than the subject's Sale No. 1 2 3 4 5 6 7 8 unit size,and thus downward adjustments have been applied to all of these comparables for Sale Price/Sq.Ft. $690 $1526 $1,176 $1 121 $1071 $574 $1000 $859Unit Size/Sq.Ft. 2,000 2,095 952 1,185 1,075 11,274 1,172 1,254 the unit sizes and configurations. Adjustments: Share Size:The share size of a project influences sale price.Typically,smaller Property Rights Conveyed — - — -- - - — — shares need to sell for a higher price per square foot in order to cover the more substantial Financing Terms - — -- - — — — Conditions of Sale marketing costs and effort required to sell more numerous smaller shares,as Opposed to Market Conditions larger shares.Due to this factor in marketing and pricing fractional interest,we have applied Location — -20 -10 -10 --- +25 — upward adjustments to those shares that were substantially larger than the subject's 1/17 Amenities +5 -5 - --- --- +5 +5 +5 Physical characteristics: share,and downward adjustments to those timeshares whose shares were substantially Quality +5 -5 +5 smaller than the subject. Unit Type/Size +5 +5 -5 -5 -5 -5 -5 -5 Share Size +5 +5 +5 -5 -5 +5 +5 Net Adjustment +20 -20 -10 -20 -10 +30 +5 +5 Comparable Adjustment Summary-Old Greenwood Cottages Adjusted Price/Sq.Ft. $828 $1.221 $1,058 $897 $s64 $746 $1,050 $902 The previously discussed adjustments have been applied to the comparable sale Range: $746 to$1,221 per square foot prices in order to provide an indication of value for the subject's cottage units.The following Average: $958 per square foot adjustment table summarizes these units and the resulting value indications. The above table indicates that the adjusted prices per square foot for the fractional and timeshare units compared to the subject range from$746 to$1,221 per square foot. The average of all eight indications is$958 per square foot. Generally speaking, Comparable Sale Nos.1 and 2 are most similar to the subject in terms of location and provide a range of$828 to$1,221 per square foot.It appears that adjustment to Comparable Sale No. 2,the substantially superior Tonopalo location,may not have adequately accounted for all differences.Thus,for the attached cottage units for the subject,we consider it appropriate to place most weight on Comparable Sale No.1,which is the Northstar development closest to the subject.Comparable Sale No.3,the Marriott Grand Residence Club,is also one of the more competitive projects,in our opinion.This project indicated a$1,058 per square foot indication.Overall,as stated previously,none of the competitive projects represent truly comparable types of units,and in our opinion it is appropriate to conclude near the average for the subject's cottage units.We consider it reasonable to conclude a market value of$900 per square foot for the subject's attached cottage units.While we recognize these conclusions as above those of the$850 per square foot pricing proposed by the developer,we consider these -132- -133- Price Per Share The cottage share pricing ranges from$67,235 to$93,176,rounded.Per share Melia Roos Tax Adjustments pricing is more difficult to compare due to the differing sizes.The cottage shares both have Fractional interest Units price points under$100,000,which is considered appropriate.Overall,the pricing appears melio Roos increase per Year 2.00% Discount Rate 5.00% reasonable. Indeed, the three-bedroom, three-bath units in the far inferior Trendwest Assigned special Tax $3,400 per unit ,,4-avelopment range from$70,000 to$96,000 for a 1/13 share,which is the most similar share Assigned Special Tax $200 per share to that offered at the subject. Disc Mello Tax Pv Year Factor W;2%inc Mello Tax The cabin per share pricing ranges from$130,765 to$158,029,rounded.These i 0.95238 $200.00 $0 share prices appear reasonable relative to the much higher pricing for the larger shares.The 2 0.90703 $204.00 $185 3 0.86364 $208.08 $180 most similar sized shares in the other market areas range from$65,000 for a 1/20 share at the 4 0.82270 $212.24 $175 5 0.78353 $216.48 $170 Hyatt Mountain Lodge to$182,000 for a 1/10 share at the Club at Big Bear.Again,the overall 6 o.74622 $220A1 $165 pricing appears to be reasonable for the subject units in relation to other market areas,as well 7 0,71068 $225.23 $160 8 0,67684 $229,73 $155 as the subject's most competitive market area. 9 0.64461 $234.32 $151 10 0.61391 $239.01 $147 11 0,58468 $243.79 $143 Mello-Roos Bond Adjustment 12 0.5r>ti84 $248.67 5138 13 0.53032 $253.64 $135 Consistent with CDAC guidelines,we have evaluated the need for an adjustment 14 0 50507 $258.71 $131 15 0A8102 $263.88 $127 to the subject's pricing due to its encumbrance by bonds.As discussed previously,the bond 16 0A5811 $269.16 $123 cost burden for the subject property is$3,000 per single-family lot and$3,400 per fractional 17 0,43630 $274.54 $120 18 0.41552 $280.03 $1':6 unit.The$3,400 per fractional unit is the annual cost for the entire physical unit.The tax per 19 0.39573 $285.63 $113 20 0.37689 $291.34 $110 unit will be further allocated to each of the 17 fractional shares to be sold in each unit.The per- 21 0.35894 $297.17 $107 share price would be$200 per year($3,400 J 17).The subject Mello-Roos bonds will be in 22 0.34185 $303.11 $104 23 0.32557 $309.17 $101 place for 30 years.In order to adjust for the Mello-Roos bond payment,we will deduct the i 24 0.31007 $315.35 $98 25 0.29530 $321,66 $95 present value of the bond payments for 30 years,discounted at 5 percent.A 5 percent 26 028124 $328.09 $92 discount rate is consistent with the safe rate on a 30-year Treasury note.The present value of 27 0.26785 $334.65 $90 28 0,25509 $341.34 $87 the bond payments for a 1/17 fractional share in a unit discounted at 5 percent for 30 years is 29 0.24295 $348.17 $85 $3,682 per share.This equates to approximately$62,602 per whole unit.Reference is made to 30 0.23136 $355.13 682 Totals $3,682 Per Share the calculations on the following page. 17 snares per unit Conclusion-Share Values Adjusted for Mello-Roos Based on the previous discussion,we have calculated the average price per share for the cottages and cabins for use in our discounted cash flow analysis.In our opinion,it is most appropriate to apply an average as it relates to estimating sales revenues over the holding period.The averages are considered appropriate as it is difficult to project which type -1.8 a- -13s- of units will sell faster,and when.Applying averages such as this are considered appropriate DEVELOPMENTAL ANALYSIS-LAND RESIDUAL and typical methodology applied in the industry.The average share prices for the subject are calculated as follows: The developmental analysis conducted in this section assumes the Community Facilities District funded improvements are in place, as well as developer funded Market Less Mello- Adjusted improvements.This is a reasonable assumption given the status of the installation of the No.of snare Roos snare improvements as of the date of value.In our opinion,this is how a typical urchaserwould look Unit Type S.Ft. Shares Price Adjustment Price Rounded to P P yP P Cottages at the subject property"as is"as of the date of value.The developmental analysis represents 2BR/2.5BA 1,270 612 $67,235 $3,682 $63,553 $63,500 the valuation method, which most closely simulates the analysis conducted by a 3BR/3.5BA 1,760 612 93,176 3,682 89,494 89,500 Average/Totals 1,515 1,224 $76,500 knowledgeable buyer of subdivision acreage such as the subject.The assumptions on which Cabins the discounted cash flow analysis is based are discussed in this section of the report. 3BR/3.5BA 2,470 816 $130 765 $3,682 $127 083 $127 000 4BR/4.5BA 2,985 442 158,029 3,682 154,347 154,000 Average/Totals 2,728 1,258 $136.500 Revenues Sale revenues to be generated at the subject property are from the sale of 99 single-family lots and fractional interests in 72 cottage units and 74 cabin units.Market value of the lots and cabins was discussed previously herein. Lot Revenues As discussed previously,there are 86 of the 99 subject lots currently under contract at an average price of$308,000.The remaining lots are the higher priced lots with the excellent ski area views and golf course frontage at the south end of the subject development. While there was some market resistance to purchasing these in the pre-sale phase,it is our opinion that the proposed net asking prices on these lots will be achieved now that the roads and amenities in the subject development are completed or under construction and a more finished appearance in the subdivision allows for completing the sales of these lots.Given the fact that 86 of the lots are under contract,we will reflect most of the lot sales revenue in the first quarter of our analysis.We have recognized some of the lot sales in the 2nd quarter of our analysis to reflect the timing for the as yet unsold lots.The average lot sale price of$350,000, including the last 13 lot sales,is applied in our analysis. Fractional Revenues Reference is made to the Sales Comparison Approach-Fractional Interest section of this report in order to identify the achievable market values for the subject's cottage and cabin units.The following table summarizes the average values concluded for the cottage and cabin units to be employed in our discounted cash flow analysis. -139- -1+0- • Fixed expenses,including insurance,master associations in the case of the market area,as well as industry averages provided by Ragatz Associates in their study subject,and taxes.For the purposes of our analysis,we have shown taxes referenced,previously in the Fractional Interest Market Analysis section of this report.The separately from the HOA dues. following table summarizes the HOA dues at competitive projects in the subject's market area. The above expense categories were reviewed for the subject's proposed homeowners association operating budgets.The following table summarizes the homeowner's HOA Dues-Competitive Projects Lake Tahoe Area ,.. association budget provided by East West Partners.We have excluded property taxes from the lnalysis due to the uncertainty as to how the fractional interest units will be assessed.Showing Project Annual HOA Dues Per Share Annual HOA Dues Per Week Northstar Club $1,386-1/7 Share $187 taxes as a separate line item allows for more specific sensitivity allowance. " Tonopalo $9,860 to$12 968-117 Share $1 327-$1 746 Marriott Grand Residence $3 600 to$6 600-1/4 Share $277 to$508 Kirkwood $1,608 to$1,896-1/8 Share $247 to$292 Homeowners Association Budget' 1$3.096 to$4,776-1/4 Share $238 to$367 Subject-Old Greenwood $3,070`-1/17 Share Cottage $1,023` .Expenses Cottages Cabins $3,840`-1117 Share Cabin $1,280` Administrative $ 502,139 $ 549,717 `Excluding faxes Operating 59,361 73,530 Unit 738,642 972,015 Maintenance 448,661 528,530 The above table indicates that the subjects projected HOA dues are substantially Utilities 235,032 270,923 higher than most of the competition in the market area,with the exception of Tonopalo.Given Fixed(Excluding Taxes 468.096 577,633 Total $2 451 931 $2 972 348 the large amount of amenities and the golf course at the subject property,it would be Replacement Reserves 200,000 200.000 anticipated that HOA dues should be higher than the otherfour properties in the Tahoe area. Total $2,651,931 $3,172,348 The following table summarizes average fractional industry and HOA fees for traditional Cottage Per Unit Allocation Cabin Per Unit Allocation fractional and private residence club developments as surveyed by Ragatz Associates. ( , 2BR 3BR 3BR 4BR Per Unit .010804358 .015816295 .013192076 .015246435 Average Fractional Industry HOA Fees $28,652.41 $41,943.72 $41,849.86 $48,367.00 Traditional Fractional/Private Residence Club Per Share .063555 .093037 .077600 .089685 $1 821 $3 902 $3 248 $4 338 =NAt$10,300 e Per Week of OwnershipSubject Cottages Subject Cabins Exchange Dues 209 209 209 209 Studio 5 $150/$495 Total $2 030 $4 111 $3 457 $4,547 1 BR 10 $160/$525 Per Share Averages 2BR 90 $180/$1,165 $ 677` Cottages $3070 3BR 30 $3251$1,300 $1,370` $1,152` Cabins $3 840 48R NA/$2,090 $1,516` Excluding taxes Source:Ragatz Associates •Excluding taxes Source:East West Partners The above table indicates that the homeowners association dues for the The above table indicates the range of pricing by unit type and by week for cottages range from$2,030 to$4,111 per share,with higher dues in the cabins of$3,457 to traditional fractional and private residence clubs.It is noted the range indicated by unit type for $4,547 per share.We have compared these projected dues with other projects in the subject's a two-bedroom unit is $1,800 to $5,190, a three-bedroom is $3,265 to $6,030, and substantially higher at$10,300 for a four-bedroom unit.The subjects pricing by unit generally falls well within this range indicated by the industry averages.Another method used to make the county and state.We have estimated the whole ownership assessment by a review of comparisons on an equal basis is to review the HOA fees as it relates to price per week of condominium and home sales in the Truckee area.The following table summarizes this ownership.The subject's dues per week of ownership are also substantially higher than the calculation. competitive projects noted above,with the exception of Tonopalo,but are well within the industry averages indicated by the Ragatz Associates survey.The averages forthe subject are Old Greenwood Estimated Taxes Per Unit between$677 and$1,516 per week of ownership by.unit type,where the Ragatz Associates industry data indicates a very wide range of$150 to$2,090 for a two-to four-bedroom unit Weighted Avg. Assessed Value Estimated Avg, X Current Estimated Taxes Unit Size Per Sq.Ft. Value/Unit Tax Rate Per Share week of ownership.Generally,it is acknowledged that the subjects dues are towards the high Cottages 1,515 Sq.Ft. $400 $ 606,000 $.0106 $6,424 Ti7=$378 end of this range,which is consistent with its previous classification as somewhat of a hybrid Cabins 2,651 Sq.Ft. $400 $1,060,000 $.0106 $11,240 17= between traditional fractional and the higher end private residence club type project.For the Weighted Average Tax/Unit $8,865 q 17= purposes of our analysis,we will utilize the average HOA dues per share for the cottages of Weighted Average Tax/Share $521 $3,070 and for the cabins of$3,840. The previous analysis has indicated the reasonableness of the HOA dues The above table indicates the calculations for the estimated taxes per share for ' excluding taxes.All of the comparable indications included taxes.If the tax estimates made in the real property.In our opinion,these are reasonable estimates in relation to sale prices and the following section are added in,it appears the subjects HOA dues will be at the high end of assessments of single-family homes and attached units,which we have reviewed in the the market. subject's market area.The amounts calculated above will be utilized in the discounted cash flow section of this report as applied to the unsold inventory held by the developer. Real Estate Taxes ' It is also necessary to estimate the taxes for the vacant development land, Real estate taxes represent a significant holding cost for a project that has an which will be improved in phases over the projection period.This projection is made on a extended sellout period.The real estate taxes applicable to the subject were discussed in per unit basis.The cottage land valuation is estimated at$60,000 per unit,which is detail previously in the Assessed Valuation and Taxes section of this report.As noted therein, approximately 10 percent of the whole ownership figure estimated previously.The cabin there is some uncertainty as to the methodology by which the Nevada County Assessors lots value has been estimated at$200,000 per unit,which is approximately 20 percent of Office will appraise the subject's fractional units.In our opinion,it would penalize the subject the estimated whole ownership values estimated previously.These ratios are considered property to apply the tax rate to the full value of the subject property based on the 1/17 shares. reasonable and appropriate in estimating taxes attributable to the underlying land of the un- This is because the share price includes the use of off-site amenities that are part of the Tahoe built units in our developmental analysis.This calculation is made as follows: Mountain Club. The share price also needs to reflect the necessary marketing and Assessed Value Estimated Estimated Taxes entrepreneurial effort to market a fractional development the size and scope of the subject.In Vacant Land Current Tax Rate Lot Taxes Per Share our opinion,it is reasonable to apply a tax rate to an estimated assessed value which is Cottages $60,000/Unit $.0106 $ 636 $37.41 consistent with the underlying cost and value of each of the subject units based on whole Cabins $200,000/Unit $.0106 2,120 124.71 Weighted Average $130,959/Unit $1,388 $81.65 ownership.We have reviewed the rules of Proposition 13 and the methods for assessment with Rounded to $82.00 the subject developer.In our opinion,the assessment of the subject units as individually owned units similar to other cabins and condominiums in the subject's area is the most appropriate The above property tax estimates for the subject units and land are based on method and is most consistent with our understanding of the applicable taxing requirements for reasonable methodology.It is recognized that there is some uncertainty as to how the Nevada _ ..__...,..�x. ..... .......... opinion,the fact that the subject lots have been completed and marketed to the point of binding Internal Rate of Return sales contracts greatly reduces the profit expectation in the marketplace.For the purposes of The internal rate of return(IRR)takes into consideration all elements of the cash our analysis,we have applied a 4 percent profit to the single-family lot sales.This equates to a flow,including profits,current value of money and income and expenses involved in the profit of approximately$1,400,000 for the lots.Given the likelihood of the lot sales closing determination of the cash flow.The following table summarizes the range of discount rates or within the first quarter of our analysis,this amount of profit may be excessive and is certainly internal rates of return,including developer's profit,as published in the Korpacz Real Estate �. conservative relative to the low risk.However,in keeping with the intent of a bulk value Investor Survey. stimate per CDAC guidelines,we consider it appropriate to,recognize this level of profit in our analysis.In order to recognize the anticipated immediate sellout of the single-family lots,we " Discount Rates(IRRs) have recognized an offset to the effects of discounting the lot sales in the first period of our Including Developer's Profit analysis.This is considered appropriate given the large number of binding sales contracts and Second Quarter 2003 projected closing dates anticipated as of the date of value. Current Quarter Fourth Quarter 2002 The developer's profit line item in our discounted cash flow represents an Free and clear allocation of the net revenue after repayment of development costs.This allocation allows for RANGE 11.00%-35.00% 11.00%-35.00%AVERAGE 20.25% 20.21% the developer to realize profits throughout the sell-out period while allowing for remaining cash CHANGE +4 flow to be available for a return to the underlying land investment. Subject to Financing RANGE 15.00%-30.00% 15.00%-30.00% Discount Rate AVERAGE 20.50% 22.08% In order to recognize the time value of money and convert the future cash flows CHANGE — -158 into an estimate of present value,we have applied a discount rate to the future cash flows.The Source:Korpacz Real Estate investor Survey,Second Quarter 2003 discount rate is often contemplated concurrently with profit.It is our opinion it is appropriate to apply profit as a separate line item from discounting in order to be able to conduct sensitivity The above table indicates that discount rates for leveraged developments are i analysis as it relates to the impact of these two items on the cash flow.It is our opinion that the slightly higher than those projected on a free and clear basis,all cash.Generally,the range of profit is conceptually separated from the time value of money.We have reviewed investor the averages is consistent,running between approximately 20.25 and 20.50 percent as of surveys,including the Korpacz Real Estate Investor Survey and the RERC Investor Survey to Second Quarter 2003.Typically,developers of fractional projects might have higher IRR identify and anticipate yields on the various types of investment grade real estate available in expectations due,to the risks of marketing this type of real estate product.However,the subject the market.As of Second Quarter 2003,the overall average yield anticipated for investment development has mitigated this risk with the near-term cash flow available from the single grade real estate was 11.1 percent.This is for more conventional property types,including family lot sales,as well as the inclusion of the subject in a larger development concept retail,industrial and office projects.For the purposes of our analysis,we consider it appropriate incorporating off-site amenities.Reference is made to the following discounted cash flow to apply a discount rate of 10 percent to the subject.This rate is coupled with the profit analysis,which outlines the cash flows and the anticipated internal rate of return based on our percentage noted above to achieve an internal rate of return(IRR)exceeding 21 percent.A 10 determination of profit and discount rate.The IRR calculated in our analysis is 21.43 percent, percent discount rate is considered substantial as it relates to the risk of the subject which is consistent with the averages noted in the investor survey discussed above. development as well as returns available on alternative investments. � pp a (p O R ff3 V,V„M aND V t---11]M O O tl p p tC, ` 8 V "Q_G�0+fy t0 CI to 47 �Q'a N<A u'i fqf��Y7 t0[�]Ol Qi O two N i th h Ci M N3 h. e- l'/M tT '-•-'t[1 i"ti V l�? aR V 3,1 .•.O:V 6� r...F .�... �I'. 2 n c ku 00. g g s" o F'- Sa`Tii '�i p°e u c?K. a�' in � •`u � �7. N �: a E is1 h h-tj-,••,aQ'r Vc'r t'a3 ni£`s,'c7 Ur�u..UA...flx¢1K ' `im to C. � Es h zU$ja�i$a�<okX3'a��csc�mn og,R za urcai wcc u�'a oyuK u O,v S0 : 'b 1i 22 �? v oo uB a- a cr.ar- TRUCKEE DONNER CFD VALUE ALLOCATION The Mello-Roos Community Facilities District(CFD)No.03-01 has been divided into two separate zones.These zones have separated the subject property into a total of 100 single-family lots and four existing cabins in Zone 1.As noted previously,there is one single- family lot that is not intended for sale.Zone 2 represents all of the land to be occupied by the fractional product.As requested,we have prepared a value allocation attributable to each of these zones within the CFD.It should be noted that because of the shared infrastructure and other items,a completely precise allocation is not possible.However,based on the proposed revenues and the analysis of the entire CFD as conducted previously,we do believe that a reasonable value allocation can be made. The allocation of value to Zone 1 and Zone 2 requires an allocation of the Mello- Roos bond proceeds to each zone.This allocation is calculated in the following table. Mello-Roos Fund Allocation Total Mello-Roos Bond Issue $12,245,000 Total Mello-Roos Funds to Project 9,275,000 Source:UBS Financial Annual Debt Service Taxable Property Pro Rate Share Fund Allocation Zone 1 r X=• i 3 s, T v 104 Units @$3,000/Unit= $312,000 38.6%x$9,275,000= $3,580,150 Zone 2 x` x 146 Units @$3,400/Unit= 496.400 EIA2j x$9,275,000= 5.694.850 000"' � � .- � � °> •- Total $808,400 100% $9,275, Recognizing the near-term value of the lot and cabin sales in Zone 1 and f s x assigning the balance of the total bulk value of the CFD to Zone 2 best appropriates the allocation of value for the two zones in the subject.These calculations are shown in the following table. � fie us � 3g•p. C� .� ti � �x� �� � SA 6.5 VALUATION Zone 1 Value Allocation Revenue We have prepared an appraisal of certain portions of Community Facilities Lot Sales Revenue 99 Lots @$350,000/1-ot $34,650,000 District(CFD)No.03-01(referred to as Old Greenwood)which will be subject to special taxes Existing Cabins 4 Cabins @$825,000/Cabin 3,300,000 levied by the district. As a result of the appraisal and analyses made,and based upon the Total Gross Sales $37,950,000 Expenses certification,assumptions,and limiting conditions stated herein,the opinion is formed that the Sales Commission on Lots $2,945,250 market value of the fee simple interest in the subject property as of November 1,2003, Closing Costs 189,750 assuming completion of infrastructure and"as is"are as follows: Present Value Discount 441,500 Developer's Profit(Bulk Sale Discount)on Lots 1,666,000 Total Expenses 5,242,500 Market Value Conclusion for Taxable Portion of CFD 03-01 Market Value Zone 1 $32,707,500 "As Is"Assuming CFD Reimbursement Plus Zone 1 Pro Rate Share of Mello-Roos Reimbursement 3,580,150 Total Zone 1 Value Allocation $36,287,650 EIGHTY FIVE MILLION DOLLARS Rounded to$36,300,000 S85.DOO.t)00 Zone 2 Value Allocation Total CFD Market Value $85,000,000 Less Zone 1 Value Allocation 36,300,000 Total Zone 2 Value Allocation $48,700,000 The above calculations have allocated the total bulk value of the subject CFD of $85,000,000 determined previously. The Zone 1 allocation is$36,300,000 and Zone 2 allocation is$48,700,000. -15f -157- b BROWN,CHUDLEIGH,SCHULER,DONALDSON AND ASSOCIATES BROWN,CHUDLEIGH,SCHULER,DONALDSON AND ASSOCIATES The reported analyses,opinions,and conclusions were developed,and this report has been prepared,in conformity with the requirements of the Code of Professional Ethics and the Standards-of Professional Appraisal Practice of the Appraisal Institute. 11. Christopher T.Donaldson,MAI,CCIM,finds the content and conclusions of the appraisal and the report were to be in accordance with the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Institute.Christopher T. Donaldson, MAI, CCIM, has personally inspected the subject property and b comparable properties. 12. D.Tyler Dustman provided significant professional assistance to the persons signing this report. Respectfully submitted, BROWN,CHUDLEIGH,SCHULER,DONALDSON AND ASSOCIATES Christopher T.Donaldson,MAI,CCIM California State-Certified General Appraiser ADDENDA License No.AG011161 Expires O5/20/O5 , CT D:kf l -162- BROWN,CHUDLEIGH,SCHULER,DONALDSON AND ASSOCIATES QUALIFICATIONS CHRISTOPHER T.DONALDSON,MAI,CCIM CHRISTOPHER T.DONALDSON,MAt,CCIMCHRISTOPHER T.DONALDSON,MAI,CCIMCHRISTOPHER T.DONALDSON,MAI, CCIMCHRISTOPHER T.DONALDSON,MAI,CCIMCHRISTOPHER T.DONALDSON,MAI,CCIMCHRISTOPHER T.DONALDSON, - MAI,CCIM EMPLOY?MNT Brown,Chudleigh,Schuler,Donaldson and Associates Medford,Oregon and Park City,Utah Independent real estate appraisers and consultants providing appraisal,feasibility and consulting services throughout the country. First Gibraltar Bank,F.S.B. Dallas,Texas 1990-1991 Senior Appraiser responsible for reviewing appraisals for regulatory and standard=s compliance.Also conducted specialized in-house appraisal assignments. John D.Bailey and Company Dallas,Texas 1986-1990 Associate Appraiser PROFESSIONAL AFFILIATIONS Member,Appraisal Institute(MAI designation) Member#9157 Member,Commercial Investment Real Estate Institute,Certified Commercial Investment Member(CCIM designation)Member#7625 State Certified Appraiser in the following states: Arizona License#30707 California License#AGO11161 Colorado License#CG01319868 Oregon License#C000331 Texas License#TX-1322246-G Utah License#CG00042231 EtwcanON Bachelor of Arts,English _ Coe College 1978 i ASSUMPTIONS AND LIMITING CONDITIONS The undersigned appraisers acknowledge they are not qualified to render an opinion with regard to the presence of toxic materials,and recommend an environmental scientist be retained to determine the exact status of the property. This report is made expressly subject to the following assumptions and limiting No environmental impact studies were requested nor performed with regard to this appraisal,and the appraisers hereby reserve the right to alter,amend, conditions: revise,or rescind any portion of the value or opinions expressed herein based on any subsequent data discovered which could significantly impact the market 1. No responsibility is assumed by the appraisers for matters that are legal in value of the property. nature. 8. The distribution of total valuation estimate in this report between lanc 2. No opinion of title is rendered,and the property is appraised as though free of all improvements(if any)applies only under the existing or reported prograr,. _. encumbrances and the title marketable. utilization.The separate valuation for land and improvements(if present)must not be used in conjunction with any other appraisal and is invalid if so used. 3. The appraisal covers the property described only,and the legal description is assumed to be correct. 9. The assumption has been made that all required licenses,consents,permits or other legislative or administrative authority,local,state,federal,and/or private 4. No survey of the boundaries of the property has been made.All areas and entity or organization have been or can be obtained or renewed for any use dimensions furnished to the appraisers are assumed to be correct. considered in the value estimate. 5. Information concerning market and operating data,as well as data pertaining to 10. The property is appraised as though operated under competent and responsible the property appraised,was obtained from others and/or based on observation. ownership and management. This information has been verified and checked,where feasible,and is used in this appraisal only if it is believed to be reasonably accurate and correct. 11. Opinions of value contained herein are estimates.There is no guarantee,written However, such information is not guaranteed, and no liability is assumed or implied,that the subject property will sell for such amounts.It assumes there resulting from possible inaccuracies or errors regarding such information or is full compliance with all applicable federal, state, local environmental estimates. regulations and laws unless noncompliance is stated,defined,and considered in the appraisal report. 6. The data contained herein comprises the pertinent data considered necessary to support the value estimate.We have not knowingly withheld any pertinent facts, 12. It is assumed that all applicable zoning and use regulations and restrictions have but we do not guarantee that we have knowledge of all factors,which might i been complied with unless non-conformity has been stated, defined, and influence the value of the subject property.Due to rapid changes in the external considered in the appraisal report. factors,the value estimate is considered reliable only as of the effective date of the appraisal. 13. The appraisers are not required to give testimony or to be in attendance in court or before other legal authority by reason of this appraisal without prior agreement 7. The appraisers assume there are no hidden or unapparent conditions of the and arrangement between the client and appraisers. property,subsoil,or structures that would render it more or less valuable.The appraisers assume no responsibility for such conditions,or for engineering 14. Disclosure of the contents of this appraisal report is governed by the By-Laws required to discover such factors.It is assumed no soil contamination exists as a and Regulations of the Appraisal Institute. result of chemical drainage or leakage in connection with any production operations on or near the property. In addition, the existence (if any) of 15. The appraisers assume no responsibility for any costs or consequences arising potentially hazardous materials,such as asbestos,used in the construction or due to the need or the lack of need for flood hazard insurance.An agent for the maintenance of the improvements or disposed of on-site, has not been Federal Flood Insurance Program should be contacted to determine the actual considered. need for flood hazard insurance. -158- -159- 16. The liability of the appraisers'company,its owner and staff,is limited to the BROWN,CHUDLEIGH,SCHULER,DONALDSON AND ASSOCIATES Client only,and to the amount of the fee actually paid for the appraisal services rendered,as liquidated damages,if any cause of action should arise.Further, there is no accountability,obligation,or liability to any third party.The appraisers CERTIFICATION are in no way to be responsible for any costs incurred to discover or correct any deficiencies of any type present in the property;physically,financially,and/or legally. The undersigned appraisers certify that they have petsonally analyzed the 17. The liability of the appraisers'company,its owner and staff,is limited to the property herein known as the Community Facilities District No.03-01(Truckee Donner Public Client only,and to the amount of the fee actually paid for the appraisal services Utility District),Truckee,California;and to the best of their knowledge and belief, rendered,as liquidated damages,if any cause of action should arise.Further, there is no accountability,obligation,or liability to any third party.The appraisers 1. The statements of fact contained in this report are true and correct. are in no way to be responsible for any costs incurred to discover or correct any deficiencies of any type present in the property physically,financially,and/or 2. The reported analyses, opinions, and conclusions are limited only by the legally. reported assumptions and limiting conditions and are our personal unbiased professional analyses,opinions,and conclusions. 3. We have no past, present, or prospective direct or indirect interest in the property that is the subject of this report and we have no personal interest or bias with respect to the parties involved. 4. We have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment. 5. Our engagement in this assignment was not contingent upon the development or reporting predetermined results. 6. Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client,the amount of the value estimate,the attainment of a stipulated result,or the occurrence of a subsequent event. The appraisal assignment was not based on a required minimum valuation,a specific valuation,or the approval of a loan. 7. We are competent to appraise the property that is the subject of this report based on our previous experience appraising similar type properties. 8. Our analyses,opinions,and conclusions were developed,and this report has been prepared in conformity with the Uniform Standards of Professional Appraisal Practice. 9. The use of this report is subject to the requirements of the Appraisal instil relating to review by its duly authorized representatives. 10. The Appraisal Institute has a policy of continuing education."As of the date of this report, I, Christopher T. Donaldson, MAI, CCIM, have completed the requirements under the continuing education program of the Appraisal Institute." -160- -161- .... ......... ......... all- l l- a M t M. ,H � i A i '� ¢1 '1 1 i i �� �7f g ����� � t$�?: 3 x� ���� �Y.4 � "� " 1 � R Mil �� 555K s��s� l I �� 3 �'� ^� � �i ���' 6 ��g� �gii -'it $yns � � Will! a $ ' a 8g J@ TA LJ 0i AIL RM 111.101.111 11%;:AstUitsLA 11111 ills:nx .0 LA ;. .1,0AI1 xj,ax 0 :>klsaax 1111 0..:aF0.111 Y..«, <,r_>a 111 111 1�.:,«��� � � a 11Lrym�a aKk � '> ff Y�Su .11 1 11u�s s x#L 11. 10.1f 13.,111 <,,., .  „L .. ,,::,a 1111 Hill ill S°* k w d ull Hall IMI lit som pax :f�rx=�w>��,�,��g-.��• �a U���;,hce dss spL 41 �Nstis0 sS emw g 101 Ln1111 11 x 1A A i u v.gy°aNe s r. d �! ;��u �3 ��� su:sa wt� �§ � � sax we Mil rx a�N��1��g?' ?; 1 a � 'r » ssa.6wasxxYfi_ .° � Otis � � �'�z< aa� �Gxs � s � � �• s �'� m Al was s=. r g wl1 sm �n' a0wa.01 x IJ as x s�k .x sr�s i s » nzos hill Rsw L111x ._<,<.W A.WkAJ v KIND,,! LI I County Assessor will ultimately tax the subject.However,due to the timing of the construction and sales of product,it appears the property taxes have only a minimal impact on the bulk Development Budget/Expenditures value conclusion stated herein. Old Greenwood,LLC Actual&Budget Mello-Roos Tax Development Costs: Through Year-End 2003 Remaining Total Budget Project to Date Difference The Mello-Roos Tax applicable to the subject was discussed previously,and the Capitalized Project Costs: rate of apportionment has been calculated at$3,000 per single-family lot and$3,400 per Land Acquisition $16,957,263(1) $16,957,263 $ fractional unit.The fractional unit can be further divided to the amount of Mello-Roos tax by Architectural Fees 1,718,430 1,003,312 715,i._ Professional Services 1,368,200 817,434 550,766 share,which equates to$200 per share.The pricing of these units was adjusted previously to EIR&Land Planning 1,136,275 800,573 335,702 account for the Mello-Roos costs.This will be factored into our analysis at$3,000 per lot and Site Work&Infrastructure(2) 22,333,767 19,125,755 3,208,012 $200 per share. Tap Fees Permits&Taxes 6,876,375 1,152,050 5,724,325 Building Construction Costs 74,482,296 5,969,911 68,512,385 Furniture,Fixtures&Equipment 13,280,674 1,427,674 11,853,000 Infrastructure Costs Project Management Fees 11,275,260 3,762,260 7,513,000 The subject has had substantial infrastructure already installed. There are Legal/Financial Expenses 3,173,040 1,688,040 1,485,000 existing roads with pavement entry into the development,and all roads have been rough cut. Marketinq Fractional 43 085795 2865 795 40,200,000 Marketing Lots 1,200,000 1,200,000 0 Paving was ongoing as of the date of inspection,and our analysis assumes all infrastructure Marketing Tmr&Founders 500,000 500,000 0 costs budgeted for 2003 have been installed by November 1,2003.The following table Club Amenities 3 6 7 0 1 17,343,498 8,687,000 summarizes all the budgeted and remaining costs projected for the subject property. Total Development Costs $206 074 375 $74 613 565 4 $131 460 810 (1)Reflects a$5,000,000 reimbursement made from Tahoe Mountain Club for the golf course. (2)Excludes future Old Greenwood building. (3)Based on allocation of cost at$3,500 per fractional share(2,482 shares at$3,500 per share). (4)Includes amenity cost contributions from Tahoe Club Company. We have viewed the detailed budgets for each of the line items noted above and have determined that the remaining on-site road and utility costs for completion of the subject development is$3,208,012.This amount is anticipated to be spent over the remaining years, as development continues in certain parcels of the subject property related to phasing of the cottages and cabins.This amount will be deducted to reflect the"as is"value of the subject. Amenity Costs The subject development has amenities that are to serve a larger development concept,which includes other projects in the Lake Tahoe region.These have been discussed previously,and include the Northstar-at-Tahoe projects,Gray's Crossing and Coyote Moon golf courses,and the Wild Goose restaurant.The Tahoe Club Company is a related entity to the subject developer,East West Partners,and will oversee the development on costs of these -14s- -150- amenities.As the costs of the amenities are to be shared by all projects,we have allocated only those amenity costs to be paid by the subject property in our analysis.These costs are Developer's Overhead calculated in our analysis at$3,500 per fractional share,for a total of$8,687,000.They are We have allowed for developer's overhead in our analysis in order to account for recognized on a per share basis in our analysis as the shares are sold. the administrative and oversight duties involved in coordinating a large development such as In addition to the fractional share amenity cost contributions,it is anticipated that the subject property.This is intended to allow for any legal or financial expenses,professional the subject will need an on-site property management building,which may also serve as a dub fees such as engineering,project management fees,remaining entitlement costs,and other amenity.The developer has projected this cost at$3,500,000,which we have included in our overhead items. We have estimated these costs at 2 percent of gross revenues. Our analysis.The total amenity costs projected on-site for the Old Greenwood development is experience in the marketplace is that this allocation can range anywhere from 1 to 5 percent in approximately$38,000,000 of which approximately$17,300,000 had been spent as of the date the current market.In our opinion,given the amount of infrastructure and operations already in of value.The remaining costs will be funded partially by the subject revenues noted above and place at the subject,an estimate in the middle of this range is considered appropriate.We the Tahoe Club Company which is a related entity to the subject developer. have not applies any developers overhead to the single family lots which are completed and under contract. Building Costs Costs of construction for the cottage and fractional units is deducted in order to Developers Profit account for all costs associated with improvement of the subject property and reducing these Any development undertaken such as the subject requires a profit incentive to cost deductions to a land residual value.The building costs for the subject's cottages and induce the entrepreneurial effort necessary for undertaking the risk of this type of development. cabins were discussed previously herein. Based on the various sources,we consider it We have had discussions with several market participants in the fractional market in order to reasonable to utilize the subject developer's construction cost estimates. These are identify profits.It is noted that there were several fractional project developers at the most summarized as follows: recent fractional timeshare conference sponsored by www.WoddsFinestResorts.com,'Taking Fractional Development to the Next Level,"who reported difficulties in achieving profits.Profits Fractional Development Costs are typically either recognized as a percentage of revenues or percentage of costs.However,it Cottages is noted that East West Partners has experienced profitable development in Colorado.Our 2BR 1,270 Sq.Ft.@$240/Sq.Ft.=$304,800+$66,200 F,F&E=$371,000/17= $21,824/Share analysis will recognize profit as a percentage of revenue.Our discussions with most fractional 3BR 1,760 Sq.Ft.@$240/Sq.Ft.=$422,400+$81,200 F,F&E=$503,600/17= $29,624/Share projects indicated they are looking to achieve profits of 15 to 30 percent,with internal rates of Average $25,724/Share return overall in the range of 25 percent or greater. Based on various sources and Cabins comparisons to other types of development,it is our opinion that a profit requirement of 12 3BR 2,470 Sq.Ft.@$238/Sq.Ft.=$587,860+$91,20o F,F&E=$679,060/17= $39,944/snare percent of gross sales revenues is realistic in the current market given the status of the subject 4BR 2,985 Sq.Ft.@$238/Sq.Ft.=$710,430+$109,000 F,F&E=$819,430/17= $48,202/Share is well into the development stage.We have not applied any developer's profit to the existinr Average $42,845/Share cabin sales,Tahoe Club Company reimbursement,or Mello-Roos reimbursement,as these art low risk income not subject to the marketing risk of the fractional product. Based on the above table,we have utilized the per share cost allocated in our discounted cash flow analysis.We have recognized approximately$1,000,000 of costs already The taking of profits and overall internal rate of return for the subject is more spent on the ten cabin units under construction as a deduction from the cost calculations in the complex than typical due to the influence of the 99 single-family lots,86 of which are pre-sold. first quarter of our analysis. The fact that these lots provide a large amount of near-term sales revenue is significant.In our -151- -132- I shares in the first two quarters of our analysis to allow for completion of construction.In the Unit Type s.Ft. No.of snares Share Price third quarter,there are 80 sales total,42 pre-sales and 38 sales in the quarter. Cottages The total absorption period for the fractional product is 34 quarters,or 8.5 years. 3BR/3.58A 1 760 612 89500 2BR/2.56A 1,z70 612 $ ,500 This is considered a realistic absorption period given the total number of shares available. Averse 1,515 1,224 $76,500 Total marketing periods of four to six years were noted for smaller fractional projects discussed in the Market Analysis section of this report. Cabins 3BR/3.5BA 2,470 816 $127,000 46R/4.5BA 2,985 442 $154,000 Expenses- Average 2,728 1,258 $136,500 There are numerous expenses and costs associated with marketing,holding and remaining costs to develop the property within the Truckee Donner CFD.These are discussed We have employed averages for the price per lot and price per fractional unit, in this section of the report. which is an appropriate methodology.This eliminates the subjectivity of trying to project which Cost of Sales size cottage or which size cabin will close more rapidly, and an'average is a typical We have conducted extensive interviews with developers of fractional projects, methodology in the marketplace. as well as reviewed market data in order to identify the appropriate estimate of cost of sales for Existina Cabin Sales Revenues the subject property.It is well known that the typical marketing costs for weekly timeshare The four existing cabins in the subject development are proposed to be sold by intervals generally ranges between 30 and 50 percent of sales revenue.However,marketing the subject developer in asale/leaseback situation.The sale of these cabins is projected to costs for fractional ownership of more than one week tend to be lower due to a more low key take place in the first quarter of analysis given the favorable lease terms,which provide an sales approach,which is more sophisticated than the high volume,high pressure approaches attractive investment return.The value of these cabins was determined previously in this report used in selling weekly timeshares.Owner referrals are significant,and there is less reliance on at$3,300,000. incentive offers and more focus on direct mail and specific marketing towards the target buyer. I The developer's projections for marketing costs include a 9 percent sales Absorption commission and a 16 percent promotional cost,for a total marketing expense of 25 percent. The absorption of the single family lots at the subject property will all occur in the We have conducted extensive interviews and research with other participants in the fractional first two quarters of the discounted cash flow due to the fact that 86 of the 99 lots are under ownership industry to determine the appropriate level of marketing and commissions. contract,and it is anticipated that construction of roads within the development and the fact One of the more substantial developers of the quarter-share fractional product is that amenity construction is underway should motivate consummation of the sales of the American Skiing Corporation.They report that generally cost of sales in all seven of their remaining 13 lots by the second quarter of our analysis. quarter�share developments have been less than 20 percent,usually in the range of 14 to 16 The absorption of the fractional units was discussed extensively in the Fractional percent. Interest Market Analysis section of this report.As concluded therein,we have applied an We have reviewed a report prepared by Hobson Ferrarini Associates and their annual absorption rate of 152 fractional units(38 per quarter)for each of the two product types, Industry Overview of the Luxury Fractional and Private Residential Club published October cottages and cabins,to be built on the subject property.Our analysis has also assumed 25 2000.They have indicated that marketing and sales costs for luxury fractionals are in the range percent pre-sales of the first ten units constructed,which equates to 42 shares in addition to of 12 to 20 percent,and should average approximately 15 percent of total revenue.Sales the projected average quarterly absorption of 38 units per quarter.There is no absorption of commissions are based on the price point of the fractional product,as well as sales velocity. -141- -t42- Typical in-house sales commissions reported by this research company range from 1.5 to 4 percent,averaging 2.5 percent,with 3 to 4 percent for referrals from outside brokers.It is noted Marriott Grand Residence Club that although these cost percentages are lower than timeshare,the total sales dollars spent Lake Tahoe are still relatively substantial because of the higher unit prices. Marketing and Sales Cost Summary Marketing costs were a topic of discussion during our recent attendance at the Marketing Program 7.8% "Taking Fractional Development to the Next Level"seminar held in Deer Valley Resort,Park Marketing Administration 1.0% City,Utah on September 22,2003.The attendees at this seminar represented very active Sales Administration 2.0% General Administration 2.7% market participants in the fractional industry.Generally,it was agreed that marketing costs Sales Executive compensation 4.0% were approximately 15 to 18 percent of total revenues,excluding commissions.It was noted by Sales Center 0.5% some that location could influence marketing costs as much as 3 to 4 percent.Commissions Total(As a%of Sales Volume) 18.0% were reported to range between 6 and 9 percent,again depending on sales,price point and sales velocity. The above table indicates that Marriott is anticipating a total marketing cost of 18 We have also reviewed marketing costs for the other projects developed by East percent,including commission.Marriott has among the leanest ratios of sales cost in relation to West Partners in the Colorado area.Marketing costs for the Hyatt Mountain Lodge in Beaver revenue due to the large scope of their operation and their method for generating leads. Creek were reported at 24 percent,and slightly higher marketing costs of 26 to 27 percent, Given the range of marketing costs and commissions discussed previously,it including commissions,were reported at the Hyatt Main Street Station in Breckenridge. appears that the subject's projected marketing costs of 25 percent,broken down as 16 percent We have also reviewed a proposed marketing and sales cost summary,which for marketing and promotion and 9 percent for commission,appears quite reasonable and was the proposed budget for the Marriott Grand Residence Club in South Lake Tahoe.The appropriate in relation to other developments built by East West,as well as developments in breakdown of their budget and marketing and sales costs is shown in the following summary. the subject's market area and the fractional industry in general. Homeowners Association Fees Homeowner's association fees are part and parcel of virtually every type of fractional interest and private residence type development.These homeowner's association fees are for the following costs: • Administrative costs,such as accounting,management,office supplies,and salaries and wages associated with management personnel. • Operating expenses,including transportation,pest control and telephone. • Unit expenses,including laundry and linen,cleaning supplies,cleaning services, inventory replacement and room amenities. • Maintenance expenses,including landscaping,snow removal,painting,and repairs and maintenance,including labor. • Utilities expense,including cable television,water,sewer and gas. -143- -144- conclusions to be generally consistent with those of the developer and in our opinion,are above adjusted sale price indications,we consider it appropriate to conclude a market value of consistent with the market for these size units. $900 per square foot for the subject's cabin units.This is consistent with the competitive data, as well as the developer's projections. Comparable Adjustment Summary-Old Greenwood Cabins The previous discussion in terms of comparing the subject units to competitive Market Value Conclusions-Old Greenwood Fractional Shares projects is also applicable to the cabins.The only differences would be in terms of the quality Based on the previously concluded values per square foot for each of the sum and unit type/size characteristics.Typically,there is a premium for a detached unit compared units,we have calculated all of the value indications for the subject by the different ur, to an attached unit.The cabins at the subject property are proposed to be of the highest quality comparison,including price per square foot,price per week and price per share.These are with more substantial build-out and finish than the cottages,and are also of a substantially summarized in the following table. larger size,with three-and four-bedroom configuration.Therefore,we have modified the adjustments for these two factors,which are summarized in the following adjustment table. Market Value Conclusions Old Greenwood Fractional Shares Per Square Foot Fractional Sales Adjustment Table Cottages Old Greenwood Cabins-Average Unit Size 2,728 Square Feet 2BR/2.5BA 1,270 Sq.Ft.