NEW ISSUE NOT RATED LIMITED OFFERING

Transcription

1 NEW ISSUE LIMITED OFFERING Dated: March 1, 2003 Portofino Isles Community Development District (Port St. Lucie, Florida) $7,135,000 Special Assessment Bonds, Series 2003A and $520,000 Special Assessment Bonds, Series 2003B NOT RATED Due: May 1, as shown on the inside cover The Portofino Isles Community Development District Special Assessment Bonds, Series 2003A (the Series 2003A Bonds ) and Special Assessment Bonds, Series 2003B (the Series 2003B Bonds and collectively with the Series 2003A Bonds, the Bonds ) are being issued by the Portofino Isles Community Development District (the District or the Issuer ), a local unit of special purpose government organized and existing under the laws of the State of Florida, in fully registered form, without coupons, in denominations of $50,000 and multiples of $5,000 in excess thereof (except in the case of partial redemption as described herein). The Bonds, when issued, will be registered in the name of Cede & Co., as the bond owner and nominee for The Depository Trust Company ( DTC ), New York, New York. Purchase of beneficial interests in the Bonds will be made in book-entry only form. Accordingly, principal of and interest on the Bonds will be paid from the sources provided below by Wachovia Bank, National Association (the Trustee ) directly to Cede & Co. as the nominee of DTC and the registered owner thereof. Disbursements of such payments to the DTC Participants is the responsibility of DTC and disbursements of such payments to the beneficial owners is the responsibility of DTC Participants and the Indirect Participants, as more fully described herein. Any purchaser as a beneficial owner of a Bond must maintain an account with a broker or dealer who is, or acts through, a DTC Participant to receive payment of the principal of and interest on such Bond. See DESCRIPTION OF THE BONDS Book-Entry Only System herein. The Bonds will bear interest at the fixed rates set forth below, calculated on the basis of a 360-day year comprised of twelve thirty-day months. Interest on the Bonds is payable semiannually on each May 1 and November 1, commencing November 1, The Bonds are being issued by the District pursuant to the Uniform Community Development District Act of 1980, Chapter 190, Florida Statutes (the Act ), certain resolutions of the District and a Trust Indenture, dated as of March 1, 2003 (the Indenture ), by and between the District and the Trustee. The Series 2003A Bonds are equally and ratably secured under the Indenture by a lien upon and pledge of the revenues derived by the District from the special assessments (the 2003A Assessments ) levied upon lands within the District specially benefited by the infrastructure improvements to be financed by the District from the proceeds of the Series 2003A Bonds (as more particularly described under THE PROJECT herein and Appendix A attached hereto). The Series 2003A Bonds are additionally secured by amounts on deposit in the funds and accounts, other than the Rebate Fund, created for the benefit of the Series 2003A Bonds pursuant to the Indenture (together with the 2003A Assessments, the Series 2003A Pledged Revenues ). The Series 2003B Bonds are equally and ratably secured under the Indenture by a lien upon and pledge of the revenues derived by the District from the special assessments (the 2003B Assessments and collectively with the 2003A Assessments, the Special Assessments ) levied upon lands within the District specially benefited by the infrastructure improvements to be financed by the District from the proceeds of the Series 2003B Bonds (as more particularly described under THE PROJECT herein and Appendix A attached hereto). The Series 2003B Bonds are additionally secured by amounts on deposit in the funds and accounts, other than the Rebate Fund, created for the benefit of the Series 2003B Bonds pursuant to the Indenture (together with the 2003B Assessments, the Series 2003B Pledged Revenues and collectively with the Series 2003A Pledged Revenues, the Pledged Revenues ). Pursuant to the Indenture, certain of the Bonds are subject to optional, mandatory sinking fund and extraordinary mandatory redemption at the times, in the amounts and at the redemption price as more fully described herein under the caption DESCRIPTION OF THE BONDS Redemption Provisions herein. THE BONDS OF EACH SERIES ARE LIMITED OBLIGATIONS OF THE DISTRICT SECURED SOLELY BY AND PAYABLE FROM THE SERIES PLEDGED REVENUES PLEDGED THEREFOR UNDER THE INDENTURE AND NEITHER THE PROPERTY, THE FULL FAITH AND CREDIT, NOR THE TAXING POWER OF THE DISTRICT, THE CITY OF PORT ST. LUCIE, FLORIDA, ST. LUCIE COUNTY, FLORIDA, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED AS SECURITY FOR THE PAYMENT OF THE BONDS, EXCEPT THAT THE DISTRICT IS OBLIGATED UNDER THE INDENTURE TO LEVY AND TO COLLECT OR CAUSE TO BE COLLECTED, SERIES SPECIAL ASSESSMENTS TO SECURE AND PAY THE BONDS OF EACH SERIES. THE BONDS OF EACH SERIES DO NOT CONSTITUTE A GENERAL OBLIGATION OR INDEBTEDNESS OF THE DISTRICT, THE CITY OF PORT ST. LUCIE, FLORIDA, ST. LUCIE COUNTY, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION. THE BONDS ARE NOT SECURED BY A LIEN ON THE PROJECT OR ON ANY OTHER PROPERTY OF OR IN THE DISTRICT BUT ARE SECURED ONLY BY A LIEN UPON THE PLEDGED REVENUES IN THE MANNER PROVIDED IN THE INDENTURE. THE SERIES 2003A BONDS ARE NOT SECURED BY THE SERIES 2003B PLEDGED REVENUES AND THE SERIES 2003B BONDS ARE NOT SECURED BY THE SERIES 2003A PLEDGED REVENUES. NO APPLICATION HAS BEEN MADE FOR A RATING WITH RESPECT TO THE BONDS, AND IT IS UNLIKELY THAT AN INVESTMENT GRADE RATING WOULD HAVE BEEN OBTAINED HAD APPLICATION BEEN MADE. THE UNDERWRITER IS LIMITING THIS OFFERING TO ACCREDITED INVESTORS. SEE BOND OWNERS RISKS, ABSENCE OF RATINGS AND SUITABILITY FOR INVESTMENT HEREIN. This cover page contains information for quick reference only. It is not a summary of the Bonds. Investors must read the entire Limited Offering Memorandum to obtain information essential to the making of an informed investment decision. In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law (i) assuming continuing compliance with certain covenants and the accuracy of certain representations, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; and (ii) the Bonds and the income thereon are exempt from taxation under the laws of the State of Florida, except estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. Interest on the Bonds may be subject to certain federal taxes imposed only on certain corporations, including the corporate alternative minimum tax on a portion of that interest. For a more complete discussion of tax aspects, see TAX MATTERS herein. The Bonds are offered for delivery when, as and if issued by the District and accepted by the Underwriter, subject to prior sale, withdrawal or modification of the offer with written notice and subject to the approval of legality by Squire, Sanders & Dempsey, L.L.P., Bond Counsel. Lewis, Longman & Walker, P.A., West Palm Beach, Florida, is serving as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Shughart Thomson & Kilroy, P.C., Denver, Colorado; for the District by its counsel, Lewis, Longman & Walker, P.A., West Palm Beach, Florida; and for the Trustee by its counsel, Holland & Knight, Miami, Florida. RBC Dain Rauscher, Fort Lauderdale, Florida is financial advisor to the District. It is expected that settlement for the Bonds will occur through the facilities of The Depository Trust Company in New York, New York, on or about March 10, Dated: March 5, 2003

2 MATURITIES, AMOUNTS, INTEREST RATES AND PRICES $7,135,000 Special Assessment Bonds, Series 2003A $7,135, % Term Bond due May 1, 2033 Priced to Yield 100% (Accrued interest from March 1, 2003 to be added) $520,000 Special Assessment Bonds, Series 2003B $520, % Term Bond due May 1, 2006 Priced to Yield 100% (Accrued Interest from March 1, 2003 to be added)

3 PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT N.W. 11th Manor Coral Springs, FL (954) BOARD OF SUPERVISORS Larry M. Abbo, Chairman Steven M. Glassman, Vice Chairman Steven B. Greenfield, Supervisor Charles D. Brecker, Supervisor John Culleton, Supervisor DISTRICT MANAGER / ASSESSMENT CONSULTANT Severn Trent Services, Inc. Coral Springs, Florida DISTRICT COUNSEL / DISCLOSURE COUNSEL Lewis, Longman & Walker, P.A. West Palm Beach, Florida BOND COUNSEL Squire, Sanders & Dempsey, L.L.P. Jacksonville, Florida DISTRICT ENGINEERS Culpepper & Terpening, Inc. Ft. Pierce, Florida TRUSTEE Wachovia Bank, National Association Miami, Florida FINANCIAL ADVISOR RBC Dain Rauscher Inc.

4 REGARDING USE OF THIS LIMITED OFFERING MEMORANDUM The Underwriter has provided the following sentence for inclusion in this Limited Offering Memorandum. The Underwriter has reviewed the information in this Limited Offering Memorandum in accordance with, and as part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. No dealer, broker, salesman or other person has been authorized by the District, the State of Florida or the Underwriter to give any information or to make any representations other than those contained in this Limited Offering Memorandum, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This Limited Offering Memorandum does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information set forth herein has been obtained from the District, the District Engineer, the District Manager, the Financial Advisor, Disclosure Counsel, the Developer and other sources that are believed by the Underwriter to be reliable. The District, the District Engineer, the District Manager, the Financial Advisor, Disclosure Counsel and the Developer will all, at closing, deliver certificates certifying that the information each supplied does not contain any untrue statement of a material fact or omit to state a material fact required to be stated herein or necessary to make the statements herein, in light of the circumstances under which they were made, not misleading. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change with respect to the matters described herein since the date hereof. THE UNDERWRITER IS LIMITING THIS OFFERING TO ACCREDITED INVESTORS AS THAT TERM IS DEFINED IN CHAPTER 517, FLORIDA STATUTES. SEE APPENDIX G HERETO FOR THE DEFINITION OF ACCREDITED INVESTOR. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR HAS THE INDENTURE BEEN QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON CERTAIN EXEMPTIONS SET FORTH IN SUCH ACTS. THE REGISTRATION, QUALIFICATION OR EXEMPTION OF THE BONDS IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAW PROVISIONS OF ANY JURISDICTIONS WHEREIN THESE SECURITIES HAVE BEEN OR WILL BE REGISTERED, QUALIFIED OR EXEMPTED SHOULD NOT BE REGARDED AS A RECOMMENDATION THEREOF. NEITHER THE STATE OF FLORIDA, ST. LUCIE COUNTY, FLORIDA, THE CITY OF PORT ST. LUCIE, FLORIDA, THE DISTRICT NOR ANY OF THEIR AGENCIES HAVE GUARANTEED OR PASSED UPON THE MERITS OF THE BONDS, UPON THE PROBABILITY OF ANY EARNINGS THEREON OR UPON THE ACCURACY OR ADEQUACY OF THIS LIMITED OFFERING MEMORANDUM.

5 TABLE OF CONTENTS Contents Page INTRODUCTION...3 DESCRIPTION OF THE BONDS...6 GENERAL...6 BOOK-ENTRY ONLY SYSTEM...7 DISCONTINUANCE OF SECURITIES DEPOSITORY...9 REDEMPTION PROVISIONS...9 NO ACCELERATION...13 SECURITY FOR AND SOURCE OF PAYMENT OF THE BONDS...13 GENERAL...13 SPECIAL ASSESSMENTS...15 NO PARITY BONDS; PRIORITY OF PAYMENT...15 ADDITIONAL BONDS...15 DEBT SERVICE RESERVE FUND...16 DEPOSIT AND APPLICATION OF PLEDGED REVENUES...17 INVESTMENTS...19 ENFORCEMENT OF PAYMENT OF SPECIAL ASSESSMENTS...19 THE SPECIAL ASSESSMENTS...19 GENERAL...20 COLLECTION...20 METHODOLOGY...21 PREPAYMENT...21 ADJUSTMENTS TO SPECIAL ASSESSMENTS...22 COLLECTION AND ENFORCEMENT PROCEDURES...22 BOND OWNERS RISKS...27 ESTIMATED SOURCES AND USES OF FUNDS...31 DEBT SERVICE REQUIREMENTS...33 THE DISTRICT...35 GENERAL...35 LEGAL POWERS AND AUTHORITY...35 BOARD OF SUPERVISORS...36 DISTRICT MANAGEMENT...37 THE PROJECT...38 THE DEVELOPMENT AND THE DEVELOPER...38 THE DEVELOPER...38 THE BUILDERS...40 THE DEVELOPMENT...40 COMPETITION...40 DEVELOPMENT STATUS...41 UTILITIES...42 PROPERTY TAXES AND OTHER ASSESSMENTS...42 i

6 TAX MATTERS...43 AGREEMENT BY THE STATE...44 NO FINANCIAL STATEMENTS...44 VALIDATION...45 EXPERTS AND CONSULTANTS...45 LITIGATION...45 CONTINGENT AND OTHER FEES...46 LEGAL MATTERS...46 SUITABILITY FOR INVESTMENT...46 ABSENCE OF RATINGS...46 CONTINUING DISCLOSURE...46 UNDERWRITING...47 MISCELLANEOUS...48 Appendix A District Engineer s Report A-1 Appendix B Special Assessment Methodology Report B-1 Appendix C Form of Indenture C-1 Appendix D Form of Opinion of Bond Counsel D-1 Appendix E Form of Continuing Disclosure Agreement E-1 Appendix F General Information Pertaining to the City of Port St. Lucie and St. Lucie County, Florida F-1 Appendix G Accredited Investor Definition G-1 ii

7 PRELIMINARY LIMITED OFFERING MEMORANDUM PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT (Port St. Lucie, Florida) $7,135,000 Special Assessment Bonds, Series 2003A and $520,000 Special Assessment Bonds, Series 2003B INTRODUCTION The purpose of this Limited Offering Memorandum, including the cover page and appendices hereto, is to set forth certain information in connection with the offering and issuance by the Portofino Isles Community Development District (the District or the Issuer ) of its $7,135,000 Special Assessment Bonds, Series 2003A (the Series 2003A Bonds ) and its $520,000 Special Assessment Bonds, Series 2003B (the Series 2003B Bonds and collectively with the Series 2003A Bonds, the Bonds ). The District was established by Ordinance of the City Council of the City of Port St. Lucie pursuant to the Uniform Community Development District Act of 1980, Chapter 190, Florida Statutes (the Act ). The Bonds are being issued pursuant to the Act and a Trust Indenture, dated as of March 1, 2003 (the Indenture ), by and between the District and Wachovia Bank, National Association, Miami, Florida, as Trustee (the Trustee ), and resolutions adopted by the Board of Supervisors of the District authorizing the issuance of the Bonds. All capitalized terms used in this Limited Offering Memorandum that are defined in the Indenture and not defined herein shall have the respective meanings set forth in the Indenture (see Appendix C - Form of The Indenture attached hereto). The principal of, redemption premium, if any, and interest on the Series 2003A Bonds are secured equally and ratably by a first lien upon and pledge of: (i) the revenues derived by the District from the special assessments levied and collected on the District Lands which special assessments the District has levied pursuant to Resolution adopted by the Board of Supervisors of the District (the Board ) on October 14, 2002 and Resolution adopted by the Board on December 3, 2002 (collectively, the Assessment Resolutions ) to secure the Series 2003A Bonds (the 2003A Assessments ), including amounts received from any foreclosure proceeding for the enforcement of collection of such 2003A Assessments or from the issuance and sale of tax certificates with respect to such 2003A Assessments, and (ii) all moneys on deposit in the Funds and Accounts created for the benefit of the Series 2003A Bonds established under the Indenture (collectively with the 2003A Assessments, the Series 2003A Pledged Revenues ); provided however that Series 2003A Pledged Revenues do not include special assessments levied and collected by the District for operation and maintenance purposes or any moneys in the Rebate Fund established under the Indenture. See SECURITY FOR AND SOURCE OF PAYMENT OF THE BONDS herein. The principal of, redemption premium, if any, and interest on the Series 2003B Bonds are secured equally and ratably by a first lien upon and pledge of: (i) the revenues derived by the District from the special assessments levied and collected on the District Lands which special assessments the District has levied pursuant to the Assessment Resolutions to secure the Series 3