@$9001Sq.Ft._ $1,143,000 3BR/3.5BA 1,760 Sq.Ft.@$900/Sq.Ft._ $1,584,000 Sale No. 1 2 3 4 5 6 7 8 Cabins Sale Price/Sq.Ft. $794 $1 526 $994 $1,121 $1 071 $574 $1 000 $659 3BR/3.5BA 2,470 Sq.Ft.(�$900ISq.Ft._ $2,223,000 Unit Size! .Ft. 2,400 2,095 2,496 1,185 1,075 t 274 1 172 1 254 4BR/4.5BA 2,985 Sq.Ft.C$900/Sq.Ft._ $2,686,500 Adjustments: Per Week Property Rights Conveyed Cottages 2BR/2.5BA $1,143,000/17/3= $22,412 Financing Terms - - 3BR/3.513A $1,584,000/17/3= $31,059 Conditions of Sale Market Conditions Cabins --- -- -- - --- --- -- 36R/3.58A $2,223,000!17/3= $43,588 Location - -20 -10 -10 -- +25 - -- 46R/4.56A $2,686,500/17/3= $52,676 Amenities +5 -5 +5 +5 +5 Ph ical Characteristics: Per Share Cottages Quality +10 -5 +5 +5 +5 +5 +5 +10 2BR/2.5BA $1,143,000/17= $67,235Rounded to$67,000 Unit Type/Size -5 -10 -10 -10 -10 -10 3SR/3.5BA $1,584,000/17= $93,176Rounded to$93,000 Share Size +5 +5 +5 -5 -5 +5 + Net Adjustment +20 -30 0 -20 -10 +30 +5 +5 Cabins Adjusted Price/Sq.Ft. $858 $1,068 $994 $897 $964 $746 $1,050 $902 3SR/3.5BA $2,223,000117= $130,765 Rounded to$130,000 Range: $746 to$1,068 per square foot 4BR/4.5BA $2,686,500117= $158,029 Rounded to$158,000 Average: $935 per square foot The above value conclusions are considered reasonable in relation to the comparables as well as the developer's proposed pricing.It is noted that the developer has The above adjustment table indicates a slightly lower range and average of value projected pricing of the cabins to be approximately$50 per square foot higher than the than determined previously for the cottages.In our opinion,this is appropriate given the larger cottages based on superior quality finishes and freestanding construction.In our opinion,the unit size.Indeed,the difference could be larger if not for the anticipated higher quality build-out smaller size of the cottages in comparison to the cabins offsets the superior build-out of the in the cabins when compared to the cottages.Given the averages and ranges indicated by the -134- -135- cabins.The substantially higher per square foot pricing of the smaller units in the comparables supports the pricing conclusions made above. Price Per Week The value conclusions calculated previously for the subject units were calculated Other Resort Comparisons on the basis of price per square foot and were recalculated on a price per week and price per As mentioned previously,we considered it most appropriate to apply adjustments share basis for the purposes of comparison.Our final values will be calculated based on the to the projects considered most similar to the subject based on their location within the Tahoe price per share rounded to a reasonable value conclusion.On a price per week basis,the market area.However,as noted in the Fractional Interest Market Analysis section of this subject's cottages ranged from$22,412 to$31,059 per week.These per week prices are well report,we considered it appropriate to review projects in other market areas.Reference is within the range indicated by the weekly pricing at the Northstar Club and substantially below made to the following table,which summarizes the pricing presented previously on these Tonopalo.They are also well within the range indicated by the weekly timeshares.The lowest projects. prices per week are indicated by the Kirkwood Mountain Club at$4,538 to$15,769 and Trendwest South Tahoe at$8,750 to$20,000,both of which were acknowledged as inferior to Fractional Projects-Western Resort Location the subject overall.Generally,it appears the per-week pricing for the cottages is consistent with the market. Share The per-week pricing for the cabins is much higher than the cottages,in the Identification Size Unit Type Unit Sq.Ft. Price/Share Price/Week Price/SF East West Partners 1/20 Studio 438-602 $65,OOOAvg. $25,000 $1,300 $43,588 to$52,676 range.These conclusions are towards the low end of the range indicated Hyatt Mountain Lodge 2BR2BA 923-1,200 (Approx.) Beaver Creek CO 3BR/3BA 1,318-1 353 by the superior Tonopalo development,which averages$61,486 per week and goes as high as East West Partners 120 Studio 498 $65,000 $25,000 $1,225 Hyatt Main Street Station 2BR2BA 1,097 (Approx.) $111,000 per week.In our opinion,the concluded weekly price for the subject cabins are Breckenridge,CC I 3BRraA 1,550 Roaring Fork Club Cabins 1/681/4 3BR/38A 2,400 $366,000116 $42,230 $917 appropriately above the Northstar Club range on a weekly basis from$23,553 to$40,242.The Basait,CC $550,000 114 $42,300 Jack Nicklaus Golf Course per week pricing for the subject cabins is substantially higher given the larger size of the units Teton Club 1/4-126 2BR28A 1,450 $40,0WNVeek $40,000 $1,324 Jackson Hole,WY 3BR/38A 1,850 $1,038 and their freestanding nature,providing more of a true second home environment.The Arnold Palmer Golf Course The Club at Big Bear 1/10 3BR/30A 2,045 $1a2,000 $35,000 $890 $43,588 to$52,676 range is generally above that of the Roaring Fork cabins,which were at Village 4BR/4BA 2,880 $632 BigBear Lake,CA $42,230 per week,but for a substantially larger share.Given the relationship of the subject's Grand Summit Resod 1/4 studio 377587 $61,400ses,000 $a,723-$21,500 $651-s566 1/17 share size to the market and the general range of the comparables,it is our opinion that The Canyons 1BD/1BA 695-1,082 $109p00-$163,000 $27,250-$40,750 $627-$602 g g p p Park City,UT 2BD2BA 1,190-1,606 $195,000-$350,000 $48,750•$87,500 $655-$871 Penthouse 2 470-3693 $550000-$e20 000 $137500-$205000 $8904888 the per week pricing for the cabins is generally consistent with the market,although it appears perhaps slightly aggressive in relation to some of the competitive projects in the market area. As was discussed in the Fractional Interest Market Analysis section of this report, the Roaring Fork Club Cabins probably represents the most significant comparable to the subject with regards to freestanding fractional cabins.Smaller shares were sold in these cabins than those proposed for the subject.The per square foot pricing for the subject in the range of $850 to$950 per square foot appears to be reasonable in relation to these other market area comparables.In particular,a conclusion near the average at the Roaring Fork Club Cabins is considered appropriate.While their location in the Roaring Fork Valley just down from Aspen is considered highly desirable,the subject has a slightly superior market area as it relates to the drive-to market rather than a destination market,and a more substantial two-season market. -136- -137- FRACTIONAL/TIMESHARE COMPARABLE NO.8 Lake Tahoe Area Fractional/Timeshare Comparables Summary Identification Data Mof Share I % Weeks Unit Unit No. Identification Units Size Sold Sold/Mo. T Ft Price/Share Pnoe/Week Price/ Ft, Trendwest South Tahoe 1 Northstar Club 18 117 94% 18 3BR/38A 2,000 $175,000.$219,000 $23,553.$29,475 $6124767 180 Elks Point Road Northstar-atJahoe 4BR/48A 2,400 $245,000$299,000 $32,794-$40,242 $715-872 Zephyr Cove,Nevada California 2 Tonopah 19 117 45% 30 3/Den.4BR 1.947-3,022 $310,000-$825,000 $41723.$111,036 $1,145-$2,401 6731 North Lake Blvd Average 2,095 $456,842 $61,486 $1,526 Property Description Tahoe Vista A aMe Year Built 4/02 Phase I;4/03 Phase II Maniott Grand Res 189 1/4 86% 299 Studio to 952 Avg $280,000 Avg $21,538 Avg 5 No.of Units 59 fractional;53 points based 1South aakeat- 3BR3BA Project Amenities Adult&kiddie pools,clubhouse,fitness room 4 MarriottTirnberlodge 136 1/50 29% 75 1BR/1SA 838 $11,500430,000 $11,500-$30,000 $1,211Avg Unit Amenities 45"TV/DVDNCR,fireplace,hot tub,fully furnished,washer/dryer 4100 Lake Tahoe Blvd (Ph.p 2BR12BA 1,185 $17,000-$45,000 $17,000-$45,000 $1,121 Avg South Lake Tahoe Parking Surface 5 Hyatt Sierra Lodge 60 1/52 70% 36 2BR/28A 925-1 075 $13,000435,000 $13,000535,000 $1,071 989 Ir(cIthe Way Fractional Interest/Timeshare Data Incline lViila a NV Fractional Share 1l13 4 weeks 6 Kirkwood Mtn Club 40 1/4& 100% 42 Studio 436-660 $59,000-$97,000 $4,538-$7,462 $541.$588 Kirkwood Mtn Resort 1/8 1BR/2-3BA 776-1,192 $100,000.$170,000 $7,692-$13,077 $515-$570 Total Shares Available 750 fractional 'Kirkwood CA I 2BR/2-3BA 1120-1 427 1$160000-$205000 $12308-$15769 $5715574 Ownership/Use Plan Deed 1/13 share.Fixed week in a fixed,unit for the primary 7 EmbalVac Resort 142 1151 70% 58 2BR12BA- 1,172 $23.000 $23,000 $1,000 seasons rotate annually. 901 ski Rum Blvd Lockdff y South Lake Tahoe %Shares Sold 9.3%(70 sold) 8 TrendwestS Tahoe 59 1113 9.3% 2.9 1BR/1BA 846-906 S35,000-$65000 $8,750S16,250 $538.$933 Absorption 2.9 shares/month since 8/01.Slow absorption due primarily to 180 Elks Point Rd 2BR12BA 1,004 $60,0 00.$75,000 $15,000-$18,750 $777-$971 Zephyr Cove,NV 3BR/38A 1.239-1 270 $70 000-$96 000 $17 500-$20 000 $734.$983 lack of registration to sell in California.They just received their Sub. ad G,--.d 7204 1117 2BR/2BA 1,270 license in September 2003. I-80@Prosser 3BA13BA 1760 Pricing - village Exa 3BDf3BA 2,470 Trudkee 4BD/48A 2 985 Unit Type Size SF Weeks/Share Price/Share Price/Week Price/SF 1BR/IBA 846-906 4 $35000465000 $8750416250 $538-$933 Sales,Com Comparison A 28R/2BA 1,004 4 $so 000-$75,000 $15,000-$18,750 $777-$971 P Approach Fractional/Timeshare Discussion 3BR/2BA 1 239-1,270 4 $70 000-$9s 000 $17,500-$20,000 $734-$983 The previously presented data is considered the best information for determining Average $64,000 $16,000 the market value of the proposed subject timeshare units.Although there is generally a lack of Exchange Program Woridmark by Trendwest(65 resorts) gomparability with regards to physical characteristics,overall this is the competitive set by HOA Dues N/A which any regional buyer interested in purchasing fractional or timeshare would measure by Market Data their comparison shopping.The subject will be compared to the above properties based on the Market Type Drive to regional market Buyer Profile Sacramento and Bay area for fractional.Timeshare is more following elements of comparison: national.Many retirees and empty nesters. • 'Property Rights Conveyed Comments Financing Terms This project is an average project with a large building mass and very average design and • Conditions of Sale appearance.It is near the lake and casino district. • Market Conditions • Location • Amenities • Physical Characteristics Ouality Unit Type/Size Share Size The data for the fractional/timeshare comparables summarized value by three units of comparison.We have reviewed the price per share,price per week and price per -126- _12_ square foot.For the purposes of our analysis,we consider it most appropriate to analyze the and close their transactions in a relatively similar manner,and there is no need for adjustment comparables on the basis of price per square foot.In our opinion,this is the most appropriate for this attribute. unit of comparison as it factors out the different share sizes and is more consistent with typical Market Conditions real estate analysis of improved properties.We will provide a crosscheck of our conclusions The market conditions element is intended to adjust for any changes in market made by price per square foot in calculating the concluded pricing by week and share to conditions over the time period covered by the comparables in relatiol to the subject.For the evaluate the final conclusion. most part,all of our sales data is considered relatively recent and consistent with recent The price per square foot utilized in the adjustment tables presented later in this interviews with the sales or project manager personnel for each of the comparables.Therefore, report are based on the aggregate price per square foot,which is calculated by multiplying the no adjustment is considered necessary for market conditions. price per share times the number of shares per unit and dividing that aggregate retail price by Location the unit square footage.In the case of the comparables,we have either selected the overall The location attribute takes into consideration many aspects of property location. averages for property share types,the pricing of the most comparable unit size,or an average These aspects include transportation linkages related to access of primary feeder markets, of the range indicated by the most comparable unit sizes.The sale price per square foot overall desirability of the resort location and scenic quality of the location,as well as specific indications utilized in our analysis are shown in the comparable adjustment summaries locational characteristics related to golf course frontage,lake frontage,and proximity to other presented later in this section of the report. amenities such as shopping,dining and casinos.We are aware that trying to combine all of Reference is made to the following discussion related to the elements of these various aspects into a location adjustment is highly subjective. However,for the comparison outlined previously in our comparison of the subject to the comparable.The purposes of our analysis,we consider it appropriate to make our judgments on location based cottages are analyzed first,followed by separate analysis and adjustments for the cabins. on the wide range of criteria presented previously.Generally speaking,the subject shares the Property Rights Conveyed same market area characteristics related to transportation linkages to the feeder markets, All of the comparables represent a fractional interest in real estate of some type, proximity to Lake Tahoe area amenities,and the general overall region as the comparables. and thus are considered similar for this attribute and no adjustment is required. The specific characteristics contemplated in this adjustment include the fact that some of the Financing Terms comparables have direct ski-in/ski-out access,considered to be a highly desirable amenity for According to the Ragatz Associates study referenced in the Fractional Interest the winter months,whereas some of the other projects have lakefront,which is a highly Market Analysis section of this report,approximately 50 percent of fractional interests are desirable amenity for the summer months.The subject has a golf course integrated into the purchased with developer financing,and the other 50 percent with outside sources,oftentimes development allowing for golf course frontage for most of the cabin lots and limited golf course those that are recommended by a developer. Many developers report that most buyers frontage for the cottages.Both the cottages and cabins will have various qualities of view and refinance their purchase within one and one-half years.Oftentimes,the developer financing is are in a forested environment,which is considered desirable. actually at higher rates than more conventional financing.For the purposes of our analysis,we Comparable Sale No.1 is the Northstar Club,which is a ski-in/ski-out property at consider it most reasonable to apply no adjustment for this attribute.This is due to the array of the base of the Northstar-at-Tahoe ski area.While this is a highly desirable attribute,it is choices available to most buyers.In addition,the financing does not typically influence the sale opinion that this is offset by the subject unit's location on the golf course or adjacent to a, price from the seller's perspective. course,and thus no adjustment has been applied to this sale for location. Conditions of Sale Comparable Sale No.2 is situated on the lakefront in Tahoe Vista.Direct lake Conditions of sale are intended to identify any unusual or atypical motivations on frontage is a huge premium in the Lake Tahoe market area,and by this factor alone we the part of a buyer or seller in the marketplace.All of the fractional projects typically market -126- -129- SALES COMPARISON APPROACH-FRACTIONAUTIMESHARE FRACTIONALlTIMESHARE COMPARABLE NO.1 Identification The subject property is proposed to be developed with 74 freestanding cabins of Northstar Club three-and four-bedroom configuration,and 72 attached cottage units of two-and three- Northstar-at-Tahoe Ski Area bedroom configuration.These units are proposed to be sold as fractional interests of 1/17 Placer County,California ownership,as described previously herein.The primary market area for the subject is the Lake Property Description Tahoe Basin area,and the primary competitive properties to the subject with regards to Year Built 2000 No.of Units 18:12 3-bedroom,6 4-bedroom in a stacked flat fractional or timeshare ownership were described in detail in the Fractional Interest Market Project Amenities Owner's lounge,long-term owner storage,concierge Unit Amenities High quality build-out with good appliances, washer/dryer, Analysis section of this report.In our opinion,it is most appropriate to use these projects for fireplace comparison to the subject in determining appropriate market value of the proposed fractional Parking Subterranean heated parking units based on a 1/17 share.As noted in the Fractional Interest Market Analysis section of this Fractional InterestlTimeshare Data Fractional Share 1/7 interest 7.43 weeks report,the subject represents a unique product,particularly its freestanding cabins.It was Total Shares Available 126(developer held back 8 shares) necessary to go outside the Lake Tahoe region to identify similar comparables for the subject. Ownership/Use Plan Deeded interest.Owners get 3 summer and 3 winterweeks on a rotating priority with the balance in floating,time. Private This comparable data will be analyzed in relation to the conclusions made by comparison to residence club-type arrangement.No rentals. %Shares Sold 94% the projects most immediately competitive to the subject.Reference is made to the following Absorption 2.4 shares/month;17.83 weeks/month pages,which detail and summarize the data used in our analysis. Pricing Unit Type Size SF Weeks/Share Price/Share PriceM/eek Price/.SF 3BR/38A 2,000 7.43 $175,000- $23,553- $612-$767 $219,000 $29,475 4BRABA 2,400 7.43 $245,000- $32,974- $715-$872 $299 000 $40,242 I Aver a $234 500 $31 561 $746 The above pricing shows the range of original developer pricing and current listings on resales. I Prices declined in 2001 and 2002 but have increased slightly during 2003. Exchange Program www.WorldsFinestResorls.com HOA Dues $1,386/share annually(paid quarterly) Market Data Market Type Regional drive-to market;also national destination Buyer Profile Upscale Northern California, mostly families; some from Reno/Sparks area.Less than 5 percent fly in. Comments This project is a ski-in/ski-out property at the Northstar ski area near the subject. -1IS- -119 i FRACTIONAL/TIMESHARE COMPARABLE NO.2 FRACTIONALITIMESHARE COMPARABLE NO.3 Identification Identification Tonopalo Marriott Grand Residence Club 6731 North Lake Boulevard 1001 Park Avenue Tahoe Vista,California South Lake Tahoe Property Description Property Description Year Built Under construction.Completion project year-end 2003. Year Built December 2002 No.of Units 19(5 2-story buildings,some stacked and some cottage style,3 No.of Units 199 total(189 fractional,10 whole ownership),51 floor plans and 4 bedrooms) Project Amenities Owner's club,heated pool and spas,private lockers,Heavenly Project Amenities Members'lounge,fitness room,media room,heated pool and ski area spa, 300'dock and 12 docking buoys, common watercraft, Unit Amenities Good quality build-out and appliances, fireplaces, granite concierge,long-term storage counters Unit Amenities Lake views,top quality appliances,finishes and fixtures,stone Parking Structured parking,valet available fireplace,washer/dryer Parking Valet Fractional Interest/Timeshare Data Fractional Share 1/4 share(13 weeks) Fractional Interest/Timeshare Data Total Shares Available 756 Fractional Share 1/7 interest 7.43 weeks Ownership/Use Plan Deed 1/4 interest on 52 weeks. Rotating weeks covers full Total Shares Available 133 calendar every 4 years.Additional time on a space available Ownership/Use Plan 6 planned weeks, additional floating time available with a basis.Rental pool available. $45/night cleaning charge.No rentals. %Shares Sold 85%-86%sold(88%-89%sold and under contract) %Shares Sold 45%(60 under contract to close by year-end 2003) Absorption Approx.650 shares sold(23 shares/month since 6/01).Pre-sales Absorption 4 shares/month(30 weeks/month since May 2002) were reported at 80%upon opening. Pricing Pricing #Units Unit TvDe Size SF Weeks/Share Price/Share Price/Week Price/SF Site Size 49 Studio 360-737 13 $100,00- $ $1, _. Location Bldg.# Unit T a SF Weeks/Share PricelShare Price/Week Price/SF $130,000 $1010,000 000 $1,444444 Beachfront 1 3/Den&4BR 3,022 7.43 $815,000- $104,690- $1,888- i' 81 1BR/18A&2BA 667-1,233 13 $200,000- $15,385- $1,199- $825,000 $111 036 $1 979 $275 000 $21,154 $892 , Interior 2 Men&3BR 1,947- 7.43 $365,000- $49,125- $1,118- 59 2BR/2BA 965-2,000 13 $295,000- $22,692- $1,223- 2,286 $450 000 $60 565 $1 618 $375 000 $28 846 $750 Interior 3 3/Den&3BR 1,947- 7.43. $365,000- $47,779- $1,145- 4 3BR/3BA 1,798- 13 $400,000- $30,769- $890- 2,298 $390 000 $52,490 $1 402 2,090 $450 000 $34,615 $861 Interior 4 3BR 1,647- 7.43 $310,000- $41,723- $1,148- I 6 Penthouse 894- 13 $450,000- $34,615- $2,013- 1,889 $435,000 $58 546 $1 712 2,496 $620 000 $47 692 $994 Beachfront 5 Men&38R 2,070- 7.43 $700,000- $94,213- $2,159- Average 952 $280 000 $21 538 $1 176 2,270 $710,000 $95 559 $2,401 Exchange Program Marriott Vacation Club and Interval International Average 2,095 7.43 $456,842 $61 486 $1,526 HOA Dues $300 to$500 for 2BR;$460 to$550 for 3BR Exchange Program Storied Places developed by Intrawest HOA Dues $9,860 to$12,968 annually(paid quarterly) Market Data Market Data Market Type Regional drive-to market;also national destination Market Type Regional drive-to market;also national destination Buyer Profile Primarily San Francisco Bay area Buyer Profile Approx.50/50 from Sacramento and San Francisco areas Comments This property is part of the larger South Tahoe Redevelopment District,which includes a Comments gondola serving Heavenly ski area and the Marriott Timber Lodge project.The first floor This project was five years in the planning process due to its lakefront location and TRPA contains commercial space and a newcinema is under construction.The South Tahoe Casinos requirements. are just east of this project. -120- -121- land.This conclusion considers the degree to which the subject land was entitled and planned Subdivision Land Sales Summary at the time of acquisition,as well as more current market conditions.The subject's"as is" Sale Sale I Size Sale Price value,assuming completion of infrastructure,is considerably higher than the raw land values No. Identification Date Acres Total /Acre noted above. 1 Gray's Crossing 11/00 763.32 $15,000,000 $19,651 Northeast Comer St.Hwy.89&1-80 Truckee I Multi-Unit Land Sales 2 Valley 10/00 1z2.a3 1,650,000 13,a77 St. The subject property represents a mixed-use development with freestar St.Hwy.267(Across from Northstar Entrance) Placer County cabins,single-family lots and attached cottages.For informational purposes and estimating 3 Hopkins Trust Lahontan 2/00 444.44 4,000,000 9,000 Schaffer Mill Rd.&St.Hwy.267 value of any entitled but undeveloped units,we have reviewed multi-unit land sales in the Lake Placer County Tahoe area.Reference is made to the following table,which summarizes four multi-unit land 4 Joerger 480 Acres 11/99 480.00 6,000,000 12,500 Adjacent North of Lahontan sales. Placer County 5 Schaffer Mill Road 6/99 2,154.00 15,500,000 7,195 West and South of Lahontan Placer County Multi-Unit Land Sales 6 Lahontan 2/96 720,000 6,200,000 10,973 Sale Sale Size Zoning/ Sale Price Martis Valley No. Identification Date Acres DensityTotal /Unit Placer County subject Old Greenwood -- 616.20 -- --- 1 Brockway Road 4/03 40.00 RM15/ $4,000,000 $6,667 Truckee Airport Road Martis Valley 600 Units Truckee Nevada County 2 133 2 13053 Northwoods Blvd. 6/03 0.32 RM15/ 200,000 50,000 $1 $1 1 a Tahoe-Donner 4 Units Truckee 3 11263 Northwoods Blvd. 4/03 0.38 RM151 215,000 53,750 The land sales summarized above indicate a range of value for development land Tahoe-Donner 4 units G Truckee in the Truckee area of$7,195 to$19,651 per acre,with an average indication of$12,133 per 4 The Sentinals 6199 1.14 Res-Cottage/ 341,000 34,100 acre.Most of the land sales data represents raw land with base densities of development units. Kirkwood Resort 10 units Alpine County Land Sale No.1 is considered to represent the most meaningful indication of land value for the I subject property on price per acre basis for the following reasons: The above land sales indicate a wide range of per unit value.Land Sale Nos.1 through 3 represent recent sales within the Truckee area with a substantial range in pricing due • Overall land size to the very high density and number of units allowable on Land Sale No.1,compared to the • Similar location and access to Interstate 80 substantially smaller number of units in Land Sale Nos.2 and 3.Land Sale No.4 has been • Similar scope and type of proposed development • Most recent sale date among the comparables included as it represents a resort-oriented cottage development near the Kirkwood ski area.It appears that the subject's unit value as raw land based on 146 units could be in the range of Land Sale No.1 was purchased by the subject developer,East West Partners, � $35,000 to$40,000 per unit,consistent with Land Sale No.4,which is resort-oriented,and for the Gray's Crossing development.The price per acre indication of$19,651 is similar to the below Land Sale Nos.2 and 3,which were only four-unit developments.this per unit figure s acquisition price of the subject in 2001.Based on the sales data provided above,we would would be higher upon completion of all infrastructure improvements. expect a value conclusion for the subject that is higher than the average indication from the comparables.This would be expected as the comparable indications represent raw,un-entitled I -110- Conclusion EXISTING CABIN VALUATION { 9 The previous land sales data has been included for informational purposes. g No meaningful conclusions of the subject's bulk land value with entitlements and In order to determine a market value for the four existing cabins at the subject infrastructure in place can be made from this information.However,the raw land prices can constructed by the previous developer,the cost approach and the sales comparison approach serve as a benchmark in evaluating the conclusions of bulk value by the developmental were considered.Due to market specific conditions and the amenities offered at the subject r analysis conducted in this appraisal. development,we concluded that the sales comparison approach was the most reliable method to determine the market value of the cabins.The home sales data surveyed consists of recent i home sales in Truckee area developments,both with and without amenities.The following summary of home sales is presented below. li Truckee Area Home Sales(For Cabins) Sale Sale Square Year Sale Price No. Identification Date Feet Built Bed/Bath Total /S.Ft. 1 Northstar 8/03 3,293 N/A 4/3.5 $1,200,000 $364.41 274 Basque 2 Tahoe-Donner 6/03 2,418 2002 N/A 682,000 282.05 i 11755 Chalet 3 Sierra Meadows 5103 1,861 2002 N/A 474,900 255.19 10215 Columbine i 4 Tahoe-Donner 5103 2,702 2002 N/A 775,000 278.58 11899 St.Bernard 5 Northstar 5/03 2,639 1998 4/2.5 1,372,500 520.08 y 1709 Grouse Ride ! 6 Prosser Lakeview 2/03 1,848 2002 N/A 450,625 243.84 12308 Pine Forest Total/Average 2,474 $825,837 The sales presented above are considered the best available data to provide an indication of value for the subject cabins.The six sales in our analysis ranged from homes in master-planned communities such as Northstar and Tahoe-Donner to nearby subdivisions without amenities.The amenities at the subject are generally considered superior to those offered at Tahoe-Donner.The amenities at Northstar include access and excellent proximit,,', both golf and the ski resort.Although the subject is considered to have a superior golf ame• the ski amenity at Northstar is considered superior to the subject.We have assumed a good to ` excellent quality of construction in the home sales analyzed,as evidenced by the recent year built indications ranging from 1998 to 2002. As noted previously, the trend of recent fI construction in the Truckee area has been one of excellent construction quality in terms of i design and materials.The size of the comparable home sales ranges from 1,861 to 3,293 3 f -113- i. COMPARABLE LOT SALE NO.5 Lot Sales Summary Location Sale Sales Lot Average Sale No. Identification No.of Sales Sale Dates Size Avera a Price Old Greenwood 1 Lahontan 7 3/03-8/03 1.04 $459,357 01d Airport Road Lodgetrail Road Truckee 2 Tahoe-Donner 6 5/02-7/03 0.46 220,000 Northwoods Drive Description Large master-planned mixed-use golf course North of Truckee community featuring a Jack Nicklaus-designed 18- 3 Northstar-at-Tahoe 5 6/03-9/03 .33-.50 685,800 hole golf course. 4 Pine Forest at Truckee 12 10/02-9/03 0.5 176,017 Year Completed 2004(scheduled) Comstock Drive N of 1-80,W of Rte.89 No.of Lots 99 Subject Old Greenwood 86 6/03—8/03 0.535 352,000 Lot Size 0.35 to 0.97 Acres Utilities Yes-underground Lot Sales Discussion Lot Sales Data The previously presented lot sales represent the most recent lot sales in the Truckee area and are considered the most appropriate data for evaluating pricing for the Date of Sales June 2003 to August 2003 subject lots by the sales comparison approach. Primary considerations regarding the Average Lot Size Sold 0.50 Acres Average Lot Sale Price $352,000 comparable lot sales in comparison to the subject are as follows: Number of Lots Sold 86 Absorption • Location Recent Lot Sales or Listings 0 Size fa Amenities • Exclusivity/Privacy Identification Lot Size Sale Price Sale Date • View 86 Lots Under Contract .35-.97 Acres Avg.$308,000 Scheduled Closing 0 Quality of Surrounding Development 11/1/03 13 Lots Available .35-.97 Acres Avg.$639,000 Net Projected Absorption by 12/31/03 We will utilize the average of the most recent lot sales in the respective developments as the unit of comparison to the 99 lots at the subject.Our analysis of the Comments comparable lot sales is as follows. The 13 unsold subject lots listed for sale represent the most premium lots in the Location development located near the southeast boundary.These lots have golf course frontage The subject is located east of central Truckee within the town limits.All of the and excellent views of the Northstar ski area.The asking price range for the unsold lots is from$498,750 to$745,000 per lot,with an average price of$688,333 per lot. comparable lot sales are located in the greater Truckee area.All of the developments in which the lot sales occurred are well located in regards to area roadways,services and the Truckee downtown area.Lot Sale No.1 is located south of the subject in the Mantis Valley.This is a good location that has excellent proximity to Northstar-at-Tahoe Resort.Lot Sale No.2 is located north of central Truckee.Lot Sale No.3 is located at Northstar.Two of the lots in this -102- -]03- data are located in the newest on-mountain development with ski-in/ski-out access to Lot Sale No.3,consisting of lots at the Northstar resort,arguably offer the most Northstar's slopes.The remaining sales in this data set are located on the golf course in the complete amenity package of the comparables,incorporating both skiing and golf,as well as base area of the master-planned resort.Lot Sale No.4 is located southwest of the subject other mountain activities such as biking and hiking.We are also aware of shuttle service development and generally shares the same locational characteristics with the subject, throughout the Northstar community to the ski area base,which was reported to be a key Overall,location among the comparables and subject is considered similar. amenity at Northstar.Lot Sale No.3 represents lot sales in the resort bate area,short distance Size to the Northstar Village and ski lifts,as well as lot sales on the mountain with ski-in/ski-out The 99 lots at Old Greenwood range from approximately 0.35 to 1.0 acre in size, locations.Based on our expertise in ski area property evaluation,we feel that there is a with an average size of 0.50 acres.Typically,larger single-family lots sell for a higher overall considerable distinction between base area lots and ski-in/ski-out lots.The ski-in/ski-out lots price than otherwise comparable smaller lots.The average size of Lot Sale No.1 is just over 1 are considered to be the most desirable amenity for a ski inclined buyer.The golf amenity at acre.The larger lot size of Lot Sale No.1 is considered superior to the subject.The remaining Northstar is inferior to the subject due to a high percentage of public play and the quality of the comparable lots sales ranged from.33 to.54 acres,and are generally considered similar to the golf course. subject. Lot Sale No.4,Pine Forest,is being marketed as an amenity-free community, Amenities and by design,is inferior to the subject(and the comparables)for this characteristic. The subject is offering significant amenities within the Old Greenwood Exclusivity development, as well as the offsite amenities associated with the Tahoe Mountain Club Old Greenwood is proposed as a non-gated golf course community with access discussed previously.The ski valet and private on-mountain dining at Northstar are considered controlled by a welcome center gatehouse as previously described. The Jack Nicklaus to represent the most significant of the subject benefits.The availability of recreation-based Signature golf course will be mostly private,with the exception of very limited public play.One amenities is considered to have an influence on real estate value in a market area such as the element of the subject that is somewhat untested and is related to an identity of exclusivity is subject's,which is primarily recreation and/or second homeowner based. the fractional ownership units at the subject.Although we have considered the fractional Lot Sale No.1 offers golf and club membership amenities that are considered to ownership units a potential deterrent for a lot buyer,the sales record of lots at the subject be at least equal to those offered at Old Greenwood.Lahontan does not offer the ski-related suggests that this is not a barrier affecting absorption or pricing,and thus we have disregarded benefits at Northstar such as the subject.The ski benefits are considered significant in that this consideration. they contribute to a total,year-round amenity package for subject lot owners.The dining Lot Sale No.1 is considered to have an overall more exclusive identity than the benefits at the Wild Goose Restaurant are more difficult to quantify and have not been given subject.Foremost,it is the first development of its kind in the area and is gated with privacy significant consideration in the amenity comparison.Overall,the subject is considered to have diligently maintained,creating a certain cachet.In addition,Lahontan is located in a more superior amenities over Lahontan. private setting than the subject and is not visible from the highway. Initially,lots sold at Lot Sale No. 2,Tahoe-Donner, offers a golf amenity to its residents at a Lahontan exceeded$1,000,000.As a single-family lot community,Lahontan will have fewer significant discount:however,the golf course lacks the signature quality of Jack Nicklaus owners than the subject,contributing to an identity of exclusiveness.It is noted that,althc-a design and there is a much more golf demand in a community of this scope.As a result,this the concept of exclusiveness has a direct relationship with pricing, it is not considt amenity is,in effect,diluted.Tahoe-Donner also has a unique amenity in its onsite ski hill. necessarily relevant to the success or absorption rates in a development. However,the quality of the skiing and lodge facilities is greatly inferior to the ski operations at The subject is considered to have more exclusivity appeal than the other Northstar,and thus this amenity is also considered diluted.Overall,the subject lots offer a comparables simply because the remaining comparables are accessible to the public and superior amenity package over Lot Sale No.2. share their respective amenities with the public. -t04 -105- TRUCKEE DONNER PUBLIC UTILITIES DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-01 ! Community Facilities District Cost Estimates The purpose of this appraisal is to estimate the market value of the fee simple Facilities Budget Estimated Costs interest in the subject property assuming completion of the infrastructure,which is to be Water $4,991,000 partially funded by the proposed CFD.The bonds to be issued fall under the jurisdiction of the Electric 2,937,000 Mello-Roos Co Fiber 615,000mmunity Facilities Act of 1982.Following is a summary of the Community Roads 3,857,000 Facilities District report as it applies to the subject,as well as the rate of apportionment and Storm Drain 1,534,000 applicable taxes,which will be applied to the taxable property within the subject district. Formation costs 200,000 Total Public Improvements $14,134,000 Facilities The bond debt service calculations prepared by UBS Financial Services,Inc.are The facilities to be installed in the CFD are briefly summarized as follows: resented in the table on the following g page.These indicate the total bond amount of • Water supply and distribution and fire suppression facilities. $12,245,000.Of this$12,245,000,$750,000 will go directly to the PUD,and the amount to be • Electrical supply and distribution facilities. actually utilized for construction funds allocated to the developer is$9,275,000.Based on the bond issues,the annual special tax per unit of taxable property within the subject property can ! etc.Public roadways and associated curbs,gutters,sidewalks,landscaping,signage, be summarized in the following table. • Public access parks and trails. Expected Land Uses and Expected Maximum Special Tax Revenues • Storm drains and flood control facilities. at CFD Formation ! Any other public improvements identified in accordance with the development Maximum Special Tax Total Expected agreement between the Truckee Donner Public Utilities District and Old Number of Expected Per Unit/Acre for Fiscal Maximum Special Tax Greenwood LLC. Expected Land Uses Units/Acres Year 2004-2005' Revenues Single family detached 104 Units $3,000 per SFD Lot $312,000 property and single The boundaries of the Community Facilities District were described previously in family attached property this report as approximately 617 acres. in zone 1 Single family detached 154 Units $3,400 per SFD Lot $523,600 The cost estimates for the facilities to be included in the CFD are summarized in property and single family attached property the following table. in zone 2 Taxable Other Property 0 Acres N/A $0 Total Expected Maximum Special Tax Revenues $835,600 Figures are shown in Fiscal Year 2004-2005 dollars and will escalate 2 percent per year thereafter. i i -95 -96- i II, - Nov 10,200312:54 Poe Prepared byUHSFnurcial Services Inc. (Flounce 3.000Truckee-DanncrFUD:CFDI-NMI_NOAD)pages SALES COMPARISON APPROACH LOT SALES BOND Deer SERVICE Truckee-Dormtt Public utility District CFD No.1 The subject property has been platted for 100 lots,99 of which are available for Old Greenwood"cc sale.The 100th lot will be retained by the subject developer and possibly utilized as a Prelm&wy sizing Period showcase lot for environmentally friendly home construction.As of the date of value,86 of the Ending Pdncial Coupon Interest Debt Service 99 lots at the subject property were under contract with 10 percent deposits and were 09ro1n004 521,473.26 521,473.26 scheduled to close as of November 1,2003,We have retained a listing of the specific buyers 09ro112005 736197.50 736,197.50 09/0112006 10.000 3250% 736:19750 746,197.50 and their lots and specific contract dates in our files.The contract dates for the existin sales 09ro12007 30,000 3.650% 73s,872.50 765,872.50 g 09/0112008 45,000 4.050% 734,777.50 779,777.50 basically occurred between July 7,2003 and August 9,2003.The subject lots were marketed j 09/012009 60,000 4.350% 732.955.00 792,955.00 09MI2010 e0,000 4.950% 726,585.00 926,585.00 with some discounts made available to Founder Members and some negotiated discounts.The 09ro1n011 100,000 4.930% 726,583.00 826,383.00 eg ns 09/011201 145,000 5.150% 715, 5.00 841,635.00 average net sales price of the 86 lots under contract as of Se tember 2,2003 was$308,000. o9ro1no13 us,aoo s.300% ,454ss.00 960,45s.00 p 09/01/2015 195,000 s.400%50M 698,590,00 $93,590.00 There were 13 lots unsold as of the date of value,which represents mostly the higher priced o9ro1n013 193,000 5.500% 69t1,590.00 893,590.00 p !, 09/012017 253,000 5.700% 673,265.00 930,265.00 lots with the excellent ski area views.The average asking o9rolnon 2ss,000 s.7ao% 67s,z6s.00 93o,z6s.00 g g price for these lots is$639,000,and 09/0112018 290,000 5.800% 660,730.00 950,730.00 the total average g g purposes 09/012019 325,000 s.750% 643,910.00 968,910.00 ge price for all lots,including the askin s,is$352,000.For the u oses of our 09ro1n020 365,00o 5.850% 625,222.50 990,222.50 !! 09/0112021 405,000 6.100% 603,870.00 I,008,870.00 analysis,we have rounded this figure to$350,000 for average lot pricing. ! 09/0112022 450.000 6.100% 579,165.00 1.029,165.00 ! 09/01/2023 49s,000 6.100% 351,715.00 1,046,715.00 In order to evaluate the reasonableness of the subject lot pricing in relation to the 09/01/2024 550,000 6.150% 521,520.00 1,071,520.00 09/0112025 605,WO 6.150% 497,695.00 1,092,695.00 market,we have provided the following sales comparison approach lot sales in the subject's 091012026 665,000 6.150% 450,497.50 1,115,487.50 09/0112027 725,000 6.150% 409,590.00 1,134,590.00 immediate market area.Reference is made to the data sheets for the various subdivisions 09/0112028 795,00o 6.150% 365,002.50 1,160,0o2.50 09/012o29 865.000 6.150% 316.110.00 1,181,110.00 located in the subject's market area and the comparable lot sales therein. !, 09/01/2030 945,000 6.150% 262,912.50 1,207,912.50 09/0112031 1,015,000 6.150% 204,795.00 1,219,795.00 09/012032 1,110,000 6.150% 142,372.50 1,252,372.50 09101/2033 1,205,000 6.150% 74,107.50 1,279,107.50 !. 12,245,000 16,760,19826 29,003,188.26 i I iI I i -96 a- -97- Community Lodge Construction Schedule A proposed building of approximately 50,000 square feet called the Old Greenwood House will contain a lobby,check-in/reception area,administrative area, 100-seat The subject will be developed in phases as the land allows.As noted previously in the restaurant,5,000 square foot conference facility and 20 lodging units.This building will development agreement,35 percent of the development must be completed within five be located on Lot E near the clubhouse/pro shop. years and 50 percent within ten years.As of the date of value,there were ten cabin units under construction,with cottage construction anticipated to start within 30 days. Employee Housing The first ten cabins are projected for completion as of March 2004,with the first seven A 28-unit employee housing building is included in the subject's development plan.As of cottage units to be completed by June 2004.The Jack Nicklaus Signature Golf course is the date of appraisal,the subject developer intends to transfer this facility to an offsite projected for completion in July 2004,as is the completion of the swim,tennis ar location,most likely in their future Gray's Crossing development. fitness center. Cabin and Cottage Building Specifications 'Cabin Units Structure: Wood frame on concrete slab foundations with rough sawn One component of the subject development is 74 detached cabin units that will be sold timber accents and trim,stone veneer and stone chimney. as fractional ownerships.The cabins will offer an upscale product over the cottage units, being larger and offering more privacy and quality finishes. The following table Roof: Composite asphalt shingles with limited amounts of metal summarizes the cabin product offering at the subject. seam roofing. Cabin Unit Summary Doors: Solid wood core exterior and interior doors.Garage doors are solid wood with vertical and horizontal planking.Some Type No.of Units S.Footage/Unit Total S.Foote a doors have small pane windows. 3 Bedroom/3.5 Bath 48 2,470 118,560 Windows: Metal clad,thermal pane with interior wood trim. 4 Bedroom/4.5 Bath 26 2,985 77,610 Totals/Averse 74 2,651 196,170 HVAC: Heat: Natural gas,high efficiency forced air. Cooling: Cased cooling coil&two-stage condensing unit. Cottages Hot Water: Lochinvar gas fired water heater. There are 72 attached cottages proposed for the subject.The cottages will be located Patios/Porches: All units will have a rustic wood front porch and at least one on the east side of the development south of the swimming,tennis and fitness facility. grade-level patio of natural stone or pavers. Most of the cottages will have interior locations and will not be oriented toward golf course views;however,some of the cottage units will have golf course frontage on the Garages: Three and four bedroom units will have a two-car garage. 18thhole.The following table summarizes the cottage offering at the subject. Two bedroom units will have a one-car garage. Cottage Unit Summary Design Features: Vaulted ceilings,stone fireplace in living room and master bedroom,wood timber accents. Type No.of Units S.Footage/Unit Total S.Footage 2 Bedroom/2.5 Bath 36 1,270 45,720 Interior Finish: Painted,textured sheetrock walls and ceilings,stained alder 3 Bedroom/3.5 Bath 36 1,760 63,360 baseboard and wood trim;combination of carpet,slate and Totals/Average 72 1,515 109,080 wood flooring,granite and ceramic tile counter tops,and custom plumbing and lighting fixtures throughout. All of the cabin and cottage units will be sold fully furnished with high quality furnishings and artwork.All kitchens will be fully outfitted with GE appliances(Profile series in the cabin units)and kitchen accessories.In addition,televisions are included in the living room and every bedroom.Overall,the subject is considered a high quality product,with !, the cabin units offering premium finishes and appointments over the cottage units. -F7- _88_ HIGHEST AND BEST USE Swim,Tennis and Fitness Pavilion The swim,tennis and fitness pavilion building will be approximately 17,000 square feet The highest and best use may be defined as the reasonably probable and legal and was under construction as of the date of value,with the scheduled completion by use of vacant land or an improved property which is physically possible,legally permissible, July 2004.This amenity-based area will have an outdoor pool with zero entry for children,as well as a small kiddie pool and hot tubs.There will be six tennis courts.The financially feasible,and results in the highest value.The four criteria in determining the highest building will have a fitness center with exercise equipment,a kiddie club area and other and best use of the subject property as vacant and as improved include: member areas.This building is designed of excellent architecture and materials,and represents a significant amenity as it relates to the overall development. 1. Physically Possible-A use for which the subject is physically suitable or adaptable. Conclusion 2. Legally Permissible-A use which is orwill be permitted under existing or Overall,the improvements in the Old Greenwood project represent a mixed use of reasonably obtainable zoning regulations. residential product,including residential lots purchased for custom home construction, which will have specific architectural guidelines.There will be substantial amenity 3. Financially Feasible-A use for which there is economic,social,and/or improvements associated with the golf course and a swim,tennis and fitness center market demand. facility. 4. Maximally Productive-A use which is compatible with the nature and condition of surrounding land uses. The subject property is a proposed mixed-use development project with several different types of residential product to be constructed,as well as substantial amenities.The project construction is well underway,with infrastructure nearing completion and vertical construction done on some portions of the development.Following is a discussion of the highest and best use of the subject property as if vacant and as improved. As If Vacant Physically Possible The Land section previously presented in this report depicted the subject site as slightly irregular in shape with some gently rolling topography and good access from surrounding thoroughfares.The subject site represents a 616-acre parcel of land,providing for a wide range of physically possible uses. Legally Permissible The underlying zoning of the subject property was discussed previously in Th Land section of this report.This included the recreation district,rural residential district,and the single-family residential zoning district.As of the date of value,the legally permissible uses were more specific as per the development agreement summarized previously.This allows for legally permissible uses related to the golf course and recreational aspects of the subject,as _s¢ _90_ OLD GREENWOOD DEVELOPMENT AGREEMENT SUMMARY Golf Course Parcels(Outside Development Area) The golf course outside the development area are allowed to have all typical golf course The Old Greenwood development has been through the town of Truckee improvements,including golf course tees,fairways,greens and water features,as well planning process and has been approved under the specific'requirements of the Old as the temporary real estate sign along Interstate 80. Greenwood Development Agreement recorded with the Nevada County Recorder,dated Golf Course Parcels(Within Development Area) August 23,2002.Due to the detail contained in this document,a summary of the development The golf course parcels within the specified development area include a golf course_, clubhouse/pro shop and cart storage facility,golf practice facility with support buildinc agreement follows the overview of the project,as follows. of,3,000 square feet, and maintenance facilities for golf course and proper „ management functions consisting of three buildings not to exceed a total of 22,OOG square feet. Overview The Old Greenwood development consists of a master-planned golf course Commercial Development(Old Greenwood House)Parcel Community lodge building not to exceed 50,000 square feet of floor space,including based community featuring club oriented facilities,maintenance buildings,and a combination main lobby,check-in/reception functions,administration functions,including property of residential development.Old Greenwood will be developed with•a focus towards clustered management,restaurant not to exceed 5,000 square feet of floor space,and 20 lodging units. development,which maximizes open space.It should be noted that the original development agreement included a total of 849.3 acres,some of which is not a part of the Community Swim/fitness center not to exceed 17,000 square feet of floor space,including a swimming facility,deck and six exterior tennis courts. Facilities District appraised herein.In the overall development plan,366.7 acres of the land will be open space,354.5 acres will be dedicated to the golf course,and 111.2 acres of the land Single Family Lot(Full Ownership)Development Parcels ,104 single family lots (five lots may be converted into residential townhouse or area will be developed with specified attached,full ownership and fractional ownership parcels. condominium units within the Attached Units Development Parcels). As of the date of value,the development is underway in the form of road improvements and Residential uses as permitted in the RS(Single Family Residential)zoning district of the various infrastructure, as well as the complete golf course shaping and water feature Development Code of the existing Land Use Regulations, including secondary construction.The first vertical construction of the fractional ownership cabins was also in residential units and accessory uses and structures. progress,as observed during the physical inspection of the subject property.Community i Fractional Ownership Units Development Parcels benefits offered to the public will include limited public play of the golf course and the 79 detached fractional ownership units(five units may be converted into attachedfractional ownership units within the Attached Units Development Parcels). installation of hiking/biking trail easements through the subject for public use. The development agreement has a term of 15 years for expiration. The Attached Units Development Parcels 15 residential townhouse or condominium units. development needs to be completed by then or lose entitlements. 80 attached fractional ownership units. Agreement Summary-Permitted Uses and Density and Intensity of Uses 20 lodging units in separate buildings from fractional ownership units provided the Open Space(OS Parcels) lodging units are not incorporated into the commercial lodge building and the floor The open space parcels at the subject are intended to remain primarily open.However, space for lodging units is subtracted from the allowed floor space for the commercial the entry gatehouse, welcome center, large storage tank, monument entry sign, lodge building. neighborhood park and golf cart paths are allowed in these open space parcels. -79- -80- Employee Housing Development Parcel ownership of an individual unit and prohibiting occupancy to more than 30 consecutive days 28 multi-family residential units, and no more than 90 days in any calendar year. Multi-family uses as permitted in the RM.(Multi-family Residential)zoning district of the Development Code of the Existing Land Use Regulations,including accessory uses and structures. Phasing Plan The golf course,pro shop,cart storage,commercial lodge,swimming/fitness center and appurtenant facilities and structures to those uses may be constructed and completed at any time during the life of the Development Agreement. 35 percent of the 278 single-family lots, residential cottage units, and/or detached/attached fractional ownership units shall be completed within five years of the effective date of the Development Agreement.Employee housing shall be constructed as required by Project Standards and Section 2.8 of the Agreement. 50 percent of the 278 single family lots, residential cottage units, and/or detached/attached fractional ownership units,not including the employee housing units, shall be completed within ten years of the effective date of the Development Agreement.Employee housing shall be constructed as required by Project Standards and Section 2.8 of the Agreement. Employee Housing Requirement 15 units of employee housing shall be completed prior to or concurrently with the completion of the golf course. The Community Development Director may defer completion of these employee housing units for a period of up to two years from the date of completion of the golf course if an off-site location for the Old Greenwood employee housing is found and the housing has received the necessary Town land use approvals from the Town.The Council,at its discretion,may approve an extension of up to three additional years without formally amending the Agreement.The remaining units shall be completed prior to or concurrently with the completion of the 200h single-family lot,residential cottage units,and/or detached/attached fractional ownership unit.The employee housing may be constructed within the project site,or off-site within the Town of Truckee. Construction of appurtenant structures,parking and accessory uses,as well as open space uses,is provided in each of the development parcels outlined above.As of the date of appraisal,it is the developer's intention to transfer the Employee Housing component to the Gray's Crossing Development,which will be anticipated to commence in 2006.Additional regulations contained in the Development Agreement relate to protecting wildlife and plant life and minimizing the impacts of construction.The residential development standards call for the specifications of building materials to include the use of native stone,shingle siding and stucco exteriors,green composite wood shingles and structural use of timbers.A deed restriction will apply to all fractional ownership units, limiting an owner to no more than a 25 percent -81- -82- their price points were higher than the subject's.The other out-of-area resorts indicate a Fractional and Timeshare Absorption Rates generally tight range of 23 to 37 weeks per month.The Hyatt Mountain Lodge has exhibited Weeks among the highest absorption rates,offering a share slightly smaller in terms of numbers of Project #Units Share Size Marketing Period %Sold Sold/Month weeks than the subject. Northstar Club 18 1/7 4/00-9103 94 18 Tono alo 19 1/7 5/02-9/03 45 30 Pricing is among the most significant variables in determining absorption,and this Marriott Grand Residence 189 1/4 6/01-9/03 86 299 is discussed in detail in the Sales Comparison Approach section of this report.Overall,it was—, Marriott Timberlod a 135 1150 6101-9/03 29 75 concluded that the subject's pricing is appropriate and should allow for absorption rat Hyatt Sierra Lode 60 1/52 9/99-9/03 70 36 Kirkwood Mountain Club 40 1/4&118 7/99-9/03 100 42 consistent with the market. Embassy Vacation Resort 142 1/51 4/96-9/03 70 58 As discussed previously herein,the subject is offering the appropriate amenities, Trendwest South Tahoe 59 1/13 8101-9/03 9.3 2.9 has good accessibility to a large market and is well located,which should allow it to be highly Hyatt Mountain Lode 40 1/20 6/97-1/99 100 122 competitive in the market. Hyatt Main Street Station 40 1120 8100-9103 65 37 Roaring Fork Club Cabins 18 1/6a1/4 12/97-9103 100 10 One of the more significant aspects of the subject that is unique in comparison to Teton Club 37 1/26-1/4 1/99-9103 57 29 all of the elements summarized previously is that the subject is offering two distinct product The Club at Big Bear Village 61 1/10 12/00-9/03 25 23 types.The freestanding cabins are unique,and we were able to find only one other project in Grand Summit Resort 212 1/4 2198-9/03 85 1 35 the country offering this type of product in the Roaring Fork Club Cabins.The subject's Mean 58 Weeks/Month attached cottage product is also somewhat unique in that it is not a stacked flat arrangement Median 33.5 Weeks/Month Average Excluding 2 High and 2 Low Indications 38 Weeks/Month but a cottage or town home style development,which is different from any of the other projects. Absorption at the subject is influenced by the fact that there are two distinct product types The above table indicates a wide range of absorption rates depending on product available at different price points and unit size ranges.This allows for absorption to occur type,location and many factors.The Northstar Club and Tonopalo represent the two projects simultaneously at generally similar rates on two different product types. closest to the subject in terms of location and indicate a range of 18 to 30 weeks sold per We have also reviewed the developers projections as it relates to absorption month.Interestingly,both of these projects have the same share size but substantially different before making conclusions for use in our analysis.The following table summarizes the price points,with the much higher priced product actually selling at a higher rate.The Marriott developers absorption projections,as provided by East West Partners, projects in South Tahoe were experiencing extremely high rates of absorption.This is due to the Marriott brand name and the excellent location of these projects.In addition,the higher rate of weeks sold per month for the Grand Residence is also due to the quarter-share size.The more remote Kirkwood project was also experiencing good absorption,as was the Embassy Vacation Resort in South Tahoe,which is a timeshare project.The Trendwest absorption was substantially lower than the other projects due to its product type and difficulties in marketing experienced by this project. The resorts out of the area that were reviewed included the Roaring Fork Club Cabins,which were the most similar product type to the subject and indicated one of the lowest absorption rates.However,they have a substantially larger share and number of weeks,and t- -7s- and Altitude offering this free trial stay will also be advertised,as well as billboards,which Developer's Absorption Projections already exist in the Truckee area,and the Wall Street Journal.Intercept marketing is also 1 2 3 a 5 6 7 8 underway with an existing space on the Main Street tourist area in Truckee.East West 2004 2005 2006 2007 2008 2009 2010 2011 Total Partners will also be able to conduct intercept marketing at the Northstar-at-Tahoe ski area 3BR Cabins 7 5 6 6 6 6 6 6 48 4 BR Cabins 6 3 3 3 3 1 3 2 Z6 given their proposed improvements and presence at the base area of that ski resort.The Total Cabin Units 13 8 9 9 9 9 9 8 74 subject and developers also intend to build a relationship with the local brokerage market, Total Cabin Shares 221 136 153 153 153 153 153 136 1,258 providing advertising graphics forfree to the brokers and offering 5 percent commissions to the Total Cabin Weeks 663 1 408 459 459 459 459 459 408 3.774 Cabin Weeks/Mo. 55 34 38 38 38 38 38 34 39 Avg. outside brokers. 28R Cottage 3 5 5 4 5 4 5 5 36 Overall,the subject developers appear to have a well-conceived marketing plan, 3BR Cotta e a 5 a 5 4 s a 5 36 which is crucial to achieving good rates of absorption.It is significant to note that the developer Total Cottage Units 7 10 9 9 9 9 9 10 72 has pre-sold 86 of the 99 single-family lots prior to completion.This speaks well of the Total Cottage Shares 119 170 153 153 153 153 153 170 1,224 Total Cottage Weeks 357 510 459 459 459 459 459 510 3,672 desirability of the project and its location,as well as the marketing efforts of the developer. Cottage Weeks/Mo. 30 43 38 38 38 38 38 43 38 Absorption Conclusion Total Fractional Weeks/Mo. 85 77 76 76 76 76 76 77 77 Avg.. Based on the previous analysis,it is our opinion that it is appropriate to apply 38 weeks per month absorption,which equates to approximately 12 to 13 shares per month of each the cabin and cottage product types.We consider this a reasonable projection based on The above table indicates that the developer is projecting an overall average a review of the wide range of product and all of the considerations discussed in this market absorption of 39 weeks per month for the cabin units and 38 weeks per month for the cottage analysis.The absorption reflected in our discounted cash flow analysis will include pre-sales of units.It is noted that this absorption is very consistent with the absorption identified in the approximately 10 percent of each product type,which makes for more sales in the first quarter previously presented table of fractional and timeshare projects.Indeed,the average,excluding of completion.Reference is made to the discounted cash flow analysis presented later in this the highs and lows from the body of fractional and timeshare data presented previously,was report,which shows the detailed absorption figures projected for the subject. 38 weeks per month. Marketing Plan East West Partners has a very specific marketing plan devised for marketing the subject property.In addition,they have hired a professional marketing company,IMI Resorts, based out of South Carolina,which specializes in fractional and golf course resorts marketing. The marketing for the subject will be multi-faceted but focused primarily on major media and direct mail to create a trial stay at the subject property.They will be sending approximately 30,000 to 40,000 pieces per month to the San Francisco Bay area,as well as the Los Angeles area.The direct mail offering will be for two nights and three days at the subject,including two rounds of golf and a$100.00 dinner certificate at the Wild Goose restaurant for$299.00.There will be an approximate three-month rotation in terms of the style and appearance of the direct mail and media pieces.In addition,print advertising in specific magazines such as Nicklaus 73 -74- The projects will offer a 300-foot pier and twelve docking buoys for boats.This amenity is overall good skiing on this mountain.While considered somewhat linked to the Lake Tahoe substantial as it relates to owners utilizing the recreational aspects of Lake Tahoe itself.Sales area,this project is far less competitive to the subject. are reasonably strong in this project,particularly in consideration of its'pricing,with 45 percent Trendwest South Tahoe of the units reported to be sold as of September�003. The Trendwest South Tahoe project has distinctly different market orientation Marriott Grand Residence Club from most of the other projects in the area.It is much more average in its appeal with the The Marriott Grand Residence Club is a four-and five-story project with stacked appearance of typical three-story stacked apartment type buildings with large building mas.- flats above commercial space on the main level.This location is adjacent to the recently and very little architectural detail and design.This project is a bland of fractional units,ar constructed gondola for the Heavenly Valley ski area.Thus,this project has excellent ski units that'trade within the Trendwest point system. It is located approximately two miles access.In addition,this project is within walking distance of the Stateline Casino District of northeast of the Stateline Casino District and is within walking distance of a public beach on Nevada,which has several high-rise casinos,including Harrahs,Caesar's Palace,Harvey's Lake Tahoe.Its proximity to golf is the same as the projects in South Tahoe,with availability to and others.These features make this a highly competitive project in the Lake Tahoe area, the Edgewood Tahoe Golf Course just to the south.This project does offer the most similar which has enjoyed excellent sales.This project is also within walking distance of the public size fraction to the subject,with a 1/13 share,or four weeks.However,its pricing is intended to beach on Lake Tahoe.The quarter-share interests represent 13 weeks,which is a high amount be substantially different, and its amenities and overall market orientation are,not truly of usage for second home ownership,and thus caters to owners putting their units in a rental competitive to the subject. pool.While considered a highly desirable project and competitive for all of its amenities and Marriott Timberlodge qualities,this project is quite different from the type of product to be offered at the subject.In The Marriott Timberlod a is the,lar est and most active timeshare project in the q P l q YP P 1 9 9 P j addition,there has always been something of a dichotomy in the market for North Tahoe Lake Tahoe area.It is adjacent to the Marriott Grand Residence on the other side of the versus South Tahoe.The South Tahoe area has always been regarded as a bit more Heavenly,gondola in the same South Tahoe Redevelopment Project. This project is metropolitan due to the presence of the casinos,and also more congested in terms of traffic. commanding the highest weekly prices for timeshare among the three timeshare projects However,redevelopment projects such as those incorporated in the Marriott buildings have currently active in the Tahoe area.While potentially competitive for some of the vacation created a new desirability for the South Tahoe area.There is golf available nearby at the buyers in the Lake Tahoe area,this project is substantially different from what is to be offered Edgewood Tahoe Golf Course in Nevada. in Old Greenwood. Kirkwood Mountain Club Hyatt Sierra Lodge The Kirkwood Mountain Club has excellent ski-in/ski-out access at the base of The Hyatt Sierra Lodge is located on the Nevada side of Lake Tahoe in Incline the Kirkwood ski area.Kirkwood is generally regarded as an outlying area from the Lake Tahoe Village.They have had difficulty in construction delays and marketing delays,but overall has region with more limited availability of restaurants,shopping and services.The access to this experienced good success,due in part to its branding with the Hyatt name.It does have a. area is more difficult and can be tedious in poor weather.It is approximately 30 to 40 minutes casino amenity and a private beach area on Lake Tahoe,as well.This is generally a good from South Lake Tahoe via a two-lane highway.In addition,this project does not have good quality project. proximity to golfing and summer activities.One of the general criteria in creating a successful Embassy Vacation Resort fractional project is locating it in areas with high real estate values.The Kirkwood area does not This project is also located in South Lake Tahoe with good proximity to the lake. have the same high real estate values of the towns more proximate to Lake Tahoe.As a result, Its location on Ski Run Boulevard gives it a more direct drive to the Heavenly Valley ski area the price points at this property are substantially less,but the project has been successfully and is also a short drive to the Stateline Casino District to the east.There are some good marketed,primarily for its appeal to families for the isolated nature of the project and the onsite amenities,including a swimming pool and owner's lounge.This project was developed -63- -64- by the Sunterra Corporation,which experienced bankruptcy filing in 2000,and this has created Overall,based on the characteristics described above,the subject property is some difficulties and stigma associated with this development.Also,this is a very different considered to be well positioned in its current market.Due to the uniqueness of the product, product type from the subject and not truly competitive. some effort has been made to identify more similar projects in other market areas of the Summary of Subject's Competitive Market Position Western United States.We have surveyed projects in Park City,Utah,Colorado,Jackson The previous discussion was intended to provide some basis of comparison for Hole,Wyoming,and Big Bear,California,to help further define the subject's competitive the subject as it relates to the overall market for fractional and timeshare projects in the Lake market position.Further discussion was also made herein as it relates to the primary target Tahoe area.All of these developments are competitive to the subject in that they are drawing market for the subject property. their primary customer base from the Northern California markets of Sacramento and the San Francisco Bay area.However,they all offer relatively different characteristics.In our opinion, Northern California Feeder Markets the subject has an excellent market position as it relates to competing in the marketplace for The fact that the subject's primary target market are the Sacramento and San the following reasons: Francisco Bay metropolitan areas has already been extensively mentioned and discussed herein.The proximity to a population of approximately 10,000,000 people within a 3.5-hour • Accessibility-The subject has excellent accessibility directly to Interstate 80.In drive period is very significant as it relates to the market potential for the subject property.The addition,the recent completion of the Highway 267 bypass has addressed the subject is generally going to appeal to the higher income levels,which are quite strop in the issue of congestion for traffic in the Truckee area during high seasons and has g Y g g PP g q g significantly reduced the drive time to Northstar-at-Tahoe ski area and Lake Sacramento and San Francisco Bay areas,in particular.Generally,it is considered that most of Tahoe. the subject's potential market is in the income bracket of$250,000 annually or higher; • Amenities-The subject offers excellent amenities,which address almost all of however,it could also cater to buyers in the$150,000 to$250,000 annual income range.The the desirable aspects of recreation in the Lake Tahoe area.Onsite amenities are following table summarizes the population,households and income levels for these primary excellent,with the golf course,golf teaching academy,swimming pools,fitness center and owner's lounge, tennis courts and fly fishing streams. Offsite market areas. amenities included in the subject's sports membership include golfing privileges at the Coyote Moon Golf Club,on-mountain privileges with the proposed Village at Northstar development being constructed by East West Partners,as well as the Schaffer's Camp member's only restaurant at mid-mountain on the Northstar- at-Tahoe ski area. The Wild Goose restaurant,which is on the lakefront, provides for a direct member link to Lake Tahoe.The only missing amenity is some type of link to the recreational boating on the lake. • Use Plan-The subject's use plan is considered highly desirable as it does provide each owner with a prime season week in either summer or winter,as well as excellent flexibility with regards to the floating time. • Product Type-The subject has a unique product type for the Tahoe market, which in some ways is more directly addressing the desirability of Lake Tahoe as an area for second home ownership.All of the other fractional product in the area is generally stacked flat type condominiums, with the exception of Tonopalo.These development products will have golf course frontage,and all of the products will share in an area that does have excellent forested feel of Lake Tahoe,with the large pine trees and some excellent mountain views. -s�- -66- The above table indicates that the most common unit configuration by far is the Fractional Interest Sales Volume/Pricing two-bedroom unit,and that the average two-bedroom unit size is 1,165 square feet in more Sales volume for high-end and private residence clubs has increased traditional projects,and 1,470 square feet in the high-end/PRC product.Overall,the average substantially from the late 1990s.The following table summarizes sales volume for this product unit size tends to be larger in the high-end/PRC product than in the traditional fractional type. product.In addition,there are four-bedroom units noted for the high-end/PRC product,which generally do not exist in a meaningful way in the traditional fractional market.Overall,the unit High-End/Private Residence Clubs mix for the subject Old Greenwood project fits well within the market indications. Sales Volume The fractional share size for the units in the existing product vanes substantially. N Year Sales in Millions %Change The evolution of the fractional share size has generally gone from larger shares of 1/4 shares 1999 $160.7 to 116 shares,or approximately 8 to 13 weeks,to smaller shares.The 1/17 share offered by the 2000 328.5 104.4% subject represents three weeks.The following table summarizes the fractional share size and 2001 35 2. 2002 357.4.9 1 .1°/ the existing supply as identified by Ragatz Associates. Source:Ragatz Associates Fractional Share Size The above table indicates the flattening of sales volume since 2000.In our Fraction 1/6-1/4 1/9-1/7 1/13-1/10 1/26-1117 other opinion,this is due to several factors.One is that the economic downturn and impacts of the #Weeks 8.6-13 5.7-7.4 4-5.2 2.0-3.0 N/A recession began late 2000/early 2001 and were intensified forthe travel industry by the events Traditional Fractional Interest 56% 21% 21% 9% 6% of 9/11.The recession and downturn in the market have created somewhat less demand for Hi h-End/PRCs 15% 33% 42% 8% 8% vacation ownership due primarily to the diminishing returns in the stock market. Source:Ra atz Associates I Individual pricing of fractional units varies substantially based on location, amenities and services offered,as well as fraction size.Ragatz Associates has applied three The above table indicates huge growth from 1999 to 2000 and that the 1/17 diffe�ent units of comparison to examine retail prices of fractional interest real estate,including share offered by the subject is currently in the minority as it relates to more abundant fractions l price per fraction,price per square foot,and price per week of ownership.An analysis of the of 1/4 to 1/6 share.However,as discussed,it is our opinion there is evidence of change in the fraction price by unit size results in a wide range due to the various amount of time perfraction. market as several of the sources we have reviewed indicate that unused time represents a An examination of the price per square foot of the units provides a more consistent comparison drawback to current ownership of the larger shares.The subject developers have reported a carefully researched plan offering three weeks,which is regarded as a typical amount of across various fraction sizes.In addition,the price per week of ownership also accounts for achievable time to visit the Lake Tahoe area from the most significant drive-to market near the fraction size but is unable to consider the different types of units. The following table summarizes the average pricing for the existing supply of fraction projects surveyed b Ragatz 9 P 9 9 PPY P 1 Y Y 9 subject,which is the San Francisco Bay area.This attribute will be discussed in greater detail Associates. later in this report.According to Ragatz Associates,the average fraction size among high- end/PRC projects is a 1/8 share. price points indicated by the PRC units.The price per square foot for the subject units also falls Fractional Interest Average Pricing generally within the lower half of the range indicated by the Ragatz Associates data.The price By Unit Type Per S.Ft.b it Te Per Week Ownership per week indicated for the subject cabin units actually exceeds the price per week for the three- Unit Type Traditional High-End PRC High End PRC #Weeks Traditional High-End PRCs and four-bedroom units indicated in the Ragatz Associates study by substantial amounts.This Studio $29,250 $64,950 $97,800 $675 $1,460 2-3 $10,000 $44,000 $28,780 higher average price per week is generally attributable to the high level iof amenities at the 1 BR 41,000 80,700 134,600 610 1,480 4-5 15,525 25,160 51,000 subject,which will be discussed later in this report. 2 BR 54,750 117,420 208,830 695 1,320 6-7 6,780 35,390 46,150 3 BR 75,000 157,165 288,950 595 1,300 8-10 NIA 20,500 33,440 4 BR N/A 281,250 312,100 575 985 12-13 2,700 14,600 28,280 Source:Ragatz Associates The above pricing provides a wide range of indications,which generally brackets those proposed for the subject property.The subject pricing is summarized in the following table. Developer Proposed Pricing Old Greenwood 2002 Price 2002 Price Price Per Type S.Ft. No.of Units Per Fraction Per S.Ft. Week Fractional Units 3 BR Cabin-17ths 2,470 48.0 74 138,030 $950 $46,010 4 BR Cabin-17ths 2,985 26.0 74 166,810 950 55,603 2 BR Attached' 1,270 36.0 72 67,240 900 22,413 3BRAttached* 1,760 36.0 72 93,180 900 1 31,060 Total Fraction Units 146.0 Source:East West Partners The above table indicates that the subject units have a relatively mid-range price point in relation to the market data.The subject's two-bedroom cottages are priced at$67,000 per unit and allow for a price point closer to the average pricing for two-bedroom traditional type units.The three-bedroom cottage units are also priced towards the lower end of the range indicated by the pricing by unit type.The cabin units are at a substantially higher price point, which is considered appropriate given the more luxurious orientation and freestanding nature of the cabins.Their unit pricing for three-and four-bedroom units is more consistent with the pricing indicated by the high-end fractional units,but is not anywhere near as expensive as the -5 7- -55- village and new,high quality single and multi-family development.East West Partners will play FRACTIONAL INTEREST MARKET ANALYSIS a major role in the transformation at Northstar,which puts them in the position to offer ski amenities to the owners in Old Greenwood. The Truckee Donner Public Utilities District,Community Facilities District No.03- 01, has been created to help provide for infrastructure development costs for the Old Greenwood development.Old Greenwood is a master-planned development consisting of single-family lots,freestanding cabins and attached cottages.The cabins and cottages are— j t proposed for sale in fractional ownership based on a 1/17 share.In other words,each cottac and cabin will have 17 owners,each entitled to three weeks of occupancy.This type of ownership is currently referred to in the market as a fractional interest.This market analysis is i 1 intended to provide an overview of the fractional ownership industry,providing definitions for certain concepts in a rapidly evolving product type.Extensive research has been conducted by the appraisers regarding the fractional ownership industry. Specifically,the reports and information reviewed by the appraisers in preparation of this-market analysis include the following: • Fractional Interest: A Market Profile, 2003 edition prepared by Ragatz Associates,May 2003. e • Industry Overview of the Luxury Fractional and Private Residential Club t prepared by Hobson and Ferrarini Associates,October 2000. • The High-End Fractional Interest Market and Comments on the Proposed Truckee Sierra Resort and Spa(pre-cursor to Old Greenwood),prepared by RCI Consulting,September 1999. • Interviews with the development personnel of East West Partners,and other reports and information provided by the developer. • Fieldwork conducted through interviews and site visits to numerous fractional (; timeshare properties in the Lake Tahoe region and other resort areas. • Attendance at and review of information from"Taking Fractional Development to the Next Level" seminar hosted in Deer Valley, Utah by www.WoddsFinestResorts.com.in September 2003. t The information gathered from the above sources has been summarized and is 4€ reported in this market analysis section as succinctly and precisely as possible as it relates to the overall industry trends to a comparison of the proposed development at the subject rI property,which is being marketed as Old Greenwood. ` -`7- <w Traditional Fractional:Product selling for less than$500 per square foot.These are Fractional Interest Overview usually resort condominiums of average quality,in regional resort areas,with typical resort amenities and services,often characterized as at the three-star level of quality. , Generally,the fractional interest concept can be defined as the selling of resort � real estate in intervals of more than one week but less than whole ownership.The fractional High-End Fractional:Product selling for$500 to$999 per square foot.This product represents a step up from the preceding category,typically due to some combination of more interest resort market has been formally evolving as a product type very rapidly since the mid- desirable location,lower density,larger unit size,higher construction and furnishings quality,or 1990s. Prior to its current evolution as a well-defined marketable product,the fractional additional amenities or services.Often characterized as of four-star quality. ownership concept has existed for many years in the form of individual friends or relatives Private Residence Clubs(PRCs):Product selling for$1,000 or more per square foot. collectively purchasing a vacation home and sharing its use.Difficulties with this historical type These represent the pinnacle of quality--not just among fractional interest but in comparison r with virtually any resort accommodations available—due to a combination of locations in the ss of use has been that friendships and family would have conflicts as to how much time and top tier of resort destinations on prime sites,extraordinary architecture and design,and the s' when each party could use the property,and responsibilities for maintenance,costs and legal highest levels of services and amenities.Alive-star quality product in every way. issues if an owner moves or cannot afford continued ownership.Developers have formalized The above definitions are differentiated by product selling cost,but also note the fractional approach by providing shared ownership through employment of a professional significant differences in product related to other items such as location,lower density,unit management company, which provides a detailed schedule of use and access and k' size,quality,amenities and services.The subject's market position as it relates to these professional management,as well as facilitating re-sales and other services or amenities. definitions will be discussed in greater detail later in this section of the report.Overall,the There is an important distinction to be made in the current marketplace between subject represents something of a hybrid between the high-end fractional and the private a timeshare and a fractional interest.Historically,timeshare developments have only sold one j residence club type of product.The subject will be offering larger units of superior quality and 4r week of ownership and no more.Due to unscrupulous developers and high-pressure sales good amenities and services,but will not be at the very top of the spectrum in terms of quality c tactics from various timeshare developments in the 1970s and 1980s,the term timeshare has and service.Thus,when additional information is utilized from the Ragatz Associates report, developed a negative connotation,from which the developers of fractional interest products are k the subject is most closely associated with the high-end fractional type of product. : trying to distance themselves.Thus,there is a high degree of sensitivity among current Some of the advantages of fractional ownership from a consumer standpoint are developers that is intended to help differentiate fractional interest from timeshare.While the summarized as follows: concepts are the same in that the purchasers are buying an allocated amount of time in a • Use of an upscale vacation property without the costs and responsibilities of $ specific resort property,there have been significant differences offered in the products as it wholly owned second homes. relates to services,amenities,location and other factors.However,the primary distinction Flexibility in use. currently being made in the market between timeshare and fractional interest is the amount of time owned.Timeshare is still generally regarded as one-week ownership,and fractional Fractional allows for a greater proportion of the purchase price to be allocated to ; the product itself,rather than expensive marketing and administrative costs Y. ownership is regarded as a unique type of time ownership greater than one week but less than associated with timeshare.Fractional represents a step up from timesharing and whole ownership.This has ranged from 1/4 to 1/26 shares. a substitute for second home ownership. Further differentiation has been occurring in the product type being offered within 0 Creates some control over future vacation costs. .' {j the fractional interest market.In our opinion,it is appropriate to utilize the terminology for the different types of fractional interest as set forth in the Fractional Interests Market Profile There are advantages to developers of fractional properties, as well, in prepared by Ragatz Associates.These are summarized as follows: comparison to whole ownership condominiums.These are summarized as follows: -.}9- _50_ t j although located in Placer County,is located within the geographic limits of the Truckee ZIP code.Current levels of growth for high-end homes are expected to taper off after the subject Existing Home Sales Data for Truckee Area(Zip Code 96161) property and Gray's Crossing reach build-out over the next few years as there is less development land available in Truckee.Other future development of note,which may contain sin le Family Homes Condominiums/Gotta es Year No.of Sales Median Price %Change No.of Sales Median Price %Change high-end homes,will most likely be located in the Martis Valley planning area south of the 1998 738 $179,000 7.0% 82 $140,000 8.5% subject. 1999 863 202,000 12.8% 96 150,000 7.1% 2000 691 280,000 38.6% 94 193,000 28.79 2001 423 316,500 13.0% 66 209,500 8.5% Conclusion 2002 672 356,250 12.6% 88 227,500 8.6% The Lake Tahoe region has been experiencing strong levels of population and Annual Chan e housing growth over the last decade.Growth on the Nevada side is most influenced by the a Mos.>02 ns $359 500 -- 27 $165 000 -- ' metropolitan Reno area.Growth in Truckee is generally consistent with area trends,although it 4 Mos.>03 173 400,000 11.3% 30 244,000 47.9% is experiencing a larger share of growth in the higher value housing market.This is assumed to Source:Data nick Information Systems be driven by the area's resort oriented developments such as the Lahontan,and eventually the subject. There have been significant increases in the median price of existing home sales over the last five years.We have also provided the following table comparing the median single-family home price for 2002 communities on the California side of the Lake Tahoe to This section of the housing market analysis will examine housing price trends,as understand Truckee's real estate market relative to other markets in the area. well as existing/future supply and demand for homes in the subject's market.The demand section will consist of an examination of eligible buyers in the subject's primary markets of Sacramento and San Francisco Bay area.These two markets represent,by far,the buyers of Median 2002 Existing Single Family Home Price in Selected Lake Tahoe Region Communities Tahoe area second home properties,as confirmed by conversations with several area real Area/Zip Code Median Price estate brokers and developers.It is estimated that approximately 80 percent of the second � � South Lake Tahoe/96150 $250,000 homeowners in the Tahoe area hail from the Bay area. Soda s rin /95728 300,000 Truckeel96161 356,250 Pricing Trends Camelian Ba 196140 400,000 The following table shows pricing trends for single-family homes and Homewood/96141 335,000Tahoma/96142 322,500 condominium/cottages in Truckee from 1998 to 2002. Kings Beach/96143 300,000 Tahoe Ci /96145 400,000 Olympic Valle/96146 620,000 Tahoe Vista/96148 360,000 Source:Data uick Information Systems This table suggests that Truckee generally fits in the middle of the range of the area real estate markets in terms of pricing.It is noted that the Olympic Valley,which is -s9- -40- essentially the entrance to Squaw Valley ski resort,has the highest median home pricing in the Donner Lake Area area at$620,000. This area consists of a series of subdivisions clustered along the north,west and south shores of Donner Lake.Many properties are second homes or vacation rentals,including Truckee Housing Inventory several condominium developments along the shoreline. Donner Memorial State Park Residential development in Truckee has occurred sporadically in phases over the surrounds the southeastern part of the lake.Limited commercial services,are located at the years since Truckee was first established as a wagon train stop in the late 1800s.The historic west end of the lake's north shore,including a restaurant,gift shop and real estate services, area of downtown Truckee has a variety of housing development that contributes to the charm and the Donner Pines Center at the east end,which includes a small market and a restaurant. of the town.Most development in Truckee has been single family oriented.The following is a Recreational facilities include a public beach,boat launching facilities and boat rentals. discussion of Truckee's neighborhoods and organized developments per the town of Truckee Glenshire/Devonshire Area general plan. Glenshire/Devonshire consists of a series of subdivisions comprising about 1,500 Downtown Truckee housing units on about three square miles located at the eastern boundary of Truckee.Most of Downtown Truckee is the historic heart of the community and contains a mixture the housing units in the area are occupied by full-time residents. Services within the of commercial development centered around Commercial Row,older residences,and industrial development include a comer store,child-care,an elementary school,a neighborhood club and railroad uses. house/swimming pool and real estate services. Gateway Sierra Meadows This central Truckee neighborhood largely consists of more recent commercial This area consists of a series of subdivisions,including Sierra Meadows and development, including a major grocery store, several restaurants, and small strip mall Ponderosa Palisades,comprising about 1,500 housing units on about two square miles in the developments along Donner Pass Road,Residential areas are located near the intersection of south central area of Truckee.The Nevada/Placer County line splits the neighborhood,with Northwoods Boulevard and Donner Pass Road,and between Donner Pass Road and the some homes in the south part of Sierra Meadows lying outside the town limits in Placer freeway.Several important public facilities are located in the Gateway area,including the County.The only commercial service within the subdivision is a homeowners association club Tahoe Forest Hospital,a public library,the Nevada County Government Center,and four house/pool.A convenience store and a regional park are located adjacent to the northern school sites. boundary of the development. Tahoe Donner Prosser Area This major residential area consists of 6,200 residential lots across seven square The Prosser area includes a grouping of subdivisions, including Prosser miles in the northeast quadrant of Truckee.Approximately 75 percent of these properties are Lakeview,Sugar Pine Estates and Prosser Lake Heights,comprising several hundred housing second homes.The closest grocery store is between two and one-half and five miles away. units over three square miles in the northern central area of Truckee.There are no services in Services within the development include a convenience store/deli,real estate services and this area,and the closest grocery store is about four miles away. other limited professional services,restaurants,a pre-school,and a variety of development- Other Residential Areas related recreational facilities,including a ski area and a golf course. Other smaller residential subdivision include the Armstrong Tract, north o. Interstate 80 between Donner Lake and the Gateway area;Olympic Heights,southwest of the Airport Flats area;and Pannonia Ranchos,a rural,large lot subdivision east of Prosser Lakeview. -42- GOLF MARKET ANALYSIS Lahontan The subject is a golf course based community featuring the only Jack Nicklaus Lahontan is an exclusive golf community with over 500 homesites on Signature golf course in the Lake Tahoe area.Golfing has played a large part in Lake Tahoe's approximately 900 acres.The 18-hole championship course is a Tom Weiskopf design and is reputation as a year-round resort area.The mild temperatures,high percentage of sunny days highly regarded.This community sold out all of the lots in the initial offering over a 40-month and mountain scenery all contribute to region's suitability for an enjoyable golf environment. period.Currently,there are 100 resale home sites available.Golf operations data was now There are ten golf courses located in the subject's local North Lake Tahoe area. An inventory available,although due to the exclusive private nature of the community,the appraisers hat of golf courses in the subject's area is listed below. assumed that the number of annual rounds played at Lahontan is significantly less than other area courses.Lahontan has a maximum of 400 golf memberships available. North Lake Tahoe Golf Courses Coyote Moon Identification Location Holes Par Type This is the newest public course, having opened in 1999.Coyote Moon is Lahontan Truckee 18172 Private considered the most prestigious of the public courses,having been named the best golf course Coyote Moon Truckee 18/72 Public in the entire Tahoe region by the Northern California Golf Guide.Coyote Moon was acquired Incline Village Championship Incline Village 18/NA Public/Resort Incline Village,Mountain Course Incline Village 18158 Public/Resort by East West Partners in 2000.Approximately 20,000 average annual rounds are played at Northstar-at-Tahoe Northstar Resort 18/72 Public/Resort Coyote Moon,which is considered to be approximately 85 percent of the capacity.Most of the Old Brockway Kings Beach 9/36 Public rounds are played by destination golfers,with local play accounting for only 10 percent of the Ponderosa Golf Course Truckee 9/36 Public Resort at S uaw Creek Olympic Valley 18171 Public/Resort rounds played.Coyote Moon is the most expensive golf course in the area,with fees ranging Tahoe City Golf Course Tahoe City 9/33 Public from$150 to$195 for 18 holes.Management indicated that there has been in increase in the Tahoe Donner Truckee 18172 Semi-Private rounds played as word spreads about the beauty and quality of the course. Northstar All but one of the courses is open to public play,thus allowing the capture of Northstar is an 18-hole course that originally opened in 1972 as part of the tourist and corporate group golf rounds,as well as local play.Greens fees generally range from Northstar-at-Tahoe master-planned community.Interviews with management indicated that $85 to$200 dollars for 18 holes and$18 to$40 at the 9-hole courses.Lahontan is the only 24,000 to 26,000 annual rounds are played at the course,with group business representing 75 private golf course included and will most likely offer the most similar golf experience as the to 80 percent of these rounds.Northstar is the least expensive golf course in the region at subject,Old Greenwood.Other than Lahontan,all of the golf courses listed above are open to $105 per 18-holes.It was reported that from mid-June to mid-September,tee times are fully public play.It is noted that although the subject is a private golf course community,limited booked. public play will be offered at Old Greenwood per the subject's development agreement with the Tahoe-Donner town of Truckee,and the Truckee High School Golf team will have the option of using it as their The Tahoe-Donner Golf Course is also an amenity to a master-planned home course.The following is a brief description of the golf courses in the Truckee areas community.The course caters primarily to residents of the Tahoe-Donner community byway of considered most similar to the proposed Old Greenwood course. special season p pass rates. As a result, there is little public play at this course. This development is not considered to be directly competitive with the subject as it is not an exclusive gated community.In addition,the community is over 30 years old and homes and lots are available at a much lower price point. -31- -32- Gray's Crossina HOUSING MARKET ANALYSIS Gray's Crossing is a proposed golf course community being developed by the subject developer,East West Partners,featuring an 18-hole championship golf course virtually Analysis of the residential housing market includes a regional analysis of the adjacent to the subject to the north.Gray's Crossing will be an upscale community;however, greater Lake Tahoe region,including three counties in California and three counties in Nevada, due to timing and control of the development by the subject developer,it is not considered to as well as a more in-depth look at recent trends in Truckee.Factors that influence housing be competitive with the subject.This project is currently in the planning process. demand,particularly as it relates to higher value second homes,will be addressed.Factors discussed in this analysis include trends and projections for the following characteristics: Conclusion Golf is a major component of the Lake Tahoe region's four-season resort lifestyle. 