8 2003B Bonds (the 2003B Assessments ), including amounts received from any foreclosure proceeding for the enforcement of collection of such 2003B Assessments or from the issuance and sale of tax certificates with respect to such 2003B Assessments, and (ii) all moneys on deposit in the Funds and Accounts created for the benefit of the Series 2003B Bonds established under the Indenture (collectively with the 2003B Assessments, the Series 2003B Pledged Revenues, and, collectively with the Series 2003A Pledged Revenues, the Pledged Revenues ); provided however that Series 2003B Pledged Revenues do not include special assessments levied and collected by the District for operation and maintenance purposes or any moneys in the Rebate Fund established under the Indenture. See SECURITY FOR AND SOURCE OF PAYMENT OF THE BONDS herein. THE BONDS OF EACH SERIES ARE LIMITED OBLIGATIONS OF THE DISTRICT SECURED SOLELY BY AND PAYABLE FROM THE SERIES PLEDGED REVENUES PLEDGED THEREFOR UNDER THE INDENTURE AND NEITHER THE PROPERTY, THE FULL FAITH AND CREDIT, NOR THE TAXING POWER OF THE DISTRICT, THE CITY OF PORT ST. LUCIE, FLORIDA, ST. LUCIE COUNTY, FLORIDA, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED AS SECURITY FOR THE PAYMENT OF THE BONDS, EXCEPT THAT THE DISTRICT IS OBLIGATED UNDER THE INDENTURE TO LEVY AND TO EVIDENCE AND CERTIFY, OR CAUSE TO BE CERTIFIED, FOR COLLECTION, SERIES SPECIAL ASSESSMENTS TO SECURE AND PAY THE BONDS OF THE RESPECTIVE SERIES. THE BONDS DO NOT CONSTITUTE A GENERAL OBLIGATION OR INDEBTEDNESS OF THE DISTRICT, THE CITY OF PORT ST. LUCIE, FLORIDA, ST. LUCIE COUNTY, FLORIDA, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION. THE SERIES 2003A BONDS ARE NOT SECURED BY THE SERIES 2003B PLEDGED REVENUES AND THE SERIES 2003B BONDS ARE NOT SECURED BY THE SERIES 2003A PLEDGED REVENUES. The Bonds are not a suitable investment for all investors (see SUITABILITY FOR INVESTMENT and BOND OWNERS RISKS herein). The Underwriter is limiting the offering of the bonds to accredited investors as that term is defined in Section , Florida Statutes (see Appendix G attached hereto). Prospective investors in the Bonds are invited to contact the Underwriter, visit the District, ask questions of representatives of the Developer (as hereinafter defined) and representatives of the District and to request documents, instruments and information which may not necessarily be referred to, summarized or described herein. Therefore, prospective investors should use the information appearing in this Limited Offering Memorandum within the context of, and in conjunction with, such additional information. The District was established for the purpose of delivering specialized services and facilities described in the Act, including roads, water, sewer and drainage. The Act authorizes the District to issue Bonds for the purpose, among others, of financing, funding, planning, establishing, acquiring, constructing or reconstructing, enlarging or extending, equipping, operating and maintaining facilities relating to such services, and other basic infrastructure projects within or without the boundaries of the District, all as provided in the Act. 4

9 The District encompasses approximately acres of land entirely within the jurisdictional boundaries of the City of Port St. Lucie, Florida, of which approximately acres are deemed specially benefited by the Project and will, initially, be subject to the Special Assessments. The balance of the acreage in the District is comprised of wetlands, lakes, roads, open space, library facilities and easement areas which are not subject to Special Assessments. For more complete information about the District, its Board of Supervisors and the District Manager, see THE DISTRICT herein. The Bonds are being issued in order to finance the construction and acquisition of certain roadways, surface water management system, water distribution system, wastewater collection and transmission facilities (collectively, the Project ). See THE PROJECT herein. The Project will benefit certain residential and commercial property within a real estate development known as Portofino Isles (the Development ). The District is included completely within the boundaries of the Development. The Development is being developed by Prime Homes at Portofino Isles, Ltd., a Florida limited partnership (the Developer ). See THE DEVELOPMENT AND THE DEVELOPER herein. In addition to funding the Project, proceeds of the Bonds will also be used to fund the Debt Service Reserve Fund, to capitalize approximately seven (7) months of interest accruing on the Bonds and to pay costs of issuing and delivering the Bonds. See ESTIMATED SOURCES AND USES OF BOND PROCEEDS herein. The Indenture provides that the District will not issue any obligations other than the Bonds, and any Completion Bonds or refunding bonds relating thereto, payable from the Pledged Revenues nor voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge payable from the Pledged Revenues, except in the ordinary course of business. See SECURITY FOR AND SOURCE OF PAYMENT OF THE BONDS herein. The City of Port St. Lucie and St. Lucie County, as well as the District and other public entities impose taxes and/or other assessments on the same properties encumbered by the Special Assessments. The consent of the owners of the Bonds is not required with respect to the levy and imposition of these and other taxes and/or assessments that may be imposed in the future. See BOND OWNERS RISKS and THE DEVELOPMENT AND DEVELOPER- Millage herein. The District and the Developer will each enter into a Continuing Disclosure Agreement in order to comply with the continuing disclosure requirements contained in Securities and Exchange Commission Rule 15c2-12. See CONTINUING DISCLOSURE herein and Appendix E hereto. There follows in this Limited Offering Memorandum a brief description of the District, the Project, the Developer, the Builders and the Development, together with summaries of the terms of the Bonds, the Indenture and certain provisions of the Act. All references herein to the Indenture and the Act are qualified in their entirety by reference to such documents and statutes and all references to the Bonds are qualified by reference to the definitive forms thereof and the provisions with respect thereto contained in the Indenture. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Indenture. The Indenture 5

10 appears as Appendix C hereto. The information herein under the captions THE DEVELOPMENT AND THE DEVELOPER and THE BUILDERS has been furnished by the Developer and has not been independently verified by the District or the Underwriter. This Limited Offering Memorandum speaks only as of its date and the information contained herein is subject to change. General DESCRIPTION OF THE BONDS The Bonds are being issued in fully registered form in denominations of $5,000 and any integral multiple of $5,000 in excess thereof (except (a) that the Bonds are initially issuable only in denominations of $50,000 and increments of $5,000 in excess thereof, and (2) in the case of a partial redemption in which case any Bond may be in a denomination of less than $50,000), and may be sold or otherwise transferred only to Accredited Investors. (See SUITABILITY FOR INVESTMENT herein and Appendix G for the definition of Accredited Investor ). The Bonds will be dated March 1, 2003, and will bear interest from that date at the fixed rate per annum set forth on the cover page and will mature, subject to the redemption provisions set forth below, on the date and in the amount set forth on the inside cover page hereof. Interest on the Bonds shall be payable from this date or from the most recent interest payment date to which interest has been paid next preceding their date of authentication, unless any such Bond is authenticated as of a November 1 or May 1 to which interest has been paid, in which case it will bear interest from such authentication date, or unless a Bond is authenticated between a Record Date and the next succeeding interest payment date, in which event such Bond will bear interest from such interest payment date. Interest on the Bonds will be computed on the basis of a 360- day year consisting of twelve (12) thirty day months and will be payable semiannually on each May 1 and November 1, commencing November 1, Interest on the Bonds will be payable by check or draft mailed to the person in whose name the Bond is registered at the close of business on the fifteenth day preceding an Interest Payment Date. Any Owner of Bonds in an aggregate principal amount of at least $1,000,000 shall be entitled to have interest paid by wire transfer to such registered owner to the bank account number on file with the Trustee and Paying Agent, upon requesting the same in a writing received by the Trustee and Paying Agent at least 15 days prior to Record Date, which writing shall specify the bank, which shall be a bank in the United States, and bank account number to which interest payments are to be wired. The principal or redemption price of the Bonds will be payable in lawful money of the United States of America at the designated corporate trust office of Wachovia Bank, National Association, Miami, Florida, the Paying Agent, upon the presentation and surrender of such Bonds as the same is due and payable. If all of the Bonds are registered in the name of one (1) owner, the Bonds will not be required to be presented and surrendered for partial payment of the Bonds, if such owner and the Trustee agree that evidence of such payment will be evidenced by the records of the Trustee. 6

11 Book-Entry Only System The Depository Trust Company ( DTC ), New York, New York, or its successor 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 Bond certificate for each maturity will be issued in the aggregate principal amount of such maturity and will be deposited with DTC. So long as Cede & Co. is the Registered Owner of the Bonds, payments of the principal of and interest due on the Bonds will be payable directly to DTC. References herein to the Registered Owners of the Bonds shall mean DTC or Cede & Co., and shall not mean the Beneficial Owners referred to below. Certain portions of the following information has been furnished by DTC. DTC is a limited purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds securities that its participants (the Participants ) deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in the Participant s accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (the Indirect Participants ). The rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of the Bonds (the Beneficial Owner ) is in turn to be recorded on the Direct and Indirect Participant s records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Participants acting on behalf of the Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interest in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. No Bonds will be registered in the names of the Beneficial Owners, except in the event participation in the book-entry system is discontinued as described below. To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered in the name of DTC s partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. 7

12 DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Redemption notices will 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. 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). Principal and interest payments on the Bonds will be made to DTC. DTC s practice is to credit Direct Participants accounts on the payable date in accordance with their respective holdings shown on DTC s records unless DTC has reason to believe that it will not receive payment on the payable date. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Paying Agent or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of principal and interest to DTC is the responsibility of the District or the Paying Agent, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event that a successor securities depository is not obtained, Bond certificates will be printed and delivered to the registered holder. The District may decide to discontinue use of the book-entry only system for transfers through DTC (or a successor securities depository). In such event, Bond certificates will be printed and delivered to the Beneficial Owners. The information in this section concerning DTC and DTC s book-entry only system has been obtained from DTC. Neither the District, the Paying Agent nor the Underwriter makes any representation or warranty regarding the accuracy or completeness thereof. SO LONG AS CEDE & CO., AS NOMINEE FOR DTC, IS THE SOLE REGISTERED OWNER, THE DISTRICT AND THE PAYING AGENT SHALL TREAT 8

13 CEDE & CO. AS THE ONLY OWNER OF THE BONDS FOR ALL PURPOSES UNDER THE INDENTURE INCLUDING RECEIPT OF ALL PRINCIPAL OF AND INTEREST ON THE BONDS, RECEIPT OF NOTICES, VOTING AND REQUESTING OR DIRECTING THE DISTRICT AND THE PAYING AGENT TO TAKE OR NOT TO TAKE, OR CONSENTING TO, CERTAIN ACTIONS UNDER SUCH INDENTURE. THE DISTRICT AND THE PAYING AGENT HAVE NO RESPONSIBILITY OR OBLIGATION TO THE PARTICIPANTS OR THE BENEFICIAL OWNERS WITH RESPECT TO (A) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY PARTICIPANT; (B) THE PAYMENT BY ANY PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER WITH RESPECT TO THE PRINCIPAL OF AND INTEREST ON THE BONDS; (C) THE DELIVERY OR TIMELINESS OF DELIVERY BY ANY PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN TO BONDHOLDERS; (D) THE SELECTION BY DTC OR ANY DTC PARTICIPANT OR INDIRECT PARTICIPANT OF ANY BENEFICIAL OWNER TO RECEIVE PAYMENT IN THE EVENT OF A PARTIAL REDEMPTION OF THE BONDS; OR (E) OTHER ACTION TAKEN BY DTC OR CEDE & CO., AS REGISTERED OWNER. Discontinuance of Securities Depository DTC may discontinue providing its services with respect to the Bonds at any time by giving notice to the District and discharging its responsibilities with respect thereto under applicable law, or the District may terminate its participation in the system of book-entry transfers through DTC at any time. In the event that the DTC book-entry only system is discontinued and it is not replaced with another book-entry system, the following provisions will apply: principal of the Bonds and redemption premium, if any, thereon will be payable in lawful money of the United States of America at the principal office of Wachovia Bank, National Association, as Paying Agent, in Miami, Florida (the Paying Agent ). Interest on the Bonds will be payable on each May 1 and November 1 by check or draft mailed to the respective addresses of the Registered Owners thereof as shown on the registration books of the District maintained by the Registrar as of 5:00 P.M. Eastern Time on the record date therefor as set forth in the Indenture; provided, however, that the Registered Owner of any Bond in the principal amount of $1,000,000 or more may, upon written request made to the Registrar and at the expense of such Registered Owner, direct that payment of interest thereon be made by wire transfer or any other medium acceptable to the District and to such Registered Owner, all as more specifically provided in the Indenture. The transfer of the Bonds will be registrable and they may be exchanged at the principal office of the Registrar, upon the payment of any taxes, fees or other governmental charges required to be paid with respect to such transfer or exchange. Redemption Provisions The Bonds shall be subject to redemption at the times and in the manner described below. Except as otherwise provided in the Indenture, if less than all the Bonds are to be redeemed pursuant to an Extraordinary Mandatory Redemption, the Trustee shall select the Bonds or portions of the Bonds to be redeemed pro rata between the Series 2003A Bonds and the Series 9