0 Population There are several golf course operations in the Truckee area,offering a wide range of golf • Households • Housing Units opportunities.Discussions with golf course personnel in the area indicate that there is a strong & Median Home Value demand for golf and that the subject will arguably offer the best course yet in the area. • Vacant Housing Units • Owner vs.Renter Occupied Units The following table demonstrates general growth trends in population and households in the Lake Tahoe area counties.It is noted that the majority of the population and land area in the California counties included below are located west of the Lake Tahoe region and are influenced more by the Sacramento economy and demographic trends.It was not possible to isolate the portions of counties relevant to the Lake Tahoe region.This data is still considered meaningful,as larger regional trends are toward development and growth east from the more populated areas into the historically more rural,mountainous areas near the Lake Tahoe area. California Counties Population and Household Trends Po ulatlo Households County 1990 2000 2002 2007 Pro'. %Change 19W 2000 2002 2007 %Change Nevada 78,510 92,033 94,377 100,586 17.2% 30,760 36 894 38 082 41,153 19.9% Placer 172,794 248,399 262571 198850 43.8% 64098 93382 99163 114,073 45.7% El Dorado 125.994 156,299 161,741 175,956 24.1% 46,846 58,939 61,291 67,380 25.8% Source:CCIM,STDBonline,U.S.Census -33- -34- Trend TAHOE MOUNTAIN CLUB The trend of development proposed in the subject's immediate area is for resort related communities.The existing development includes some older established residential The subject developer,East West Partners,has recently created a private club subdivisions. membership concept to a family of resort properties and amenities located in the Truckee/North Lake Tahoe Region,referred to as the Tahoe Mountain Club.This is considered a unique offering,which encompasses many of the year-round recreational and resort,,,_ experiences that make the Lake Tahoe area a unique destination.A separate ownership ant' of the developer called the Tahoe Club Company funds and operates the amenities for then group of resorts in the region.The benefits of the Tahoe Mountain Club are a key marketing tool in the sales of the product at Old Greenwood.Membership in the club is included with the purchase of Old Greenwood fractional property,but must be purchased separately by the lot owners.The following is a brief discussion of the on-site'and off-site Tahoe Mountain Club amenities and facilities offered at Old Greenwood. On-Site— • Special privileges at the 18-hole,Jack Nicklaus Signature Golf Course. • Private access to the 18,000 square foot Swim,Tennis,Fitness Pavilion and Spa. • Golf Academy with short game teaching center and double-ended driving range. • Fly fishing teaching and practice area. All on-site amenities at Old Greenwood are under construction and are expected to be complete by June of 2004. Off-Site- • Special privileges at the 18-hole,highly acclaimed,Coyote Moon Golf Course under the ownership of East West Partners since opening in 2000. • Preferred reservations at the Wild Goose Restaurant located on the Lake Tahoe waterfront.This is a fine dining restaurant purchased by East West Partners and remodeled in 2003.It is approximately 15 minutes south of the subject in Tahoe Vista near the terminus of Highway 267. • Valet ski storage and spa privileges in the Alpine Club at the Village at Northstar (estimated completion in 2005). • Schaffer"s Camp,a members-only,on-mountain restaurant/ski lodge at Northstar (estimated completion in 2005). -sd- • Access to membership at the Gray's Crossing's 18-hole,Peter Jacobsen/Jim Hardy designed golf course located north of Interstate 80 adjacent to Old Tahoe Mountain Club Greenwood(estimated completion in 2006). Membership Plan Overview Sorts Signature Golf The Northstar Resort amenities offered to Tahoe Mountain Club members are a Membership Price $25,000 $75,000 result of the development partnership between East West Partners and Booth Creek.Other Membership Deposit Phasing: development proposed at Northstar by East West Partners includes the development of the Jul November 2003 $2004 20.00 $1000' 65.000 ' 0002 Village at Northstar,a pedestrian mountain village featuring condominiums,boutique shopping Total $25,000 $75,000 and dining and services,and The Highlands,a community of on-mountain ski-in/ski-out homes. Monthly Dues: Jul 2004 $250 $500 There are various levels of club membership ranging from limited to full use of the amenities If neither the Northstar Alpine Club nor Schaffer's Camp Club facilities have commenced construction by described above,with initiation fees ranging from$30,000 to$125,000.The Tahoe Mountain June 2004,then$5,000 of the final deposit payment shall not be due until one of the two facilities has commenced construction. Club is a unique package of resort amenities,which has been carefully conceived by East 'Monthly dues will be$50 starting anuary 1,2004 until July 1,2004 as shown above. West Partners to include most of the key resort elements of the Lake Tahoe region and is considered to contribute to the marketability of Old Greenwood and future developments by Golf Privileges Coyote Moon Old Greenwood Signature Golf Membership: East West Partners.It is significant to note that several of these amenities are already in place. Advance Tee Times 60 Days in Advance 60 Days in Advance This enhances the marketability of the product compared to trying to sell a product before any Greens Fee Discount Cart Fee Only Cart Fee Only of the amenities are built. Sports Membership: Advance Tee Times 45 Days in Advance 45 Days in Advance The Tahoe Mountain Club memberships are currently being offered at sports Greens Fee Discount 10% 10% membership or signature golf membership levels.The club membership is being included as part of the fractional product sale price.The fractional owners will have all membership privileges only when in residence for their time allotment.The lot owners are not required to The Tahoe Mountain Club is a separate, but related,entity of East West Partners.The purchase a membership,but are being offered a priority to purchase membership in several amenities on-site within the CFD will be available to members of the Tahoe Mountain Club who different forms.The cost and privileges of this club are summarized in the following table. have purchased property off-site in other related projects.Thus,the cost of construction of these amenities is shared by the other projects.Therefore,as stated previously,our analysis recognizes only the costs attributable to the taxable property in the CFD,and specifically assumes the Tahoe Mountain Club entity will pay the costs attributable to the other projects. I, -25- -zs- Economy Placer County Major Employers , Employer Name Location Industry The following tables summarize the major employers in Nevada and Placer Alpine Meadows Ski Resort Olympic Valley Lodging&Recreation Counties. Artes n Solutions,Inc. Lincoln Computer&Data Processing Services City of Roseville Roseville Public Administration(Government) Nevada County Major Employers Coherent Inc. Auburn Medical Instruments&Supplies Countyof Placer Multiple Public Administration(Government) Employer Name Location Industry Hewlett-Packard Roseville Com uter&Office Equipment Boreal Ski Area Soda Springs Lodging and Recreation NEC Electronics Roseville Electronic Components&Accessories -County of Nevada Multiple Public Administration/Government Nevada Joint Union HS District Grass Valle Public Education Oracle Corp. Rocklin Computer&Data Processing Services Northstar at Tahoe Truckee Lodging and Recreation Pride Industries Roseville Individual&Family Services Sierra Nevada Memorial Hospital Grass Valley Healthcare Resort at Squaw Creek Olympic Valley Lodging&Recreation Sugar Bowl Ski Area I Norden I Lodging and Recreation Sierra Community College Rocklin Colleges&Universities Tahoe-Donner Association I Truckee i Lodging- Tahoe Forest Hospital Truckee Healthcare Squaw Valle USA Ski Corp. Olympic Valle Lodging&Recreation Thompson Multimedia/Grass Valle GroupNevada Ci Commun cations Equipment SureWest Communications Roseville Telephone Communications US Government Multiple Public Administration/Government Sutter Hospitals Roseville Hospitals Source:California Employment Development Department. Union Pacific Railroad Co. Roseville Railroads Source:California Employment Development Department. The following table summarizes the labor force information for Nevada and Placer Counties for July 2003 as compared to the previous year. Nevada County Labor Force Statistics I Seasonally Adjusted 000s July July. Percent 2003 2002 Change Labor Force 50,130 50,170 -0.08% Employment 47,900 47,940 -0.08% Unemployment 2,230 2,240 -0.45% Unemployment Rate 4.5% 4.5% California Unemployment Rate 6.9% 7.1% -2.8% United States Unemployment Rate Source:State of California,Employment Development Department,Labor Market Information Division. -15- -16- Placer County Labor Force Statistics As indicated by the previous summary,the services category encompasses a Seasonally Adjusted significant portion of the Nevada County total employment.Other large employment categories 000s July July. Percent include government and trade. 2003 2002 Change Services have consistently reflected one of the highest rates of employment Labor Force 142,400 140100 1.6% increases of all industries in Nevada County. This growth has occun�ed as a result of Em to ment 135,600 133,600 1.5 Unemployment 6,800 6,500 4.6% continuous population expansion and continued resort oriented development in the Truckee Unemployment Rate 4.8% 4.6% 4.3% area.Health care services exhibited the largest job gains,while tourism continues to exhibit California Unemployment Rate 4.5% 4.5% ---- strong growth rates. United States Unemployment Rate 6.9% 7 1% -2 8% Source:State of California,Employment Development Department,Labor Similar employment by industry data for Placer County was not considered Market Information Division. relevant as it is included in the Sacramento Metropolitan Statistical Area(MSA)and has very As indicated,the unemployment rate in Nevada County was unchanged and different characteristics compared to the subject's market area. Placer County was basically stable over the past year.The total civilian labor force was Transportation relatively stable in both counties over the last year.The unemployment rate for both counties is A limited range of transportation opportunities are available to businesses located lower than the state of California and the U.S.averages. in the subject's area.Interstate 80 is the major highway accessing eastern Nevada and Placer Reference is made to the following table,which presents average annual non- Counties.The western portion of these counties is positioned as part of the rapidly growing greater Sacramento Metropolitan area,which offers rail,air,truck,and bus service.In addition, farm wage and salary employment statistics for Nevada County for July 2002 and July 2003. the deep-water port of Sacramento provides easy access to the markets of the Pacific Rim. Well-designed highway systems allow for the rapid large-scale movement of people and Nevada County products with generally moderate congestion.The central location also allows one-day freight Nonagricultural Wage and Salary Employment by Industry"000s delivery to all West Coast cities. July July Percent Commercial air service to the Truckee area is provided by the Reno/Tahoe Industry Cate go 2003 2002 Change Airport,approximately 35 miles east of the subject.Commercial air service in the western Total All Industries 30.9 29.67 -1.4 Total Farm 0.12 0.12 0 portion of Nevada and Placer County is provided via the Sacramento Metropolitan Airport,a Total Non-farm 29.97 29.55 -1.4 1 1.5-hour drive west of Truckee.The Tahoe Basin is served by the Lake Tahoe Airport in South Goods-Producing J5.44 5.12 -5.9 Lake Tahoe and the Truckee-Tahoe Airport in Placer County just south of the subject. Mining&Construction 3.57 3.25 -9.0 Manufacturing 1.87 1.87 0 Bus service for the Truckee area is provided by Greyhound lines from both Service-Producing 24.53 24.43 -0.4 Sacramento and the Carson City/Reno areas.There are also numerous daily charter services Transportation&Public Utilities 5.43 5.53 1.8 from the Bay Area to the Lake Tahoe area.Freight and passenger train services to thr Information,Finance,Insurance&Real Estate 2.02 2.0 1.0 Truckee area are provided by Southern Pacific and Amtrak. Services 11.32 11.45 -1.1 Government 1 5.76 5.45 5.7 Source: State of California Employment Development Dept. EXPOSURE TIME LOCATION ANALYSIS Exposure time may be defined as follows: The subject Mello-Roos Community Facilities District No.03-01,Truckee Donner PUD,is located in Truckee,Nevada County,California.Reference is made to the location map haThe estimated lengthve been offered on the market prior to the hypothetical consummation time the property interest being appraised would on the facing page,which shows the location of the subject property in Northern California and ha of a sale at market value on the effective date of the appraisal; a in relation to the Lake Tahoe Basin area.The following provides an overview of the area- retrospective estimate based upon an analysis of past events assuming a demographic and market factors for the competitive and open market." region and its geographic location,as well as tl immediate property surroundings. Source:Uniform Standards of Professional Appraisal Practice(USPAP). The overall concept of reasonable exposure also assumes adequate,sufficient, Regional Analysis and reasonable effort in marketing.The subject represents a unique resort property with a The regional analysis provides a brief review of the state,Lake Tahoe Basin and large value,which limits the number of potential investors.Our analysis has considered all North Lake Tahoe demographic and economic conditions. revenue sources in place at the subject,as well as expenses,and has applied a reasonable The state of California is among the most dynamic of international communities. profit and discount,which should attract a buyer to the present value of the subject as stated California's economic strength is based upon its population,business diversity,strategic herein.In our opinion,the subject is to the point where there is substantially less risk involved location and recent economic restructuring for the 21 st century.These positive factors support in terms of entitlements,approvals and development costs, and would be considered a the future economic performance of business and real estate investment within the state. desirable project by resort developers.We are aware of projects on a national basis that have California is the most populous state in the United States,with a 2002 population similar scope that trade in various stages of development.In our opinion,based on the values of 34.5 million residents.California's population grew by 13.8 percent from 1990 to 2000,and concluded herein,the appropriate exposure time estimate for the subject is twelve months. is projected to grow to approximately 36.5 million by 2007. As stated above,exposure time is intended as a retrospective time period prior to California's economic strength has been tied to its diversity of businesses,which the date of sale. Marketing period is the opposite in that it is the anticipated time period includes a wide range of manufacturing,trade,services,and agriculture activities.One factor required to sell the property going forward from the date of value at the market value stated supporting California's economy has been its strategic location as a gateway to the Pacific and herein.In our opinion,the marketing period for the subject would be similar to the exposure Mexico.California is the center of trade with the Pacific Rim countries,and over 80 percent of period of twelve months. all U.S.trade with these nations is through California's airports and harbors. California consistently out-performed the rest of the country during the 1980s,but was particularly hard hit by the national and regional recession of the early 1990s.During the late 1980s and early 1990s,California lagged the nation's slide into recession,as well as its economic rebound.The recession hit later and harder in California than on the national level. The state and southern California region began measurable economic recovery in mid-1993 and experienced strong growth in late 1990s,particularly the San Francisco Bay area,as a result of immense growth in the technology sector.However,in 2000/2001,the decline in the technology sector greatly affected job growth and the economy in the Northern Califomia area. Overall,economic forecasts for the California region,including the San Francisco property.More specific analysis of the outlying population centers which impact the subject Bay area,project generally favorable job growth trends,and there has been continued strong property is addressed in the Housing Market Analysis,Fractional Interest Market Analysis and housing demand. other areas of this appraisal report. San Francisco/Northern California/Reno/Sparks Lake Tahoe Basin/North Lake Tahoe The subject is located in a resort area around Lake Tahoe,which straddles the The subject property is located in the Town of Truckee,in the North Lake Tahoe California/Nevada border.It has long been a recreational area for the substantial population Region,which is just north of the Lake Tahoe Basin and accessed by I nterstate 80.Truckee is base located within an approximate three-to four-hour drive.The following table summarizes located approximately 32 miles from the Reno/Tahoe Airport,with a drive time of approximately the population trends for the most significant areas of Northern California and the Nevada 30 minutes.The Lake Tahoe region is located on the Califomia-Nevada border between the counties located around Lake Tahoe. Sierra Nevada Crest and the Carson Range mountains.Approximately two-thirds of the Lake Tahoe Basin is in California and one-third is in Nevada.The Basin comprises approximately Population Trend Summary Report 501 square miles,including the waters of Lake Tahoe,which is 191 square miles.Lake Tahoe 2000 Census 1 1 2002 Estimate 2007 Projection is well known for its crystal blue pure water and beautiful mountain setting.The lake itself is 22 San Francisco-Oakland an Jose,CA DMA miles long,12 miles wide,has 72 miles of shoreline,and a greatest depth of 1,645 feet,making Total Population 6,679,769 6,800,139 7,125 925 it the third deepest lake in North America. Total Households 2,443,380 2,480,324 2,577,122 The Lake Tahoe region includes portions of El Dorado and Placer Counties in Sacramento MSA California,and Washoe and Douglas Counties in Nevada,as well as the rural areas east of Total Po ulation 1,628,190 1,679,405 1,813,727 Carson City,Nevada,which are not incorporated in a county.Nevada County is north of the Total Households 605,919 624,875 673,908 Lake Tahoe Basin,and its eastern portion has a strong association with the Lake Tahoe Basin Source:STDBonline due to proximity and a wide range of recreational opportunities it offers.The average elevation of the lake is 6,225 feet above sea level,with mountain ranges around the basin going up to 11,200 feet in elevation. There are various populated areas in the Lake Tahoe Basin Nevada Counties Population and Household surrounding the lake.The largest incorporated area is South Lake Tahoe,California,with a Trends population of 23,000 people, and adjacent Stateline, Nevada in the south. Tahoe City, Population California to the northwest is the next largest,followed by Incline Village,Nevada on Lake County 2000 2002 2007 Pro. Douglas 41,259 43,813_JiSo 377 Tahoe's northeast shore.There is primarily extensive forest service land and areas of large Washoe 33948e 355073 395,419 lakefront summer homes between South Lake Tahoe and Tahoe City along Highway 89. Cancan City 52,457 54,651 1 60,343 Between Tahoe City and Incline Village on the north shore of the lake are primarily more Source:COO STDBonline,U.S.Census upscale, retail service-oriented developments, as well as additional lakefront homes, The above tables indicate there have been strong growth trends and there is condominiums,and camping areas.Between Incline Village and South Lake Tahoe on the east continued projected growth and population for the area,which influenced the property values side of the lake are generally more sparsely populated areas and more residential oriented and economic trends in the subject's market area.The total population in the areas indicated areas. above is over 8.9 million people,which is significant as it relates to the influence on the subject -�- -to- SUMMARY OF SALIENT DATA TABLE OF CONTENTS Page Identification Letter of Transmittal..............................................................................................................i Summary of Salient Data....................................................................................................iv Truckee Donner Public Utilities District Purpose of Appraisal...................................................................................:........................1 Mello-Roos Community Facilities District No.03-01 Intended Use/Intended User.................................................1 Interstate 80 at the Prosser Village Exit Date of Inspection...................................:........................................................................ Truckee,California Date of Appraisal... PropertyRights Appraised.............................................................................................. Definition..............................................................................................................................1 Land Area Definition of Market Value.............................. Scopeof Appraisal................................................................................................................3 616.20 acres in the boundaries of the district. legal Description......................................................... PropertyHistory....................................................................................................................5 ExposureTime......................................................................................................................7 Proposed Taxable Improvements Location Analysis..................................................................................................................8 TahoeMountain Club................................:.........................................................................24 CabinCottage Ski Market Analysis.............................................................................................................27 Single Family Lots Fractional Ownership Fractional Ownership Golf Market Analysis...........................................................................................................31 No.of Units 99 74 Cabins/1,258 Shares 72 Cottages/1,224 Shares Housing Market Analysis.....................................................................................................34 Size .534 Acres Average 3BD/3.5BA 2,470 Sq.Ft. 213D/2.5BA 1,270 Sq.Ft. Fractional Interest Market Analysis.....................................................................................48 413D/4.513A 2,985 Sq.Ft. 3BD/3.5BA 1,760 Sq.Ft. Lake Tahoe Area Fractional/Timeshare Analysis................................................................59 TheLand..............................................................................................................................75 Old Greenwood Development Agreement Summary..........................................................79 Description of Improvements...............................................................................................83 Highestand Best Use..........................................................................................................90 Date of Value October 10,2003 Assessed Valuation and Taxes-2002-2003.......................................................................93 Truckee Donner Public Utilities District/Community Facilities District No.03-01.................95 Market Value Conclusions Sales Comparison Approach-Lot Sales.............................................................................97 es Comparison Approach-Development Land Sales'..................................................109 Market Value Conclusion of CFD No.03-01 2alls Approach Cabin Valuation...................................................................................................113 o ..................................................................................................................115 As Is"Assuming CFD Reimbursement $85,000,000 Sales Comparison Approach-Fractional/Timeshare........................................................118 Developmental Analysis-Land Residual.'.........................................................................140 Truckee Donner CFD Value Allocation........................................155 Valuation.....:.....................................................................................................................157 Assumptions and Limiting Conditions................................................................................158 Certification.......................................................................................................................161 Addenda Qualifications iv PURPOSE OF THE APPRAISAL DEFINITION OF MARKET VALUE The purpose of this appraisal is to set forth our opinion of the market value of the "The most probable price which a property should bring in a competitive and fee simple interest in Mello-Roos Community Facilities District No.03-01,Truckee Donner open market under all conditions requisite to a fair sale,the buyer and seller each acting PUD,located in Truckee,California. prudently and knowledgeably,and assuming the price is not affected Icy undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of INTENDED USE/USER OF THE APPRAISAL title from seller to buyer under conditions whereby: It is our understanding that the intended use of this appraisal is for CFD bond financing purposes and that the intended users of the appraisal are the parties related to 1. Buyer and seller are typically motivated; issuing and purchasing the bonds. 2. Both parties are well informed or well advised,and acting in what they consider their best interests; DATE OF INSPECTION 3. A reasonable time is allowed for exposure in the open market; The subject property was physically inspected on several occasions in 4. Payment is made in terms of cash in United States dollars or in terms of financial September 2003,the most recent being September 9,2003. arrangements comparable thereto;and 5. The price represents the normal consideration for the property sold unaffected DATE OF APPRAISAL by special or creative financing or sales concessions granted by anyone The effective date of this appraisal is November 1,2003,assuming completion of associated with the sale.,4 all private improvements as of this date. The intent of the above definition is considered similar to the market value defined in the CDAC guidelines published in 1994.The above definition is employed,as it PROPERTY RIGHTS APPRAISED is more current. The property rights appraised herein pertain to the fee simple interest in the +The Appraisal Foundation,Uniform Standards of Professional Appraisal Practice. single-family lots and fractional ownership at the subject property,subject to special tax and special assessment liens. DEFINITION Fee Simple Interest Fee simple interest, in valuation terms, is defined as"absolute ownership unencumbered by any other interest or estate,subject only to the limitations imposed by the governmental powers of taxation,eminent domain, police power,and escheat."It is an inheritable estate. Source:The Appraisal of Real Estate,Twelfth Edition,the Appraisal Institute,2001. -1- -2- i I Construction APPENDIX D Housing unit and building permit data for the Truckee for the years 1998 through 2002 is summarized SUMMARY OF INDENTURE below. TOWN OF TRUCKEE BUILDING PERMIT VALUATION (as of December 31) Industry 1998 1999 2000 2001 2002 Valuation(in thousands of dollars): New Residential Single $40,981 $47,532 $48,515 $.30,858 $38,158 Multiple 1,508 2,580 8,265 2,793 16,195 Total New Residential $42,489 $50,113 $56,780 $33,651 $54,353 Number of New Housing Units: Single 264 321 280 157 173 Multiple 20 31 92 30 144 Total Units 284 352 372 187 317 Source:Economic Sciences Corporation. 1 { { { I S � i 1 i 1 C-5 D-I D0CSSF\4107W6122925.0009 DOCSSR41070v6'\22925.0009 i I. I, APPENDIX E APPENDIX F ` CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT CONTINUING DISCLOSURE AGREEMENT OF DEVELOPER t i C' E-1 F-1 DOCSSF,4107M6122925.0009 DOCSSF\4107N6\22925.0009 until the earliest redemption date for the Outstanding Bonds,which,depending on the ATTACHMENT I Bond offering document,may be as early as the next interest payment date. TRUCKEE DONNER PUBLIC UTILITY DISTRICT Step 8. Compute the amount of interest the TDPUD reasonably expects to derive from COMMUNITY FACILITIES DISTRICT NO.03-1 reinvestment of the Bond Redemption Amount plus the Redemption Premium from the (OLD GREENWOOD) first Bond interest payment date after which the prepayment has been received until the redemption date for the Outstanding Bonds. EXPECTED LAND USES AND EXPECTED MAXIMUM SPECIAL TAX REVENUES Step 9. Take the amount computed pursuant to Step 7 and subtract the amount computed AT CFD FORMATION pursuant to Step 8(the"Defeasance Requirement'). Step 10. Determine the costs of computing the prepayment amount,the costs of redeeming Bonds, Total Expected and the costs of recording any notices to evidence the prepayment and the redemption Maximum Special Tax Maximum (the"Administrative Fees and Expenses"). Number of Per Unit/Acrefor Special Tax Expected Land Uses Expected Units/Acres Fiscal Year 2004-05* Revenues' Step 11. If and to the extent so provided in the indenture pursuant to which the Outstanding Bonds Single Family to be redeemed were issued,a reserve fund credit shall be calculated as a reduction in the Detached Property applicable reserve fund for the Outstanding Bonds to be redeemed pursuant to the and Single roper ]04 Units $3,000 r prepayment(the"Reserve Fund Credit"). ng Y per SFD Lot $312,000 Attached Property in Step 12. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Zone I Steps 3,5,6,9,and 10,less the amount computed pursuant to Step I I(the"Prepavmem Single Family Amount"). Detached Property and Single Family 154 Units $3,400 per SFD Lot $523,000 A partial prepayment may be made in an amount equal to any percentage of full prepayment desired by the Attached Property in party making a partial prepayment.The Maximum Special Tax that can be levied on an Assessor's Parcel after Zone 2 a partial prepayment is made is equal to the Maximum Special Tax that could have been levied prior to the Taxable Other prepayment,reduced by the percentage of a full prepayment that the partial prepayment represents,all as Property 0 Acres N/A $0 determined by or at the direction of the Administrator. Total Expected Maximum Special Tax Revenues 1 $835,000 1. INTERPRETATION OF SPECIAL TAX FORMULA Figures are shown in focal vear 2004-05 dollars and will escalate two percent(191o)per year thereafter. The TDPUD reserves the right to make minor administrative and technical changes to this document that do not materially affect the rate and method of apportioning Special Taxes. In addition,the interpretation and application of any section of this document shall be left to the TDPUD's discretion. Interpretations may be made by the TDPUD by ordinance or resolution for purposes of clarifying any vagueness or ambiguity in this Rate and Method of Apportionment of Special Tax. A-10 A-lI DOCSSF41070v6\22925.0009 DOCSSF410700\22925.0009 ATTACHMENT 2 APPENDIX B COMPLETE APPRAISAL IDENTIFICATION OF TAX ZONES r i 4 I fif f i ! I A-12 B-1 DOCSSF.41070v6\22925.0009 DOCSSF•4107N6212925.0009 Course Property shall also include any property within the CFD that is used for a swim,tennis,and/or fitness "Bonds"means bonds or other debt(as defined in the Act),whether in one or more series,issued,insured or facility. assumed by CFD No.03-1 related to public infrastructure and/or improvements that are authorized to be funded by CFD No.03-1. "Maximum Special Tax"means the greatest amount of Special Tax that can be levied on an Assessor's Parcel in any Fiscal Year determined in accordance with Section C below,as may be adjusted pursuant to Step "Capitalized Interest"means funds in any capitalized interest account available to pay debt service on Bonds. 3 in Section D Below. "CFD Formation"means the date on which the Resolution of Formation to form CFD No.03-1 was adopted "Other Property"mans,in any Fiscal Year,all Parcels of Taxable Property which are not Single Fain` b the Board of Directors. Y Detached Property,Single Family Attached Property,Undeveloped Property. "County"means the County of Nevada. "Proportionately"mans,for Developed Property,that the ratio of the actual Special Tax levied in any Fiscal Year to the Maximum Special Tax authorized to be levied in that Fiscal Year is equal for all Assessor's Parcels "Developed Property"mans,in any Fiscal Year,the following: of Developed em' ped Property,and for Undeveloped Property that the ratio of the actual Special Tax to the Maximum Special Tax is equal for all Assessor's Parcels of Undeveloped Property. • for Single Family Detached Property,all parcels for which a Final Map was recorded prior to May 1 of the preceding Fiscal Year "Public Property"means any property within the boundaries of CFD No.03-1 that is owned by the federal govenmment,State of California,County,Town,Truckee Donner Public Utility District,or other public • for Single Family Attached Property and Rental Property,all parcels for which a building agency. permit for new construction of a residential structure was issued prior to May 1 of the preceding Fiscal Year. "Rental Property"mans,in any Fiscal Year,all Parcels within the CFD for which a building permit was "Excess Public Property"means the acres of Public Property that exceed the acreage exempted in Section G issued for construction of a residential structure with multiple Units that share common walls,all of which are below.In any Fiscal Year in which a Special Tax must be levied on Excess Public Property pursuant to Step 4 offered or are expected to be offered for rent to the general public and/or employees. Fractional Units within in Section E below,Excess Public Property shall be those Assessor's Parcel(s)that most recently became the CFD shall at no time be categorized as Rental Property. Public Property based on the dates on which Final Maps recorded creating such Public Property. "SFD Lot"mans an individual residential lot,identified and numbered on a recorded Final Map,on which a "Expected Land Uses"mans the total number of Units expected to be constructed within the CFD as building pen-nit has been or is permitted to be issued for construction of a single family detached unit without determined from time to time by the Administrator after applying the steps set forth in Section D below. At further subdivision of the lot and for which no further subdivision of the lot is anticipated pursuant to the CFD Formation,the Expected Land Uses were based on the Tentative Map.The Expected Land Uses at CFD Tentative Map. Formation are summarized in Attachment 1 hereto;the Administrator shall update Attachment 1 each time a change occurs to the land use plans for property in the CFD. "Single Family Attached Property"mans,in any Fiscal Year,all Parcels of Developed Property for which a building permit was issued for construction of a residential structure consisting of two or more Units that share "Expected Maximum Special Tax Revenues"mans the amount of annual revenue that would be available if common walls and are offered or expected to be offered as for-sale units,including attached Fractional Units the Maximum Special Tax was levied on the Expected Land Uses. The Expected Maximum Special Tax and such residential structures that met that statutory definition of a condominium contained in Civil Code Revenues as of CFD Formation are shown in Attachment 1 of this Rate and Method of Apportionment of Section 135E Special Tax. "Single Family Detached Property"mans,in any Fiscal Year,all Parcels of Developed Property for which "Final Bond Sale"means the last series of Bonds that will be issued on behalf of CFD No.03-1(excluding a building permit was issued or is permitted to be issued for construction of a Unit that does not share a any Bond refundings),as determined in the sole discretion of the TDPUD. common wall with another Unit,including detached Fractional Units. "Final Map"means a final map,or portion thereof,recorded by the County pursuant to the Subdivision Map "Special Tax"mans a Special Tax levied in any Fiscal Year to pay the Special Tax Requirement. Act(California Goverment Code Section 66410 et seq.)that creates individual lots on which building permits for new construction may be issued without further subdivision and for which no further subdivision is "Special Tax Requirement"mans the amount necessary in any Fiscal Year to:(i)pay principal and interest anticipated pursuant to the Tentative Map. on Bonds which is due in the calendar year that begins in such Fiscal Year;(ii)create and/or replenish reserve funds for the Bonds;(iii)cure any delinquencies in the payment of principal or interest on Bonds which have "Fiscal Year"means the period starting July I and ending on the following June 30. occurred in the.prior Fiscal Year or,based on existing delinquencies in the payment of Special Taxes,are expected to occur in the Fiscal Year in which the tax will be collected;(iv)pay Administrative Expenses;and "Fractional Unit"means a single family detached unit or a single family attached unit for which multiple (v)pay the costs of public improvements and public infrastructure authorized to be financed by CFD No.03-1. owners may each purchase a fractional share of ownership(also referred to as a timeshare unit by the The amounts referred to in clauses(i)and(ii)of the preceding sentence may be reduced in any Fiscal Year by: California Department of Real Estate). (i)interest earnings on or surplus balances in funds and accounts for the Bonds to the extent that such earnings or balances are available to apply against debt service pursuant to a Bond indenture,Bond resolution,or other "Golf Course Property"mans any property within CFD No.03-1 that is used as a golf course,including but legal document that sets forth these terms;(ii)proceeds received by CFD No.03-1 from the collection of not limited to,a driving range,clubhouse,parking,lodge,outbuildings,and other golf-related amenities. Golf A-2 A-3 DOC SSF A 10700\22925.0009 D0CSSF141070v6\22925.0009 penalties associated with delinquent Special Taxes;and(iii)any other revenues available to pay debt service remaining Acreage to calculate the Special Tax that will apply to Undeveloped Property within the Assessor's on the Bonds as determined by the Administrator. Parcel. "Taxable Other Property"mans,in any Fiscal Year,all Assessor's Parcels of Other Property which had,in In addition,the Administrator shall,on an ongoing basis,monitor whether changes in land use have been prior Fiscal Years,been:(i)developed and taxed as Single Family Detached Property or Single Family proposed that will affect the Expected Land Uses and whether Final Maps that have been proposed for Attached Property,or(ii)designated in the Tentative Map as Single Family Detached Property or Single approval by the Town are consistent with the Expected Land Uses.If changes to the Expected Land Uses are Family Attached Property and,when a change to the Expected Land Uses was proposed designating the Parcel proposed,the Administrator shall apply the steps set forth in Section D below. as Other Property,no prepayment was received pursuant to Step 3.b in Section D below. "Taxable Property"mans all of the Assessor's Parcels within the boundaries of CFD No.03-1 which are not C. MAXIMUM SPECIAL TAX exempt from the Special Tax pursuant to law or Section G below. 1. Single Famih>Detached Proper "Tax Zone"mans one of the two mutually exclusive geographic areas defined below and identified in Attachment 2 of this Rate and Method of Apportionment of Special Tax,and any subsequent Tax Zones The Maximum Special Tax for Single Family Detached Property in Zone 1 for Fiscal Year 2004-05 is created to contain property annexed into the CFD after CFD Formation. $3,000 per SFD Lot. The Maximum Special Tax for Single Family Detached Property in Zone 2 for Fiscal Year 2004-05 is$3,400 per SFD Lot, On July 1,2005 and on each July 1 thereafter,these "Tax Zone#1"means the geographic area that is specifically identified in Attachment 2 of this Rate and Maximum Special Tax rates shall be increased by an amount equal to two percent(2%)of the amount Method of Apportionment of Special Tax as Tax Zone#1. in effect for the prior Fiscal Year. "Tax Zone#2"mans the geographic area that is specifically identified in Attachment 2 of this Rate and 2. Single Family Attached PropeM Method of Apportionment of Special Tax as Tax Zone Q. The Maximum Special Tax for Single Family Attached Property in Zone 1 for Fiscal Year 2004-05 is "TDPUD"mans the Truckee Donner Public Utility District. $3,000 per Unit.The Maximum Special Tax for Single Family Attached Property in Zone 2 for Fiscal Year 2004-05 is$3,400 per Unit. On July 1,2005 and on each July I thereafter,these Maximum "Tentative Map"means the Tentative Map and Conditional Use Permit for the Old Greenwood Planned Special Tax rates shall be increased by an amount equal to two percent(2%)of the amount in effect Development,which was included as Exhibit D to the Development Agreement between East West Partners for the prior Fiscal Year. and the Town which was recorded at the County Recorder's Office on August 23,2002. 3. Taxable Other Property "Town"mans the incorporated Town of Truckee. The Maximum Special Tax for Taxable Other Property shall be the amount needed on a per-acre basis "Undeveloped Property"mans,in any Fiscal Year,all Parcels of Taxable Property within the CFD that are to maintain the Maximum Special Tax that was assigned to the Parcel prior to the Parcel becoming not Developed Property. Taxable Other Property.After the Maximum Special Tax has been determined for a Parcel of Taxable Other Property,the Maximum Special Tax shall be increased each Fiscal Year thereafter by an "Unit"means(i)for Single Family Detached Property,an individual single-family detached unit,and(ii)for amount equal to two percent(2%)of the amount in effect the prior Fiscal Year. Single Family Attached Property,an individual residential unit within a duplex,triplex,fourplex,townhome, or condominium structure. 