14 2003B Bonds based on the original principal amounts of each Series and within each Series, by lot. Partial redemptions of Bonds shall be made in such a manner that the remaining Bonds held by each Bondholder shall be in Authorized Denominations, except for the last remaining Bond of each series. Optional Redemption. (i) Series 2003A Bonds. The Series 2003A Bonds may, at the option of the District be called for redemption prior to maturity as a whole, at any time, or in part on any Interest Payment Date, on or after May 1, 2013 (less than all Series 2003A Bonds to be selected by lot), at the Redemption Prices (expressed as percentages of principal amount) set forth in the following table plus accrued interest from the most recent Interest Payment Date to the redemption date: Redemption Periods (Dates Inclusive) Redemption Prices May 1, 2013 and thereafter 100% (ii) Series 2003B Bonds. The Series 2003B Bonds are not subject to redemption prior to maturity at the option of the District. Extraordinary Mandatory Redemption in Whole or in Part. The Bonds are subject to extraordinary mandatory redemption prior to maturity by the District in whole, on any date, or in part, on any Interest Payment Date, at an extraordinary mandatory redemption price equal to 100% of the principal amount of the Bonds to be redeemed, plus interest accrued to the redemption date, as follows: (i) Series 2003A Bonds are redeemable from Series 2003A Prepayment Principal deposited into the Series 2003A Prepayment Subaccount in the Series 2003A Redemption Account of the Bond Redemption Fund following the payment in whole or in part of Special Assessments on any portion of the District Lands in accordance with the Indenture. (ii) Series 2003A Bonds are redeemable from moneys, if any, on deposit in the Series 2003A Accounts and Subaccounts in the Funds and Accounts (other than the Rebate Fund) sufficient to pay and redeem all Series 2003A Outstanding Bonds, and accrued interest thereon to the redemption date or dates in addition to all amounts owed to Persons under the Indenture. (iii) The Bonds are redeemable on or after the Completion Date of the Project, by application of moneys remaining in the Construction Fund not reserved by the District for the payment of any remaining part of the Cost of the Project, and by application of any moneys remaining in the Series 2003A Capitalized Interest Subaccount or the Series 2003B Capitalized Interest Subaccount representing Capitalized Interest in excess of the amount required to pay interest on the Series 2003A Bonds through November 1, 2003, or the Series 2003B through 10

15 November 1, 2003, as the case may be, all of which shall be transferred to the Series 2003A General Account or the Series 2003B General Account of the Series 2003 Bond Redemption Fund pursuant to the Indenture, and applied by the District toward the redemption of the Series 2003A Bonds and/or the Series 2003B Bonds in accordance with the manner it has credited such excess moneys toward extinguishment of Series 2003A Special Assessments and/or Series 2003B Special Assessments which the District shall describe to the Trustee in writing. (iv) The Bonds are redeemable from excess moneys transferred from the Series 2003A Revenue Subaccount and the Series 2003B Revenue Subaccount to the Series 2003A and Series 2003B General Accounts of the Bond Redemption Fund, respectively, in accordance with the Indenture. (v) The Bonds are redeemable following condemnation or the sale of any portion of the Project to a governmental entity under threat of condemnation by such governmental entity and the payment of moneys which are not to be used to rebuild, replace or restore the taken portion of the Project to the Trustee by or on behalf of the District for deposit into the Series 2003A General Account or the Series 2003B General Account of the Bond Redemption Fund in order to effectuate such redemption and applied by the District to redeem Series 2003A Bonds or Series 2003B Bonds in accordance with the manner it has credited such moneys toward extinguishment of Series 2003A Special Assessments and/or Series 2003B Special Assessments which the District shall describe to the Trustee in writing. (vi) The Bonds are redeemable following the damage or destruction of all or substantially all of the Project to such extent that, in the reasonable opinion of the District, the repair and restoration thereof would not be economical or would be impracticable, to the extent of amounts paid by the District to the Trustee for deposit to the Series 2003A General Account or the Series 2003B General Account of the Bond Redemption Fund and applied by the District to redeem Series 2003A Bonds or Series 2003B Bonds in accordance with the manner it has credited such moneys toward extinguishment of Series 2003A Special Assessments and/or Series 2003B Special Assessments; provided, however, that at least forty-five (45) days prior to such extraordinary mandatory redemption, the District shall cause to be delivered to the Trustee (x) notice setting forth the redemption date and (y) a certificate of the Consulting Engineer confirming that the repair and restoration of the Project would not be economical or would be impracticable. (vii) At such time, if any, that the Deferred Acquisition Amount has been paid, Series 2003B Bonds are redeemable from amounts on deposit in the Series 2003B Debt Service Reserve Account in excess of the Debt Service Reserve Requirement for the Series 2003B Bonds, respectively, and transferred to the Series 2003B Prepayment Subaccount of the Series 2003B Redemption Account of the Bond Redemption Fund in accordance with the Indenture to be used, together with any Special Assessment prepayments on deposit in the Series 2003B Prepayment Subaccount of the Series 2003B Redemption Account of the Bond Redemption Fund, for the Extraordinary Mandatory Redemption of the Series 2003B Bonds. (It is anticipated that Series 2003B Special Assessment prepayments may occur within a short period of time after issuance of the Bonds.) 11

16 Mandatory Bond Amortization Redemption. The Series 2003A Bonds are subject to mandatory redemption in part by the District by lot prior to their scheduled maturity from moneys in the Series 2003A Bond Amortization Account in satisfaction of applicable Amortization Installments at the Redemption Price of 100% of the principal amount thereof, without premium, together with accrued interest to the date of redemption on May 1 of the years and in the principal amounts set forth below: Year (May 1) Principal Amount Year (May 1) Principal Amount 2004 $80, $210, , , , , , , , , , , , , , , , , , , , , , , , , , , , * 525,000 * Maturity. The Series 2003B Bonds are not subject to mandatory Bond Amortization Account redemption. Notice of Redemption or Purchase. When required to redeem or purchase Bonds under any provision of the Indenture or directed to do so by the Issuer, the Trustee shall cause notice of the redemption, either in whole or in part, to be mailed at least thirty (30) but not more than sixty (60) days prior to the redemption or purchase date to all Owners of Bonds to be redeemed or purchased as such Owners appear on the Bond Register on the fifth (5th) day prior to such mailing, at their registered addresses, but failure to mail any such notice or defect in the notice or in the mailing thereof shall not affect the validity of the redemption or purchase of the Bonds for which notice was duly mailed in accordance with the Indenture. Such notice shall be given in the name of the Issuer, shall be dated, shall set forth the Bonds Outstanding which shall be called for redemption or purchase and shall include, without limitation, the following additional information: (a) the redemption date or purchase date; 12

17 (b) (c) (d) (e) (f) the Redemption Price or purchase price; CUSIP numbers, to the extent applicable, and any other distinctive numbers and letters; if less than all Outstanding Bonds to be redeemed or purchased, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed or purchased; that on the redemption date or purchase date the Redemption Price or purchase price will become due and payable upon surrender of each such Bond or portion thereof called for redemption or purchase, and that interest thereon shall cease to accrue from and after said date; and the place where such Bonds are to be surrendered for payment of the Redemption Price or purchase price, which place of payment shall be a corporate trust office of the Trustee. If at the time of mailing of notice of an optional redemption or purchase, the Issuer shall not have deposited with the Trustee or Paying Agent moneys sufficient to redeem or purchase all the Bonds called for redemption or purchase, such notice shall state that it is subject to the deposit of the redemption or purchase moneys with the Trustee or Paying Agent, as the case may be, not later than the opening of business on the redemption or purchase date, and such notice shall be of no effect unless such moneys are so deposited. If the amount of funds deposited with the Trustee for such redemption, or otherwise available, is insufficient to pay the Redemption Price and accrued interest on the Bonds so called for redemption on the redemption date, the Trustee shall redeem and pay on such date an amount of such Bonds for which such funds are sufficient, selecting the Bonds to be redeemed by lot from among all such Bonds called for redemption on such date, in the same manner as the initial selection of Bonds to be redeemed, and from and after such redemption date, interest on the Bonds or portions thereof so paid shall cease to accrue and become payable; but interest on any Bonds or portions thereof not so paid shall continue to accrue until paid at the same rate as it would have had such Bonds not been called for redemption. Under the Indenture, the Issuer is authorized to provide conditional notices of redemption. No Acceleration The Bonds are not subject to acceleration upon the occurrence of an event of default. General SECURITY FOR AND SOURCE OF PAYMENT OF THE BONDS The principal of, redemption premium, if any, and interest on the Series 2003A Bonds are secured equally and ratably by a lien upon and pledge of: (i) the revenues derived by the District from the 2003A Assessments levied and collected on the District Lands which 2003A 13

18 Assessments the District has levied pursuant to the Assessment Resolutions to secure the Series 2003A Bonds including amounts received from any foreclosure proceeding for the enforcement of collection of such 2003A Assessments or from the issuance and sale of tax certificates with respect to such 2003A Assessments, and (ii) all moneys on deposit in the Funds and Accounts created for the benefit of the Series 2003A Bonds established under the Indenture (collectively, the 2003A Pledged Revenues ); provided however that Series 2003A Pledged Revenues do not include special assessments, fees or charges levied and collected by the District for operation and maintenance or other purposes or any moneys in the Rebate Fund established under the Indenture. The principal of, redemption premium, if any, and interest on the Series 2003B Bonds are secured equally and ratably by a lien upon and pledge of: (i) the revenues derived by the District from the 2003B Assessments levied and collected on the District Lands which 2003B Assessments the District has levied pursuant to the Assessment Resolutions to secure the Series 2003B Bonds including amounts received from any foreclosure proceeding for the enforcement of collection of such 2003B Assessments or from the issuance and sale of tax certificates with respect to such 2003B Assessments, and (ii) all moneys on deposit in the Funds and Accounts created for the benefit of the Series 2003B Bonds established under the Indenture (collectively, the 2003B Pledged Revenues ); provided however that Series 2003B Pledged Revenues do not include special assessments, fees or charges levied and collected by the District for operation and maintenance or other purposes or any moneys in the Rebate Fund established under the Indenture. In this Limited Offering Memorandum, the terms Series Pledged Revenues and Series Assessment mean either (a) the Series 2003A Pledged Revenues and 2003A Assessment or (b) the Series 2003B Pledged Revenues and 2003B Assessment. THE BONDS OF EACH SERIES ARE LIMITED OBLIGATIONS OF THE DISTRICT SECURED SOLELY BY AND PAYABLE FROM THE SERIES PLEDGED REVENUES PLEDGED THEREFOR UNDER THE INDENTURE AND NEITHER THE PROPERTY, THE FULL FAITH AND CREDIT, NOR THE TAXING POWER OF THE DISTRICT, THE CITY OF PORT ST. LUCIE, FLORIDA, ST. LUCIE COUNTY, FLORIDA, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED AS SECURITY FOR THE PAYMENT OF THE BONDS, EXCEPT THAT THE DISTRICT IS OBLIGATED UNDER THE INDENTURE TO LEVY AND COLLECT, OR CAUSE TO BE COLLECTED, SERIES SPECIAL ASSESSMENTS TO SECURE AND PAY THE BONDS. THE BONDS DO NOT CONSTITUTE A GENERAL OBLIGATION OR INDEBTEDNESS OF THE DISTRICT, THE CITY OF PORT ST. LUCIE, FLORIDA, ST. LUCIE COUNTY, FLORIDA, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION OR LIMITATION. THE SERIES 2003A PLEDGED REVENUES ARE NOT PLEDGED TO THE SERIES 2003B BONDS AND THE SERIES 2003B PLEDGED REVENUES ARE NOT PLEDGED TO THE SERIES 2003A BONDS. EACH SERIES OF BONDS AUTHORIZED UNDER THE INDENTURE AND THE OBLIGATION EVIDENCED THEREBY SHALL NOT CONSTITUTE A LIEN UPON ANY 14

19 PROPERTY OF THE DISTRICT, INCLUDING, WITHOUT LIMITATION, THE PROJECT OR ANY PORTION THEREOF IN RESPECT OF WHICH ANY SUCH BONDS ARE BEING ISSUED, OR ANY PART THEREOF, BUT SHALL CONSTITUTE A LIEN ONLY ON THE SERIES PLEDGED REVENUES AS SET FORTH IN THE INDENTURE. NOTHING IN THE BONDS AUTHORIZED UNDER THE INDENTURE OR IN THE INDENTURE SHALL BE CONSTRUED AS OBLIGATING THE DISTRICT TO PAY THE BONDS OF EACH SERIES OR THE REDEMPTION PRICE THEREOF OR THE INTEREST THEREON EXCEPT FROM THE SERIES PLEDGED REVENUES, OR AS PLEDGING THE FAITH AND CREDIT OF THE DISTRICT, THE COUNTY OR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, OR AS OBLIGATING THE DISTRICT, THE COUNTY OR THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS, DIRECTLY OR INDIRECTLY OR CONTINGENTLY, TO LEVY OR TO PLEDGE ANY FORM OF TAXATION WHATEVER THEREFOR. Special Assessments The Special Assessments are a type of non-ad valorem assessments which are imposed against the land subject thereto upon the basis of a special benefit to such land determined to result from the acquisition and construction of the Project. Non-ad valorem assessments are not based upon millage and can become a lien against homestead property as permitted by the Florida Constitution. See THE SPECIAL ASSESSMENTS herein. The assessment methodology included in the assessment proceedings adopted by the District is included herein as Appendix B - Special Assessment Methodology Report attached hereto. No Parity Bonds; Priority of Payment The District has covenanted in the Indenture that the Series Pledged Revenues are not and shall not be subject to any other lien senior to or, except as described below, on a parity with the lien created in favor of the Bonds of the respective Series. ALTHOUGH THE LIEN UPON AND THE PROCEEDS OF SERIES SPECIAL ASSESSMENTS SECURING THE BONDS OF A SERIES ARE PLEDGED EXCLUSIVELY TO THE BONDS OF SUCH SERIES, THE LIEN OF THE SERIES SPECIAL ASSESSMENTS MAY OVERLAP AND BE CO-EQUAL WITH THE LIENS OF OTHER ASSESSMENTS WHICH HAVE BEEN OR MAY BE IMPOSED BY THE DISTRICT, THE CITY, THE COUNTY OR OTHER UNITS OF LOCAL GOVERNMENT HAVING ASSESSMENT POWERS WITHIN THE DISTRICT WITH RESPECT TO THE SAME REAL PROPERTY AND WILL ALSO BE CO-EQUAL WITH THE TAX LIENS OF THE CITY, THE COUNTY, SCHOOL DISTRICT AND OTHER UNITS OF LOCAL GOVERNMENT HAVING TAXING POWERS WITHIN THE DISTRICT (see THE SPECIAL ASSESSMENTS Collection and Enforcement Procedures and THE DEVELOPMENT AND DEVELOPER Property Taxes and Other Assessments herein). Additional Bonds The District may issue additional bonds payable from the Pledged Revenues solely for the purposes of completing the Project ( Completion Bonds ) (in a principal amount, when 15

20 aggregated with the Bonds, not to exceed $8,420,500) or refunding the Bonds ( Refunding Bonds ). Debt Service Reserve Fund A Debt Service Reserve Fund is created under the Indenture and within such Fund, there is created a Series 2003A Debt Service Reserve Account and a Series 2003B Debt Service Reserve Account. The Debt Service Reserve Requirement for the Series 2003A Bonds is defined in the Indenture as 7.84% of the Maximum Annual Debt Service Requirement for the Outstanding Series 2003A Bonds (initially $559,125.00). The Debt Service Reserve Requirement for the Series 2003B Bonds is defined in the Indenture as 10% of the aggregate principal amount of the Outstanding Series 2003B Bonds (initially $52,000.00). The Indenture provides that, notwithstanding the foregoing, the aggregate Debt Service Reserve Requirement for the Series 2003 Bonds shall not exceed an amount equal to the lesser of (i) the maximum annual Series 2003 Debt Service Requirement for the Outstanding Series 2003 Bonds, (ii) 125% of the average annual Series 2003 Debt Service Requirement for Outstanding Series 2003 Bonds, and (iii) 10% of the original stated principal amount (within the meaning of the Code) of the Series 2003 Bonds. At the closing of the Series 2003 Bonds, the Series 2003A Debt Service Reserve Account will be funded with proceeds of the Series 2003A Bonds in an amount equal to the Debt Service Reserve Requirement for the Series 2003A Bonds and the Series 2003B Debt Service Reserve Account will be funded with proceeds of the Series 2003B Bonds in an amount equal to the Debt Service Reserve Requirement for the Series 2003B Bonds. The Indenture permits the deposit to the Series 2003A Debt Service Reserve Account and the Series 2003B Debt Service Reserve Account of a Debt Service Reserve Insurance Policy or Debt Service Reserve Letter of Credit in lieu of cash therein. Amounts on deposit in the Series 2003A Debt Service Reserve Account will decrease as the Outstanding principal amount of the Series 2003A Bonds decreases, upon the extraordinary mandatory redemption prior to maturity of Series 2003A Bonds as the result of Prepayments of Series 2003A Special Assessments. On each November 2 (or, if such date is not a Business Day, on the Business Day next preceding such day), the Trustee shall determine the amount on deposit in the Series 2003A Debt Service Reserve Account and, upon certification to the Trustee as provided in the Indenture, pay any excess therein above the Debt Service Reserve Requirement for the Series 2003A Bonds caused by Series 2003A Special Assessment prepayments to be paid to the Developer as a portion of the Deferred Acquisition Amount; provided that such payment shall not be made at any time that any amounts due and owing with respect to the Series 2003B Special Assessments have not been paid. Amounts on deposit in the Series 2003B Debt Service Reserve Account will decrease as the Outstanding principal amount of the Series 2003B Bonds decreases, upon the extraordinary mandatory redemption prior to maturity of Series 2003B Bonds as a result of Prepayments of Series 2003B Special Assessments. On each November 2 (or, if such date is not a Business Day, on the Business Day next preceding such day), the Trustee shall determine the amount on deposit in the Series 2003B Debt Service Reserve Account and, upon certification by the District 16

21 Manager in the manner set forth in the Indenture, pay any excess therein above the Debt Service Reserve Requirement for the Series 2003B Bonds caused by Series 2003B Special Assessment prepayments to be paid to the Developer as a portion of the Deferred Acquisition Amount; provided that such payment shall not be made at any time that the payment of any amounts due and owing with respect to the Series 2003B Special Assessments have not been paid. See SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2003 BONDS General and Debt Service Reserve Fund herein. It is expected that the Series 2003B Bonds will be redeemed prior to maturity from prepayments of 2003B Assessments. See SECURITY FOR AND SOURCES OF PAYMENT OF THE SERIES 2003 BONDS-Redemption Provisions herein. Whenever for any reason on an Interest or Principal Payment Date or mandatory redemption date, the amount in the Series Subaccount in the Interest Account or Bond Amortization Account of the Series 2003 Debt Service Fund, as the case may be, is insufficient to pay all amounts payable on the Series 2003A Bonds or Series 2003B Bonds, respectively, therefrom on such payment date the Trustee is required to transfer the amount of any such deficiency, to the extent available, from the corresponding Series Subaccount in the Series 2003 Debt Service Reserve Funds (with amounts being transferred first from the Series 2003B Debt Service Reserve Account) into the Interest Account or Bond Amortization Account, as the case may be, with priority to the Interest Account and then to the Bond Amortization Account, to be applied to pay the Bonds. Earnings on investments in the Series Subaccounts in the Debt Service Reserve Fund shall be retained to the credit of such Subaccounts until applied as set forth in the Indenture. Deposit and Application of Pledged Revenues The District shall deposit all Series Special Assessments received by the District, within 5 business days of receipt thereof, with the Trustee for deposit into the corresponding Series Subaccount in the Revenue Fund; provided however that amounts received as prepayments of Series Special Assessments shall be deposited directly into the corresponding Series Subaccount in the Bond Redemption Fund. The Trustee shall transfer from amounts on deposit in each Series Subaccount in the Revenue Fund to the corresponding Series Subaccount in the Funds and Accounts designated below, the following amounts, at the following times and in the following order of priority: FIRST, upon receipt but no later than the Business Day preceding the first May 1 for which there remains an insufficient amount (A) from Series 2003A Bond proceeds (or investment earnings thereon) on deposit in the Series 2003A Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003A Bonds due on such May 1, and (B) from Series 2003B Bond proceeds (or investment earnings thereon) on deposit in the Series 2003B Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003B Bonds due on such May 1, and no later than the Business Day next preceding each May 1 thereafter to the Series 2003A Interest Subaccount and the Series 2003B Interest Subaccount, respectively, in the Interest Account of the Debt Service Fund, an amount from the Series 2003A Revenue Account equal to the interest on the Series 2003A Bonds and an amount from the Series 17

22 2003B Revenue Account equal to the interest on the Series 2003B Bonds becoming due on such May 1, less any amounts on deposit in the Series 2003A Interest Subaccount or the Series 2003B Interest Subaccount not previously credited; SECOND, no later than the Business Day next preceding each May 1, commencing May 1, 2004, to the Series 2003A Bond Amortization Account of the Debt Service Fund, an amount from the Series 2003A Revenue Account equal to the principal amount of Series 2003A Bonds subject to mandatory redemption on such May 1, less any amount on deposit in the Series 2003A Bond Amortization Subaccount not previously credited; THIRD, no later than the Business Day next preceding each May 1, commencing May 1, 2006, to the Series 2003B Principal Subaccount of the Debt Service Fund, an amount from the Series 2003B Revenue Account equal to the principal amount of Series 2003B Bonds maturing on such May 1, less any amount on deposit in the Series 2003B Principal Subaccount not previously credited; FOURTH, upon receipt but no later than the Business Day preceding the first November 1 for which there remains an insufficient amount (A) from Series 2003A Bond proceeds (or investment earnings thereon) on deposit in the Series 2003A Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003A Bonds due on such November 1, and (B) from Series 2003B Bond proceeds (or investment earnings thereon) on deposit in the Series 2003B Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003B Bonds due on such November 1, and upon receipt but no later than the Business Day next preceding each November 1 thereafter to the Series 2003A Interest Subaccount and the Series 2003B Interest Subaccount, respectively, in the Interest Account of the Debt Service Fund, an amount from the Series 2003A Revenue Account equal to the interest on the Series 2003A Bonds and an amount from the Series 2003B Revenue Account equal to the interest on the Series 2003B Bonds becoming due on such November 1, less any amount on deposit in the Series 2003A Interest Subaccount or the Series 2003B Interest Subaccount not previously credited; FIFTH, upon receipt but no later than the Business Day next succeeding each November 1 (A) while Series 2003A Bonds remain Outstanding, to the Series 2003A Debt Service Reserve Account, an amount from the Series 2003A Revenue Account equal to the amount, if any, which is necessary to make the amount on deposit therein equal to the Debt Service Reserve Requirement for the Series 2003A Bonds and (B) while Series 2003B Bonds remain Outstanding, to the Series 2003B Debt Service Reserve Account, an amount from the Series 2003B Revenue Account equal to the amount, if any, which is necessary to make the amount on deposit therein equal to the Debt Service Reserve Requirement for the Series 2003B Bonds; and SIXTH, subject to the following paragraph the balance of any moneys in the Revenue Fund after making the foregoing deposits shall remain therein. (1) The Trustee shall within ten (10) days after the last Interest Payment Date in each calendar year, upon requisition of the District Manager, pay District Expenses. 18

23 (2) The Trustee shall within fifty (50) days after the end of each Bond Year, deposit to the Rebate Fund the amount shown in the report of the Rebate Consultant for such Bond Year as the recommended deposit to the Rebate Fund; (3) The Trustee shall within sixty (60) days preceding each May 1 deposit to the Bond Redemption Fund such amounts, if any, as shall be determined by the District Manager to be necessary to provide for redemption of Series 2003 Bonds in $5,000 principal increments; (4) The Trustee shall, at the direction of the District Manager, pay any remaining moneys to the Developer as an installment of the Deferred Acquisition Amount, unless such payment would reduce the amount remaining on deposit in the Revenue Fund below the sum of Five Thousand Dollars ($5,000). Investments The Trustee shall, as directed by the District in writing, invest moneys held in any Fund or Account established under the Indenture in Investment Securities; provided, however, that, amounts on deposit to the credit of the Accounts within the Debt Service Fund shall be invested only in Government Obligations or a fund described in paragraphs (d) or (f) of the definition of Investment Securities. All deposits in time accounts shall be subject to withdrawal without penalty and all investments shall mature or be subject to redemption by the Owner without penalty, not later than the date when the amounts will foreseeably be needed for purposes of the Indenture (for purposes of this paragraph, the term penalty shall mean a contractual payment or forfeiture paid for early redemption of an investment and shall not mean a loss on the sale of an investment due to a decline in the market value thereof). All securities securing investments shall be deposited with a Federal Reserve Bank, with the trust department of the Trustee, as authorized by law with respect to trust funds in the State, or with a bank or trust company having a combined net capital and surplus of not less than $50,000,000. The interest and income received upon such investments and any interest paid by the Trustee or any other depositary of any Fund or Account (and subaccount) and any profit or loss resulting from the sale of securities shall be added or charged to the Fund or Account (and subaccount) for which such investments are made. Enforcement of Payment of Special Assessments The Issuer has covenanted in the Indenture to levy Special Assessments in the manner prescribed in the Indenture and all pertinent resolutions, ordinances or laws at the times and in the amounts as shall be necessary to pay when due the Debt Service Requirements on all Outstanding Bonds. See THE SPECIAL ASSESSMENTS herein. THE SPECIAL ASSESSMENTS The information appearing below under the caption Methodology has been provided by Severn Trent Services, Inc., in its capacity as District Manager. The information is included herein in reliance upon the expertise of such firm and, although believed by the Underwriter to 19

24 be reliable, has not been independently verified by the Underwriter or its counsel. No person other than the District Manager makes any representation or warranty as to the accuracy or completeness of such information. General Pursuant to Section , and Chapter 170 of the Florida Statutes, payment of the Special Assessments is secured by a lien on the real property in the District coequal with all State, County, school district and municipal taxes, superior in dignity to all other liens, titles and claims on such real property. ALTHOUGH THE LIEN UPON AND THE PROCEEDS OF THE SERIES SPECIAL ASSESSMENTS WILL SECURE THE BONDS OF THE CORRESPONDING SERIES, AND SAID LIEN AND PROCEEDS OF THE SERIES SPECIAL ASSESSMENTS ARE PLEDGED EXCLUSIVELY TO THE BONDS OF THE CORRESPONDING SERIES, THE LIEN OF THE SPECIAL ASSESSMENTS MAY BE WITH RESPECT TO THE SAME REAL PROPERTY AS, AND THEREFORE OVERLAP AND BE CO-EQUAL WITH, THE LIENS OF OTHER ASSESSMENTS WHICH HAVE BEEN OR MAY BE IMPOSED BY THE DISTRICT, THE CITY, THE COUNTY OR OTHER UNITS OF LOCAL GOVERNMENT HAVING ASSESSMENT POWERS WITHIN THE DISTRICT. See THE DEVELOPMENT AND THE DEVELOPER Property Taxes and Other Assessments herein. Collection With respect to the Series 2003A Bonds, it is the District s present intent to use the uniform method for levy, collection, and enforcement of non-ad valorem assessments set forth in Section , Florida Statutes, pursuant to which the District must certify to the Tax Collector a non-ad valorem assessment roll by September 15 of each year. The Tax Collector will include on the tax notice issued pursuant to Section , Florida Statutes, the dollar amount of the Special Assessments so certified. The District further intends to ensure that a written agreement with the Property Appraiser and Tax Collector is entered into and maintained in accordance with Section (2), Florida Statutes, in order to permit the Special Assessments to be billed and collected by the Tax Collector pursuant to Section , Florida Statutes. See Collection and Enforcement Procedures below. The terms of such agreements are typically for one year, automatically renewable for successive annual periods. The Special Assessments may be subject to all the collection and enforcement provisions of Chapter 197, Florida Statutes. In the event the uniform method of collecting non ad-valorem assessments is not available to the District in any year, or if the District determines that using the uniform method of collecting non-ad valorem assessments is not in its best interest, the Special Assessments may be collected as is otherwise permitted by law. The resolutions levying the Special Assessments (the Assessment Resolutions ) have been adopted and adjusted by the District. The preliminary assessment roll adopted pursuant to the Assessment Resolutions will be revised to reflect the final bond sizing. The 2003A Assessments will be levied annually at six percent (6%) in excess of the amount needed to pay debt service on the Series 2003A Bonds so as to cover the up to four percent (4%) discount 20

25 allowed for early payment of assessments and an additional two percent (2%) for collection costs. The 2003B Assessments will be levied and collected off the tax roll, on a monthly basis, by direct billing. See THE SPECIAL ASSESSMENTS Collection of Assessments by the District herein. The roadway infrastructure costs allocated to commercial property outside the boundaries of the District (as described in the Special Assessment Methodology Report attached hereto as Appendix B ) is expected to be repaid either by (1) reimbursement from the City s Glassman Special Assessment District pursuant to the terms of an Interlocal Agreement to be entered into between the parties, or (2) by the Developer upon transfer of each lot to a party other than an Initial Bulk Purchaser. Methodology The allocation of benefits and costs to benefited parcels within the District is presented in the Special Assessment Methodology Report attached hereto as Appendix B. Prepayment Pursuant to the terms of Section , Florida Statutes, the Act, the Indenture and the proceedings relating to the levy of the Special Assessments adopted by the District prior to the issuance of the Bonds, at any time from the date of levy of Special Assessments on a parcel of District Lands through the date that is thirty (30) days after the Project has been completed and accepted by the District, any owner of property subject to the Special Assessments may, at its option, require the District to release and extinguish the lien upon its property by virtue of the levy of the Special Assessments that relate to the Bonds by paying to the District the entire amount of the Special Assessments on such property, without interest. At the time of delivery of the Bonds, the Developer will waive this prepayment right. At any time subsequent to thirty (30) days after the Project has been completed and accepted by the District, any owner of property subject to the Special Assessments may, at its option, require the District to release and extinguish the lien upon its property by virtue of the levy of the Special Assessments by paying to the District the entire amount of the Special Assessments plus accrued interest to the next succeeding Interest Payment Date (or the second succeeding Interest Payment Date if such prepayment is made within forty-five (45) calendar days before an Interest Payment Date), attributable to the property subject to Special Assessments owned by such owner; provided, however, to the extent that such payments are to be used to redeem Series 2003B Bonds, in the event the amount in the Series 2003B Debt Service Reserve Account will exceed the Debt Service Reserve Requirement for the Series 2003B Bonds as a result of a Prepayment and the resulting decrease in the Debt Service Reserve Requirement with respect to the Series 2003B Bonds, the excess amount shall be transferred from the Series 2003B Debt Service Reserve Account to the Series 2003B Prepayment Account of the Series 2002 Bond Redemption Fund, as a credit against the Series 2003B Prepayment Principal otherwise required to be paid by the owner of such lot or parcel, upon written instructions of the District Manager together with a certificate of the District stating that, after giving effect to such transfers sufficient moneys will be on deposit in the Series 2003B Debt Service Reserve Account to equal or exceed the Debt 21