4. Undeveloped Property The Maximum Special Tax for Undeveloped Property for Fiscal Year 2004-05 is$11,325 per Acre. B. DATA FOR ANNUAL ADMINISTRATION On July 1,2005 and on each July 1 thereafter,this Maximum Special Tax shall be increased by an On or about July 1 of each Fiscal Year,the Administrator shall identify the current Assessor's Parcel numbers amount equal to two percent(2%)of the amount in effect for the prior Fiscal Year. for all Parcels of Taxable Property.The Administrator shall also determine:(i)whether each Assessor's Parcel Pursuant to Section 53321(d)of the Act,the Special Tax levied against a Parcel used for private residential of Taxable Property is Developed Property or Undeveloped Property,(ii)for Developed Property,which purposes shall under no circumstances increase more than ten percent(1091o)as a consequence of delinquenev , Parcels are Single Family Detached Property,Single Family Attached Property,and Taxable Other Property, or default by the owner ofar v other Parcel or Parcels and shall,in no event,exceed the Maximum Special Tm (iii)for Parcels of Single Family Attached Property,the number of Units on each Parcel,(iv)whether there are in effect for the Fiscal Year in which the Special Tax is being levied. Parcels of Rental Property,Excess Public Property or Parcels with Affordable Units,and(v)the Special Tax Requirement. D. BACK-UP FORMULA For Single Family Attached Property,the number of Units shall be determined by referencing the site plan, condominium plan,or other development plan. If,in any Fiscal Year,an Assessor's Parcel includes both The Maximum Special Taxes set forth in Section C above were calculated based on the Expected Land Uses at Developed Property and Undeveloped Property,the Administrator shall determine the Acreage associated with CFD Formation. The Administrator shall review Tentative Map revisions and other changes to the land uses the Developed Property,subtract this Acreage from the total Acreage of the Assessor's Parcel,and use the proposed within the CFD and compare the revised land uses to the Expected Land Uses to evaluate the impact A-4 A-5 DOCSSF,4107006 22925.0009 DOCSSFw1070,6\22925.0009 the FDIC acquires its fee interest in the property,nor will it recognize the validity of any lien to the extent it the Glasoly ruling could still result in the treatment of post petition special taxes as"administrative expenses," purports to secure the payment of any such amounts. Special taxes unposed under the Mello-Roos Act and a rather than as tax liens secured by real property,at least during the pendency of bankruptcy proceedings. special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth According to the court's ruling,as administrative expenses,post-petition taxes would be paid, Circuit has issued a ruling on August 28,2001 in which it determined that the FDIC,as a federal agency,is assuming that the debtor had sufficient assets to do so. In certain circumstances,payment of such exempt from Mello-Roos special taxes. administrative expenses may be allowed to be deferred.Once the property is transferred out of the bankruptcy,,,,, The District is unable to predict what effect the application of the Policy Statement would have in the estate(through foreclosure or otherwise),it would at that time become subject to current ad valorem taxes. event of a delinquency in the payment of Special Taxes on a parcel within the District in which the FDIC has The Act provides that the Special Taxes are secured by a continuing hen which is subject to the san. or obtains an interest,although prohibiting the lien of the FDIC to be foreclosed out at a judicial foreclosure lien priority in the case of delinquency as ad valorem taxes. No case law exists with respect to how a We could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such bankruptcy court would treat the lien for Special Taxes levied after the filing of a petition in bankruptcy. an outcome could cause a draw on the Reserve Account and perhaps,ultimately,if enough property were to Glasnly is controlling precedent on bankruptcy courts in the State.IftheGlas2l precedent was applied to the become owned by the FDIC,a default in payment on the Bonds. levy of the Special Taxes,the amount of Special Taxes received from parcels whose owners declare Bankruptcy and Foreclosure bankruptcy could be reduced. The various legal opinions to be delivered concurrently with the delivery of the Bonds(including Bankruptcy,insolvency and other laws generally affecting creditors rights could adversely impact the Bond Counsel's approving legal opinion)will be qualified,'as to the enforceability of the various legal interests of owners of the Bonds in at least two ways. First,the payment of property owners'taxes and the instruments,by moratorium,bankruptcy,reorganization,insolvency or other similar laws affecting the rights ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue of creditors generally. judicial foreclosure proceedings may be limited by bankruptcy,insolvency or other laws generally affecting creditors'rights or by the laws of the State relating to judicial foreclosure. In addition,the prosecution of a No Acceleration Provision foreclosure could be delayed due to many reasons,including crowded local court calendars or lengthy procedural delays. The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a Secondly,the Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being payment default or other default under the Bonds or the Indenture. applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or Loss of Tax Exemption against a landowner and if the court found that any of such landowner had an interest in such moneys within the meaning of Section 541(a)(1)of the Bankruptcy Code. As discussed under the caption"TAX MATTERS,"the interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished,the result of a failure of the District to comply with certain provisions of the Internal Revenue Code of 1986,as amount and priority of any Special Tax lien could be modified if the value of the property falls below the value amended. Should such an event of taxability occur,the Bonds are not subject to early redemption and will of the lien. If the value of the property is less than the lien,such excess amount could be treated as an remain outstanding to maturity or until redeemed under one of the redemption provisions of the Indenture. unsecured claim by the bankruptcy court. In addition,bankruptcy of a property owner could result in a delay in procuring Superior Court foreclosure proceedings. If enough parcels were involved in bankruptcy Limitations on Remedies proceedings,court delays would increase the likelihood of a delay or default in payment of the principal of, and interest on,the Bonds and the possibility of delinquent tax installments not being paid in full Remedies available to the owners of the Bonds may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt On July 30,1992,the United States Court of Appeals for the Ninth Circuit issued its opinion in a status of the Bonds. bankruptcy case entitled In re Glasoly Marine Industries.In that case,the court held that ad valorem property taxes levied by Snohomish County in the State of Washington after the date that the property owner filed a Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the petition for bankruptcy were not entitled to priority over a secured creditor with a prior lien on the property. extent that enforceability may be limited by bankruptcy,insolvency,reorganization,fraudulent conveyance or Although the court upheld the priority of unpaid taxes imposed before the bankruptcy petition,unpaid taxes transfer,moratorium,or other similar laws affecting generally the enforcement of creditors'rights,by imposed after the filing of the bankruptcy petition were declared to be"administrative expenses"of the equitable principles and by the exercise of judicial discretion. The lack of availability of certain remedies or bankruptcy estate,payable after all secured creditors.As a result,the secured creditor was able to foreclose on the limitation of remedies may entail risks of delay,limitation or modification of the rights of the owners of the the property and retain all the proceeds of the sale except the amount of the pre-petition taxes. Bonds. The Bankruptcy Reform Act of 1994(the"Bankruptcy Reform Act")included a provision which Limited Secondary Market excepts from the Bankruptcy Code's automatic stay provisions,"the creation of a statutory lien for an ad valorem property tax imposed by...a political subdivision of a state if such tax comes due after the filing of There can be no guarantee that there will be a secondary market for the Bonds or,if a secondary the petition[by a debtor in bankruptcy court]." This amendment effectively makes the Glasoly holding market exists,that such Bonds can be sold for any particular price. Although the District and the Developer inoperative as it relates to ad valorem real property taxes.However,it is possible that the original rationale of have committed to provide certain financial and operating information on an annual basis,there can be no assurance that such information will be available to Bondowners on a timely basis. See"CONTINUING 37 38 D0CSSF\41070v6\22925.0009 DOCSSF1410700\2292S.0009 DISCLOSURE." The failure to provide the required annual financial information does not give rise to will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. monetary damages but merely an action for specific performance. Occasionally,because of general market However,no assurance can be given as to the enforceability of the foregoing covenants. conditions,lack of current information,or because of adverse history or economic prospects connected with a particular issue,secondary marketing practices in connection with a particular issue are suspended or The interpretation and application of the Initiative will ultimately be determined by the courts with terminated.Additionally,prices of issues for which a market is being made will depend upon then prevailing respect to a number of the matters discussed above,and it is not possible at this time to predict with certainty circumstances.Such prices could be substantially different from the original purchase price. the outcome of such determination or the timeliness of any remedy afforded by the courts. See"SPECIAL RISK FACTORS-Limitations on Remedies." Proposition 218 Ballot Initiatives An initiative measure commonly referred to as the"Right to Vote on Taxes Act"(the"Initiative")was approved by the voters of the State of California at the November 5,1996 general election. The Initiative Article XIII A,Article X111 B and Proposition 218 were adopted pursuant to measures qualified for added Article XIIIC and Article XIIID to the California Constitution. According to the"Title and Summary" the ballot pursuant to California's constitutional initiative process. On March 6,1995 in the case of Rossi v. of the Initiative prepared by the California Attorney General,the Initiative limits"the authority of local Brown,the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition governments to impose taxes and property-related assessments,fees and charges." The Initiative could of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. potentially impact the Special Taxes available to the District to pay the principal of and interest on the Bonds From time to time,other initiative measures could be adopted by California voters.The adoption of any such as described below. initiative might place limitations on the ability of the State,TDPUD or local districts to increase revenues or to increase appropriations or on the ability of the landowners within the District to complete the remaining Among other things,Section 3 of Article XIII states that"...the initiative power shall not be proposed development.See"SPECIAL RISK FACTORS-Failure to Develop Properties"herein. prohibited or otherwise limited in matters of reducing or repealing any local tax,assessment,fee or charge." The Act provides for a procedure which includes notice,hearing,protest and voting requirements to alter the CONTINUING DISCLOSURE rate and method of apportionment of an existing special tax. However,the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax Pursuant to a Continuing Disclosure Agreement with MuniFinancial,as dissemination agent(the pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the "Disclosure Agreement'),the District,has agreed to provide,or cause to be provided,to each nationally reduction or termination of the special tax would not interfere with the timely retirement of that debt. On recognized municipal securities information repository and any public or private repository or entity July 1,1997,a bill was signed into law by the Governor of the State enacting Government Code Section 5854, designated by the State as a state repository for purposes of Rule 15c2-12(bx5)adopted by the Securities and which states that: Exchange Commission(each,a"Repository")certain annual financial information and operating data concerning the District. The Annual Report to be filed by the District is to be filed not later than June 1 of "Section 3 of Article XIIIC of the California Constitution,as adopted at the November 5, each year,beginning June 1,2005,and is to include audited financial statements of TDPUD.The requirement 1996,general election,shall not be construed to mean that any owner or beneficial owner of a that TDPUD file its audited financial statements as a part of the Annual Report has been included in the municipal security,purchased before or after that date,assumes the risk of,or in any way consents to, Disclosure Agreement solely to satisfy the provisions of Rule 15c2-12.The inclusion of this information does any action by initiative measure that constitutes an impairment of contractual rights protected by not mean that the Bonds are secured by any resources or property of TDPUD other than as described Section 10 of Article I of the United States Constitution." hereinabove. See"SOURCES OF PAYMENT FOR THE BONDS"and"SPECIAL RISK FACTORS— Limited Obligations." TDPUD failed to file in a timely manner its annual reports required under the Accordingly,although the matter is not free from doubt,it is likely that the Initiative has not conferred continuing disclosure obligation undertaken in connection with previously issued certificates of participation. on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely In early 2003,TDPUD filed all required reports and TDPUD is now current on all filings required pursuant to retirement of the Bonds. its previous continuing disclosure undertaking. It may be possible,however,for voters or the Board of Directors acting as the legislative body of the To assist the Underwriter in complying with Rule 150-12(b)(5),the Developer will enter into a District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the certain Continuing Disclosure Agreement(the"Landowner Disclosure Agreement")covenanting to provide an Bonds,but which does reduce the maximum amount of Special Taxes that may be levied in any year below the Annual Report not later than of each year beginning ,and Semi-Annual existing levels.It may also be possible for voters or the Board of Directors to change the Rate and Method in a Reports each and beginning . The Annual Reports provided by the Developer manner that would alter the amount of Special Taxes for which various types of properties are responsible(for are to contain audited financial statements,if any are prepared,and the additional financial and operating data example,by shifting the order in which various types of property are taxed).Furthermore,no assurance can be outlined in the Landowner Disclosure Agreement attached in APPENDIX F. given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds.Therefore,no assurance can be given with respect to the levy of Special Taxes The Landowner Disclosure Agreements will inure solely to the benefit of the District, an for Administrative Expenses.Nevertheless,to the maximum extent that the law permits it to do so,the District Dissemination Agent,the Underwriter and owners or beneficial owners from time to time of the Bonds. has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on taxable parcels within the District on which a completed structure is located to less than an amount equal to TAX MATTERS I10%of Maximum Annual Debt Service on the Outstanding Bonds. In connection with the foregoing covenant,the District has made a legislative finding and determination that any elimination or reduction of In the opinion of Stradling Yocca Carlson&Rauth,a Professional Corporation,Newport Beach, Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds.The District California,Bond Counsel,under existing statutes,regulations,rulings and judicial decisions,interest on the also has covenanted that,in the event an initiative is adopted which purports to alter the Rate and Method,it Bonds is excluded from gross income for federal income tax purposes,and is not an item of tax preference for 39 40 DOCSSF\41070v6\22925.0009 DOCSSF141070v6122925.0009 f 1 The projected sources and uses of funds in Table 6 has been prepared based upon assumptions of The Appraisal sets for several assumptions made by the Appraiser when arriving at the total appraised future sales revenues,development costs,operating costs,property taxes,public facilities financing and other value. In particular,the Appraiser assumed that the Tahoe Club Company would make its payment of S5 items.The projects actual sources and uses of funds may vary from the table above.Therefore,there can be million to purchase the land underlying the on-site amenities on schedule in June 2004.See"—Development s no assurance that the actual revenues will not be less than projected or occur later than projected by the Plan—Finance Plan."In addition,the value in the Appraisal assigned to the Cabins and Cottages assumes the Developer. finalization of an agreement with some type of exchange network to facilitate greater marketability. To the extent that actual revenues are less than projected in Table 6 or are received more slowly than In arriving at its statement of value,the Appraiser also assumed that there are no hidden or unapparer projected in Table 6,other needed financing mechanisms are not put into place or actual expenses are greater conditions of the property or subsoil that render it more or less valuable,that all required licenses,certificat than or occur earlier than projected above,there could be a shortfall in the cash required to complete the of occupancy or other legislative or administrative authorizations from governmental agencies or privat, development as projected above. entities or organizations have been or can be obtained,that no hazardous waste and/or toxic materials are ` located on the property within the District that would affect the development process,that the improvements to Environmental Compliance be funded with the Bonds are completed and that the proposed development is constructed in a timely mamter with no adverse delays(i.e.,construction will proceed as proposed with no limitations on development Pursuant to Resolution No. 2002-29 adopted on June 20, 2002, the Town certified a Final occurring). Environmental Impact Report and associated Notice of Determination with respect to the property in the i District.A Phase 1 Environmental Site Assessment(the"Assessment")with respect to property in the District The Appraiser made several other assumptions and assumptions when arriving at the total appraised was prepared by HK Holdrege&Kull in June 2002. The Assessment did not reveal evidence that incidents value set forth in the Appraisal,all as set forth in APPENDIX B. No assurance can be given that the involving hazardous or potentially hazardous materials have impacted the District.The Developer is not aware assumptions made by the Appraiser will,in fact,be realized,and,as a result,no assurance can be given that the of any threatened or endangered species on any property in or adjacent to the District. property within the District could be sold at the appraised values included in the Appraisal.See"APPENDIX B—COMPLETE APPRAISAL." Development Agreement SPECIAL RISK FACTORS Development of the land within the District is subject to a Development Agreement,dated August 14, `f 2002,by and between the Town and the Developer(the"Development Agreement").The Development The purchase of the Bonds involves a high degree of investment risk and,therefore,the Bonds are not Agreement sets forth the development standards that must be followed in connection with the building out of appropriate investments for many tFpes of investors. The following is a discussion of certain risk factors Old Greenwood and vests development rights in the Developer. So long as the Developer is in compliance which should be considered,in addition to other matters set forth herein,in evaluating the investment quality with its responsibilities under the Development Agreement,the Town's ability to change or add conditions to a the Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or the development of Old Greenwood,or restrict such development,is limited.. The Appraisal summarizes more of the events discussed herein could adversely affect the ability or willingness of property owners in the certain portions of the Development Agreement.See"APPENDIX B—COMPLETE APPRAISAL." District to pav their Special Taxes when due.Such failures to pay Special Taxes could result in the inability of the District to make full and punctual pavments of debt service on the Bonds. In addition,the occurrence of Appraisal one or more of the events discussed herein could adversely affect the value of the property in the District.See 11—Land Values"and"—Limited Secondary Market"below. The Appraiser valued the taxable property within the District primarily based upon a sales comparison approach to value and based upon a number of assumptions and limiting conditions contained in the Appraisal Concentration of Ownership as set forth in APPENDIX B.Under the sales comparison approach to value,the Appraisal takes into account the development status of the land in the District,analyzes the market for similar properties and compares All of the land in the District is currently owned by the Developer.Assuming 86 of the 99 Lots close these properties to the properties in the District. The Appraiser is of the opinion that the aggregate"as is" escrow as described under"THE DEVELOPMENT AND PROPERTY OWNERSHIP—Development Plan value of the land within the District as of November 1,2003,assuming the completion of all improvements to —Single Family Lots,"approximately 58.18%of the projected 2004-05 Special Tax levy would be paid by be financed with proceeds of the Bonds was$85 million.The Appraisal allocates$37 million of the total value the Developer with the balance being paid by individual owners.If additional sales beyond the 86 Lots occur to the Lots and Existing Cabins,and allocates the remaining$48 million to the Cabins and Cottages. before the levy of the 2004-05 Special Tax,a higher percentage of the levy will be allocated to the individual owners.See"THE COMMUNITY FACILITIES DISTRICT—Taxpayers."Until the sale of additional units To calculate the value of the land in the District,the Appraiser made several assumptions. One such to individuals,the receipt of the Special Taxes is largely dependent on the willingness and the ability of the assumption relates to the timing of development in the District and the absorption schedule for the Lots, Developer to pay the Special Taxes when due. Failure of the Developer,or any successor,to pay the annual Cabins and Cottages.The Appraiser assumed that all Lots would be sold by the end of the second quarter in Special Taxes when due could result in a default in payments of the principal of,and interest on,the Bonds, f 2004. With respect to the Cabins and Cottages,the Appraiser applied an annual absorption rate of 152 when due.See`SPECIAL RISK FACTORS—Failure to Develop Properties"below. fractional interests for each of the fractional interest products. The Appraiser's analysis also assumed 25% pre-sales of the first ten fractional interest products constructed,which equates to 42 fractional interests in Furthermore,no assurance can be made that the Developer,or its successors,will complete the addition to the projected average quarterly absorption schedule of 38 fractional interests per quarter. The intended construction and development in the District. See"SPECIAL RISK FACTORS—Failure to Appraiser assumed no absorption of fractional interests in the first two quarters to allow for completion of Develop Properties"below. As a result,no assurance can be given that the Developer and the other construction. The total absorption schedule for the Cabins and Cottages is 34 quarters,or 8.5 years. To the landowners within the District will continue to pay Special Taxes in the future or that they will be able to pay extent actual absorption of Lots,Cabins or Cottages differs from the absorption schedule assumed by the such Special Taxes on a timely basis. See "SPECIAL RISK FACTORS—Bankruptcy and Foreclosure" 4 Appraiser,the actual value of land in the District may also differ from the value reported in the Appraisal. 29 30 DOCSSF410700%22925.0009 DOCSSR4107M\22925.0009 i below,for a discussion of certain limitations on the District's ability to pursue judicial proceedings with Failure to Develop Properties respect to delinquent parcels. � Undeveloped or partially developed land is inherently less valuable than developed land and provides Limited Obligations less security to the Bondowners should it be necessary for the District to foreclose on the property due to the nonpayment of Special Taxes. Although the majority of necessary public infrastructure in the District is in The Bonds and interest thereon are not payable from the general funds of TDPUD. Except with place,the failure to complete development in the District as planned,or substantial delays in the completion of respect to the Special Taxes,neither the credit nor the taxing power of the District nor TDPUD is pledged for the development due to litigation or other causes may reduce the value of the property within the District and the payment of the Bonds or the interest thereon,and,except as provided in the Indenture,no Owner of the increase the length of time during which Special Taxes will be payable from undeveloped property,and may Bonds may compel the exercise of any taxing power by the District or TDPUD or force the forfeiture of any affect the willingness and ability of the owners of property within the District to pay the Special Taxes when TDPUD or District property. The principal of,premium,if any,and interest on the Bonds are not a debt of due. TDPUD or a legal or equitable pledge,charge,lien or encumbrance upon any of TDPUD's or the District's property or upon any of TDPUD's or the District's income,receipts or revenues,except the Special Taxes and Land development is subject to comprehensive federal,State and local regulations. Approval is other amounts pledged under the Indenture. required from various agencies in connection with the layout and design of developments,the nature and extent of improvements,construction activity,land use,zoning and health requirements,as well as numerous Insufficiency of Special Taxes other matters.There is always the possibility that such approvals will not be obtained or,if obtained,will not be obtained on a timely basis. Failure to obtain any such agency approval or satisfy such governmental Under the Rate and Method,the annual amount of Special Tax to be levied on each taxable parcel in requirements would adversely affect planned land development.The Development Agreement,however,vests the District will generally be based on whether such parcel is categorized as single family attached property or certain development rights in the Developer and restricts the Town from modifying development approvals,all single family detached property. Non-residential acreage such as the golf course is not subject to the Special as described under"THE DEVELOPMENT AND PROPERTY OWNERSHIP—Development Agreement." Tax levy.See"APPENDIX A—RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES." Finally,development of land is subject to economic considerations. If for any reason property within the District becomes exempt from taxation by reason of ownership Additionally,the Developer may need to obtain financing to complete the development of the Cabins by a non-taxable entity such as the federal government,another public agency or a religious organization, and Cottages in the District. No assurance can be given that the required funding will be secured or that the subject to the limitations of the maximum authorized rates,the Special Tax will be reallocated to the remaining proposed development will be partially or full completed,and it is possible that cost overruns will be incurred J Pe g P P P P Y Y rnP taxable properties within the District. This would result in the owners of such property paying a greater which will require additional funding beyond what is assumed in the Appraisal.Such funding may or may not amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of be available. Added costs could result in a reduction in the value of the land in the District. See"THE such property to pay the Special Tax when due. DEVELOPMENT AND PROPERTY OWNERSHIP—Appraisal"herein. Moreover,if it substantial portion of land within the District became exempt from the Special There can be no assurance that land development operations within the District will not be adversely j Tax because of public ownership,or otherwise,the maximum Special Tax which could be levied upon affected by a future deterioration of the real estate market and economic conditions or future local,State and the remaining property within the District might not be sufficient to pay principal of and interest on the federal governmental policies relating to real estate development,the income tax treatment of real property Bonds when due and a default could occur with respect to the payment of such principal and interest. ownership,or the national economy. A slowdown of the development process and the absorption rate could adversely affect land values and reduce the ability or desire of the property owners to pay the annual Special Tax Delinquencies Taxes. In that event,there could be a default in the payment of principal of,and interest on,the Bonds when due. Under provisions of the Act,the Special Taxes,from which funds necessary for the payment of principal of,and interest on,the Bonds are derived,are customarily billed to the properties within the District Bondowners should assume that any event that significantly impacts the ability to develop land in the on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such District would cause the property values within the District to decrease substantially from those estimated by Special Tax installments are due and payable,and bear the same penalties and interest for non-payment,as do the Appraiser and could affect the willingness and ability of the owners of land within the District to pay the ad valorem property tax installments. See"SOURCES OF PAYMENT FOR THE BONDS—Special Taxes," Special Taxes when due. for a discussion of the provisions which apply,and procedures which the District is obligated to follow under the Indenture,in the event of delinquencies in the payment of Special Taxes. See"—Bankruptcy and Future Land Use Regulations and Growth Control Initiatives Foreclosure"below,for a discussion of the policy of the Federal Deposit Insurance Corporation(the"FDIC") regarding the payment of special taxes and assessment and limitations on the District's ability to foreclosure on It is possible that future growth control initiatives could he enacted by the voters or future local,state the lien of the Special Taxes in certain circumstances. or federal land use regulations could be adopted by governmental agencies and be made applicable to the development of the vacant land within the District with the effect of negatively impacting the ability of the Neither the Developer nor EWRDV is currently delinquent in the payment of any special taxes or owners of such land to complete the development of such land if they should desire.to develop it. This assessments and neither has any history of such delinquency since their formation. possibility presents a risk to prospective purchasers of the Bonds in that an inability to complete desired development increases the risk that the Bonds will not be repaid when due. The owners of the Bonds should assume that any reduction in the permitted density,significant increase in the cost of development of the vacant land or substantial delay in development caused by growth and building permit restrictions or more restrictive land use regulations would cause the values of such vacant land within the District to decrease. A 31 32 DOCSSFl410700\22925.0009 DOCSSF A10700\22925.0009 l i Estimated Value-to-Lien Ratios THE DEVELOPMENT AND PROPERTY OWNERSHIP The value of the land within the District is significant because in the event of a delinquency in the Except.for the information under the captions"—Appraisal,"the Developer has provided the payment of Special Taxes the District may foreclose only against delinquent parcels.Table 4 below estimates information in this section. the appraised value-to-lien ratios for property in the District based on the principal amount of the Bonds.The assessed value of all land within the District(including land not subject to the Special Tax levy)for fiscal year The information herein regarding ownership ofproperty in the District has been included because it is 2003-2004 is$14,724,687. The estimated assessed value-to-lien ratio of the property within the District considered relevant to an informed evaluation of the Bonds. The inclusion in this Official Statement of_, following the issuance of the Bonds based on the fiscal year 2003-2004 Assessor's roll is 1.2 to Is. The information related to existing owners of property should not be construed to suggest that the Bonds,or t' appraised value of the land within the District as set forth in the Appraisal is$85,000,000. The estimated Special Taxes that will be used to pay the Bonds,are recourse obligations of the property owners.A prope appraised value-to-lien ratios based upon the land values in the Appraisal as of November 1,2003 is 6.69 to I owner mar sell or otherwise dispose of land within the District or a development or any interest therein at m, As set forth in Table 2 above,there is$186,928 of additional land-sectred debt which is payable from taxes time. and assessments levied on property within the District which,if included in the estimated value-to-lien calculations,would lower the ratios somewhat from that stated above and from the ratios in Table 4 below. No assurance can be given that the proposed development within the District will occur as described below. As the proposed land development progresses and units are sold,it is expected that the ownership of The District will provide updated assessed value-to-lien data in its Annual Report prepared pursuant to the land within the District will become more diversified.No assurance can be given that development of the the Continuing Disclosure Agreement but will not update the appraised values or appraised value-to-lien land within the District will occur,or that it will occur in a timely manner or in the configuration or intensity estimates. described herein,or that any landowner described herein or the Developer will obtain or retain ownership of anv of the land within the District. The Bonds and the Special Taxes are not personal obligations of any TABLE 4 landowners or the Developer and,in the event that a landowner or the Developer defaults in the payment of the Special Taxes,the District may proceed with judicial foreclosure but has no direct recourse to the assets o ESTIMATED APPRAISED VALUE-TO-LIEN RATIOS anv landowner or the Developer. As a result,other than as provided herein,no financial statements or information is,or will be,provided about the Developer or other landowners. The Bonds are secured solely Projected %of Estimated by the Net Taxes and other amounts pledged under the Indenture.See"SOURCES OF PAYMENT FOR THE 2004-05 Projected Appraised BONDS"and"SPECIAL RISK FACTORS." Appraised Lien of Special Tax Special Tax Value-To- Property Type Value Bonds Levy`1 Levy Lien Ratio The Developer Non-Fractional Interest Units(') $37,000,0001'I $6,40,040 $3 4,936 49.57% 7.95 Old Greenwood,LLC. The Developer is a wholly-owned subsidiary of EWRDV. EWRDV is a Fractional Interest Unitst2t 85,000,000 2,220,000 304.936 00.00 6.96 Delaware limited partnership,limited liability limited partnership in a family of related but independent All Taxable Property $85,000,000 $12,220,000 $616,936 100.00% 6.96 companies formed to build,sell,manse and support P g ppo high-quality real estate Properties. East West Partners, the appointed manager of the Developer and EWRDV,along with related entities have developed over$1 ni Imltdas the Exwting Cabins and the Lots,ae such tame are defined raider"THE DEVELOPMENT AND PROPERTY OWNERSHIP—Development Plan." billion of residential and commercial real estate. Over the past 20 ears,East West Partners and related m Includes the Cabin and Cottages.as such terns arc&I'ed unda"THE DEVELOPMENT AND PROPERTY OWNERSHIP—Dewlopment Plan." P y +'The Appraisal assigns a value to all taxable property in the District,in whole_The Appraiser has,however,provided an apre-i nsit,allocation of value between entities have developed primary residential plan communities;club,recreation,and hospitality facilities;and the non-bacnoral i 1-1 prope ty and the aaetionatinteman property. resort combiningresidential and recreational facilities. Projects developed by East West Partners N)Ptojened 2004-05 Special Tax levy is based on expected hand uses,pinmted debt service on the Bonds and$25,000 of admbdatrative expenses. 1 properties Pmhn i y,subject tU change. and related entities also include destination resorts,hotels,condominiums and fractional ownership units. see:Appraiser,MtriFi—W and Unaemnner. Projects have been developed in various locations in Colorado including Vail,Beaver Creek, Eagle, Breckenridge,Silverthome,Bachelor Gulch and Downtown Denver,as well as in Truckee and Lake Tahoe, California,and Charleston,South Carolina. The general partner of EWRDV is HF Holding Corp.and the managing limited partner is HF Management LLC. The investor limited partner,Crescent Resort Development,Inc.,owns an 89.8989% interest in EWRDV and is the primary source of EWRDV's investor capital. Crescent.Crescent Resort Development,Inc.,("CRDI")the investor limited partner of the Developer, is a wholly-owned subsidiary of Crescent Real Estate Equities Company("Crescent"). Crescent is one of the largest publicly held real estate investment trusts in the United States.Through its subsidiaries and partners, Crescent owns and manages a portfolio of 73 premier office buildings totaling approximately 29.5 million square feet primarily located in the southwestern United States,with major concentrations in Dallas,Houston and Austin,Texas,and Denver,Colorado. In addition,Crescent invests in world-class resorts and spas and upscale residential developments. Crescent,through CRDI,has been a principal investor in East West Partners and its subsidiaries for the last 8 Preliminary,subject to change. 21 22 DOCSSF.41070v6\22925.0009 DOCSSF\410700\22925.0009 years and has invested in excess of$200 million in the partnership. Crescent stock is publicly traded on the Jeffrey E. Butterworth manages design and construction activities for the Old Greenwood New York Stock Exchange under the ticker symbol"CEL development. Prior to joining East West Partners,Mr.Butterworth was a project engineer for GE Johnson Construction Company in Beaver Creek,Colorado. He was involved with the development of McCoy Peak Projects in Vicinity of District. East West Partners is currently managing the development of several Lodge,Market Square,Vilar Center for the Arts,Villa Montane Townhomes,Villas at Beaver Creek and the additional projects in the vicinity surrounding the District. Gray's Crossing,a destination resort community Hyatt Mountain Lodge,all in Beaver Creek Colorado. Mr.Butterworth received a Bachelor's degree in located in the Town,is currently in the entitlement process and is pursuing a Development Agreement. Construction Management from Colorado State University. Planning commission approval from the Town was received in November 2003.Upon final approval,Gray's Crossing is expected to include 600 single family lots,45,000 square feet of retail commercial space,two Mark J.Wasley is Vice President of Finance and is responsible for managing the financial aspects of church sites,a school site along with associated open space.The Gray's Crossing project will also include a East West Partner's operations in the Lake Tahoe region.Before joining East West Partners,Mr.Wasley was golf course and related resort amenities. The Village-at-Northstar and Northstar Highlands,two resort the Controller for Parker Development,a developer of high-end communities located in the Sacramento area, communities to be developed by East West Partners are located approximately six miles north of Lake Tahoe specifically Serrano in El Dorado Hills,California.Mr.Wasley earned his CPA while employed in the audit at the Northstar-at-Tahoe ski resort.The Village-at-Northstar and Northstar Highlands are currently in the department at KPMG Peat Marwick.He has a Bachelor's in Business Administration-Accounting from entitlement process having received planning commission approval in October 2003.Upon completion,these California State University-Sacramento. communities will collectively consist of approximately 1,800 residential condominium and town home units and approximately 125,000 square feet of commercial retail space. Development Plan East West Partners is also developing several recreational facilities throughout the Lake Tahoe region Introduction. The land within the District was acquired by subsidiaries of East West Partners in May which will be available on a membership basis to residents of various communities developed by East West 2001 and was part of a larger purchase of approximately 900 acres within the town limits of the Town of Partners,including the residents of the District.Such facilities include Coyote Moon Golf Course in the Town Truckee.Subsequent to acquisition,approximately 250 acres of land north of Interstate 80 was donated to the and Wild Goose Restaurant located on the north shore of Lake Tahoe. See"-Development Plan-Tahoe Truckee Donner Land Trust for permanent conservation and approximately 50 acres was retained and will be Mountain Club." developed separate from the District.The remaining acreage comprises the District. The property within the District is accessed via a dedicated highway exit from Interstate 80. Kev StaffofEast West Partners.Key staff members of the Developer are discussed below. Old Greenwood is situated at to the north end of the Martis Valley with views of the valley and the ski Blake L.Riva is a senior partner and former Chief Financial Officer of East West Partners providing resort Northstar-at-Tahoe. Old Greenwood has direct highway access to area ski resorts,downtown Truckee, management decision authority over the Old Greenwood development and the other Lake Tahoe area projects Lake Tahoe.The ski resorts of Squaw Valley,Alpine Meadows,Northstar-at-Tahoe and Sugar Bowl are each being developed by East West Partners. Prior to joining East West Partners,Mr Riva was controller for less than 15 minutes away by car.Lake Tahoe's north shore is 13 miles to the south. Seattle-based Lorig Associate,Inc.Mr.Riva holds a business degree from the University of Washington and has been a Certified Public Accountant. Old Greenwood is expected to be developed into a mountain resort community consisting of 99 single family lots,74 fractional interest detached cabins,72 fractional interest attached cottages and four whole Charles I.Madison is a senior partner in charge of various resort development projects in Vail,Beaver ownership log-home style cabins.On-site amenities are expected to include a Jack Nicklaus Signature Design Creek&Breckenridge,Colorado and in Lake Tahoe,California. Mr.Madison has extensive experience with 18-hole championship golf course and proshop as well as a recreation pavilion featuring swim,tennis and fractional ownership projects through his management of such projects as the Hyatt Mountain Lodge in Beaver fitness facilities. Creek,Colorado,and Main Street Station in Breckenridge,Colorado. Before joining East West Partners Mr. Madison was Executive Vice President/Chief Financial Officer of Vail Associates,hic.He holds a business Pursuant to the Rate and Method,only the residential properties within the District will be subject to degree from the University of Washington and is a graduate of Harvard Universitys Advanced Development the Special Tax levy.The golf course and other amenity facilities will not be subject to Special Tax levy.See Management Program in Real Estate.He has also been a Certified Public Accountant. "APPENDIX A-RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." A.William Fiveash serves as the project manager for the Old Greenwood development. Mr.Fiveash Single Family Lots. The development at Old Greenwood includes 99 single family home lots(the has served in several capacities with East West Partners including property management and real estate sales. "Lots").The majority of the Lots are located along the fairways of the golf course in Old Greenwood.See"- His primary expertise is with fractional ownership projects such as the Hyatt Mountain Lodge in Beaver Creek, Golf Course and Other Recreational Amenities." All necessary infrastructure with respect to the Lots is in Colorado,and Main Street Station in Breckenridge,Colorado. Mr.Fiveash received a Masters of Business place. The Lots average approximately 0.5 acres in size and have an average current sales price of$387,000. Administration with an emphasis of hospitality management and operation from the University of Denver and Individual owners will be responsible for the financing and building of homes on the Lots but will be under no a dual Bachelor's degree in Business and Geography from Wittenberg University obligation to further develop their lots.Such owners will be offered membership in the Tahoe Mountain Club.- as described below under"-Tahoe Mountain Club." Greg Traxler serves as the Vice President of Sales and Marketing in charge of developing and managing the sales and marketing effort related to the fractional interest units at Old Greenwood.Prior to Of the 99 Lots,86 are subject to sales agreement contracts with individual owners. Each owner has joining East West Parners,Mr.Traxler served as the Director of Sales for the Marriott Corporation's Grand deposited 10%of the purchase price in escrow. Escrows with respect to each of the 86 Lots will close upon Residence and Timberlodge projects in South Lake Tahoe,California.Prior to Marriott Corporation,he the receipt of the final public report by the State of California Department of Real Estate and the payment of worked in the Lake Tahoe region for Fairfield Communities,Inc. Mr.Traxler received a Masters in the balance of the sales price by the applicable individual owner. The Developer expects to receive the final Advertising and Public Relations from University of Arkansas. public report by the end of November 2003.Thereupon,notice will be given to the individual owners and each owner will have 15 days to provide the balance of the sales price and close escrow on the Lot.The Developer expects all 86 Lots to close escrow by the end of 2003. The sale of the 86 Lots is expected to generate gross 23 24 D0CSSF141070v6\22925.0009 DOCSSF41070v6i22925.0009 no assurance that the property owners will be financially able to pay the annual Special Tax or that they will (b) Whenever moneys are withdrawn from the Reserve Account,after making the required transfers,the pay such taxes even if financially able to do so.See"SPECIAL RISK FACTORS"herein. Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund,or from any other legally available funds which the District elects to apply to such purpose,the amount needed to restore the amount of such Special Tax Fund Reserve Account to the Reserve Requirement.Moneys in the Special Tax Fund shall be deemed available for transfer " to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits The Trustee shall,on each date on which the Special Taxes are received from the TDPUD or the District, required to be made to the Interest Account or the Principal Account for the next succeeding Interest Payment Date.If deposit the Special Taxes in the Special Tax Fund to be held by the Trustee,provided that any Prepayment shall be amounts in the Special Tax Fund or otherwise transferred to replenish the Reserve Account are inadequate to r'—", deposited in the funds and accounts(and in the respective amounts)specified in the certificate of the Special Tax the Reserve Account to the Reserve Requirement,then the District shall include the amount necessary fully to Administrator delivered to the Trustee in connection with the delivery of the Prepayment to the Trustee. The Trustee the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the extent of the maa shall transfer the amounts on deposit in the Special Tax Fund on the dates and in the amounts set forth in the Indenture, permitted Special Tax rates and as permitted by the Act. in the following order of priority,to: (c) In connection with an optional redemption of the Bonds or a partial defeasance of the Bonds,amounts (a) The Administrative Expense Account, in the Reserve Account may be applied to such optional redemption or partial defeasance so long as the amount on deposit in the Reserve Account following such optional redemption or partial defeasance equals the Reserve (b) The Interest Account, Requirement. (c) The Principal Account, (d) To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for Outstanding Bonds,amounts in the Reserve Account may be applied to pay the principal of and interest (d) The Redemption Account, due on the Bonds in such final Bond Year. Moneys in the Reserve Account in excess of the Reserve Requirement not transferred in accordance with the provisions of the Indenture shall be withdrawn from the Reserve Account on each (e) The Reserve Account, Interest Payment Date and transferred to the Interest Account. (f) The Rebate Fund,and Administrative Expense Account (g) The Surplus Fund. In addition to Bond proceeds deposited therein,the Trustee shall,commencing in Fiscal Year 2004-2005,not less often than annually transfer from the Special Tax Fund and deposit in the Administrative Expense Account from Principal Account and Interest Account time to time amounts necessary to make timely payment of Administrative Expenses upon the written direction of the District;provided,however,that the total amount of the deposits into the Administrative Expense Account in any Bond The principal of and interest due on the Bonds until maturity,other than principal due upon redemption,shall Year shall not exceed the Administrative Expense Cap until such time as(i)there has been deposited in the Interest be paid by the Trustee from the Principal Account and the Interest Account,respectively. The Trustee shall make the Account and the Principal Account an amount,together with any amounts already on deposit therein,that is sufficient required transfers from the Special Tax Fund on each interest Payment Date first to the Interest Account and then to the to pay the interest and principal on all Bonds due'in such Bond Year and(ii)there has been deposited in the Reserve Principal Account;provided that if amounts in the Special Tax Fund are inadequate then any deficiency shall be made Account the amount,if any,required in order to cause the amount on deposit therein to equal the Reserve Requirement. up by an immediate transfer from the Reserve Account. In addition to the foregoing,the Trustee shall also deposit in the Administrative Expense Account the portion of any Prepayment directed to be deposited in the certificate of the Special Tax Administrator delivered to the Trustee in In addition to the transfers to the Interest Account and Principal Account described above,the Trustee shall connection with such Prepayment. also transfer thereto such portions of a Prepayment as may be directed in the cenificate of the Special Tax Administrator delivered to the Trustee in connection with the Prepayment. Acquisition and Construction Fund Reserve Account The moneys in the Acquisition and Construction Fund shall be applied exclusively to pay the Project Costs and Costs of Issuance. Amounts for Project Costs or Costs of Issuance shall be disbursed by the Trustee from the Project There shall be maintained in the Reserve Account an amount equal to the Reserve Requirement.The amounts Account or the Costs of Issuance Account,as the case may be,pursuant to a requisition signed by an Authorized in the Reserve Account shall be applied as follows: Representative of the District,which must be submitted in connection with each requested disbursement. (a) Moneys in the Reserve Account shall be used solely for the purpose of(i)paying the principal of, Upon receipt of a Certificate of the General Manager that all or a specified portion of the amount remaining in including Sinking Fund Payments,and interest on any Bonds when due in the event that the moneys in the Interest the Project Account is no longer needed to pay Project Costs,the Trustee shall transfer all or such specified portion to Account and the Principal Account are insufficient therefor,(ii)making any required transfer to the Rebate Fund upon the Special Tax Fund.Upon receipt of a Certificate of the General Manager that all or a specified portion of the amount written direction from the District,and(iii)making any required transfer to the Prepayment Account.If the amounts in remaining in the Costs of Issuance Account is no longer needed to pay Costs of Issuance,the Trustee shall transfer all the Interest Account or the Principal Account are insufficient to pay the principal of,including Sinking Fund Payments, or such specified portion of to the Administrative Expense Account. or interest on any Bonds when due,or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required,the Trustee shall withdraw from the Reserve Account for deposit in the Interest Account or the Principal Account or the Rebate Fund,as applicable,moneys necessary for such purposes. 