26 Service Reserve Requirement for the Series 2003B Bonds and accompanied by cash flows which demonstrate that, there will be sufficient Series 2003B Pledged Revenues to pay the principal and interest, when due, on all Series 2003B Bonds Outstanding. At any time any owner of property subject to the Special Assessments may, at its option, or under certain circumstances described in the Special Assessment Methodology attached hereto as Appendix B in connection with prepayments derived from application of the true-up mechanism therein, shall, require the District to reduce or release and extinguish the lien upon its property by virtue of the levy of the Special Assessments by paying to the District all or a portion of the Special Assessment, which shall constitute Series 2003A Prepayment Principal or Series 2003B Prepayment Principal, as directed by the District pursuant to the provisions of the Indenture, plus accrued interest to the next succeeding Interest Payment Date (or the second succeeding Interest Payment Date if such prepayment is made within 45 calendar days before an Interest Payment Date), attributable to the property subject to Special Assessment owned by such owner. Adjustments to Special Assessments Upon completion of the Project, the Series Special Assessments securing the corresponding Series of Bonds will be credited, pro rata, with the amount of any excess of the original Series Special Assessments over the actual cost of the Project funded from proceeds of the corresponding Series of Bonds. In making such credit, no credit shall be given for bond financing costs, capitalized interest, funded reserves or bond discount. Collection and Enforcement Procedures The Series 2003A Bonds and the Series 2003B Bonds are secured, respectively, by the 2003A Assessments and the 2003B Assessments imposed on lands within the District subject to assessment pursuant to the Assessment Resolutions. To the extent that landowners fail to pay such Series Special Assessments, delay payments, or are unable to pay the same, the successful pursuance of collection procedures available to the District is essential to continued payment of principal of, and interest on, the corresponding Series of Bonds. The Act provides for various methods of collection of delinquent assessments by reference to other provisions of the Florida Statutes. The following is a description of certain statutory provisions of special assessment payment and collection procedures appearing in the Florida Statutes, but is qualified in its entirety by reference to such statutes. The District will levy 2003A Assessments for the Series 2003A Bonds that will be payable in 30 annual installments. The District intends annually to take such actions as are required to effectuate the collections of 2003A Assessments under the uniform method of collection provided by Sections , and , Florida Statutes. The determination, order, levy and collection of the Special Assessments must be done in compliance with procedural requirements and guidelines provided by law. Failure by the District, the Tax Collector or the Property Appraiser to comply with such requirements could 22

27 result in delays in the collection of, or the complete inability to collect annual installments of Special Assessments during any year pursuant to the uniform method. All taxes and non-ad valorem special assessments shown on the tax notice must be paid in whole, as the Tax Collector cannot accept partial payments. Such delays in the collection of, or complete inability to collect, annual installments of Special Assessments pursuant to the uniform method or any other method could have a material adverse effect on the ability of the District to make full or punctual payment of debt service on the Bonds (see BOND OWNERS RISKS herein). Special assessments are a lien on the land against which they are assessed from January 1 of the year the special assessment was levied until paid or barred by operation of law. The lien of the Special Assessments is of equal dignity with the liens for state and county taxes upon land, and thus is a first lien, superior to all other liens, including mortgages (except for state and county taxes and other taxes which are of equal dignity). The Tax Collector is to bill such taxes together with all other county taxes, and landowners in the District are required to pay all such taxes without preference in payment of any particular increment of the tax bill, such as the increment owing for the Special Assessments. Upon receipt by the Tax Collector of the Special Assessments, moneys therefrom will be deposited as provided in the Indenture. All county, school and special district taxes, special assessments and voter-approved ad valorem taxes levied to pay principal of and interest on bonds, including the Special Assessments levied by the District, are payable at one time. If a taxpayer does not make complete payment, he or she cannot designate specific line items on his or her tax bill as deemed paid in full. In such cases, the Tax Collector does not accept such partial payment and the partial payment is returned to the taxpayer. Therefore, any failure to pay any one line item, whether it be the Special Assessments or not, would cause the Special Assessments collected by this method to not be collected, which would have a significant adverse effect on the ability of the District to make full or punctual payment of debt service on the Bonds. Florida law provides that, subject to certain conditions, special assessments such as the Special Assessments, may be collected in the same manner as county ad valorem taxes. County ad valorem taxes for each year and non-ad valorem assessments billed by the Tax Collector are payable during the period commencing November 1 of such year and ending March 30 of the following year. If the amounts on the tax notice (including the annual installments of Special Assessments) are paid during the November following the billing or during the succeeding three months, the taxpayer is granted a discount equal to four percent (4%) in November and decreasing one percent (1%) per month to one percent (1%) in February. All unpaid taxes become delinquent on April 1 of the year following the November in which they are billed. Commencing in April, a one percent (1%) per month penalty accrues on the unpaid tax and assessments. Delay in the mailing of tax notices to taxpayers may result in a delay throughout this process. Collection of delinquent taxes is, in essence, based upon the sale by the Tax Collector of tax certificates on the assessed parcel and the remittance to the District of the proceeds of such sale. In the event of a delinquency in the payment of taxes, the landowner may, prior to the sale of tax certificates, pay delinquent taxes plus an interest charge of up to eighteen percent (18%) per annum on the amount of delinquent taxes. If the landowner does not act, the Tax Collector is 23

28 required to sell a tax certificate to the person who pays the unpaid taxes and interest and penalties thereon and certain costs, and who accepts the lowest interest rate (not to exceed 18% per annum) to be borne by the tax certificate. If there are no bidders, St. Lucie County, Florida (the County ) is to hold, but not pay for, tax certificates with respect to the property, bearing interest at the maximum legal rate of interest. The County may sell such tax certificates to the public at any time at the principal amount thereof plus interest at the rate of not more than eighteen percent (18%) per annum and a fee. The demand for such tax certificates is dependent upon various factors which include the interest (and the rate thereof) which can be earned by ownership of such tax certificates and the value of the land which is the subject of such tax certificates (which may be subject to sale after 2 years at the demand of the tax certificate holder). The underlying market value of the property in the District should determine the demand for such property and the expectation of successful collection of delinquent annual installments of Special Assessments thereon which are the source of payment of the Bonds. Any tax certificate in the hands of a person other than the County may be redeemed and canceled by anyone prior to the time a tax deed is issued or the property is placed on the list of lands available for sale. The person effecting such redemption must pay the face amount of the tax certificate and interest at the rate borne by the tax certificate plus costs and other charges. Regardless of the interest rate actually borne by the tax certificates, persons redeeming tax sale tax certificates must pay a minimum interest rate of five percent (5%), unless the rate borne by the tax certificates is zero percent (0%). The proceeds of such a redemption are paid to the Tax Collector, who transmits to the holder of the tax certificate such proceeds less service charges, and the tax certificate is canceled. Redemption of tax certificates held by the County is effected by purchase of such tax certificates from the County, as described below. The private holder of a tax certificate that has not been redeemed has seven years from the date of issuance of the tax certificate in which to act against the property. After an initial period of two years from April 1 of the year of issuance of the tax certificate has passed, during which time action against the land is held in abeyance to allow for sales and redemptions of tax sales tax certificates, such holders may apply for a tax deed. The applicant is required to pay the Tax Collector all amounts required to redeem all other outstanding tax certificates covering the land, any omitted taxes or delinquent taxes, current taxes, if due, and interest. Thereafter, the property is advertised for public sale. In any such public sale by the Clerk of the Court of the County (the Clerk ), the private holder of the tax certificate who is seeking a tax deed for non-homestead property is deemed to submit a minimum bid equal to the amount required to redeem the tax certificate, and charges for cost of sale, redemption of other tax sales certificates on the land, and the amounts paid by such holder in applying for the tax deed, plus interest thereon. In the case of homestead property, the minimum bid must include, in addition to the amount of money required for the opening bid on non-homestead property, an amount equal to one-half of the assessed value of the homestead. If there are no higher bids, the holder receives title to the land, and the amounts paid for the tax certificate and in applying for a tax deed are credited toward the purchase price. If there are other bidders, the holder may enter the bidding. The highest bidder is awarded title to the land. The portion of proceeds of such sale needed to redeem the tax sale tax certificate (and all other amounts paid by such person in applying for a tax deed) are forwarded to the holder thereof or 24

29 credited to such holder if he or she is the successful bidder. Excess proceeds are distributed first to satisfy governmental liens against the property and then to the former title holder of the property (less service charges), lien holders of record, mortgagees of record, vendees of recorded contracts for deeds, other lien holders and persons to whom the land was assessed on the tax roll for the year in which the land was last assessed, all as their interests may appear. If the County holds a tax certificate and has not succeeded in selling it, the County may apply for a tax deed after the County s ownership of such tax certificate for two years. The County pays costs and fees to the Tax Collector but not any amount to redeem other outstanding tax certificates covering the land. The public bidding on non-homestead property must start at a minimum bid equal to the value of all outstanding certificates, plus omitted years taxes, delinquent taxes, interest and all costs and fees paid by the County. The minimum bid on homestead property must also include an amount equal to one-half of the latest assessed value of the homestead. If there are no bidders, the County may purchase the land for the opening minimum bid. After ninety days, any person or governmental unit may purchase the land without further notice or advertising by paying the opening minimum bid to the County. Taxes and any non ad valorem special assessments accruing after the date of public sale do not require repetition of this process, but are added to the required minimum bid. Seven years after the date of public sale, unsold lands escheat to the County and all tax certificates and liens against the property will be canceled and the Clerk will execute a tax deed vesting title in the Board of County Commissioners, with no liability to the County. As reported for tax roll years ended 1995 through 2001, the following table indicates the amount of County ad valorem taxes and special assessments levied and collected by the County. Tax Roll Year Property Tax Levies and Tax Collections St. Lucie County, Florida Total Levied Discounts Allowed Other Credits (1) Errors & Insolvencies Total Collected Percent Collected (2) 1995 $187,600,727 $5,876,124 $5,335,800 $1,298,220 $174,039, % ,823,727 6,054,774 7,362,344 1,063, ,343, % ,335,655 5,554, , , ,041, % ,822,265 6,831, ,072 3,012, ,284, % ,386,439 6,844, ,364 4,890, ,726, % ,310,596 7,242,847 2,389, , ,925, % ,757,648 7,763,515 2,496, , ,661, % Source: St. Lucie County Tax Collector (1) Other credits include warrants pending, county tax sale certificates, uncollected litigation, uncollected centrally assessed, deduct penalties and interest and over or under collection. (2) Percent collected equals total taxes collected divided by total taxes levied. Neither the District nor the Underwriter has independently investigated or verified the property data in the table above and neither assumes responsibility for the accuracy or 25

30 completeness of the information contained therein. The summary of real property taxes was obtained by the District from the St. Lucie County Tax Collector. Neither the District nor the Underwriter can give any assurance to the holders of the Bonds (1) that the past experience of the County with regard to tax and special assessment delinquencies as shown above is applicable in any way to the Special Assessments, (2) that future landowners and taxpayers in the District will pay such Special Assessments, (3) that a market may exist in the future for the aforementioned tax certificates in the event of sale of such certificates for taxable units within the District, and (4) that eventual sale of tax certificates for real property within the District, if any, will be for an amount sufficient to pay amounts due under the Indenture to discharge the lien of Special Assessments and all other liens that are coequal therewith. Collection of Assessments by the District With respect to the Series 2003B Assessments, the District intends to collect such 2003B Assessments directly and bill the landowners on a monthly basis for amounts due semi-annually in regard to such 2003B Assessments. In regard to the 2003B Assessments collected directly by the District rather than pursuant to the uniform method, the procedures and remedies regarding the sale of tax certificates described above will not be available in regard to any such delinquent 2003B Assessments, or any other delinquent Special Assessments for which the uniform method is unavailable. Concerning delinquent 2003B Assessments billed directly by the District, the District is authorized to foreclose the lien of such delinquent 2003B Assessments by bringing foreclosure proceedings in the Circuit Court in and for St. Lucie County, Florida as provided for in Chapter 173, Florida Statutes. Chapter 173, Florida Statutes, provides that after the expiration of one year from the date any special assessment or installment thereof becomes due, the District may commence foreclosure proceedings against the lands upon which the assessments are liens. Such proceedings are in rem, meaning that it is brought against the land and not against the owner. In general, under Chapter 173, Florida Statutes, after the District commences the suit, there is a period of notice to, and an opportunity for response by, affected persons. Ultimately a hearing will be held and, if the court decides in favor of the District, a judgment will be rendered in the amount of the delinquent 2003B Assessments, interest and penalties on such delinquent 2003B Assessments and costs of the proceeding. In the judgment or decree the court may, in its discretion, direct the payment of all unpaid state and county taxes and also all unpaid city or town taxes and special assessments or installments thereof, imposed or falling due since the institution of the suit, with the penalties and costs, out of the proceeds of such foreclosure sale, or it may order and direct such sale or sales to be made subject to such state and county and city or town taxes and special assessments. The judgment would also direct sale of the land subject to the delinquent 2003B Assessments by public bid to the highest bidder. Any and all conveyances vest in the purchaser the fee simple title to the property so sold, subject only to such liens for state and county taxes or taxing districts whose liens are of equal dignity with the lien of such 2003B Assessments, and liens for municipal taxes and special assessments, or installments thereof, as are not directed by the decree of sale to be paid out of the proceeds of said sale. 26

31 THERE CAN BE NO ASSURANCE THAT ANY SALE, PARTICULARLY A BULK SALE, OF LAND SUBJECT TO DELINQUENT 2003B ASSESSMENTS WILL PRODUCE PROCEEDS SUFFICIENT TO PAY THE FULL AMOUNT OF SUCH DELINQUENT 2003B ASSESSMENTS PLUS OTHER DELINQUENT TAXES AND ASSESSMENTS APPLICABLE THERETO. ANY SUCH DEFICIENCY COULD RESULT IN THE INABILITY OF THE DISTRICT TO REPAY, IN FULL, THE PRINCIPAL OF AND INTEREST ON THE SERIES 2003B BONDS. Enforcement of the obligation to pay Special Assessments and the ability to foreclose the lien created by the failure to pay Special Assessments or the ability of the Tax Collector to sell tax certificates and ultimately tax deeds may not be readily available or may be limited as such enforcement is dependent upon judicial actions which are often subject to discretion and delay. BOND OWNERS RISKS There are certain risks inherent in an investment in bonds secured by special assessments issued by a public authority or governmental body in the State of Florida. Certain of these risks are described in THE SPECIAL ASSESSMENTS Collection and Enforcement Provisions ; however, certain additional risks are associated with the Bonds offered hereby. This section does not purport to summarize all risks that may be associated with purchasing or owning the Bonds. PROSPECTIVE PURCHASERS ARE ADVISED TO BOTH READ THIS LIMITED OFFERING MEMORANDUM INCLUDING ALL APPENDICES HERETO IN ITS ENTIRETY TO IDENTIFY INVESTMENT CONSIDERATIONS RELATING TO THE BONDS AND TO CONSULT WITH THEIR COUNSEL, INVESTMENT ADVISOR OR TAX ADVISOR AS TO THE APPROPRIATENESS OF THEIR INVESTING IN THE BONDS. I. Until further development takes place on the benefited land within the District and all parcels are sold to Builders or other parties, collection of the Special Assessments is substantially dependent upon their timely payment by the Developer. See THE DEVELOPMENT AND THE DEVELOPER herein. At closing, it is expected that substantially all of the property within the District burdened by the Special Assessments will be owned either directly or indirectly by the Developer. In the event of the institution of bankruptcy or similar proceedings with respect to the Developer or any other subsequent significant owner of property within the District, delays and impairment could occur in the payment of debt service on the Bonds as such bankruptcy could negatively impact the ability of: (i) the Developer and any other significant land owner being able to pay the Special Assessments; (ii) the County to sell tax certificates in relation to such property; and (iii) the District to foreclose the lien on the Special Assessments. In addition, the remedies available to the Owners of the Bonds upon an event of default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay. Under existing constitutional and statutory law and judicial decisions, the remedies specified by federal, state and local law and in the Indenture and the Bonds, including, without limitation, enforcement of the obligation to pay Special Assessments and the ability of the District to foreclose the lien of the Special Assessments, may not be readily available or may be limited. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel s 27

32 approving opinion) will be qualified as to the enforceability of the various legal instruments by limitation imposed by bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors enacted before or after such delivery. The inability, either partially or fully, to enforce remedies available respecting the Bonds could have a material adverse impact on the interest of the Owners hereof. II. The sole security for the payment of the principal and interest on the Bonds is the timely collection of the Special Assessments. The Developer expects, in its normal course of business, to develop and sell benefited land to be served by the Project to Builders for resale to the general public in the form of lots and homes for residential use. Special Assessments do not constitute a personal indebtedness of the owners of the land subject thereto, but are secured by a lien on such land. There is no assurance that the owners will be able to pay the Special Assessments or that they will pay such Special Assessments even though financially able to do so. The assessment of the benefits to be received by the land within the District as a result of implementation of the Project is not indicative of the realizable or market value of the land, which value may actually be higher or lower than the assessment of benefits. To the extent that the realizable or market value of the land benefited by the Project is lower than the assessment of benefits, the ability of the District to realize sufficient value from a foreclosure action to pay debt service on the Bonds may be adversely affected. Such adverse effect could render the District unable to collect delinquent Special Assessments, if any, and provided such delinquencies are significant, could negatively impact the ability of the District to make the full or punctual payment of debt service on the Bonds. III. The Series 2003B Bonds have been structured with a three (3) year maturity, based on the expectation that the District will receive funds from the City s proposed Glassman Special Assessment District prior to such maturity. Prospective purchasers of the Series 2003B Bonds should be aware that it is the expectation of the District that such funds may be received by the District within a short period of time after issuance of the Series 2003B Bonds and the likely early prepayment of the Series 2003B Bonds should be considered by such prospective purchasers. Upon the sale of lots from the Developer to a purchaser other than an Initial Bulk Purchaser, the Indenture requires a mandatory principal repayment be deposited in the Series 2003B Bond Redemption Account, net of the Debt Service Reserve Fund credit. Neither the District nor the Underwriter has verified, or is able to verify, the Developer s build-out projections and the ability of the District to retire the Series 2003B Bonds within the three (3) year period. IV. The District may be affected by changes in general economic conditions, fluctuations in the real estate market, increases in lending rates and other factors. In addition, the proposed Development is subject to comprehensive federal, state, and local regulations and future changes to such regulations. Approval is required from various public agencies in connection with, among other things, the design, nature and extent of required public improvements, both public and private, and construction of the Development in accordance with applicable zoning, land use and environmental regulations for the Development. Although no delays are anticipated and a substantial portion of the required approvals for the Development have been received (see Appendix A District Engineer s Report ), failure to obtain any additional approvals in a timely manner could delay or adversely affect the Development, which 28

33 may negatively impact the Developer s desire or ability to develop the Development as contemplated. No assurance can be given that unknown hazardous materials, protected animals, or any other land or natural condition subject to regulation, do not currently exist or may develop in the future whether originating within the Development or from surrounding property, and what effect such may have on the Development. V. The Developer s obligation to pay the Special Assessments is limited solely to the obligation of any landowner to pay its Special Assessment. Neither the Developer nor any Builder is a guarantor of payment on any Special Assessment and the recourse for the Developer s or a Builder s failure to pay the Special Assessments is limited to their several ownership interests in the assessed land. VI. The willingness and/or ability of an owner of land within the District to pay the Special Assessments could be affected by the existence of other taxes and assessments imposed upon the property by the City, the County or other governmental entities with jurisdiction over the District. Public entities whose boundaries overlap those of the District, such as the City, the County, the St. Lucie School District and other special districts, could, without the consent of the owners of the land within the District, impose additional taxes or assessments on the property within the District. See THE DEVELOPMENT AND THE DEVELOPER - Property Taxes and Other Assessments herein. VII. The Bonds are being offered only to accredited investors as defined in Section , Florida Statutes, and may not constitute a liquid investment, and there is no assurance that a liquid secondary market will exist for the Bonds in the event an Owner thereof determines to solicit purchasers of the Bonds. Even if a liquid secondary market exists, there can be no assurance as to the price for which the Bonds may be sold. Such price may be lower than that paid by the current Owner of the Bonds, depending on the progress of the District, existing market conditions and other factors. There can also be no assurance, in the event the District does not have sufficient moneys on hand to complete the Project, that the District will be able to raise through the issuance of bonds or otherwise the moneys necessary to complete the Project. VIII. In addition to legal delays that could result from bankruptcy, the ability of the District to enforce collection of delinquent Special Assessments will be dependent upon various factors, including the delay inherent in any judicial proceeding to enforce the lien of the Special Assessments and the value of the land which is the subject of such proceedings and which may be subject to sale. See THE SPECIAL ASSESSMENTS herein. If the District has difficulty in collecting the Special Assessments, the Debt Service Reserve Fund could be rapidly depleted and the ability of the District to pay debt service could be materially adversely affected. IX. The District is only undertaking the improvements included in the Project as described more fully in Appendix A District Engineer s Report. The cost of additional improvements related to finished lots within the District that are not included in the Project will be paid for by the Developer s or the Builders operating funds. There can be no assurance that the Developer or the Builders will be able to pay, or arrange to pay, for the cost of these improvements. 29

34 X. No application for a rating on the Bonds has been made and it is unlikely that the District would have been successful in obtaining an investment grade rating for the Bonds had application been made. XI. Although the District Engineer will certify that all permits necessary to complete the Project have either been obtained or, in its opinion, will be obtained and that there is no reason to believe that the necessary permits cannot be obtained for that Project, in the event that those permits or approvals are not forthcoming or are significantly delayed, the ability of the Developer and the Builders to market and sell lots within the Development could be significantly impaired or frustrated. XII. Owners should note that several mortgage lenders have, in the past, raised legal challenges to the primacy of the liens of Special Assessments in relation to the liens of mortgages burdening the same real property; to the best knowledge of District (without investigation) in all such cases to date, the applicable courts have held that the assessment liens (like those or the Special Assessments) are superior to those of the commercial mortgage lenders. This section does not purport to summarize all risks that may be associated with purchasing or owning the Bonds and prospective purchasers are advised to read this Limited Offering Memorandum in its entirety for a more complete description of investment considerations relating to the Bonds. [Remainder of page intentionally left blank] 30

35 ESTIMATED SOURCES AND USES OF FUNDS Series 2003A Bonds The proceeds from the sale of the Series 2003A Bonds are expected to be applied as follows: SOURCES: Principal Amount of Bonds $7,135, Accrued Interest 11, TOTAL ESTIMATED SOURCES $7,146, USES: Project Construction Fund $5,885, Capitalized Interest (1) 296, Debt Service Reserve Fund 559, Costs of Issuance (2) 323, Accrued Interest 11, TOTAL ESTIMATED USES $7,146, (1) Represents approximately seven (7) months of capitalized interest. (2) Includes, among other things, a portion of Bond Counsel fees, Underwriter s Discount, Financial Advisor s fees, Consulting Engineer s fees, Disclosure Counsel fees, District Counsel fees, Trustee fees and printing costs. [Remainder of page intentionally left blank] 31

36 Series 2003B Bonds The proceeds from the sale of the Series 2003B Bonds are expected to be applied as follows: SOURCES: Principal Amount of Bonds $520, Accrued Interest TOTAL ESTIMATED SOURCES $520, USES: Project Construction Fund $420, Capitalized Interest (1) 18, Debt Service Reserve Fund 52, Costs of Issuance (2) 23, Accrued Interest TOTAL ESTIMATED USES $520, (1) Represents approximately seven (7) months of capitalized interest. (2) Includes, among other things, a portion of Bond Counsel fees, Underwriter s Discount, Financial Advisor s fees, Consulting Engineer s fees, Disclosure Counsel fees, District Counsel fees, Trustee fees and printing costs. 32

37 Series 2003A Bonds DEBT SERVICE REQUIREMENTS 33

38 Series 2003A Bonds (cont d) Series 2003B Bonds 34

39 THE DISTRICT General The District consists of approximately acres located in the City of Port St. Lucie, Florida. It was established by Ordinance of the City Council of the City of Port St. Lucie, Florida, effective August 22, A site map showing the location of the District in the City of Port St. Lucie is included in the District Engineer s Report which is contained in Appendix A hereto. Legal Powers and Authority The District is an independent unit of local government created in accordance with the Act. The Act was enacted in 1980 to provide a uniform method for the establishment of independent districts to manage and finance basic community development services, including capital infrastructure required for community developments throughout the State of Florida. The Act provides legal authority for community development districts (such as the District) to finance the acquisition, construction, operation and maintenance of the major infrastructure for community development. The Act provides that community development districts have the power to issue general obligation, revenue and special assessment revenue debt obligations in any combination to pay all or part of the cost of infrastructure improvements authorized under the Act. The Act further provides that community development districts have the power under certain conditions to levy and assess ad valorem assessments or non-ad valorem assessments, including special assessments, on all taxable real and tangible personal property within their boundaries to pay the principal of and interest on debt obligations issued and to provide for any sinking or other funds established in connection with any such debt obligation issues. Pursuant to the Act, such special assessments may be assessed, levied, collected and enforced in the same manner and time as county property taxes. Among other provisions, the Act gives the District s Board of Supervisors the right: (i) to hold, control, and acquire by donation, purchase, condemnation or dispose of any public easements, dedications to public use, platted reservations for public purposes or any reservations for those purposes authorized by the Act and to make use of such easements, dedications, or reservations for any of the purposes authorized by the Act; (ii) to finance, fund, plan, establish, acquire, construct or reconstruct, enlarge or extend, equip, operate and maintain stormwater management and control, water supply, sewer and wastewater management systems, or any combination thereof and to construct and operate connecting intercepting or outlet sewers and sewer mains and pipes and water mains, conduits, or pipelines in, along, and under any street, alley, highway, or other public place or ways, and to dispose of any effluent, residue or other byproducts of such system, or sewer system; (iii) to borrow money and issue the bonds, certificates, warrants, or other evidence of the District; and (iv) to exercise all of the powers necessary, convenient, incidental or proper in connection with any of the powers, duties or purposes authorized by the Act. 35

40 The Act does not empower the District to adopt and enforce land use plans or zoning ordinances, and the Act does not empower the District to grant building permits. These functions are performed by the City, acting through its City Council and its departments of government. The Act exempts all property of the District from levy and sale by virtue of an execution and from judgment liens, but does not limit the right of any owner of bonds of the District to pursue any remedy for enforcement of any lien or pledge of the District in connection with such bonds, including the Bonds. Board of Supervisors The Act provides for a five-member Board of Supervisors (the Board ) to serve as a governing body of the District. Members of the Board of Supervisors must be residents of the State and citizens of the United States. The members are elected on an at-large basis by the owners of property within the District. The Developer, who may be the majority owner of all the benefited property within the District at the time of the next at-large election, may determine the composition of the future Board. Ownership of land within the District initially entitles each landowner to cast one (1) vote per acre of land owned by such landowner and located within the District (with fractions thereof rounded to the nearest whole number) for each person to be elected. All members serve until expiration of their terms and until their successors are chosen and qualified. If, during the term of office, a vacancy occurs, the remaining members of the Board fill the vacancy by an appointment for the remainder of the unexpired term. After the sixth year after the initial appointment of members, once the District reaches 250 qualified electors, the position of two Board members whose terms are expiring is filled by qualified electors of the District, elected by the qualified electors of the District. A qualified elector is a registered voter who is a resident of the District and the State and a citizen of the United States. At the election where members are first elected by qualified electors, two members must be qualified electors and a third remaining member whose term is expiring will be elected by landowners. One of the Board members elected by the qualified electors shall serve a two year and the other a four year term, and the remaining Board member whose term is expiring shall be elected for a four year term by the landowners and is not required to be a qualified elector. Thereafter, as terms expire, all members must be qualified electors and will be elected by qualified electors and serve staggered terms. Notwithstanding any of the foregoing, if at any time the Board of Supervisors proposes to exercise its ad valorem taxing power, prior to the exercise of such power, it must call an election at which all members of the Board of Supervisors will be elected by and shall themselves be qualified electors of the District. Elections subsequent to such decision will be held in a manner such that the members will serve four year terms with staggered expiration dates in the manner set forth in the Act. The current members of the Board of Supervisors and their occupations are set forth below. Supervisor Employer Term Expires Larry M. Abbo Prime Investors and Developers, Inc. October,

41 Steven M. Glassman Glassman Corporation October, 2004 Steven B. Greenfield Steven B. Greenfield, P.A. October, 2006 Charles D. Brecker Katz, Barron, Squitero Et Al October, 2004 John Culleton Prime Investors and Developers, Inc. October, 2004 The Act empowers the Board of Supervisors to adopt administrative rules and regulations with respect to any projects of the District, and to enforce penalties for the violation of such rules and regulations. The Act permits the Board of Supervisors to levy taxes under certain conditions, and to levy special assessments, and to charge, collect and enforce fees and user charges for use of District facilities. District Management The Act authorizes the Board to hire a District Manager as the chief administrative official of the District. The Act provides that the District Manager shall have charge and supervision of the works of the District and shall be responsible for (i) preserving and maintaining any improvement or facility constructed or erected pursuant to the provisions of the Act, (ii) maintaining and operating the equipment owned by the District, and (iii) performing such other duties as may be prescribed by the Board. The District has hired Severn Trent Services, Inc. (the District Manager ) to serve as District Manager. Gary Moyer is Senior Vice-President of the District Manager. Mr. Moyer began his development career with Westinghouse Electric Corporation in 1973 after receiving a Bachelor of Science degree from Pennsylvania State University and a Master of Business Administration degree from the University of Notre Dame. He founded Gary L. Moyer, P.A. in 1982 for the purpose of providing professional managerial services to units of local government, specifically special purpose districts. Mr. Moyer is actively involved in the management of more than 150 special districts throughout the State of Florida, including community development districts, that have collectively issued in excess of $2 billion of bonds. Mr. Moyer has served on the Board of Directors of the Association of Special Districts, the Broward County 208 Water Quality Board and the Broward County Areawide Clean Water Advisory Board. Mr. Moyer's office is located at Northwest 11th Manor, Coral Springs, Florida 33065, telephone number Rhonda K. Archer, Vice President of Operations of the District Manager, is actively involved in administering the District and is serving as Assessment Consultant to the District. Ms. Archer is responsible for all financial accounting and reporting for the districts served by the District Manager, including monthly financial statements, accounts payable, payroll and payroll reports, administration of employee benefits, pension plan administration, purchasing & bidding, insurance procurement, coordination with staff and preparation of the annual budget, preparation of rate studies, rate analysis and adoption of rates by rule in accordance with Chapter , and , Florida Statutes, levying ad valorem and non-ad valorem assessments, in accordance with adopted assessment methodology, assessment collections, calculating due-onsale assessments, Annual Financial Reports for Units of Local Government, coordination of Annual Audit Reports in accordance with Florida Statues, TRIM Compliance, preparation and review of bond documents for public financing, preparation and review of requisitions from 37