13 14 DOCSSF4107010'22925.0009 DOCSSF4107MI2925.0009 ....win-... Proceeds of Foreclosure Sales receives a certificate from one or more Independent Financial Consultants which,when taken together,certify that,on the basis of the parcels of land and improvements existing in the District as of the July 1 preceding the reduction,the A potential source of funds to pay debt service on the Bonds is the proceeds received following a judicial maximum amount of the Special Tax which may be levied on then existing Developed Property(as defined in the Rate foreclosure sale of land within the District resulting from the landowner's failure to pay the Special Tax when due. and Method)in each Bond Year will equal at least 110%of the sum of the estimated Administrative Expenses and Pursuant to the Act,in the event of any delinquency in the payment of any Special Tax levied,the District may order Annual Debt Service in that Bond Year on all Bonds and Parity Bonds to remain Outstanding after the reduction is the institution of a Superior Court action to foreclose the lien securing such unpaid Special Tax within specified time approved,(b)the District finds that any reduction made under such conditions will not adversely affect the interests of limits.In such an action,the real property subject to the unpaid Special Tax may be sold at a judicial foreclosure sale. the Owners of the Bonds and(c)the District receives both(i)a certificate of the Developer specifying the development activity that the Developer expects will take place within the District in each Fiscal Year until all such development is Under the Act,the commencement of judicial foreclosure following the nonpayment of a Special Tax is not complete,which specification shall be sufficiently detailed to permit the preparation of the certificate required pursuant mandatory.However,the District has covenanted for the benefit of the Owners of the Bonds that it(i)will commence to(ii),and(ii)a certificate from one or more independent Financial Consultants which,when taken together,in the judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special determination of the District,certify that(A)on the basis of the parcels of land and improvements existing in the Taxes on such parcels is greater than$7,500 by the October 1 following the close of each Fiscal Year in which such District as of the July I preceding the proposed reduction and(B)on the basis of the future development activity Special Taxes were due and(ii)will commence judicial foreclosure proceedings against all parcels with delinquent described in the certificate of the Developer described in(i),the maximum amount of the Special Tax which may be Special Taxes by the October I following the close of each Fiscal Year in which it receives Special Taxes in an amount levied each Fiscal Year on all property within the District that is subject to the levy of the Special Taxes will equal at which is less than 95%of the total Special Tax levied for such Fiscal Year,and(iii)will diligently pursue such least 110%of the sum of the estimated Administrative Expenses and Annual Debt Service in each applicable Bond foreclosure proceedings until the delinquent Special Taxes are paid;provided that,notwithstanding the foregoing,the Year on all Bonds subsequent to the proposed reduction. For purposes of estimating Administrative Expenses for the District may elect to defer foreclosure proceedings on any parcel which is owned by a delinquent property owner foregoing calculations,the Independent Financial Consultant or Special Tax Administrator shall compute the whose property is not,in the aggregate,delinquent in the payment of Special Taxes for a period of three years or more Administrative Expenses for the current Fiscal Year and escalate that amount by two percent(2%)in each subsequent or in an amount in excess of$12,000 so long as(1)the amount in the Reserve Account of the Special Tax Fund is at Fiscal Year. least equal to the Reserve Requirement,and(2)the District is not in default in the payment of the principal of or interest on the Bonds. The District may,but shall not be obligated to,advance funds from any source of legally Limited Obligation available funds in order to maintain the Reserve Account of the Special Tax Fund at the Reserve Requirement or to avoid a default in payment on the Bonds. The Bonds are limited obligations of the District payable solely from Net Taxes pledged therefor and from certain other amounts held in the Special Tax Fund pursuant to the Indenture. The faith and the credit of neither the The District covenanted that it will deposit the proceeds of any foreclosure which constitute Net Taxes in the District.TDPUD,the State of California nor anv political subdivision thereof is pledged to the payment of the principal Special Tax Fund. of,premium,if any,or interest on the Bonds. The issuance of the Bonds shall not directly,indirectly or contingently obligate the District,TDPUD,the State of California or any political subdivision thereof to levy or pledge any form of The District will not, in collecting the Special Taxes or in processing any such judicial foreclosure taxation whatsoever therefor,other than the Special Taxes,or to make any appropriation for their payment other than proceedings,exercise any authority which it has pursuant to the California Government Code in any manner which from Net Taxes and from certain other amounts held in the Special Tax Fund. would materially and adversely affect the interests of the Bondowners and,in particular,will not permit the tender of Bonds in full or partial 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 a reduction in the maximum Special Taxes that may be levied on the taxable property within the District in any Fiscal Year to an amount less than the sum of 110%of Annual Debt Service in the Bond Year ending on the September I following the end of such Fiscal Year plus the estimated Administrative Expenses for such Bond Year. No assurances can be given that the real property subject to foreclosure and sale at a judicial foreclosure sale for nonpayment of the Special Tax will be sold or,if sold,that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Reduction of Maximum Special Taxes Pursuant to the Indenture,the District found and determined that,historically,delinquencies in the payment of special taxes authorized pursuant to the Act in community facilities districts in California have from time to time been at levels requiring the levy of special taxes at the maximum authorized rates in order to make timely payment of principal of and interest on the outstanding indebtedness of such community facilities districts. For this reason,the District also determined that a reduction in the Maximum Special Tax authorized to be levied on parcels in the District below the levels provided in the Indenture would interfere with the timely retirement of the Bonds. The District determined it to be necessary in order to preserve the security for the Bonds to covenant,and,to the maximum extent that the law permits it to do so,the District covenants that it will take no action that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax,including the initiation of proceedings to reduce the Maximum Special Tax rates for the District,unless,in connection therewith,(a)the District 15 16 DOCSSF\41070�6\22925.0009 DOCSSF41070,622925.0009 Continuing Disclosure ESTIMATED SOURCES AND USES OF FUNDS The District and the Developer have agreed to provide,or cause to be provided,to each(nationally recognized The following table sets forth the expected uses of Bond proceeds: municipal securities information repository and any public or private repository or entity designated by the State as a state repository for purposes of Rule I Sc2-12(b)(5)adopted by the Securities and Exchange Commission certain annual Sources of Funds financial information and operating data. The District has further agreed to provide notice of certain material events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12(b)(5). See Principal Amount of Bonds $ "CONTINUING DISCLOSURE"herein,APPENDIX E and APPENDIX F hereto for a description of the specific nature of the annual reports to be filed by the District and the Developer and notices of material events to be provided TOTAL SOURCES by the District. Uses of Funds Bond Owners'Risks Acquisition and Construction Fund $ Certain events could affect the timely repayment of the principal of and interest on the Bonds when due. See Reserve Account the section of this Official Statement entitled"SPECIAL RISK FACTORS"for a discussion of certain factors which Cost of Issuance Account(') should be considered,in addition to other matters set forth herein,in evaluating an investment in the Bonds. The Administrative Expense Account Bonds are not rated by any nationally recognized rating agency. The purchase ofthe Bonds involves significant risks, Interest Account(') and the Bonds are not suitable investments for all investors.See"SPECIAL RISK FACTORS"herein. Underwriter's Discount Other Information TOTAL USES $ This Official Statement speaks only as of its date,and the information contained herein is subject to change. Includes legal costs,printing costs,consultant fees and other costs of issuing the Bonds. 1a>Represents capitalized interest on the Bonds through September 1,2004. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture,the Bonds and the constitution and laws of the State as well as the proceedings of the Board of Directors,acting as the legislative body of the District,are qualified in their entirety by references to such documents,laws and proceedings,and with respect to the Bonds,by reference to the Indenture. Capitalized terms not otherwise defined herein shall have the meanings set forth in ttie Indenture. Copies of the Indenture,the Continuing Disclosure Agreements and other documents and information referred to herein are available for inspection and(upon request and payment to TDPUD of a charge for copying,mailing and handling)for delivery from TDPUD at P.O.Box 309,Truckee,CA 96160,Attention:Secretary. I 5 6 DOCSSR41070v6\22925.0009 DOCSSFA10700122925.0009 THE BONDS Redemption Dates Redemption Prices General Provisions Through March 1,20 September 1,20 ,and March 1,20 The Bonds will be dated their date of delivery and will be issued in the aggregate principal amount of September 1,20 ,and March 1,20 $ The Bonds will bear interest from their dated date at the rates per annum set forth on the inside September 1,20 and thereafter cover page hereof,payable semiannually on each March 1 and September 1,commencing March 1,2004(individually, an"Interest Payment Date"),and will mature in the amounts and on the dates set forth on the inside cover page hereof Mandatory Sinking Fund Redemption,The Bonds maturing on September 1,20 are subject to mandatory Interest on the Bonds will be computed on the basis of a 360-day year consisting of twelve 30 day months.The Bonds sinking payment redemption in part on September 1,20_,and on each September 1 thereafter to maturity,by lot,at a will be issued in fully registered form in denominations of$5,000 or any integral multiple thereof 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 fund payments as follows: Principal of and interest on the Bonds are payable in lawful money of the United States of America.Interest is payable by check of the Trustee mailed to the registered owners appearing on the registration books of the Trustee as of the close of business on the fifteenth day of the month next preceding each Interest Payment Date. Principal and any Redemption Date Principal premium on the Bonds are payable upon surrender of the Bonds at the Principal Office of the Trustee. (September 1) Amount The Bonds,when issued,will be registered initially in the name of Cede&Co.,as registered owner and nominee of DTC. So long as DTC,or Cede&Co.,as nominee,is the registered owner of all the Bands,principal and interest payments on the Bonds will be made directly to DTC,and disbursement of such payments to the DTC Participants(defined below)will be the responsibility of DTC,and disbursement of such payments to the Beneficial Owners(defined below)will be the responsibility of the DTC Participants,as more fully described under"—Book- Entry-Only System." Redemption Mandatory Prepavment Redemption. All of the Bonds are subject to redemption prior to their stated maturities on any Interest Payment Date from the proceeds of prepayments of Special Taxes,in whole or in par(in integral multiples of$5,000),at a redemption price(expressed as a percentage of the principal amount of the Bonds or portions thereof to be redeemed)as set forth below,together with accrued interest thereon to the date fixed for redemption: Redemption Dates Redemption Prices The amounts in the foregoing table shall be reduced pro rota by the principal amount of all Term Bonds which Through March 1,20 %September 1,20_,and March 1,20 are redeemed as a result of any prior partial redemption of Term Bonds. September 1,20 ,and March 1,20 Redemption Procedures. The Trustee shall cause notice of an redemption to be mailed b first class mail, September 1,20_and thereafter p Y mP Y `i postage prepaid,at least thirty(30)days but not more than sixty(60)days prior to the date fixed for redemption,to the respective registered owners of Bonds designated for redemption,at their addresses appearing on the Bond registration Optional Redemption.The Bonds maturing on or after September 1,20 ,are subject to optional redemption, books;but such mailing shall not be a condition precedent to such redemption and failure to mail or to receive any such from sources of funds other than prepayments of the Special Tax prior to their stated maturity as a whole,or in part(in notice,or any defect therein,shall not affect the validity of the proceedings for the redemption of such Bonds. integral multiples of$5,000)in order of maturity selected by the District and by lot within a maturity,on any Interest Payment Date on or after September 1,20_,at a redemption price(expressed as a percentage of the principal amount Upon surrender of Bonds redeemed in part only,the Trustee shall authenticate and deliver to the registered of the Bonds or portions thereof to be redeemed)as set forth below,together with accrued interest thereon to the date owner a new Bond or Bonds,of the same maturity,of any authorized denomination in aggregate principal anti"`"`* fixed for redemption: equal to the unredeemed portion of the Bond or Bonds. Book-Entry-Only System DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede&Co.(DTC's partnership nominee).One fully-registered certificate will be issued for each maturity of the Bonds,each in the aggregate principal amount of such maturity,and will be deposited with DTC. I Preliminary,subject to change. Preliminary,subject to change. 7 g DOCSSF°•41070W,22925.0009 - DOCSSR41070v6\22925.0009 TABLE OF CONTENTS TABLE OF CONTENTS Page Page INTRODUCTION.................................................................................................................................................1 Natural Disasters..........................................................................................................................................33Hazardous Substances.................................................................................................................................34 General...........................................................................................................................................................1 Forward Looking Statements..........................................................................................................................I Parity Taxes and Special Assessments.........................................................................................................34 The District.....................................................................................................................................................2 Disclosures to Future Purchasers..................................................................................................................34 Sources of Payment for the Bonds..................................................................................................................3 Non-Cash Payments of Special Taxes................................. 35 ......................................................................... Description of the Bonds................................................................................................................................4 Payment of the Special Tax Is Not a Personal Obligation of the Owners....................................................35_, LandValues..................................................................................................................................................- Tax Matters.................................... ...........................................................................................................4 FDIC/Federal Government Interests in Professionals Involved in the Offering...........................................................................................................4 Properties...................................................................................... ContinuingDisclosure....................................................................................................................................5 Bankruptcy and Foreclosure.........................................................................................................................No Acceleration Provision..........................................................................................................................38 Bon Owners'Risks.......................................................................................................................................5 ...................................... . Other Information...........................................................................................................................................5 Loss of Tax Exemption................................................................................................................................38Limitations on Remedies.............................................................................................................................38 . ESTIMATED SOURCES AND USES OF FUNDS.............................................................................................6 Limited Secondary Market...........................................................................................................................38 Proposition218.............................................................................................................................................39 THE BONDS.........................................................................................................................................................7 ........... ..........................A0 ................................................................................. General Provisions..........................................................................................................................................7 Ballot Initiatives................... Redemption.....................................................................................................................................................7 CONTINUING DISCLOSURE..................................................:......:................................................................40 Book-Entry-Only System...............................................................................................................................8 TAX MATTERS............................................................................................:.................................................... Debt Service Schedule for the Bonds...........................................................................................................11 SOURCES OF PAYMENT FOR THE BONDS....................................................... LEGAL OPINION..............................................................................................................................................42 GeneralProvisions........................................................................................................................................12 LITIGATION......................................................................................................................................................42 SpecialTaxes................................................................................................................................................12 NO RATING......................................................................................................................................................42 Special Tax Fund..........................................................................................................................................13 PrincipalAccount and Interest Account.......................................................................................................13 UNDERWRITING..............................................................................................................................................42 ReserveAccount...........................................................................................................................................13 FINANCIALINTERESTS.................................................................................................................................42 Administrative Expense Account.................................................................................................................14 Acquisition and Construction Fund..............................................................................................................14 PENDING LEGISLATION................................................................................................................................42 Proceedsof Foreclosure Sales......................................................................................................................15 ADDITIONAL INFORMATION.......................................................................................................................43 Reduction o Sp ecial peal Taxes.........................................................................................................15 LimitedObligation.......................................................................................................................................16 THE COMMUNITY FACILITIES DISTRICT..................................................................................................18 APPENDIX A-RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1APPENDIX B-COMPLETE APPRAISAL................. General Description of the District...............................................................................................................18 APPENDIX C-GENERAL INFORMATION CONCERNING THE TOWN OF TRUCKEE.......................C-1 Description of Authorized Facilities.............................................................................................................18 APPENDIX D-SUMMARY OF INDENTURE.............................................................................................D-I Taxpayers.....................................................................................................................................................18 APPENDIX E-CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT...................................E-1 Estimated Direct and Overlapping Indebtedness..........................................................................................19 APPENDIX F-CONTINUING DISCLOSURE AGREEMENT OF DEVELOPER......................................F-I Expected Tax Burden...................................................................................................................................20 APPENDIX G-FORM OF OPINION OF BOND COUNSEL.......................................................................G-1 Estimated Value-to-Lien Ratios...................................................................................................................21 THE DEVELOPMENT AND PROPERTY OWNERSHIP................................................................................22 TheDeveloper..............................................................................................................................................22 DevelopmentPlan........................................................................................................................................24 Environmental Compliance..........................................................................................................................29 DevelopmentAgreement..............................................................................................................................29 Appraisal.......................................................................................................................................................29 SPECIAL RISK FACTORS................................................................................................................................30 Concentrationof Ownership.........................................................................................................................30 LimitedObligations......................................................................................................................................31 Insufficiency of Special Taxes.....................................................................................................................31 TaxDelinquencies........................................................................................................................................31 Failure to Develop Properties.......................................................................................................................32 Future Land Use Regulations and Growth Control Initiatives.....................................................................32 EndangeredSpecies......................................................................................................................................33 DOCSSR41070v6\22925.0009 DOCSSP41070v M925.0009 [REGION MAP] [TAHOE AREA MAP] DOCSSFA107M\212925,0009 DOCSSF1410700'22925.0009 i EXHIBIT C parties thereto,constitute the legally valid and binding obligations of Developer enforceable against Developer in accordance with their respective terms. FORM OF DEVELOPER COUNSEL OPINION 3. The Developer has all requisite authority to own its property in the Community Facilities District and to perform its obligations under the Developer Agreements. We have acted as special counsel to Old Greenwood LLC,a limited liability Ik company(the"Developer")in connection with the issuance of the above-referenced bonds(the 4. To our actual knowledge,the Developer is not in violation of any provision of,or it "Bonds")by the Truckee Donner Public Utility District Community Facilities District No.03-1 default under its organizational documents,or any agreement or other instrument,the violation c (Old Greenwood)(the"Community Facilities District"). The Bonds are being sold to UBS default under which would materially and adversely affect the ability of the Developer to completL Financial Services Inc.,as underwriter(the"Underwriter"). This opinion is being delivered to you the proposed development of its property within the Community Facilities District,as described in pursuant to Section 3(cx12)of the Bond Purchase Agreement between the Community Facilities the Official Statement(the"Development"). I4 District and the Underwriter(the"Bond Purchase Agreement"). Capitalized terms used herein and not otherwise defined have the meanings ascribed to them in the Bond Purchase Agreement. 5. There are no legal or governmental actions,proceedings,inquiries or investigations pending or threatened by governmental authorities or to which the Developer is a party or of which In expressing the opinion below,we have assumed,without inquiry or investigation(i)the any property owned by the Developer is subject which,if determined adversely to the Developer, genuineness of all signatures,the authenticity of all documents submitted to us as originals,the would,except as.described in the Official Statement,indMdually or in the aggregate(i)have a conformity to original documents of documents submitted to us as copies or as exhibits,and the material adverse effect on the financial position or operations of the Developer,considered as a authenticity of such originals of such latter documents;(ii)the due execution and delivery of the whole,(ii)have a material adverse affect on the Developer's ability to complete the Development Developer Agreements(defined herein)by persons other than the Developer;(iii)that each party to and comply with its obligations under the Developer Agreements,or(iii)in any way contesting or the Developer Agreements,other than the Developer;is duly organized,validly existing and in good affecting the validity or enforceability of the Developer Documents or any action of the Developer standing under the laws of the jurisdiction of its organization or formation;(iv)that each party to the contemplated by any of said documents,or in any way contesting the completeness or accuracy of f Developer Agreements,other than the Developer,has the power and authority to execute and deliver the Official Statement,nor to our knowledge is there any basis therefore. the Developer Agreements and to perform its obligations thereunder and all such actions have been duly and validly authorized by all necessary proceedings on its part; (v)that the Developer 6. To the best of our knowledge,no facts have come to the attention of the attorneys in Agreements constitute legal,valid and binding obligations of each party thereto(other than the this firm during the course of this firm's representation of the Developer which caused such attorneys Developer)enforceable against such parties in accordance with its terms;and(vi)that there are no to believe that the information relating to the Developer and the property owned by the Developer oral or written terms or conditions agreed to by the Community Facilities District and the Developer contained in the Official Statement(excluding therefrom(a)any financial,statistical,or engineering which would have an effect on the opinions rendered herein. We have made no examination of,and information,data,or forecasts,numbers,charts,estimates,projections,assumptions,or expressions express no opinion as to,title to the properties within the Community Facilities District.No opinions of opinion,(b)any information about valuation,appraisals,absorption,or environmental matters are expressed herein with respect to compliance with the anti-fraud provisions of applicable federal included or referenced therein, including, without limitation, any information describing or and state securities or other laws,rules or regulations. summarizing all or any part of the Appraisal(as such terms are defined in the Official Statement), and(c)information which is identified as having been provided by a source other than the Developer Based solely upon and subject to the foregoing as well as to the qualifications, or any Affiliate thereof),as of the date thereof did not,and as of the date hereof does not,contain any limitations,exclusions,exceptions,assumptions and other matters set forth herein,we are of the untrue statement of a material fact or omit to state a material fact required to be stated therein or i opinion that: necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading. F 1. The Developer is a limited liability company duly organized,validly existing and in good standing under the laws of the State of and is qualified to do business in the State of California. Very truly yours, 2. The(i)Acquisition and Disclosure Agreement,dated as of October 1,2003 between the Developer and the District (the "Acquisition Agreement"), the Developer Continuing Disclosure Agreement,dated as of December 1,2003,between the Developer and MuniFinancial,as dissemination agent(the"Developer Continuing Disclosure Agreement")and the Development Agreement,dated as of August 14,2002(the"Development Agreement"), between the Developer and the Town of Truckee (collectively, the "Developer Agreements"),have been duly authorized by all necessary action on the part of Developer,have been duly executed and delivered by the Developer and,assuming due execution and delivery by the other OldGmwd.BondPurchaseAarccmn((3)doc 19c^'"' C-2 i (a) As of the Closing Date,no litigation shall be pending or,to the knowledge of the otherwise rendered void by reason of the Closing and regardless of any investigations made by duly authorized officer of the Community Facilities District executing the certificate referred to or on behalf of the Underwriter(or statements as to the results of such investigations)concerning in Section 3(c)(6)hereof,threatened,to restrain or enjoin the issuance or sale of the Bonds or in such representations and statements of the Community Facilities District and regardless of any way affecting any authority for or the validity of the Bonds or the Community Facilities delivery of and payment for the Bonds. District Documents or the existence or powers of the Community Facilities District;and 9. Effective Date. This Bond Purchase Agreement shall become effective and (b) As of the Closing Date, the Community Facilities District shall receive the binding upon the respective parties hereto upon the execution of the acceptance hereof by tt-' opinions referred to in Section 3(c)(3)and(5)hereof. Community Facilities District and shall be valid and enforceable as of the time of st acceptance. 5. Expenses. Whether or not the Bonds are delivered to the Underwriter as set forth herein: 10. Partial Unenforceability. Any provision of this Bond Purchase Agreement which is prohibited or unenforceable in any jurisdiction shall,as to such jurisdiction,be ineffective to (a) The Underwriter shall be under no obligation to pay, and the Community the extent of such prohibition or unenforceability without invalidating the remaining provisions Facilities District shall pay or cause to be paid(out of any legally available funds of the of this Purchase Agreement or affecting the validity or enforceability of such provision in any Community Facilities District)all expenses incident to the performance of the Community other jurisdiction. Facilities District's obligations hereunder,including,but not limited to,the cost of preparing and delivering the Bonds to DTC,the cost of preparation,printing,distributing and delivering of the 11. No Prior Agreements. This Bond Purchase Agreement supersedes and replaces Indenture,the Preliminary Official Statement,the Official Statement and all other agreements all prior negotiations,agreements and understandings between the parties hereto in relation to the and documents contemplated hereby(and drafts of any thereof)in such reasonable quantities as sale of Bonds for the Community Facilities District. requested by the Underwriter;and the fees and disbursements of the Trustee,Bond Counsel, Disclosure Counsel and any financial advisors,special tax consultants,appraisers,accountants, 12. Governing Law. This Bond Purchase Agreement shall be governed by the laws of engineers or any other.experts or consultants the Community Facilities District retained in the State of California. connection with the Bonds;and (b) The Community Facilities District shall be under no obligation to pay,and the Underwriter shall pay,any fees of the California Debt and Investment Advisory Commission,the cost of preparation of any"blue sky"or legal investment memoranda and this Bond Purchase Agreement;expenses to qualify the Bonds for sale under any"blue sky"or other state securities laws;and all other expenses incurred by the Underwriter in connection with its public offering j and distribution of the Bonds(except those specifically enumerated in paragraph(a)of this section),including the fees and disbursements of its counsel and any advertising expenses. 6. Notices. Any notice or other communication to be given to the Community Facilities District under this Bond Purchase Agreement may be given by delivering the same in writing to the Community Facilities District in care of Truckee Donner Public Utility District at the address shown on page one hereof,and any notice or other communication to be given to the Underwriter under this Bond Purchase Agreement may be given by delivering the same in writing to UBS Financial Services Inc.,777 South Figueroa Street,50th Floor,Los Angeles,CA 90017,Attention: Dan Gangwish. 7. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Community Facilities District and the Underwriter(including its successors or assigns), and no other person shall acquire or have any right hereunder or by virtue hereof. 8. Survival of Representations.Warranties and Agreements. The representations, warranties and agreements of the Community Facilities District set forth in or made pursuant to this Bond Purchase Agreement shall not be deemed to have been discharged,satisfied or 13 14 OldGmwd.BondPurchaseAereemnt(3).doe;"S93"_'DW 01dGrnwd.BondPurchaseAgreemnt(3).doc"`'""_1 i 13. Counterparts. This Bond Purchase Agreement may be executed simultaneously in EXHIBIT A several counterparts,each of which shall be an original and all of which shall constitute one and the same instrument. MATURITY SCHEDULE Very truly yours, UBS FINANCIAL SERVICES INC. Maturity Date Price or (September 1) Principal Amount Interest Rate Yield By: Managing Director By: Title: ACCEPTED: TRUCKEE DONNER PUBLIC UTILITY,on behalf of TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 (OLD GREENWOOD) By: General Manager ICI II 15 A_1 OldGmwd.BondPurchaseAereemnt f3).doc'3 n9 14)0C copies of such supplement(as used herein,the term"end of the underwriting period"means the (n) The Community Facilities District will apply the proceeds of the Bonds in later of such time as(i)the Community Facilities District delivers the Bonds to the Underwriter, accordance with the Indenture and the Acquisition Agreement and as described in the Official or(ii)the Underwriter does not retain,directly or as a member of an underwriting syndicate,an Statement; unsold balance of the Bonds for sale to the public;and,unless the Underwriter delivers written i notice to the contrary to the Community Facilities District prior to the Closing specifying another (o) The Official Statement (except the portion thereof entitled "THE date to be deemed the"end of the underwriting period,"the"end of the underwriting period" DEVELOPMENT AND PROPERTY OWNERSHIP AND DEVELOPMENT,"as to which no shall be deemed to be the Closing Date); view need be expressed)is,as of the date thereof,and will be,as of the Closing Date,trur correct and complete in all material respects;and the Official Statement(except the porti( 6) The Indenture creates a valid pledge of the Net Special Taxes and the moneys in thereof mentioned above,as to which no view need be expressed),does not,as of the dat, Special Tax Fund established pursuant to the Indenture,including the investments thereof, thereof,and will not,as of the Closing Date,contain any untrue statement of a material fact or subject in all cases to the provisions of the Indenture permitting the application thereof for the omit to state a material fact required to be stated therein or necessary to make the statements purposes and on the terms and conditions set forth therein; therein,in light of the circumstances under which they were made,not misleading;and (k) Except as disclosed in the Official Statement,no action,suit,proceeding,inquiry (p) The Preliminary Official Statement heretofore delivered to the Underwriter has or investigation,at law or in equity,before or by any court,regulatory agency,public board or been deemed final by the Community Facilities District as-of its date,except for the omission of body is pending or,to the knowledge of the Community Facilities District,threatened against the such information as is permitted to be omitted in accordance with paragraph(b)(1)of Rule 15c2- Community Facilities District(i)which would materially adversely affect the ability of the 12. The Community Facilities District hereby covenants and agrees that,within seven(7) Community Facilities District to perform its obligations under the Community Facilities District business days from the date hereof,or(upon reasonable written notice from the Underwriter) Documents or the Bonds,or(ii)seeking to restrain or to enjoin:(A)the development of any of within sufficient time to accompany any confirmation requesting payment from any customers of the land within the Community Facilities District,(B)the issuance,sale or delivery of the Bonds, the Underwriter,the Community Facilities District shall cause a final printed form of the Official (C)the application of the proceeds thereof in accordance with the Indenture or the Acquisition Statement to be delivered to the Underwriter in a quantity mutually agreed upon by the Agreement,or(D)the collection or application of the Special Tax,or the pledge thereof,or in Underwriter and the Community Facilities District so that the Underwriter may comply with any way contesting or affecting the validity or enforceability of the Bonds,the Community paragraph(b)(4)of Rule 15c2-12 and Rules G-12,G-15, G-32 and G-36 of the Municipal Facilities District Documents, any tentative or final subdivision map or building permits Securities Rulemaking Board. applicable to property within the Community Facilities District,any other instruments relating to the development of any of the property within the Community Facilities District,or any action 3. Conditions to the Obligations of the Underwriter. The obligations of the contemplated by any of said documents,or(iii)in any way contesting the completeness or Underwriter to accept delivery of and pay for the Bonds on the Closing Date shall be subject,at accuracy of the Preliminary Official Statement or the Official Statement or the powers or the option of the Underwriter,to the accuracy in all material respects of the representations and authority of the Community Facilities District with respect to the Bonds, the Community warranties on the part of the Community Facilities District contained herein,as of the date hereof Facilities District Documents,or any action of the Community Facilities District contemplated and as of the Closing Date,to the accuracy in all material respects of the statements of the by any of said documents; nor is there any action pending or, to the knowledge of the officers and other officials of the Community Facilities District and the statements of the officers Community Facilities District, threatened against the Community Facilities District which and other officials of the Developer made in any certificates or other documents furnished alleges that interest on the Bonds is not excludable from gross income for federal income tax pursuant to the provisions hereof,to the performance by the Community Facilities District of its purposes or is not exempt from California personal income taxation; obligations to be performed hereunder at or prior to the Closing Date and to the following additional conditions: (1) The District and the Community Facilities District will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the (a) At the Closing Date, the Community Facilities District Documents and the Underwriter may reasonably request in order for the Underwriter to qualify the Bonds for offer Developer Continuing Disclosure Agreement, dated as of December 1,2003,between the and sale under the"Blue Sky"or other securities laws and regulations of such states and other Developer and MuniFinancial,as dissemination agent(the"Developer Continuing Disclosure jurisdictions of the United States as the Underwriter may designate;provided,however,neither Agreement")shall be in full force and effect,and shall not have been amended,modified or the District nor the Community Facilities District shall not be required to register as a dealer or a supplemented,except as may have been agreed to in writing by the Underwriter,and there shall broker of securities or to consent to service of process in connection with any blue sky filing; have been taken in connection therewith, with the issuance of the Bonds and with the transactions contemplated thereby and by this Bond Purchase Agreement,all such actions as,in (m) Any certificate signed by any authorized official of the District or the Community the opinion of Bond Counsel,shall be necessary and appropriate; Facilities District authorized to do so shall be deemed a representation and warranty to the Underwriter as to the statements made therein; (b) Between the date hereof and the Closing Date,the market price or marketability of the Bonds at the initial offering prices set forth in the Official Statement shall not have been 5 6 OidGmwd.BondPurchascAereemnt(3)doc"9''"9_'.DOC 01dGrnwd.BondPurchaseA2recmnt(3)doc"4249. o� materially adversely affected,in the judgment of the Underwriter(evidenced by a written notice securities(or interest thereon),the validity or enforceability of the Special Tax or the ability of to the Community Facilities District terminating the obligation of the Underwriter to accept the Community Facilities District to construct or acquire the improvements as contemplated by delivery of and pay for the Bonds)by reason of any of the following: the Community Facilities District Documents or the Official Statement or the right of any owner of the property within the Community Facilities District to develop such property in the manner (1) legislation introduced in or enacted(or resolution passed)by the Congress described in the Official Statement;or of the United States of America or recommended to the Congress by the President of the United States, the Department of the Treasury, the Internal Revenue Service, or any member of (6) any event occurring, or information becoming known, which, in the Congress,or favorably reported for passage to either House of Congress by any committee of judgment of the Underwriter,makes untrue in any material respect any statement or information such House to which such legislation had been referred for consideration or a decision rendered contained in the Official Statement,or results in the Official Statement containing any untrue by a court established under Article III of the Constitution of the United States of America or by statement of a material fact or omitting to state a material fact required to be stated therein or the Tax Court of the United States of America,or an order,ruling,regulation(final,temporary or necessary to make the statements therein,in light of the circumstances under which they were proposed),press release or other form of notice issued or made by or on behalf of the Treasury made,not misleading. Department or the Internal Revenue Service of the United States of America,with the purpose or effect,directly or indirectly,of imposing federal income taxation upon the interest that would be (c) On the Closing Date,the Underwriter shall have received counterpart originals or received by the holders of the Bonds beyond the extent to which such interest is subject to certified copies of the following documents,in each case satisfactory in form and substance to taxation as of the date hereof, the Underwriter: (2) legislation introduced in or enacted(or resolution passed)by the Congress (1) The Community Facilities District Documents,together with a certificate of the United States of America,or an order,decree or injunction issued by any court of dated as of the Closing Date of the Secretary of the Board to the effect that each such document competent jurisdiction, or an order,ruling,regulation(final,temporary or proposed),press is a true,correct and complete copy of the one duly approved by the Board; release or other form of notice issued or made by or on behalf of the Securities and Exchange Commission,or any other governmental agency having jurisdiction of the subject matter,to the (2) The Official Statement, duly executed by the Community Facilities effect that obligations of the general character of the Bonds,or the Bonds,including any or all District; underlying arrangements,are not exempt from registration under or other requirements of the Securities Act of 1933,as amended,or that the Indenture is not exempt from qualification under (3) The opinion of Bond Counsel,dated the Closing Date and addressed to the or other requirements of the Trust Indenture Act of 1939,as amended,or that the issuance, Community Facilities District,in