42 construction trust funds, and Bond Compliance. Ms. Archer holds a Bachelors Degree in Business Administration from Florida Atlantic University and is an active member of the Government Finance Officer s Association, the Association of Special Districts, and formerly a member of the Broward County Areawide Clean Water Advisory Board. The District Manager s typical responsibilities can briefly be summarized as overseeing directly and coordinating the planning, financing, purchasing, staffing, reporting and governmental liaison for the District. The District Manager s responsibilities include requisitioning moneys to pay construction contracts and the related accounting and reporting that is required by the Indenture, including (i) preparing the Series 2003B Bonds interest assessment invoices; and (ii) coordinating with the Trustee, the lot closings, title lien releases, bond redemptions and, for Series 2003B Bonds, the Debt Service Reserve Fund credits. THE PROJECT The Project consists of certain roadway improvements, surface water management and control systems, water distribution and wastewater collection and transmission facilities to be acquired and constructed within the District. Included in the roadway right-of-way is pedestrian access. See Appendix A District Engineer s Report for a detailed explanation of the improvements constituting the Project. The surface water management and control systems will be owned and operated by the District. The water distribution and wastewater collection and transmission facilities will be dedicated to the City upon completion, and will be operated and maintained by the City. The Project s estimated costs by infrastructure component are set forth in the table below. Description of Work Portofino Isles CDD Estimated Cost of Infrastructure Estimated Costs(1) Stormwater Management System $ 4,656,469 Potable Water Distribution System $ 687,941 Wastewater Collection System $ 1,856,285 Roadway Infrastructure $ 417,147 Total $ 7,617,842 (1) See Engineer s Report dated February, 2003 for details on estimated costs The Developer THE DEVELOPMENT AND THE DEVELOPER 38

43 The information appearing below has been furnished by the Developer for use in this Limited Offering Memorandum. Prime Homes at Portofino Isles, Ltd. (the Developer ) is a Florida limited partnership managed by Prime Investors and Developers, Inc., a Florida corporation doing business as Prime Homebuilders. Prime Homebuilders, an Abbo family owned company, was founded in 1997 by its current directors Fred Abbo, Eva Abbo, Larry Abbo and Edward Abbo for the purpose of acquiring, planning, zoning, developing, building and managing absorption of master planned communities and other real estate properties. The Abbo Group of Companies and Prime Homebuilders have a national and international reputation for developing and building successful residential communities spanning over three generations. Prime Homebuilders was ranked among the Top Eight Builders in South Florida (Broward County) in 2002 by Appraisal and Real Estate Economic Associates/Integra Realty Resources. Prime Homebuilders was also honored to receive 7 Florida's Best Builders 2002 awards from the Builders Associations of South Florida in recognition for its merits. Descriptions of past, current and future communities by Prime Homebuilders can be found in Prime Homebuilders web page Brief descriptions of recently completed and ongoing Prime Homebuilders and Abbo Group of Companies planned developments are set forth below: Portofino Shores at North St. Lucie: Located in North St. Lucie County, between Port St. Lucie and Vero Beach, Portofino Shores will features 519 homes from the low $100 s in a 24 acre lakefront setting. This community includes a state of the art clubhouse, gated entrance and many amenities. Portofino Shores is located on King s Highway (aka the Turnpike Feeder) between Indrio Road and US1. Portofino Shores is surrounded by well established communities such as Holiday Pines, Lake Wood Park and Spanish Lakes. Portofino Bay and Portofino Estates at Waterstone in Homestead: Located in South Dade, only 30 minutes equidistant from Miami and the Keys, Portofino Bay & Portofino Estates at Waterstone offer distinctive and upscale lifestyle at affordable prices from the low $100 s. Portofino Estates and Portofino Bay will consist of 130 and 163 lots, respectively, in the first phase of Waterstone. Prime Homebuilders has a first option to purchase an equal amount of lots in the second phase. During the first day of sales, on October 12, 2002, fifty nine homes where sold, and sales to mid-december exceed 130 homes in total. In view of this success, Prime Homebuilders has managed to secure additional land to develop, build, and market an additional 120 single family homes, 300 Townhomes and a 5 acre commercial parcel. Portofino North and Portofino South at Monarch Lakes: Two recently completed, record selling and award winning communities, consisting of 169 and 118 homes, respectively. Both projects where built and sold in a period of 1-1/2 years by Prime Homebuilders in Miramar, Florida. Addison Court at Wyndham Lakes in Coral Springs: Consisting of 166 Mediterranean styled villas and townhomes in a gated community offering two to four bedrooms and one and two car garages. Addison Court includes a common recreational area with a pool, sunning deck and a cabana. This community experienced a market absorption averaging 15 homes per month. 39

44 Boynton Estates at Boynton Beach: 113 Mediterranean styled single family homes offering 1,430 to 2,611 square feet of living space with three, four and five Bedrooms with two and three car garages. This community was completed in The Builders The information appearing below has been furnished by the Developer for use in this Limited Offering Memorandum. The Developer has been in negotiations with a number of builders (the "Builders ) who will acquire the residential parcels with the Development from the Developer for the completion of development of such sites and resale to the ultimate individual landowners. As of the date hereof, the Developer has entered into a contract with Centex Homes, which has entered into a joint venture with Lennar Homes to purchase all of the lots within the Development. The anticipated takedown schedule provides for 203 single-family lots to be acquired in July, 2003; 92 townhome lots to be acquired in November, 2003; 107 singlefamily and 119 townhome lots to be acquired in July, 2004, and the remaining 236 single-family lots to be acquired in January, The Development The Portofino Isles Planned Unit Development (the Development ) is located in the corporate limits of the City of Port St. Lucie (the City ), St. Lucie County (the County ), Florida. The Development contains approximately acres and is generally located in the southeast quadrant of the intersection of Rosser Boulevard and Gatlin Boulevard, east of Interstate 95. The real property comprising the Development is owned by Glassman Development Corporation which has entered into a contract to sell such property to the Developer. It is anticipated that such property will be conveyed to the Developer shortly after issuance of the Bonds. The Development is a Planned Unit Development which was originally approved by the City Council of Port St. Lucie on July 8, 2002, and contains approximately 543 single-family residential lots; 214 multi-family units; 2.5 acres of institutional land use; a community clubhouse; and approximately 137 acres of native upland, wetlands and lakes. It is anticipated that the Development build-out will occur over the next five (5) to six (6) year period. The Developer estimates the fair market value of the Development, once the improvements are constructed, to be $25,500,000. Competition The information appearing below has been furnished by the Developer for use in this Limited Offering Memorandum. With the recent expansion of Gatlin Boulevard to six lanes, the City is experiencing significant residential development in the Gatlin corridor. For persons traveling north from Palm Beach County and the remainder of South Florida, Gatlin Boulevard is the first exit on Interstate 95 into Port St. Lucie. Gatlin Boulevard merges into Port St. Lucie Boulevard, which is 40

45 presently the major traffic artery and corridor of the City. This roadway offers the easiest access to the major population centers and to the beaches of Port St. Lucie. Brief descriptions of active residential developments in the vicinity of the Development are set forth below. Core Communities, the Developer of St. Lucie West, is undertaking the development of Tradition immediately west of Interstate 95 on Gatlin Boulevard. This community is planned to include more than 2,500 homes. St. Lucie West communities under construction include The Cascades with 214 starts and 74 houses under construction, Lake Forest with 175 starts and 86 homes under construction and Lake Charles with 136 starts and 68 houses under construction. The demand for homes in this corridor is evidenced by reports from the developers that The Cascades have sold more than 50% of the available 1,377 lots and Lake Forest has sold approximately 95% of 660 available lots. Other significant residential developments in the area include PGA Village with 210 annual starts and 124 homes under construction, River Place on the St. Lucie with 40 annual starts and 19 homes under construction, Sawgrass Lakes with 27 annual starts and 14 homes under construction and St. James Golf Club with 70 annual starts and 32 homes under construction. The above data was updated through July, 2002, and the construction activity has increased since that time. Development Status General. The Development is subject to approval and regulation by various local, state and federal agencies, especially insofar as the nature and extent of improvements, zoning, building, environmental, health and related matters are concerned. All initial governmental approvals necessary to develop the Development have been obtained. See Appendix A District Engineer s Report for a detailed discussion of the Project s permit status. In connection with seeking approvals and obtaining permits from regulatory authorities for the development plans of the Development, the Developer was required to make significant improvements in roads, water and sewer facilities and certain other concessions as a condition of such approvals and/or permits. Substantially all the aforementioned requirements have been identified and quantified with respect to the Development. The Developer must perform in accordance with the specified conditions to maintain the effectiveness of such permits or to receive additional subsequent permits. Concurrency. Florida cities are required to submit comprehensive plans in compliance with the Florida Local Government Planning and Land Development Regulation Act. The City s land development regulations must be consistent with such plans. Such Act requires that public facilities and services must meet or exceed certain standards and must be available for any development or that development order and permits must be conditioned on the availability of these public facilities and services necessary to serve any proposed development. Such Act also provides that no development order or permit may be issued which results in a reduction in the levels of service for the affected public facilities below the level of service provided in the comprehensive plan of the local government. Pursuant to the City of Port St. Lucie Comprehensive Land Use Plan, the Development has satisfied or been exempted from all concurrency requirements. 41

46 Planned Unit Development. Portofino Isles applied for and has been designated a Planned Unit Development ( PUD ) by the City. As a result, Portofino Isles was ultimately permitted for 573 single-family and 226 multi-family residential units. The Developer currently anticipates the construction of 546 single-family and 214 multi-family units. Generally, the PUD approval permits flexibility in the number of units each parcel within the PUD may contain as long as the total permitted densities are not exceeded. Plat Approval. State laws provide that a parcel of land cannot be subdivided into distinct segments without having a plat filed and finalized with the local or municipal authority, which generally requires the approval of various local governmental agencies having jurisdiction. Portofino Isles has received preliminary plat approvals and final City approval for Phase I of the single-family portion of the Development was granted on December 2, Utilities The Development is served by Florida Power & Light for electric services, BellSouth Telephone Co. for telephone service and the City for water and sewer service. Property Taxes and Other Assessments In addition to the Special Assessments levied by the District relating to the administration/maintenance costs of the District and debt service on the Bonds, landowners within the District will pay ad valorem taxes, an assessment levied by the property owner s association for each parcel ( Association Assessment ), and a special assessment for the operation and maintenance of the District which will be based on the District s operating budget adopted after a public hearing held by the District s Board of Supervisors. The Association Assessment is for common area maintenance, landscaping and security. The following millage rates appeared on the County s ad valorem tax bill within the District for the tax roll years 1995 through 2002: 42

47 CITY OF PORT ST. LUCIE, FLORIDA PROPERTY TAX RATES DIRECT AND OVERLAPPING GOVERNMENTS TAX ROLL YEAR PORT ST. LUCIE ST. LUCIE COUNTY SCHOOLS DEBT TOTAL CAPITAL OPERATING OPERATING SERVICE COUNTY OPERATING IMPROV MILLAGE MILLAGE MILLAGE MILLAGE MILLAGE MILLAGE TOTAL SCHOOLS MILLAGE OTHER AGENCIES OPERATING MILLAGE TOTAL MILLAGE Notes: Rate based on per $1,000 of taxable property value. Tax Roll Year is January 1 to December 31. Municipality s Fiscal Year is October 1 to September 30. Source: St. Lucie County Property Appraiser. TAX MATTERS In the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law, (i) interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and (ii) the Bonds and the income thereon are exempt from taxation under the laws of the State of Florida, except estate taxes imposed by Chapter 198, Florida Statutes, as amended, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, as amended. Bond Counsel will express no opinion as to any other federal or state tax consequences regarding the Bonds. The opinion on federal tax matters will be based on and will assume the accuracy of certain representations and certifications, and continuing compliance with certain covenants, of the District to be contained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including that the Bonds are and will remain obligations the interest on which is excluded from gross income for federal income tax purposes. Bond Counsel will not independently verify the accuracy of those certifications and representations. The Code prescribes a number of qualifications and conditions for the interest on state and local government obligations to be and to remain excluded from gross income for federal income tax purposes, some of which require future or continued compliance after issuance of the obligations in order for the interest to be and to continue to be so excluded from the date of issuance. 43

48 Noncompliance with these requirements by the District may cause the interest on the Bonds to be included in gross income for federal income tax purposes and thus to be subject to federal income tax retroactively to the date of issuance of the Bonds. The District has covenanted to take the actions required of it for the interest on the Bonds to be and to remain excluded from gross income for federal income tax purposes, and not to take any actions that would adversely affect that exclusion. Under the Code a portion of the interest on the Bonds earned by certain corporations may be subject to a corporate alternative minimum tax. In addition, interest on the Bonds may be subject to a branch profits tax imposed on certain foreign corporations doing business in the United States and to a tax imposed on excess net passive income of certain S corporations. Under the Code the exclusion of interest on the Bonds from gross income for federal income tax purposes may have certain adverse federal income tax consequences on items of income, deduction or credit for certain taxpayers, including financial institutions, certain insurance companies, recipients of Social Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income tax credit. The applicability and extent of these and other tax consequences will depend upon the particular tax status or other tax items of the owner of the Bonds. Bond Counsel will express no opinion regarding those consequences. Purchasers of the Bonds at other than their original issuance at the respective prices indicated on the inside cover of this Limited Offering Memorandum should consult their own tax advisers regarding other tax considerations such as the consequences of market discount. AGREEMENT BY THE STATE Under the Act, the State of Florida pledges to the holders of any bonds issued thereunder, including the Bonds, that it will not limit or alter the rights of the issuer of such bonds to own, acquire, construct, reconstruct, improve, maintain, operate or furnish the projects subject to the Act or to levy and collect taxes, assessments, rentals, rates, fees, and other charges provided for in the Act and to fulfill the terms of any agreement made with the holders of such bonds and that it will not in any way impair the rights or remedies of such holders. NO FINANCIAL STATEMENTS The District was created in August, 2002 and the activities of the District to the date of this Limited Offering Memorandum have been limited principally to the non-revenue producing activities preliminary to the issuance of the Bonds. Financial statements of the District are therefore not available and not included herein. The District has covenanted in the Form of Continuing Disclosure Agreement set forth in Appendix E hereto to provide its annual audit commencing with the audit for the District fiscal year ended September 30, 2002 to certain information repositories as described in Appendix E attached hereto. 44