substantially the form attached to the Preliminary Official offering or sale of obligations of the general character of the Bonds,or of the Bonds,including Statement as APPENDIX G,and a reliance letter from such firm,dated the Closing Date and any or all underwriting arrangements,as contemplated hereby or by the Official Statement or addressed to the Underwriter, to the effect that such approving opinion addressed to the otherwise is or would be in violation of the federal securities laws,rules or regulations as Community Facilities District may be relied upon by the Underwriter to the same extent as if amended and then in effect; such opinion was addressed to them; (3) the occurrence of any outbreak of hostilities or other national or (4) The supplemental opinion of Bond Counsel,dated the Closing Date and international calamity or crisis,or the escalation of an existing national or international calamity addressed to the Underwriter,to the effect that(i)this Bond Purchase Agreement,the Indenture or crisis,the effect of such outbreak,calamity or crises on the financial markets of the United and the Community Facilities District Continuing Disclosure Agreement have been duly States being such as would make it impracticable,in the reasonable opinion of the Underwriter, authorized,executed and delivered by the Community Facilities District,and,assuming such for the Underwriter to sell the Bonds(it being acknowledged by the Underwriter that as of the agreements constitute valid and binding obligations of the other parties thereto,constitute the date hereof no such event is occurring); legally valid and binding agreements of the Community Facilities District enforceable in accordance with their respective terms,except as enforcement may be limited by bankruptcy, (4) establishment of any new restrictions on securities materially affecting the moratorium,insolvency or other laws affecting creditor's rights or remedies and is subject to free market for securities(including the imposition of any limitations on interest rates)or the general principles of equity;(ii)the Bonds are not subject to the registration requirements of th( charge to the net capital requirements of the Underwriter established by the New York Stock Securities Act of 1933,as amended,and the Indenture is exempt from qualification pursuant tL Exchange,the Securities and Exchange Commission,any other Federal or state agency or the the Trust Indenture Act of 1939,as amended;(iii)a notice of Special Tax lien meeting the Congress of the United States,or by Executive Order; requirements of the Act has been duly recorded in the Office of the County Recorder of the County of Nevada in accordance with the provisions of the Act; and (iv)the statements (5) any amendment to the federal or California Constitution or action by any contained in the Official Statement under the captions "THE BONDS," "SOURCES OF federal or California court, legislative body, regulatory body or other authority materially PAYMENT FOR THE BONDS," "SPECIAL RISK FACTORS," "TAX MATTERS," and adversely affecting the tax status of the Community Facilities District,its property,income, "CONTINUING DISCLOSURE,"and in APPENDIX D and APPENDIX G,insofar as such 7 8 OldGmwd.BondPurchaseAPreemnt(31 doc 23A'19_'WQC OldGrnwd.BondPurchaseAareemnt(3)doc'"`"�OC ti EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAIGNG BOARD OF FAILURE TO " FILE ANNUAL REPORT Name of Obligated Person: Old Greenwood LLC,a California general partnership Name of Bond Issue: Truckee Donner Public Utility District Community Facilities District No.03-1(Old Greenwood)Special Tax Bonds Date of Issuance: ,2003 NOTICE IS HEREBY GIVEN that Old Greenwood LLC has not provided[an Annual Report][a Semi-Annual Report]with respect to the above-named Bonds as required by Section 3 of the Developer Continuing Disclosure Agreement,dated as of December 1,2003.The Developer anticipates that the required report will be filed by Dated: MUNIFINANCIAL,as Dissemination Agent By: cc: Old Greenwood LLC Issuer 13 OldGmwd,TruckeeDeveprDisclsrAgrmnt CDA.doc f hereunder. The Dissemination Agent may conclusively rely upon such certification of the As required by the Rule,if an amendment is made to the provisions hereof specifying the Developer and shall have no duty or obligation to review such Annual Report. accounting principles to be followed in preparing Financial Statements,the annual financial information for the year in which the change is made shall present a comparison between the (c) if the Dissemination Agent has not received a copy of the Annual Report by the Financial Statements or information prepared on the basis of the new accounting principles and date required in Subsection(a)or if the Dissemination Agent has not received a copy of the those prepared on the basis of the former accounting principles. The comparison shall include a Semi-Annual Report by the date required in Subsection(b),the Dissemination Agent shall notify qualitative discussion of the differences in the accounting principles and the impact of the change the Developer of such failure to receive the applicable report. If the Dissemination Agent is in the accounting principles on the presentation of the financial information. To the exter—' unable to verify that an Annual Report has been provided to the Repositories and the reasonably feasible, the comparison shall be quantitative. A notice of the change in tl Participating Underwriter by the date required in Subsection(a),or if the Dissemination Agent is accounting principles shall be provided in the manner as for a Listed Event under Section 5(c). unable to verify that a Semi-Annual Report has been provided to the Repositories and the Participating Underwriter by the date required in Subsection(b),the Dissemination Agent shall (b) The Developer's Annual Report and Semi-Annual Report shall contain or send a notice to the Municipal Securities Rulemaking Board("MSRB") and to the State incorporate by reference the following information with respect to each Major Developer: Repository,if any,in substantially the form attached as Exhibit"A." (i) If information regarding such Major Developer has not previously been (d) The Dissemination Agent shall: included in an Annual Report,a Semi-Annual Report or the Official Statement,the Development Plan of such Major Developer;or,if information regarding such Major Developer has previously (i) determine each year prior to the date for providing the Annual Report and been included in an Annual Report, a Semi-Annual Report or the Official Statement, a the Semi-Annual Report,the name and address of each National Repository and each State description of the progress made in the implementation of the Development Plan of such Major Repository,if any; Developer since the date of such information and a description of any significant changes in such (ii) provide any Annual Report and any Semi-Annual Report received by it to Development Plan and the causes or rationale for such changes. each Repository and to the Participating Underwriter,as provided herein;and (ii) If information regarding such Major Developer has not previously been included in an Annual Report,a Semi-Annual Report or the Official Statement,the Financing (iii) if it has provided the applicable report pursuant to(ii)above,file a report Plan of such Major Developer;or,if information regarding such Major Developer has previously with the Issuer and the Developer certifying that it provided the Annual Report or the Semi- been included in an Annual Report, a Semi-Annual Report or the Official Statement, a Annual Report,as the case may be,pursuant to this Disclosure Agreement,stating the date it was description of any significant changes in the Financing Plan of such Major Developer and the provided and listing all the Repositories to which it was provided. causes or rationale for such changes,including an update of the table appearing in the Official Statement as Table 6 under the heading "THE DEVELOPMENT AND PROPERTY Developer's Annuaall Report shallll contain or incorporate by reference Financial Statements for SECTION Content Annual Reports and Semi-Annual Reports. ( The OWNERSHIP—Development Plan,"which shall only be required in the Annual Report. each Major Developer for the prior fiscal year if required;provided,that,if such information is (iii) A statement as to the number of lots owned by the Developer in the required from the Developer as to another Major Developer,the Developer shall only be required Community Facilities District for which building permits were issued during the six-month to provide such information that it has actual knowledge of after reasonable inquiry. If audited period covered by such Annual Report or Semi-Annual Report,the cumulative total of the lots Financial Statements are required to be provided,and such audited Financial Statements are not for which building permits have been issued,the number of houses the construction of which it available by the time the Annual Report is required to be filed pursuant to Section 3(a),the completed in the Community Facilities District during the six-month period covered by such Annual Report shall contain unaudited Financial Statements, if prepared by such Major Annual Report or Semi-Annual Report,the cumulative total of such houses,the number of Developer,and the audited Financial Statements shall be filed in the same manner as,or as an houses in the Community Facilities District sold by it during the six-month period covered by amendment or supplement to,the Annual Report when they become available. Such Financial such Annual Report or Semi-Annual Report,and the cumulative total of such houses sold by it. Statements shall be for the most recently ended fiscal year for the entity covered thereby hereunder. (iv) A description of any sales of portions of such Major Developer's Property during the six-month period ending on the last day of the period covered by such Annual Report If the annual financial information or operating data provided in an Annual Report or a or Semi-Annual Report,including the identification of each buyer(other than individual home Semi-Annual Report is amended pursuant to the provisions hereof,the first Annual Report or buyers)and the number of residential lots or other acres sold;provided,however,that sales of Semi-Annual Report filed pursuant hereto containing the amended operating data or financial five or fewer acres may be aggregated for the purpose of such description information shall explain,in narrative form,the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. 5 6 OldGmwd,TruckeeDeveprDisclsrAgrmnt CDA.doc O1dGrnwd,TruckeeDeve rDisclsrA p gmmt CDA.doc (v) With respect to any portion of the Property owned by such Major SECTION 5. Reporting of Significant Events. (a) The following events are Listed Developer and any of its Affiliates, a statement as to whether any taxes or assessment Events for purposes of this Agreement: installments applicable to such portion of the Property are delinquent. (i) Any conveyance by a Major Developer of any portion of the Property (vi) A description of any change in the ownership structure of the Major owned by such Major Developer to an entity that is not an Affiliate of such Major Developer,the Developer and/or the financial condition of the Major Developer or any of its Affiliates if such result of which conveyance is to cause the transferee to become a Major Developer; change in ownership structure and/or financial condition could materially interfere with the Major Developer's ability to complete its Development Plan. (ii) Any failure of a Major Developer, or any Affiliate of such Major Developer,to pay when due taxes or Special Taxes with respect to any portion of the Property (vii) Any amendments to land use entitlements for any portion of the Property owned by such Major Developer or Affiliate; owned by a Major Developer that could have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of (iii) Any refusal to provide funds pursuant to or any termination of,or any such Major Developer,or any Affiliate of such Major Developer,to pay installments of Special event of default under,any line of credit,loan or other arrangement to provide funds to a Major Taxes when due. Developer or its Affiliate or any other loss of a source of funds that could have a material adverse affect on such Major Developer's most recently disclosed Financing Plan or (viii) Any precondition to commencement or continuation of development on Development Plan or on the ability of such Major Developer,or any Affiliate of such Major any portion of the Property owned by a Major Developer imposed by a governmental entity after Developer,to pay installments of Special Taxes when due; the date of issuance of the Bonds which has not been previously disclosed and which could have a material adverse affect, or any change in the status of any such precondition that was (iv) The occurrence of an Event of Bankruptcy with respect to a Major previously disclosed in the Official Statement,an Annual Report or a Semi-Annual Report, Developer or any Affiliate of such Major Developer that owns any portion of the Property; which could have a material adverse affect,on such Major Developer's most recently disclosed Financing Plan or Development Plan or on the ability of such Major Developer,or any Affiliate (v) Any significant amendments to land use entitlements for such Major of such Major Developer,to pay installments of Special Taxes when due. Developer's Property, if material to such Major Developer's most recently disclosed Development Plan; (ix) Any previously undisclosed legislative, administrative or judicial challenges to development on any portion of the Property owned by such Major Developer,or (vi) The filing of any lawsuit against a Major Developer which, in the any material change in the status of any such challenge that was previously disclosed in the reasonable judgment of such Major Developer,will adversely affect the completion of the Official Statement,an Annual Report or a Semi-Annual Report,that could have a material development of Property owned by such Major Developer,or litigation which if decided against adverse affect on such Major Developer's most recently disclosed Financing Plan or the Major Developer,in the reasonable judgment of the Major Developer,would materially Development Plan or on the ability of such Major Developer,or any Affiliate of such Major adversely affect the financial condition of the Major Developer. Developer,to pay installments of Special Taxes when due. (vii) The assumption of any obligations by a Major Developer pursuant to (x) An update of the status of any previously reported Listed Event described Section 6 hereof;and in Section 5. (viii) A change in a Major Developer's fiscal year. (c) In addition to any of the information expressly required to be provided under Subsections(a)and(b)of this Section,the Developer shall provide such further information,if (b) Whenever the Developer obtains knowledge of the occurrence of a Listed Event, any,as may be necessary to make the specifically required statements,in the light of the the Developer shall promptly(i) determine whether such event would be material under circumstances under which they are made,not misleading. applicable federal securities laws and(ii)if the Developer determines that such event would be material under applicable federal securities laws,notify the Dissemination Agent and the Issuer' - Major Developers that are Affiliates of each other may file either separate Annual in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuar. Reports and Semi-Annual Reports or combined Annual Reports and Semi-Annual Reports to Subsection(c)and shall be in a format suitable for reporting to the MSRB and the State covering all such entities. Any or all of the items listed above may be included by specific Repository,if any. reference to other documents which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official (c) If the Dissemination Agent has been instructed by the Developer to report the statement,it must be available from the MSRB. The Developer shall clearly identify each such occurrence of a Listed Event,the Dissemination Agent shall file a notice of such occurrence with other document so included by reference. the MSRB,the State Repository and the Participating Underwriter. 7 g OldGmwd,TruckeeDeveprDisclsrAgrmnt CDA.doc OldGmwd,TruckeeDeveprDisclsrAgrmnt CDA.doc Table of Contents Page EXHIBIT C RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES ARTICLE I DEFINITIONS Section1.1. Definitions.....................................................................................................................I ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1. Amount,Issuance,Purpose and Nature of Bonds.......................................................I I Section 2.2. Type and Nature of Bonds..........................................................................................I I Section 2.3. Equality of Bonds and Pledge of Net Taxes...............................................................12 Section 2.4. Description of Bonds;Interest Rates...........................................................................12 Section 2.5. Place and Form of Payment......................._...............................................................l3 Section2.6. Form of Bonds.............................................................................................................13 Section 2.7. Execution and Authentication.....................................................................................14 Section2.8. Bond Register..............................................................................................................14 Section 2.9. Registration of Exchange or Transfer.........................................................................14 Section 2.10. Mutilated,Lost,Destroyed or Stolen Bonds...............................................................15 Section 2.11. Validity of Bonds........................................................................................................15 Section 2.12. Book-Entry System.....................................................................................................15 ARTICLE III CREATION OF FUNDS AND APPLICATION OF REVENUES AND GROSS TAXES Section 3.1. Creation of Funds;Application of Proceeds...............................................................16 Section 3.2. Deposits to and Disbursements from Special Tax Fund.............................................11 Section 3.3. Administrative Expense Account of the Special Tax Fund........................................18 Section 3.4. Interest Account and Principal Account of the Special Tax Fund..............................18 Section 3.5. Redemption Account of the Special Tax Fund...........................................................19 Section 3.6. Prepayment Account of the Special Tax Fund........................................:...................20 Section 3.7. Reserve Account of the Special Tax Fund..................................................................20 Section3.8. Rebate Fund................................................................................................................21 Section3.9. Surplus Fund...............................................................................................................23 Section 3.10. Acquisition and Construction Fund............................................................................24 Section3.11. Investments.................................................................................................................25 ARTICLE IV REDEMPTION OF BONDS Section 4.1. Redemption of Bonds..................................................................................................26 Section 4.2. Selection of Bonds for Redemption............................................................................28 Section 4.3. Notice of Redemption.................................................................................................28 Section 4.4. Partial Redemption of Bonds......................................................................................29 Section 4.5. Effect of Notice and Availability of Redemption Money...........................................29 C-1 i DOCSOC\100098 5v4\2292 5.0009 DOCS001000985v4\22925.0009 Table of Contents Table of Contents (continued) (continued) Page Page Section 4.6. Purchase of Bonds by District.....................................................................................29 Section 10.4. Provisions Constitute Contract....................................................................................42 Section 10.5. Future Contracts..........................................................................................................42 ARTICLE V Section 10.6. Further Assurances......................................................................................................42 Section10.7. Severability.................................................................................................................42 COVENANTS AND WARRANTY Section 10.8. Notices................... Section 10.9. General Authorization.................................................................................................42 Section 5.1. Warranty......................................................................................................................29 Section 10.10. Execution in Counterparts...........................................................................................43 Section5.2. Covenants....................................................................................................................29 Section 5.3. Continuing Disclosure and Reporting Requirements..................................................33 ARTICLEVI Signatures ...................................................................................................................................S-1 AMENDMENTS TO INDENTURE EXHIBIT A FORM OF SPECIAL TAX BOND...........................................................................A-1 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF Section 6.1. Supplemental Indentures or Orders Not Requiring Bondowner Consent...................33 COSTS OF ISSUANCE............................................................................................B-1 Section 6.2. Supplemental Indentures or Orders Requiring Bondowner Consent..........................34 Section 6.3. Notation of Bonds;Delivery of Amended Bonds.......................................................35 EXHIBIT C RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAXES...............C-1 ARTICLE VII TRUSTEE Section 7.1. Duties,Immunities and Liabilities of Trustee.............................................................35 Section 7.2. Removal of Trustee.....................................................................................................36 Section 7.3. Resignation of Trustee................................................................................................36 Section 7.4. Liability of Trustee......................................................................................................36 Section 7.5. Merger or Consolidation.............................................................................................37 ARTICLE VIII EVENTS OF DEFAULT;REMEDIES Section 8.1. Events of Default.........................................................................................................38 Section 8.2. Remedies of Owners...................................................................................................38 ARTICLE IX DEFEASANCE Section9.1. Defeasance..................................................................................................................39 ARTICLE X MISCELLANEOUS Section 10.1. Cancellation of Bonds.................................................................................................40 Section 10.2. Execution of Documents and Proof of Ownership......................................................41 Section 10.3. Unclaimed Moneys.....................................................................................................41 ii DOCS001000985v4\22925.0009 DOCSOC\1000985v4\22925,0009 i IN WITNESS WHEREOF,the parties have executed and attested this Trust Indenture by EXHIBIT A their officers duly authorized as of the date and year first written above. FORM OF SPECIAL TAX BOND TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1 No._ $ (OLD GREENWOOD) UNITED STATES OF AMERICA STATE OF CALIFORNIA By: TRUCKEE DONNER PUBLIC UTILITY DISTRICT President of the Board of Directors of the Truckee Donner Public Utility District,acting as TRUCKEE DONNER PUBLIC UTILITY DISTRICT the legislative body ofthe Truckee Donner COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD) Public Utility District Community Facilities SPECIAL TAX BOND District No.03'1(Old Greenwood) INTEREST RATE: MATURITY DATE: DATED DATE: CUSIP NO. ATTEST: REGISTERED OWNER: CEDE&CO. District Clerk of the PRINCIPAL AMOUNT: DOLLARS Truckee Donner Public Utility District TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD)(the"District")FOR VALUE RECEIVED,hereby promises to pay,solely from certain amounts held under the Indenture(as hereinafter defined),to the BNY WESTERN TRUST COMPANY OF Registered Owner named above,or registered assigns,on the Maturity Date set forth above,unless CALIFORNIA,as Trustee redeemed prior thereto as hereinafter provided,the Principal Amount set forth above,and to pay interest on such Principal Amount from the Interest Payment Date(as hereinafter defined)next preceding the date of authentication hereof,unless(i)the date of authentication is an Interest By: Payment Date in which event interest shall be payable from such date of authentication,(ii)the date Its: Authorized Officer of a6thentication is after a Record Date(as hereinafter defined)but prior to the immediately succeeding Interest Payment Date,in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication,or(iii)the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above.Notwithstanding the foregoing,if at the time of authentication of this Bond interest is in default,interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or,if no interest has been paid or made available for payment,interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1(each,an"Interest Payment Date"),commencing March 1,2004,at the Interest Rate set forth above,until the Principal Amount hereof is paid or made available for payment. The principal of and premium,if any,on this Bond are payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the office of BNY Western Trust Company of California(the"Trustee"). Interest on this Bond shall be paid by check of the Trustee mailed by first class mail,postage prepaid,or in certain circumstances described in the Indenture by wire transfer to an account within the United States,to the Registered Owner hereof as of the close of business on the fifteenth day of the month preceding i 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 Trustee. S-1 A-I DOCS00 1000985v4\22925.0009 DOCSOU 100098 5v4\2292 5.0009 This Bond is one of a duly authorized issue of"Truckee Donner Public Utility District The Bonds are also subject to special mandatory redemption on any Interest Payment Date,in Community Facilities District No.03-1(Old Greenwood)Special Tax Bonds"(the"Bonds")issued whole or in part,from certain funds derived from the prepayment of Special Taxes,at the following in the aggregate principal amount of$ pursuant to the Mello-Roos Community Facilities redemption prices,expressed as a percentage of the principal amount thereof,together with accrued Act of 1982,as amended,being Sections 53311 et seq.,of the California Government Code(the interest to the date of redemption: "Act").The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the Board of Directors of the Truckee Donner Public Utility District,acting in Redemption Dates Redemption Pricesi its capacity as the legislative body of the District on ,2003 and a Trust Indenture March 1,20 through 1,20 103% dated as of December 1,2003,by and between the District and the Trustee(the"Indenture"),and this 1,20 and 1,20 102 reference incorporates the Indenture herein,and by acceptance hereof the Registered Owner of this 1,20_and 1,20_ 101 Bond assents to said terms and conditions.The Indenture is adopted under and this Bond is issued _1 20 and thereafter 100 under,and both are to be construed in accordance with,the laws of the State of California. , — Pursuant to the Act and the Indenture,the principal of,premium,if any,and interest on this Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the Bond are payable solely from the annual special taxes authorized under the Act to be levied and registered owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail,postage prepaid,to the addresses set forth in the registration books.Neither a failure of collected within the District and certain other amounts pledged the repayment of the Bonds as set the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of forth in the Indenture.The District has covenanted for the benefit of the owners of the Bonds that the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to under certain circumstances described in the Indenture it will commence and diligently pursue to accrue interest on the specified redemption date;provided that funds for the redemption are on completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax deposit with the Trustee on the redemption date.Thereafter,the registered owners of such Bonds installments levied for payment ofprincipal and interest on the Bonds. shall have no rights except to receive payment of the redemption price upon the surrender of the Subject to the further limitations set forth in the Indenture,the Bonds maturing on or after Bonds' September 1,20 may be redeemed,at the option of the District from any source of funds on any This Bond shall be registered in the name of the Registered Owner hereof,as to both Interest Payment Date on or after September 1,2011,in whole,or in part in the order of maturity principal and interest,and the District and the Trustee may treat the Registered Owner hereof as the selected by the District and by lot within a maturity,at the following redemption prices,expressed as absolute owner for all purposes and shall not be affected by any notice to the contrary. a percentage of the principal amount thereof,together with accrued interest to the date of redemption: Redemption Dates Redemption Prices The Bonds are issuable only in fully registered form in the denomination of$5,000 or any integral multiple thereof and may be exchanged for a like aggregate principal amount of Bonds of September 1,20_and March 1,20 102% other authorized denominations of the same issue and maturity,all as more fully set forth in the September 1,20_and March 1,20_ 101 Indenture.This Bond is transferable by the Registered Owner hereof,in person or by his attorney September 1,20_and thereafter 100 duly authorized in writing,at the Principal Office of the Trustee,but only in the manner,subject to the limitations and upon payment of the charges provided in the Indenture,upon surrender and In addition,the Term Bonds maturing on September 1,20 are subject to mandatory sinking cancellation of this Bond.Upon such transfer,a new registered Bond of authorized denomination or fund redemption prior to maturity commencing on September 1,20_,in part,by lot,from Sinking denominations for the same aggregate principal amount of the same issue and maturity will be issued Fund Payments(as defined in the Indenture)at a redemption price equal to the principal amount to the transferee in exchange therefor. thereof,plus accrued interest to the date of redemption,without premium,to the extent,in the manner and subject to the terms of the Indenture. The Trustee shall not be required to register transfers or make exchanges of(i)any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed,or(ii)any Bonds In the event of a partial redemption of Term Bonds,other than as a result of Sinking Fund chosen for redemption. Payments,each of the remaining Sinking Fund Payments for the Term Bonds that were partially redeemed will be reduced,as nearly as practicable,on a pro rata basis. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time,and in certain cases without notice to or the consent of the registered owners,to the extent and upon the terms provided in the Indenture. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT OR OF TRUCKEE DONNER PUBLIC UTILITY DISTRICT COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD)FOR WHICH THE TRUCKEE DONNER PUBLIC UTILITY DISTRICT OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE,OR HAS LEVIED OR PLEDGED,GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN.THE BONDS ARE LIMITED A-2 A-3 D0CS0C\1000985v4\22925.0009 DOCS00 1000985v4\22925.0009 I other than as expressly stated hereunder.The Trustee shall keep accurate records of all funds in the certificate of authentication of the Trustee.The Trustee shall be under no responsibility or administered by it and all Bonds paid,discharged and cancelled by it. duty and shall have no responsibility with respect to the issuance ofthe Bonds for value.The Trustee shall not be liable in connection with the performance of its duties hereunder,except for its own The Trustee is hereby authorized to redeem the Bonds when duly presented for payment at negligence or willful misconduct. maturity,or on redemption prior to maturity.The Trustee shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. The Trustee shall be protected in acting upon any notice,resolution,request,consent,order, certificate,report,Bond,certificate of an Independent Financial Consultant or other paper or »_ The District shall from time to time,subject to any agreement between the District and the document believed by it to be genuine and to have been signed or presented by the proper party or Trustee then in force,pay to the Trustee compensation for its services,reimburse the Trustee for all parties.The Trustee may consult with counsel,who may be counsel to the District,with regard to its advances and expenditures,including,but not limited to,advances to and fees and expenses of legal questions,and the opinion of such counsel shall be full and complete authorization and independent accountants or counsel employed by it in the exercise and performance of its powers and protection in respect of any action taken or suffered hereunder in good faith and in accordance duties hereunder,and indemnify and save the Trustee and its officers,directors and employees therewith. harmless against costs,claims expenses and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and The foregoing obligation of the District to indemnify the Trustee shall survive the removal or until such Bond is submitted for inspection,if required,and his title thereto satisfactorily established, resignation of the Trustee or the discharge of the Bonds. if disputed. Section 7.2. Removal of Trustee.The District may at any time at its sole discretion Whenever in the administration of its duties under this Indenture the Trustee shall deem it remove the Trustee initially appointed,and any successor thereto,by delivering to the Trustee a necessary or desirable that a matter be proved or established prior to taking or suffering any action written notice of its decision to remove the Trustee and may appoint a successor or successors hereunder,such matter(unless other evidence in respect thereof be herein specifically prescribed) thereto;provided that any such successor,other than the Trustee,shall be a bank or trust company may,in the absence of bad faith on the part of the Trustee,be deemed to be conclusively proved and having(or in the case of a financial institution that is part of a bank holding company,such company established by a written certificate of the District,and such certificate shall be full warrant to the shall have)a combined capital(exclusive of borrowed capital)and surplus of at least$50,000,000, Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, and subject to supervision or examination by federal or state authority.Any removal shall become but in its discretion the Trustee may,in lieu thereof,accept other evidence of such matter or may effective only upon acceptance of appointment by the successor Trustee. If any bank or trust require such additional evidence as to it may seem reasonable. company appointed as a successor publishes a report of condition at least annually,pursuant to law or to the requirements of any supervising or examining authority above referred to,then for the The Trustee shall have no duty or obligation whatsoever to monitor or enforce the collection purposes of this Section the combined capital and surplus of such bank or trust company shall be of Special Taxes or other funds to be deposited with it hereunder,or as to the correctness of any deemed to be its combined capital and surplus as set forth in its most recent report of condition so amounts received.The sole obligation of the Trustee with respect thereto shall be limited to the published.Any removal of the Trustee and appointment of a successor Trustee shall become proper accounting for such funds as it shall actually receive.No provision in this Indenture shall effective only upon acceptance of appointment by the successor Trustee and notice being sent by the require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the successor Trustee to the Bondowners of the successor Trustee's identity and address. performance of any of its duties hereunder,or in the exercise of its rights or powers. Section 7.3. Resignation of Trustee.The Trustee may at any time resign by giving In the event the Trustee shall advance funds in connection with its administration of this trust, written notice to the District and by giving to the Owners notice of such resignation,which notice the Trustee shall be entitled to interest at the maximum interest rate permitted by law. shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Trustee.Upon receiving such notice of resignation,the District shall promptly appoint a The Trustee shall not be deemed to have knowledge of any event of default of the type successor Trustee satisfying the criteria in Section 7.2 above by an instrument in writing. In the described in Section 8.1(c)unless and until it shall have actual knowledge thereof by receipt of event a successor trustee shall not have been designated within 30 Business Days,the Trustee shall written notice thereof at its corporate trust office. have the right to petition any federal court for an order appointing a replacement Trustee.Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective Section 7.5. Merger or Consolidation.Any company into which the Trustee may be only upon acceptance of appointment by the successor Trustee. 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 parry or any company to which the Trustee Section 7.4. Liability of Trustee.The recitals of fact and all promises,covenants and may sell or transfer all or substantially all of its corporate trust business,shall be the successor to the agreements contained herein and in the Bonds shall be taken as statements,promises,covenants and Trustee without the execution or filing of any paper or further act,anything herein to the contrary agreements of the District,and the Trustee assumes no responsibility and shall have no liability for notwithstanding. the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture,the Bonds,and shall incur no responsibility and have no liability in respect thereof,other than in connection with its express duties or obligations specifically set forth herein,in the Bonds or 36 37 DOCSOC\1000985v4\22925.0009 DOCS001000985v4\22925.0009 ARTICLE VIII by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. EVENTS OF DEFAULT;REMEDIES If any suit,action or proceeding to enforce any right or exercise any remedy is abandoned or Section 8.1. Events of Default. Anyone or more of the following events shall constitute determined adversely to the Owners,the District and the Owners shall be restored to their former an"event of default": positions,rights and remedies as if such suit,action or proceeding had not been brought or taken. (a) Default in the due and punctual payment of the principal of or redemption premium, No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of if any,on any Bond when and as the same shall become due and payable,whether at maturity as any other remedy. Every such remedy shall be cumulative and shall be in addition to every other therein expressed,by declaration or otherwise; remedy given hereunder or now or hereafter existing,at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the (b) Default in the due and punctual payment of the interest on any Bond when and as the Act or any other law. same shall become due and payable;or The Trustee's counsel is not and shall not be deemed counsel to the Bondholders.Any (c) Except as described in(a)or(b),default shall be made by the District in the communication between the Trustee and its counsel shall be deemed confidential and privileged. observance of any of the agreements,conditions or covenants on its part contained in this Indenture, the Bonds,and such default shall have continued for a period of 30 days after the District shall have In case the moneys held by the Trustee after an event of default pursuant to Section 8.1(a)or been given notice in writing of such default by the Owners of 25%in aggregate principal amount of (b)shall be insufficient to pay in full the whole amount so owing and unpaid upon the Outstanding the Outstanding Bonds. Bonds,then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest,or interest over principal,or of any The District agrees to give notice to the Trustee immediately upon the occurrence of an event installment of interest over any other installment of interest,ratably to the aggregate of such principal of default under(a)or(b)above and within 30 days of the District's knowledge of an event of default and interest. under(c)above. ARTICLE IX Section 8.2. Remedies of Owners. Following the occurrence of an event of default,any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: DEFEASANCE (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights Section 9.1. Defeasance. If the District shall pay or cause to be paid,or there shall against the District and any of the members,officers and employees of the District,and to compel the otherwise be paid,to the Owner of an Outstanding Bond the interest due thereon and the principal District or any such members,officers or employees to perform and carryout their duties under the thereof,at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, Act and their agreements with the Owners as provided in this Indenture; then the Owner of such Bond shall cease to be entitled to the pledge of Net Taxes,and,other than as set forth below,all covenants,agreements and other obligations of the District to the Owner of such (b) By suit in equity to enjoin any actions or things which are unlawful or violate the Bond under this Indenture shall thereupon cease,terminate and become void and be discharged and rights of the Owners;or satisfied.In the event of a defeasance of all Outstanding Bonds pursuant to this Section,the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such (c) By a suit in equity to require the District and its members,officers and employees to discharge and satisfaction,and the Trustee shall pay over or deliver to the District's general fund all account as the trustee of an express trust. money or securities held by it pursuant to this Indenture which are not required for the payment of Nothing in this Article or in any other provision of this Indenture,the Bonds shall affect or the principal of,premium,if any,and interest due on such Bonds, impair the obligation of the District,which is absolute and unconditional,to pay the interest on and Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in principal of the Bonds to the respective Owners thereof at the respective dates of maturity,as herein the first paragraph of this Section if such Bond is paid in any one or more of the following ways: ^` provided,out of the Net Taxes and other amounts pledged for such payment,or affect or impair the right of action,which is also absolute and unconditional,of such Owners to institute suit to enforce (a) by paying or causing to be paid the principal of,premium,if any,and interest on suc: such payment by virtue of the contract embodied in the Bonds and in this Indenture. Bond,as and when the same become due and payable; A waiver of any default or breach of duty or contract by any Owner shall not affect any (b) by depositing with the Trustee,in trust,at or before maturity,money which,together subsequent default or breach of duty or contract,or impair any rights or remedies on any such with the amounts then on deposit in the Special Tax Fund(exclusive of the Administrative Expense subsequent default or breach.No delay or omission by any Owner to exercise any right or power Account)and available for such purpose,is fully sufficient to pay the principal of,premium,if any, accruing upon any default shall impair any such right or power or shall be construed to be a waiver of and interest on such Bond,as and when the same shall become due and payable;or any such default or an acquiescence therein,and every power and remedy conferred upon the Owners DOCSOC\1000985v4••22925.0009 39 DOCS001000985v4s2925.0009 39 Section 4.2. Selection of Bonds for Redemption. If less than all of the Bonds identifying,by issue and maturity,the Bonds being redeemed with the proceeds of such check or Outstanding are to be redeemed,the portion of any Bond of a denomination of more than$5,000 to other transfer. be redeemed shall be in the principal amount of S5,000 or an integral multiple thereof. In selecting portions of such Bonds for redemption,the Trustee shall treat such Bonds as representing that Section 4.4. Partial Redemption of Bonds.Upon surrender of any Bond to be redeemed number of Bonds of$5,000 denominations which is obtained by dividing the principal amount of in part only,the District shall execute and the Trustee shall authenticate and deliver to the such Bonds to be redeemed in part by$5,000.The Trustee shall pfomptly notify the District in i Bondowner,at the expense of the District,a new Bond or Bonds of authorized denominations equal writing of the Bonds,or portions thereof,selected for redemption. in aggregate principal amount to the unredeemed portion of the Bonds surrendered,with the same interest rate and the same maturity. ! Section 4.3. Notice of Redemption.When Bonds are due for redemption under Section 4.1 above,the Trustee shall give notice,in the name of the District,of the redemption of such Section 4.5. Effect of Notice and Availability of Redemption Money.Notice of Bonds;provided,however,that a notice of a redemption to be made from other than from Sinking redemption having been duly given,as provided in Section 4.3 hereof,and the amount necessary for Fund Payments shall be conditioned on there being on deposit on the redemption date sufficient the redemption having been made available for that purpose and being available therefor on the date money to pay the redemption price of the Bonds to be redeemed. Such notice of redemption shall fixed for such redemption: (a)specify the CUSIP numbers(if any),the bond numbers and the maturity date or dates of the Bonds selected for redemption,except that where all of the Bonds are subject to redemption,or all (a) The Bonds,or portions thereof,designated for redemption shall,on the date fixed for the Bonds of one maturity,are to be redeemed,the bond numbers of such issue need not be specified; redemption,become due and payable at the redemption price thereof as provided in this Indenture, (b)state the date fixed for redemption and surrender of the Bonds to be redeemed;(c)state the anything in this Indenture or in the Bonds to the contrary notwithstanding; redemption price;(d)state the place or places where the Bonds are to be redeemed;(e)in the case of Bonds to be redeemed only in part,state the portion of such Bond which is to be redeemed;(f)state (b) Upon presentation and surrender thereof at the office of the Trustee,the redemption the date of issue of the Bonds as originally issued;(g)state the rate of interest home by each Bond price of such Bonds shall be paid to the Owners thereof; being redeemed;and(h)state any other descriptive information needed to identify accurately the Bonds being redeemed as shall be specified by the Trustee. Such notice shall further state that on the (c) As of the redemption date the Bonds or portions thereof so designated for redemption date fixed for redemption,there shall become due and payable on each Bond or portion thereofcalled shall be deemed to be no longer Outstanding and such Bonds or portions thereof shall cease to bear for redemption,the principal thereof,together with any premium,and interest accrued to the further interest;and redemption date,and that from and after such date,interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date,the Trustee shall (d) As of the date fixed for redemption no Owner of any of the Bonds or portions thereof mail a copy of such notice,by first class mail,postage prepaid,to the respective Owners thereof at so designated for redemption shall be entitled to any of the benefits of this Indenture or any their addresses appearing on the Bond Register,to the original purchaser of the Bonds.The actual Supplemental Indenture,or to any other rights,except with respect to payment of the redemption receipt by the Owner of any Bond or the original purchaser of any Bond of notice of such redemption price and interest accrued to the redemption date from the amounts so made available. shall not be a condition precedent to redemption,and neither the failure to receive nor any defect in such notice shall affect the validity of the proceedings for the redemption of such Bonds or the Section 4.6. Purchase of Bonds by District. In lieu,or partially in lieu,of optional, cessation of interest on the redemption date.A certificate by the Trustee that notice of such mandatory or mandatory sinking fund redemption,the District may elect,prior to the selection of redemption has been given as herein provided shall be conclusive as against all parties and the Bonds for redemption by the Trustee,to instruct the Trustee to purchase Bonds at public or private Owner shall not be entitled to show that he or she failed to receive notice of such redemption. sale at such prices as the District may in its discretion determine;provided that the purchase price thereof(including brokerage or other expenses)shall not exceed the principal amount thereof plus In addition to the foregoing notice,further notice shall be given by the Trustee as set out accrued interest to the purchase date and,in the case of purchase with funds in an optional below,but no defect in said further notice nor any failure to give all or any portion of such further redemption account,applicable premium. notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given ARTICLE V as above prescribed. Each further notice of redemption shall be sent by the Trustee by registered or certified mail, COVENANTS AND WARRANTY overnight delivery service or facsimile transmission to any registered securities depositories then in Section 5.1. Warranty.The District shall preserve and protect the security pledged the business of holding substantial amounts of obligations of types comprising the Bonds and any hereunder to the Bonds against all claims and demands of all persons. national information services as shall be specified by the Trustee that disseminate notice of redemption of obligations such as the Bonds. Section 5.2. Covenants. So long as any of the Bonds issued hereunder are Outstanding Upon the payment of the redemption price of any Bonds being redeemed,each check or other and unpaid,the District makes the following covenants with the Bondowners under the provisions of transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number the Act and,this Indenture(to be performed by the District or its proper officers,agents oremployees),which covenants are necessary and desirable to secure the Bonds and tend to make them 28 29 DOCSOC\10009850\22925.0009 DOCSOC\100098 5v4\22925.0009 more marketable;provided,however,that said covenants do not require the District to expend any were due and(ii)will commence judicial foreclosure proceedings against all parcels with delinquent funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: Special Taxes by the October I following the close of each Fiscal Year in which it receives Special Taxes in an amount which is less than 95%of the total Special Tax levied for such Fiscal Year,and (a) Punctual Payment:Against Encumbrances.The District covenants that it will receive (iii)will diligently pursue such foreclosure proceedings until the delinquent Special Taxes are paid; all Special Taxes in trust and will immediately deposit such amounts with the Trustee,and the provided that,notwithstanding the foregoing,the District may elect to defer foreclosure proceedings District shall have no beneficial right or interest in the amounts so deposited except as provided by on any parcel which is owned by a delinquent property owner whose property is not,in the this Indenture.All such Special Taxes shall be disbursed,allocated and applied solely to the uses and aggregate,delinquent in the payment of Special Taxes for a period of three years or more or in an purposes set forth herein,and shall be accounted for separately and apart from all other money, amount in excess of$12,000 so long as(1)the amount in the Reserve Account of the Special Tax funds,accounts or other resources of the District. Fund is at least equal to the Reserve Requirement,and(2)the District is not in default in the payment of the principal of or interest on the Bonds.The District may,but shall not be obligated to,advance The District further covenants that,in connection with the delivery of any Prepayment to the funds from any source of legally available funds in order to maintain the Reser4 Account of the Trustee,the District will also deliver to the Trustee a certificate of the Special Tax Administrator Special Tax Fund at the Reserve Requirement or to avoid a default in payment on the Bonds. identifying with respect to the Prepayment:(i)the"Remaining Facilities Amount"(as defined in the RMA),if any,with instructions that said amount shall be deposited in the Project Account of the The District covenants that it will deposit the proceeds of any foreclosure which constitute Acquisition and Construction Fund,(ii)the"Administrative Fees and Expenses"(as defined in the Net Taxes in the Special Tax Fund. RMA),with instructions that said amount shall be deposited in the Administrative Expense Account, (iii)the amount that represents the Special Taxes levied in the current Fiscal Year on the subject The District will not,in collecting the Special Taxes or in processing any such judicial Assessor's Parcel which had not been paid,with instructions to deposit portions of said amount in the foreclosure proceedings,exercise any authority which it has pursuant to Sections 53340,53344.1, Interest Account and the Principal Account of the Special Tax Fund,(iv)the amount of the"Reserve 53344.2,53356.1 and 53356.5 of the California Government Code in any manner which would Fund Credit"(as defined in the RMA),with instructions to withdraw said amount from the Reserve materially and adversely affect the interests of the Bondowners and,in particular,will not permit the Account and transfer it to the Prepayment Account in connection with the redemption of Bonds,and tender of Bonds in full or partial payment of any Special Taxes except upon receipt of a certificate of (v)the amount to be deposited in the Prepayment Account. an Independent Financial Consultant that to accept such tender will not result in a reduction in the maximum Special Taxes that may be levied on the taxable property within the District in any Fiscal The District covenants that it will duly and punctually pay or cause to be paid the principal of Year to an amount less than the sum of 1101/.of Annual Debt Service in the Bond Year ending on and interest on every Bond issued hereunder,together with the premium,if any,thereon on the date, the September 1 following the end of such Fiscal Year plus the estimated Administrative Expenses at the place and in the manner set forth in the Bonds and in accordance with this Indenture to the for such Bond Year. extent that Net Taxes are available therefor,and that the payments into the Funds and Accounts created hereunder will be made,all in strict conformity with the terms of the Bonds and this (d) Payment of Claims.The District will pay and discharge any and all lawful claims for Indenture,and that it will faithfully observe and perform all of the conditions,covenants and labor,materials or supplies which,if unpaid,might become a lien or charge upon the Net Taxes or requirements of this Indenture and all Supplemental Indentures and of the Bonds issued hereunder. other funds in the Special Tax Fund(other than the Administrative Expense Account therein),or which might impair the security of the Bonds then Outstanding;provided that nothing herein The District will not mortgage or otherwise encumber,pledge or place any charge upon any contained shall require the District to make any such payments so long as the District in good faith of the Net Taxes except as provided in this Indenture,and will not issue any obligation or security shall contest the validity of any such claims. having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds.Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of (e) Books and Accounts.The District will keep proper books of records and accounts, Net Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. separate from all other records and accounts of the District,in which complete and correct entries shall be made of all transactions relating to the levy of the Special Tax and the deposits to the Special (b) Levy of Special Tax.Beginning in Fiscal Year 2004-2005 and in each Fiscal Year Tax Fund. Such books of records and accounts shall at all times during business hours be subject to thereafter so long as any Bonds issued under this Indenture are Outstanding,the legislative body of the inspection of the Owners of not less than 10%of the principal amount of the Bonds then the District covenants to levy the Special Tax in an amount sufficient,together with other amounts on Outstanding or their representatives authorized in writing. deposit in the Special Tax Fund,to pay(1)the principal(including Sinking Fund Payments)of and interest on the Bonds when due,(2)to the extent permitted by law,the Administrative Expenses,and (f) Federal Tax Covenants.Notwithstanding any other provision of this Indenture, (3)any amounts required to replenish the Reserve Account of the Special Tax Fund to the Reserve absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Bonds Requirement. will not be adversely affected for federal income tax purposes,the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and (c) Commence Foreclosure Proceedings.The District covenants for the benefit of the specifically covenants,without limiting the generality of the foregoing,as follows: Owners of the Bonds that it(i)will commence judicial foreclosure proceedings against all parcels owned by a property owner where the aggregate delinquent Special Taxes on such parcels is greater than$7,500 by the October I following the close of each Fiscal Year in which such Special Taxes 30 31 DOCSOC 100098 5v4\2292 5,0009 DOCS00.1000985v4\22925.OM09 Interest Account of the Special Tax Fund for the payment of interest on the next following Interest Principal Account for the next succeeding Interest Payment Date.If amounts in the Special Tax Payment Date. Fund or otherwise transferred to replenish the Reserve Account are inadequate to restore the Reserve Account to the Reserve Requirement,then the District shall include the amount necessary fully to Section 3.6. Prepayment Account of the Special Tax Fund. i restore the Reserve Account to the Reserve Requirement in the next annual Special Tax levy to the (a) The Trustee shall deposit in the Prepayment Account the portion of each Prepayment extent of the maximum permitted Special Tax rates and to the extent permitted by the Act. directed to be so deposited in the certificate of the Special Tax Administrator delivered to the Trustee (c) In connection with an optional redemption of the Bonds hereunder or a partial in connection with the delivery of such Prepayment.On each date on which Bonds are to be defeasance of the Bonds in accordance with Section 9.1 hereof,amounts in the Reserve Account in redeemed from moneys on deposit in the Prepayment Account pursuant to subsection(b)of this be applied to such optional redemption or partial defeasance so long as the amount on deposit in the Section,the Trustee shall withdraw from the Capitalized Interest Subaccount of the Interest Account Reserve Account following such optional redemption or partial defeasance equals the Reserve and from the Reserve Account and deposit in the Prepayment Account the respective amounts,if any, Requirement. directed to be so withdrawn and deposited in the certificate of the Special Tax Administrator delivered to the Trustee in connection with the Prepayment giving rise to such redemption. (d) To the extent that the Reserve Account is at the Reserve Requirement as of the first day of the final Bond Year for Outstanding Bonds,amounts in the Reserve Account may be applied (b) Moneys set aside in the Prepayment Account shall be used solely for the purpose of to pay the principal of and interest due on the Bonds in such final Bond Year.Moneys in the Reserve redeeming Bonds and shall be applied on or after the redemption date to the payment of the principal Account in excess of the Reserve Requirement not transferred in accordance with the preceding of and premium,if any,on the Bonds to be redeemed upon presentation and surrender of such Bonds; provisions of this paragraph shall be withdrawn from the Reserve Account on each Interest Payment provided,however,that in lieu or partially in lieu of such call and redemption,moneys deposited in Date and transferred to the Interest Account. the Prepayment Account as set forth above may be used to purchase Outstanding Bonds in the manner hereinafter provided.Purchases of Outstanding Bonds maybe made by the District at public Section 3.8. Rebate Fund. or private sale as and when and at such prices as the District may in its discretion determine but only at prices(including brokerage or other expenses)not more than par plus accrued interest,plus the (a) The Trustee shall establish and maintain a fund separate from any other fund premium applicable at the next following call date according to the premium schedule established established and maintained hereunder designated as the Rebate Fund and shall establish a separate pursuant to Section 4.1(c)hereof. Any accrued interest payable upon the purchase of Bonds maybe Rebate Account and Alternative Penalty Account therein.All money at any time deposited in the paid from the amount reserved in the Interest Account or the Capitalized Interest Subaccount for the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee payment of interest on such Bonds on the next following Interest Payment Date. in trust,for payment to the United States Treasury.A separate subaccount of the Rebate Account and the Alternate Penalty Account shall be established for each issue of Bonds the interest on which Section 3.7. Reserve Account of the Special Tax Fund.There shall be maintained in the is excluded from gross income for federal income tax purposes. All amounts on deposit in the Reserve Account an amount equal to the Reserve Requirement. Notwithstanding any provision Rebate Fund with respect to the Bonds shall be governed by this Section and the Tax Certificate for hereof to the contrary,the amounts in the Reserve Account shall be applied as follows: suds issue,unless the District obtains an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest payments on such Bonds will not be adversely (a) Moneys in the Reserve Account shall be used solely for the purpose of(i)paying the affected if such requirements are not satisfied. principal of,including Sinking Fund Payments,and interest on any Bonds when due in the event that the moneys in the Interest Account and the Principal Account are insufficient therefor,(ii)making (1) Rebate Account.The following requirements shall be satisfied with respect any required transfer to the Rebate Fund pursuant to Section 3.8 upon written direction from the to each subaccount of the Rebate Account: District,and(iii)making any transfer to the Prepayment Account required pursuant to the provisions of Section 3.6. If the amounts in the Interest Account or the Principal Account are insufficient to pay A. Annual Computation.Within 55 days of the end of the fourth and the the principal of,including Sinking Fund Payments,or interest on any Bonds when due,or amounts in fifth Bond Year and each fifth Bond Year thereafter,the District shall calculate or cause to be the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required,the calculated the amount of rebatable arbitrage for each issue of Bonds in accordance with Trustee shall withdraw from the Reserve Account for deposit in the Interest Account or the Principal Section 148(f)(2)of the Code and Section 1.148-3 of the Rebate Regulations(taking into account any Account or the Rebate Fund,as applicable,moneys necessary for such purposes. applicable exceptions with respect to the computation of the rebatable arbitrage described in the Tax Certificate for each issue(e.g.,the temporary investments exceptions of Section 148(f)(4)(B)and(C) (b) Whenever moneys are withdrawn from the Reserve Account,after making the of the Code),and taking into account whether the election pursuant to Section 148(f)(4)(Cxvii)of required transfers referred to in Sections 3.4,3.6 and 3.8 hereof,the Trustee shall transfer to the the Code(the"1'/2%Penalty")has been made),for this purpose treating the last day of the applicable Reserve Account from available moneys in the Special Tax Fund,or from any other legally available Bond Year as a computation date,within the meaning of Section 1.148-1(b)of the Rebate funds which the District elects to apply to such purpose,the amount needed to restore the amount of Regulations(the"Rebatable Arbitrage").The District shall obtain expert advice as to the amount of such Reserve Account to the Reserve Requirement.Moneys in the Special Tax Fund shall be the Rebatable Arbitrage to comply with this Section. deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Interest Account or the 20 21 DOCSOC\1000985v4\22925.0009 DOCSCk-100098514`.22925.0009 B. Annual Transfer.Within 55 days of the end of each Bond Year for event that immediately following any transfer provided for in the previous sentence,or the date on which Rebatable Arbitrage must be calculated as required by the Tax Certificate,upon the written which the District determines that no transfer is required for such Bond Year,the amount then on direction of an Authorized Representative of the District,an amount shall be deposited to each deposit in a subaccount of the Alternative Penalty Account exceeds the amount required to be on subaccount of the Rebate Account by the Trustee from any funds so designated by the District if and deposit therein to make the payments required by Subsection(C)below,the Trustee,at the written to the extent required,so that the balance in the Rebate Account shall equal the amount of Rebatable direction of an Authorized Representative of the District,shall withdraw the excess from the Arbitrage so calculated by or on behalf of the District in accordance with(A)of this applicable subaccount of the Alternative Penalty Account and credit the excess to the Special Tax Subsection(a)(i). In the event that immediately following any transfer required by the previous Fund. sentence,or the date on which the District determines that no transfer is required for such Bond Year, the amount then on deposit to the credit of the applicable subaccount of the Rebate Account exceeds C. Payment to the Treasury.The Trustee shall pay,as directed in writing the amount required to be on deposit therein,upon written instructions from an Authorized by an Authorized Representative of the District,to the United States Treasury,out of amounts in a Representative of the District,the Trustee shall withdraw the excess from the appropriate subaccount subaccount of the Alternative Penalty Account,specified by the District in writing not later than of the Rebate Account and then credit the excess to the Special Tax Fund. 90 days after the close of the Six-Month Period the 1'/2%Penalty,if applicable and payable, computed in accordance with Section 148(f)(4)of the Code. In the event that,prior to the time of C. Payment to the Treasury.The Trustee shall pay,as directed in writing any payment required to be made from a subaccount of the Alternative Penalty Account,the amount by an Authorized Representative of the District,to the United States Treasury,out of amounts in in such subaccount is not sufficient to make such payment when such payment is due,the District each subaccount of the Rebate Account, shall calculate the amount of such deficiency and direct the Trustee,'in writing,to deposit an amount equal to such deficiency into such subaccount of the Alternative Penalty Account from any funds 1. Not later than 60 days after the end of(A)the fifth Bond Year held by the Trustee pursuant to this Indenture and designated by the District in such written and(B)each applicable fifth Bond Year thereafter,an amount equal to at least 90%of the Rebatable directions prior to the time such payment is due.Each payment required to be made pursuant to this Arbitrage calculated as of the end of such Bond Year for each issue of Bonds;and Subsection(a)(ii)shall be made to the Internal Revenue Service,Philadelphia,Pennsylvania 19255 on or before the date on which such payment is due,and shall be accompanied by Internal Revenue 2. Not later than 60 days after the payment or redemption of all Service Form 8038-T or shall be made in such other manner as provided under the Code. of the Bonds an amount equal to 100%of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year,and any income attributable to the Rebatable Arbitrage,computed in (b) Disposition of Unexpended Funds.Any funds remaining in the Accounts of the accordance with Section 148(f)of the Code. Rebate Fund after redemption and payment of the Bonds and after making the payments described in Subsection(a)(i)(C)or(a)(ii)(C)(whichever is applicable),may be withdrawn by the Trustee at the In the event that,prior to the time of any payment required to be made from the Rebate written direction of the District and utilized in any lawful manner pursuant to the Act. Account,the amount in the Rebate Account is not sufficient to make such payment when such payment is due,the District shall calculate or cause to be calculated the amount of such deficiency (c) Survival of Defeasance and Final Payment.Notwithstanding anything in this Section and deposit an amount received from any legally available source equal to such deficiency prior to or this Indenture to the contrary,the obligation to comply with the requirements of this Section shall the time such payment is due. Each payment required to be made pursuant to this Subsection(a)(i) survive the defeasance and final payment of the Bonds. shall be made to the Internal Revenue Service Center,Philadelphia,Pennsylvania 19255 on or before the date on which such payment is due,and shall be accompanied by Internal Revenue Service Form (d) Amendment Without Consent of Owners.This Section maybe deleted or amended 8038-T,or shall be made in such other manner as provided under the Code. in any manner without the consent of the Owners,provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not (ii) Alternative Penalty Account. adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds. A. Six-Month Computation.If the 1%2%Penalty has been elected,within 85 days of the Six-Month Period,the District shall determine or cause to be determined whether the (e) Trustee Responsibility.The Trustee shall be deemed conclusively to have complied 1'/2%Penalty is payable(and the amount of such penalty)as of the close of the Six-Month Period. with its obligations with respect to the Rebate Fund and any amounts required to be rebated to the The District shall obtain expert advice in making such determinations. United States Treasury hereunder by following the directions given by the District pursuant to this B. Six-Month Transfer.Within 85 days of the close of the Six-Month Section,and no other obligations of the Trustee shall be implied hereunder. Period,the Trustee,at the written direction of an Authorized Representative of the District,shall Section 3.9. Surplus Fund.After making the transfers required by Sections 3.3,3.4,3.5, deposit an amount in the appropriate subaccounts of the Alternative Penalty Account from any 3.6,3.7 and 3.8 hereof,as soon as practicable after each September 1,and in any event prior to each source of funds held by the Trustee pursuant to this Indenture and designated by the District in such October 1,the Trustee shall transfer all remaining amounts in the Special Tax Fund,if any,to the written directions or provided to it by the District,if and to the extent required,so that the balance in Surplus Fund,other than amounts in the Special Tax Fund which the District has deemed available in each subaccount of the Alternative Penalty Account equals the amount of 1'/2%Penalty due and the Special Tax Fund in calculating the amount of the levy of Special Taxes for such Fiscal Year payable to the United States Treasury determined as provided in Subsection(axii)(A)above.In the pursuant to Section 5.2(b)hereof.Moneys deposited in the Surplus Fund may be transferred by the 22 23 DOCSOC\100098514\22925.0009 DOCSOC1000985v4\22925.0009 the PUD nor any persons executing the Bonds,are liable personally on the Bonds by reason of their Interest shall be payable on each Bond from the date established in accordance with issuance. Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond has been paid;provided,however,that if at the maturity date of any Bond(or if the same is redeemable Notwithstanding anything to the contrary contained in this Indenture,the District shall not be and shall be duly called for redemption,then at the date fixed for redemption)funds are available for required to advance any money derived from any source of income other than the Net Taxes for the the payment or redemption thereof in full,in accordance with the terms of this Indenture,such Bonds payment of the interest on or the principal of the Bonds,or for the performance of any covenants shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a contained herein.The District may,however,advance funds for any such purpose,provided that 360-day year comprised of twelve 30-day months. -•« such funds are derived from a source legally available for such purpose. Section 2.5. Place and Form of Payment.The Bonds shall be payable both as to Section 2.3. Equality of Bonds and Pledge of Net Taxes. Pursuant to the Act and this principal and interest,and as to any premiums upon the redemption thereof,in lawful money of the Indenture,the Bonds shall be equally payable from the Net Taxes and other amounts in the Special United States of America.The principal of the Bonds and any premiums due upon the redemption Tax Fund(exclusive of the Administrative Expense Account)without priority for number,date of the thereof shall be payable by check of the Trustee upon presentation and surrender thereof at the Bonds,date of sale,date of execution,or date of delivery,and the payment of the interest on and Principal Office of the Trustee,or at the designated office of any successor Trustee.Interest on any principal of(including Sinking Fund Payments)the Bonds and any premiums upon the redemption Bond shall be payable from the Interest Payment Date next preceding the date of authentication of thereof,shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund that Bond,unless(i)such date of authentication is an Interest Payment Date in which event interest (exclusive of the Administrative Expense Account),which are hereby set aside for the payment of shall be payable from such date of authentication,(ii)the date of authentication is after a Record the Bonds.The Net Special Taxes and other amounts in the Special Tax Fund(exclusive of the Date but prior to the immediately succeeding Interest Payment Date,in which event interest shall be Administrative Expense Account)are hereby pledged to the payment of the principal of,premium,if payable from the Interest Payment Date immediately succeeding the date of authentication,or any,and interest on the Bonds. Such pledge shall constitute a first lien on such assets.Amounts in (iii)the date of authentication is prior to the close of business on the first Record Date occurring after the Special Tax Fund(other than the Administrative Expense Account therein)shall constitute a trust the issuance of such Bond,in which event interest shall be payable from the dated date of such Bond; fund held for the benefit of the Owners to be applied to the payment of the interest on and principal provided,however,that if at the time of authentication of such Bond,interest is in default,interest on of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or used for any other purpose,except as permitted by this Indenture or any Supplemental Indenture. made available for payment or,if no interest has been paid or made available for payment on that Notwithstanding any provision contained in this Indenture to the contrary,Special Taxes deposited in Bond,interest on that Bond shall be payable from its dated date. Interest on any Bond shall be paid the Administrative Expense Account of the Special Tax Fund,the Rebate Fund and the Surplus Fund to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the shall no longer be considered to be pledged to the Bonds;and none of the Rebate Fund,the Surplus close of business on the Record Date.Such interest shall be paid by check of the Trustee mailed by Fund,the Administrative Expense Account of the Special Tax Fund nor the Acquisition and first class mail,postage prepaid,to such Bondowner at his or her address as it appears on the Bond Construction Fund shall be construed as a trust fund held for the benefit of the Owners. Register. In addition,upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of$1,000,000 or more in principal amount of the Bonds,payment shall Nothing in this Indenture or any Supplemental Indenture shall preclude,subject to the be made on the Interest Payment Date by wire transfer in immediately available funds to an account limitations contained hereunder,the redemption prior to maturity of any Bonds subject to call and within the United States designated by such Owner. redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended,or under any other law of the State of California. Section 2.6. Form of Bonds.The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten.The Bonds and the certificate of authentication shall be Section 2.4. Description of Bonds;Interest Rates.The Bonds shall be issued in fully substantially in the form attached hereto as Exhibit A,which forms are hereby approved and adopted registered form in denominations of$5,000 or any integral multiple thereof.The Bonds shall be as the forms of such Bonds and of the certificate of authentication.Notwithstanding any provision in numbered as desired by the Trustee. this Indenture to the contrary,the District may,in its sole discretion,elect to issue the Bonds in book The Bonds shall be designated"TRUCKEE DONNER PUBLIC UTILITY DISTRICT entry form. COMMUNITY FACILITIES DISTRICT NO.03-1(OLD GREENWOOD),SPECIAL TAX Until definitive Bonds shall be prepared,the District may cause to be executed and delivered BONDS."The Bonds shall be dated as of the Delivery Date and shall mature and be payable on in lieu of such definitive Bonds temporary bonds in typed,printed,lithographed or engraved form September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear and in fully registered form,subject to the same provisions,limitations and conditions as are interest at the rates set forth in the table below payable on each Interest Payment Date: applicable in the case of definitive Bonds,except that they maybe in any denominations authorized by the District.Until exchanged for definitive Bonds any temporary bond shall be entitled and Maturity Date subject to the same benefits and provisions of this Indenture as definitive Bonds.If the District (September 1) Principal Amount Interest Rate issues temporary Bonds,it shall execute and furnish definitive Bonds without unnecessary delay and $ _% thereupon any temporary Bond may be surrendered to the Trustee at its office,without expense to the Owner,in exchange for a definitive Bond of the same maturity,interest rate and principal amount in 12 13 DOCS00 100098 5v4\2292 5.0009 DOC SOD 1000985v4\22925.0009 any authorized denomination.All temporary Bonds so surrendered shall be cancelled by the Trustee Section 2.10. Mutilated,Lost,Destroyed or Stolen Bonds.If any Bond shall become and shall not be reissued. mutilated,the District shall execute,and the Trustee shall authenticate and deliver,a new Bond of like tenor,date and maturity in exchange and substitution for the Bond so mutilated,but only upon Section 2.7. Execution and Authentication.The Bonds shall be signed on behalf of the surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the District by the manual or facsimile signatures of the President of the Board of Directors of the PUD Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond shall be lost, and the District Clerk,or any duly appointed deputy clerk. In case any one or more of the officers destroyed or stolen,evidence of such loss,destruction or theft may be submitted to the Trustee and,if who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed such evidence is satisfactory to the Trustee and,if any indemnity satisfactory to the District and the have been authenticated and delivered by the Trustee(including new Bonds delivered pursuant to the Trustee shall be given,the District shall execute and the Trustee shall authenticate and deliver,a new provisions hereof with reference to the transfer and exchange of Bonds or to lost,stolen,destroyed or Bond of like tenor and maturity,numbered and dated as the Trustee shall determine in lieu of and in mutilated Bonds),such Bonds shall nevertheless be valid and may be authenticated and delivered as substitution for the Bond so lost,destroyed or stolen. Any Bond issued in lieu of any Bond alleged to herein provided,and may be issued as if the person who signed such Bonds had not ceased to hold be mutilated,lost,destroyed or stolen,shall be equally and proportionately entitled to the benefits such office, hereof with all other Bonds issued hereunder.The Trustee shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Only the Bonds as shall bear thereon such certificate of authentication in the form set forth in Bonds which may be executed,authenticated and delivered hereunder or for the purpose of Exhibit A hereto shall be entitled to any right or benefit under this Indenture,and no Bond shall be determining any percentage of Bonds Outstanding hereunder,but both the original and replacement valid or obligatory for any purpose until such certificate of authentication shall have been duly Bond shall be treated as one and the same.Notwithstanding any other provision of this Section,in executed by the Trustee. lieu of delivering a new Bond which has been mutilated,lost,destroyed or stolen,and which has Section 2.8. Bond Register.The Trustee will keep or cause to be kept,at its office, matured,the Trustee may make payment with respect to such Bonds. sufficient books for the registration and transfer of the Bonds which shall upon reasonable prior Section 2.11. Validity of Bonds.The validity of the authorization and issuance of the notice be open to inspection by the District during all regular business hours,and,subject to the Bonds shall not be affected in any way by any defect in any proceedings taken by the District,or by limitations set forth in Section 2.9 below,upon presentation for such purpose,the Trustee shall, the invalidity,in whole or in part,of any contracts made by the District in connection therewith,and under such reasonable regulations as it may prescribe,register or transfer or cause to be transferred the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable on said Bond Register,Bonds as herein provided. laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. The District and the Trustee may treat the Owner of any Bond whose name appears on the Section 2.12. Book-Entry System. Bond Register as the absolute Owner of that Bond for any and all purposes,and the District and the Trustee shall not be affected by any notice to the contrary.The District and the Trustee may rely on (a) All Bonds shall be initially issued in the form of a separate single certificated fully the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be registered Bond for each maturity date of the Bonds.Upon initial issuance,the ownership of each the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner's Bond shall be registered in the Bond Register in the name of Cede&Co.,as nominee of DTC. address so that the Bond Register may be revised accordingly. Except as provided in Section 2.12(d)hereof,all Outstanding Bonds shall be registered in the Bond Section 2.9. Registration of Exchange or Transfer.Subject to the limitations set forth Register in the name of Cede&Co.,as nominee of DTC. in the following paragraph,the registration of any Bond may,in accordance with its terms,be (b) With respect to Bonds registered in the Bond Register in the name of Cede&Co.,as transferred upon the Bond Register by the person in whose name it is registered,in person or by his nominee of DTC,the District and the Trustee shall have no responsibility or obligation with respect or her duly authorized attorney,upon surrender of such Bond for cancellation at the office of the to(i)the accuracy of the records of DTC,Cede&Co.or any DTC Participant with respect to any Trustee,accompanied by delivery of a written instrument of transfer in a form approved by the ownership interest in the Bonds,(ii)the delivery to any DTC Participant or any other person,other Trustee and duly executed by the Bondowner or his or her duly authorized attorney. than an Owner,as shown in the Bond Register,of any notice with respect to the Bonds,including any notice of redemption,or(iii)the payment to any DTC Participant or any other person,other than an Bonds may be exchanged at the office of the Trustee for a like aggregate principal amount of Owner,as shown in the Bond Register,of any amount with respect to principal of,premium,if any, Bonds of other authorized denominations of the same maturity.The Trustee shall not collect from or interest on the Bonds.The District and the Trustee may treat and consider the person in whose the Owner any charge for any new Bond issued upon any exchange or transfer,but shall require the name each Bond is registered in the Bond Register as the holder and absolute owner of such Bond fc Bondowner requesting such exchange or transfer to pay any tax or other governmental charge the purpose of payment of principal,premium,if any,and interest on such Bond,for the purpose of required to be paid with respect to such exchange or transfer.Whenever any Bonds shall be giving notices of redemption and other matters with respect to such Bond,for the purpose of surrendered for registration of transfer or exchange,the District shall execute and the Trustee shall registering transfers with respect to such Bond,and for all other purposes whatsoever.The Trustee authenticate and deliver a new Bond or Bonds of the same maturity,for a like aggregate principal shall pay all principal of,premium,if any,and interest on the Bonds only to or upon the order of the amount;provided that the Trustee shall not be required to register transfers or make exchanges of respective Owners,as shown in the Bond Register,as provided in Section 2.8 hereof,or their (i)Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed,or respective attorneys duly authorized in writing,and all such payments shall be valid and effective to (ii)any Bonds chosen for redemption. fully satisfy and discharge the District's obligations with respect to payment of principal of, 14 15 DOCS00 1000985v4\22925.0009 DOCSOC\100098 5vtt2292 5.0009 mutual savings banks.The collateral must be held by a third parry and the Trustee on behalf of the (i) Bonds or notes issued by any state or municipality which are rated by both Rating Bondholders must have a perfected first security interest in the collateral; Agencies in one of the two highest rating categories assigned by such agencies; (f) Certificates of deposit,savings accounts,deposit accounts or money market deposits 0) Federal funds or bankers acceptances with a maximum term of one year of any bank which are fully insured by FDIC or which are with a bank rated AA or better by Standard&Poor's which has an unsecured,uninsured or unguaranteed obligation rating of"Prime-1"or"A3"or better and Aa or better by Moody's(including those of the Trustee and its affiliates); by Moody's and"A-1"or"A"or better by Standard&Poor's; (g) Investment Agreements with any corporation,including banking or financial (k) Repurchase agreements collateralized by Direct Obligations,GNMAs,FNMAs or institutions,provided that: FHLMCs with any registered broker/dealer subject to the Securities Investors'Protection Corporation jurisdiction or any commercial bank insured by the FDIC,if such broker/dealer or bank (i) the long-term debt of the provider of any such investment agreement,or in has an uninsured,unsecured and unguaranteed obligation rated"P-1"or"AY'or better by Moody's, the case of a guaranteed corporation the long-term debt of the guarantor,or in the case of a and"A-1"or"A"by Standard&Poor's;provided: monoline financial guaranty insurance company the claims paying ability,is rated,at the time of investment,in one of the two highest rating categories offered by each Rating Agency (i) a master repurchase agreement or specific written repurchase agreement (without regard to gradations of plus or minus,or numerical gradations,within such governs the transaction,and category),and (ii) the securities are held free and clear of any lien by the Trustee or an (ii) any such investment agreement shall include a provisions that in the event independent third parry acting solely as agent("Agent")for the Trustee,and such third party that the long-term debt rating or claims paying ability rating of the provider or the guarantor is(i)a Federal Reserve Bank,(ii)a bank which is a member of the Federal Deposit Insurance is downgraded below AA-by Standard&Poor's or Aa3 by Moody's during the term of the Corporation and which has combined capital,surplus and undivided profits of not less than agreement the provider must either(A)deliver to the Trustee or a third party custodian $50 million,or(iii)a bank approved in writing for such purpose by the District,and the collateral in the form of Unites States Treasury or agency obligations which at least equal Trustee shall have received written confirmation from such third party that it holds such 102%of the principal amount invested thereunder or(B)assign the existing agreement and securities,free and clear of any lien,as agent for the Trustee,and all of its obligations thereunder to a financial institution mutually acceptable to the provider, the District and the Trustee which is rated in one of the two highest rating categories offered (iii) a perfected first security interest under the Uniform Commercial Code,or by each Rating Agency(without regard to gradations of plus or minus,or numerical book entry procedures prescribed at 31 C.F.R.306.1 et seq.or 31 C.F.R.350.0 et seq.in such gradations,within such category),and securities is created for the benefit of the Trustee,and (iii) any such investment agreement shall include a provision that in the event that (iv) the Agent will value the collateral securities no less frequently than weekly the long-term debt rating or claims paying ability rating of the provider,or the guarantor,is and will liquidate the collateral securities if any deficiency in the required collateral downgraded below A-by Standard&Poor's or A3 by Moody's during the term of the percentage is not restored within two Business Days of such valuation,and agreement the provider must repay the principal of and accrued by it unpaid interest on the invested moneys,and (v) the fair market value of the securities in relation to the amount of the repurchase obligation,including principal and interest,is equal to at least 103%;and (iv) any such agreement shall include a provision to the effect that in the event of default under such Investment Agreement by such provider or in the event of a bankruptcy of (1) Any other investment which the District is permitted by law to make. such provider,the District has the right to withdraw or cause the Trustee to withdraw all funds invested in such agreement and thereafter to invest such funds pursuant to this To the extent that any of the requirements concerning Authorized Investments embodies a Indenture,and legal conclusion,the Trustee shall be entitled to conclusively rely upon a certificate from the appropriate party or an opinion from counsel to such party,that such requirement has been met. (v) any such investment agreement permits withdrawal upon not more than three (3)days notice(excepting only withdrawals from the Acquisition and Construction Fund, "Authorized Representative of the District"means the General Manager of the PUD,the from which withdrawals may be permitted upon not more than seven(7)days notice)for any Assistant General Manager of the PUD and any other person or persons designated by the legislative purpose authorized for the use of the invested funds under this Indenture; body of the District and authorized to act on behalf of the District by a written certificate signed by the President of the legislative body of the District and containing the specimen signature of each (h) Commercial paper rated,at the time ofpurchase,"Prime-1"by Moody's and"A-1" such person. or better by Standard&Poor's; "Bond Counsel"means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds 4 5 DOCSOC\1000985v4\22925.0009 DOCSOC\1000985v4�12925.0009 issued by states and their political subdivisions duly admitted to the practice of law before the highest "DTC Participants"means securities brokers and dealers,banks,trust companies,clearing court of any state of the United States of America or the District of Columbia. corporations and other organizations maintaining accounts with DTC. "Bond Register"means the books which the Trustee shall keep or cause to be kept on which "Federal Securities"means any of the following: the registration and transfer of the Bonds shall be recorded. (a) Cash, "Bondowner"or"Owner"means the person or persons in whose name or names any Bond is registered. (b) United States Treasury Certificates,Notes and Bonds(including State and Local Government Series—"SLGS"), "Bonds"means the District's S Special Tax Bonds issued pursuant to this Indenture. (c) Direct obligations of the U.S.Treasury which have been stripped by the U.S. Treasury itself,e.g.,CATS,TIGRS and similar securities, "Bond Year"means the twelve month period commencing on September 2 of each year and ending on September I of the following year,except that the first Bond Year for the Bonds shall (d) The interest component of Resolution Funding Corp.strips which have been stripped begin on the Delivery Date and end on the first September 1 which is not more than 12 months after by request to the Federal Reserve Bank of New York and are in book-entry form, the Delivery Date,provided that for purposes of Section 3.8"Bond Year"shall have the meaning ascribed thereto in the Tax Certificate. (e) Pre-refunded municipal bonds rated"Aaa"by Moody's and"AAA"by Standard& Poor's, "Business Day"means a day which is not a Saturday or Sunday or a day of the year on which banks in New York,New York,San Francisco,California,or the city where the corporate trust office (f) Obligations issued by the following agencies which are backed by the full faith and of the Trustee is located,are not required or authorized to remain closed. credit of the United States: "Certificate of the General Manager"means a written certificate or warrant request executed (i) U.S.Export-Import Bank-direct obligations or fully guaranteed certificates by the General Manager,or his or her written designee,on behalf of the District. of beneficial ownership, "Code"means the Internal Revenue Code of 1986,as amended,and any Regulations, (ii) Farmers Home Administration-certificates ofbeneficial ownership, rulings,judicial decisions,and notices,announcements,and other releases of the United States Treasury Department or Internal Revenue Service interpreting and construing it. (iii) Federal Financing Bank, "Costs of Issuance"means the costs and expenses incurred in connection with the issuance (iv) General Services Administration-participation certificates, and sale of the Bonds,including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses,costs of printing the Bonds and the preliminary and final official statements (v) U.S.Maritime Administration-guaranteed Title XI financing,and for the Bonds,fees of financial consultants,District formation and related administration costs and vi U.S.Department of Housing and Urban Development HUD project notes, all other related fees and expenses,as set forth in a Certificate of the General Manager. ( ) p g p (HUD)-p J local authority bonds,new communities debentures-U.S.government guaranteed "Costs oflssuance Account"means the Account by that name created and established in the debentures,U.S.Public Housing Notes and Bonds-U.S.government guaranteed public Acquisition and Construction Fund pursuant to Section 3.1. housing notes and bonds. "Delivery Date"means the date on which the Bonds issued and delivered to the initial "Fiscal Year"means the period beginning on July 1 of each year and ending on the next purchasers thereof. following June 30. "Developer"means Old Greenwood LLC and any successor thereto. "General Manager"means the General Manager of the PUD. . ,. "District"means Truckee Donner Public Utility District Community Facilities District "Gross Taxes"means the amount of all Special Taxes received by the District,together with No.03-1(Old Greenwood)established pursuant to the Act and the Resolution of Formation. the proceeds collected from the sale of property pursuant to the foreclosure provisions of this Indenture for the delinquency of such Special Taxes remaining after the payment of all the costs "DTC"means The Depository Trust Company,New York,New York,and its successors and related to such foreclosure actions,including,but not limited to,all legal fees and expenses,court assigns. costs,consultant and title insurance fees and expenses. 6 7 D0CS0C\1000985v4122925.0009 DOCSOC\1000985v4\22925.0009