49 VALIDATION The Bonds were validated by a Final Judgment of the Nineteenth Judicial Circuit Court in and for St. Lucie County, Florida, entered November 14, The period during which an appeal could be taken from that judgment expired without an appeal being taken. The Final Judgment validating the Bonds also validated the resolution of the Board accepting the preliminary assessment roll relating to the Special Assessments. Section 75.09, Florida Statutes, as amended, provides that a final judgment validating bonds and taxes, assessments or revenues pledged for the payment thereof, from which no appeal is taken or from which an appeal is taken and the judgment is affirmed, is forever conclusive as to all matters adjudicated against a plaintiff and all parties affected thereby, including all property owners and taxpayers and all others having or claiming any right, title or interest in property to be affected by the issuance of said bonds, certificates or other obligations or to be affected in any way thereby, and the validity of said bonds, certificates or other obligations or of any taxes, assessments or revenues pledged for the payment thereof, or of the proceedings authorizing the issuance thereof, including any remedies provided for their collection, shall never be called in question in any court by any person or party. The scope of judicial review, however, focuses on whether: (1) a public body has the authority to incur the obligation; (2) the purpose of the obligation is legal; and (3) the proceedings authorizing the obligation were proper. A final judgment validating bonds does not preclude a party from challenging the validity of such bonds or certificates on constitutional grounds. EXPERTS AND CONSULTANTS The references herein to Culpepper & Terpening, Inc. as the District Engineer and to Severn Trent Services, Inc., as District Manager and Assessment Consultant, and RBC Dain Rauscher Inc., as Financial Advisor, have been approved by said firms. The District Engineer s Report prepared by such firm relating to the Project has been included as Appendix A attached to this Limited Offering Memorandum in reliance upon such firm as an expert in engineering. References to and excerpts herein from such Report do not purport to be adequate summaries of such Report or complete in all respects. Such Report is an integral part of this Limited Offering Memorandum and should be read in its entirety for complete information with respect to the subjects discussed therein. Culpepper & Terpening, Inc. also serves as the Developer s engineer. LITIGATION There is no pending or, to the knowledge of the District, any threatened litigation against the District of any nature whatsoever which in any way questions or affects the validity of the Bonds, or any proceedings or transactions relating to their issuance, sale, execution, or delivery, or the execution of the Indenture. Neither the creation, organization or existence, nor the title of the present members of the Board of Supervisors or the District Manager is being contested. 45

50 CONTINGENT AND OTHER FEES The District has retained Bond Counsel, Disclosure Counsel, District Counsel, the Underwriter (who has retained Underwriter s Counsel), the Financial Advisor, the Assessment Consultant and the Trustee (who has retained Trustee s Counsel), with respect to the authorization, sale, execution and delivery of the Bonds. Payment of the fees of such professionals may be contingent upon the issuance of the Bonds. LEGAL MATTERS All legal matters related to the authorization, issuance, sale, and delivery of the Bonds are subject to the approval of Squire, Sanders & Dempsey, L.L.P., Jacksonville, Florida, Bond Counsel. Certain legal matters will be passed upon for the District by its counsel, Lewis, Longman & Walker, P.A., West Palm Beach, Florida; for the Underwriter by its counsel, Shughart Thomson & Kilroy, P.C., Denver, Colorado; and for the Trustee by its counsel, Holland & Knight, Miami, Florida. SUITABILITY FOR INVESTMENT While the Bonds are not subject to registration under the Securities Act of 1933, as amended (the Securities Act ), the Underwriter has determined that the Bonds are not suitable for investment by persons other than, and, as required by Chapter 189, Florida Statutes, will offer the Bonds only to, accredited investors, as defined in Section , Florida Statutes, and regulations thereunder. Prospective investors in the Bonds should satisfy themselves that they meet the definition of accredited investors and should have such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Bonds and should have the ability to bear the economic risks of such prospective investment, including a complete loss of such investment. ABSENCE OF RATINGS No application for a rating on the Bonds has been made and it is not likely that the District would have been successful in obtaining an investment grade rating for the Bonds had application been made. CONTINUING DISCLOSURE The Securities and Exchange Commission (the Commission ) has promulgated amendments to Rule 15c2-12 (the Rule ) under the Securities and Exchange Act of 1934, as amended, which prohibit underwriters from purchasing or selling municipal securities unless such underwriters have reasonably determined that the issuer and any obligated persons with respect thereto, have undertaken to provide continuing disclosure with respect to its securities, subject to certain exemptions. In the Indenture and in a Continuing Disclosure Agreement to be 46

51 delivered at the time of the issuance of the Bonds, the District and the Developer (with respect to the Developer, for only so long as they own 25%, or more in acreage of District lands) have covenanted and will covenant, for the benefit of the Owners of the Bonds, including Beneficial Owners thereof, to deliver to each nationally recognized municipal securities information repository ( NRMSIR ) and to the appropriate Florida information depository, if any, certain financial information and operating data relating to the District and the Developer ( Annual Information ) not later than April 30 of each year, commencing April 30, 2003, and to provide timely notices to the Municipal Securities Rulemaking Board (the MSRB ) and to the appropriate Florida information depository, if any, of the occurrence of any of certain material events with respect to the Bonds. The specific nature of the information to be contained in the Annual Information and of the material events is set forth in Appendix E Form of Continuing Disclosure Agreement attached hereto. The District has never before been required to provide continuing disclosure information with respect to the Rule. In addition, the District, as an independent special district under the laws of Florida, is required to file certain information, including audited annual financial statements, with the Florida Department of Community Affairs, and to maintain records open to the public for examination and copying under state public records laws. Public records of the District may be examined upon reasonable notice during normal business hours at the offices of William G. Capko, Esq., as Registered Agent, Lewis, Longman & Walker, P.A., (561) , 1700 Palm Beach Lakes Boulevard, Suite 1000, West Palm Beach, Florida 33401, and the District will furnish copies of any public records of the District, upon written request of such Owner or person specifying the particular records to be copied and payment of the District s reasonable copying charges then in effect and mailing or other delivery costs. UNDERWRITING The Underwriter will agree, pursuant to a contract to be entered into with the District, subject to certain conditions, to purchase the Series 2003A Bonds from the District in a limited offering transaction on March 10, 2003 or such later date as the District and the Underwriter may agree (the Closing Date ) at a purchase price of $7,063, (including Underwriter s discount of $71,350.00), plus accrued interest from March 1, See ESTIMATED SOURCES AND USES OF FUNDS herein. The Underwriter s obligations are subject to certain conditions precedent and the Underwriter will be obligated to purchase all the Series 2003A Bonds if any are purchased. The Underwriter will agree, pursuant to a contract to be entered into with the District, subject to certain conditions, to purchase the Series 2003B Bonds from the District in a limited offering transaction on March 10, 2003 or such later date as the District and the Underwriter may agree (the Closing Date ) at a purchase price of $514, (including Underwriter s discount of $5,200.00), plus accrued interest from March 1, See ESTIMATED SOURCES AND USES OF FUNDS herein. The Underwriter s obligations are subject to certain conditions 47

52 precedent and the Underwriter will be obligated to purchase all the Series 2003B Bonds if any are purchased. The Underwriter intends to offer the Bonds to accredited investors at the offering prices set forth on the cover page of this Limited Offering Memorandum, which may subsequently change without prior notice. The Underwriter may offer and sell the Bonds to certain dealers (including dealers depositing the Bonds into investment trusts) at prices lower than the initial offering prices and such initial offering prices may be changed from time to time by the Underwriter. MISCELLANEOUS Any statements made in this Limited Offering Memorandum involving matters of opinion or of estimates, whether or not so expressly stated, are set forth as such and not as representations of fact, and no representation is made that any of the estimates will be realized. Neither this Limited Offering Memorandum nor any statement that may have been made verbally or in writing is to be construed as a contract with the holders of the Bonds. The information and expression of opinion herein are subject to change without notice and neither the delivery of this Limited Offering Memorandum nor any sale made hereunder is to create, under any circumstances, any implication that there has been no change in the affairs of the District or the Developer from the date hereof. However, certain parties to the transaction will, on the closing date of the Bonds, deliver certificates to the effect that nothing has come to their attention that would lead them to believe that the Limited Offering Memorandum contains an untrue statement of a material fact or omits to state a material fact that should be included herein for the purpose for which the Limited Offering Memorandum is intended to be used, or that is necessary to make the statements contained herein, in light of the circumstances under which they were made, not misleading and to the effect that from the date of the Limited Offering Memorandum to the date of closing of the Bonds that there has been no material adverse change in the information provided. This Limited Offering Memorandum is submitted in connection with the sale of the securities referred to herein and may not be reproduced or used, as a whole or in part, for any other purpose. The appendices hereof are integral parts of this Limited Offering Memorandum and must be read in their entirety together with all foregoing statements. PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT By: /s/ Larry M. Abbo Chairman 48

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81 APPENDIX B Special Assessment Methodology Report

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83 PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT City of Port St. Lucie, Florida Supplemental Special Assessment Methodology Report Series 2003A and B Special Assessment Bonds February 27, 2003 Severn Trent Services, Inc NW 11 th Manor Coral Springs, Florida

84 SUPPLMENTAL SPECIAL ASSESSMENT METHODOLOGY REPORT PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT February 27, Introduction 1.1 Purpose The purpose of this supplemental report is to provide the final bond sizing and terms to update the adopted methodology for allocating the debt to be incurred by the Portofino Isles Community Development District ( Portofino Isles CDD or District ) to properties in the District. The District s debt will fund infrastructure improvements that will allow the development of the property in the District. The methodology allocates this debt to properties based upon the special benefits each receives from the infrastructure program. In this case the property located within the District includes approximately acres within the Portofino Isles Planned Development located within the city limits of Port St. Lucie, Florida. This report is designed to conform to the requirements of Chapters 190 and 170, F.S. with respect to special assessments and is consistent with our understanding of the case law on this subject. This preliminary report reflects the anticipated bond sizing, coupon rate, terms and structure of the proposed financing of the District s infrastructure program. 1.2 Background The Portofino Isles Community Development District consists of approximately acres in the City of Port St. Lucie, Florida (see Table 1 in Appendix). Portofino Isles is a Planned Development approved by the City of Port St. Lucie to include acres of Residential Single Family, acres of Residential Multi-family, a 2.5 acre Library, 7.32 acres of recreation area, and acres of wetlands, native uplands, entrance roads and easements. The project was approved to include up to 799 residential units. The assessment methodology is a four-step process. The District Engineer must first determine the costs for all District improvements needed for the build-out of the community. Second, the District Engineer determines the assessable acres that benefit from the District s infrastructure improvements. Third, a calculation is made to determine the funding amounts necessary to acquire and/or construct the District infrastructure improvements. Fourth, this amount is initially divided equally among the benefited properties on a net assessable acreage basis. Ultimately, as land is platted, this amount will be allocated to each of the benefited properties based on certain characteristics accruing to each parcel. 2

85 1.3 Special Benefits and General Benefits Improvements undertaken by the District create special benefits, different in nature and degree, for certain properties within its borders, as well as general benefits to the public at large. However, as discussed below, these general benefits are incidental in nature and are readily distinguishable from the special benefits, which accrue to certain property within the District. The infrastructure program of the District enables properties within its boundaries to be developed. Without the District s program there would be no infrastructure to support development of land in the District. Without these improvements, development of property within the District would be prohibited by law. There is no doubt that the general public and property owners outside the District will benefit from the provision of the District s infrastructure. However, these are incidental to the District s infrastructure program, which is designed solely to meet the needs of property within the District. Properties outside the District do not depend upon the District s improvement program to obtain, or to maintain, their development entitlements. This fact alone clearly distinguishes the special benefits which District properties receive compared to those lying outside of the District s boundaries. 1.4 Special Benefits Exceed the Costs Allocated to Pay for Them In the case of Portofino Isles, the value of the special benefits conferred upon each of the assessed parcels by the District s infrastructure program is far greater than the amount to be assessed against each of such parcels. The amount of bonds to be issued by the District to fund its improvement program is estimated to total $7,655,000. It is the District s improvement program that makes it possible to develop and sell the land within its boundaries. 2.0 Assessment Methodology 2.1 Overview The projected financial plan for the Portofino Isles Community Development District calls for a total of approximately $7,655,000 in tax-exempt bonds to be issued by the District. The proceeds from this bond issue will fund a portion of the District s infrastructure program and provide for capitalized interest, a debt service reserve account, and issuance costs. It is this $7,655,000 in debt that is allocable to all properties within the District benefiting from the improvements funded by the District s bonds. The landowner has developed a master plan for the property identifying particular land uses throughout the District. Table 2 in the Appendix depicts acreages 3

86 accruing to the different land uses and also the current plan for product distribution within the development. The District has relied upon the landowner s land use plan to develop the District s capital improvement program. Table 4 in the Appendix delineates the proposed construction costs for the District s infrastructure totaling approximately $7,617,842 (the Infrastructure or the Improvements ). At the outset, the District s debt will be allocated to all assessable property in the Portofino Isles CDD on an equal acreage basis within each parcel. Based on the developer s current land plan, there are approximately assessable acres within the CDD. This acreage consists of residential property to be devoted to approximately 543 single-family units and 214 multi-family units. Based on the proposed construction costs (Table 4), a projected financing structure is depicted in Table 5 in the Appendix. The Series 2003 Bonds are expected to be issued in a par amount of $7,655,000, representing two series of bonds. The Series A bonds will be issued in a par amount of $7,135,000 with a coupon rate of 6.5% to be amortized over 30 years, with a final maturity of 5/1/2033. The Series B bonds will be issued in a par amount of $520,000 with a coupon rate of 5.7% to be amortized over 3 years, interest only, with a final principal balloon maturity on 5/1/ Master Improvement Program as a Total System The District intends to undertake the responsibility of providing a portion of the infrastructure, which will serve the Portofino Isles CDD community. The Improvements are an integrated system of facilities. For example, a total system consists of not only the first mile of roadway or utility piping, but also the last few feet. All landowners benefit from the first mile of roadway pavement. Additionally, all landowners benefit from the last few feet of roadway pavement. Therefore, the Infrastructure program works as a total system, and each portion of the system provides special benefits for each land use, according to the development program. The Infrastructure program includes the public improvements required for development approval, the costs for which are allocated on a fair and equitable proportionate basis across all the assessable property in the District. 2.3 Allocation of Debt The infrastructure program (the Program ) benefits all developable acres within the District. The assessment methodology detailed herein provides for a fair and reasonable allocation of debt based on this premise. Initially, the assessments will be levied on all assessable land on an equal acreage basis, because at that juncture every acre benefits equally from the Program. 4

87 The debt incurred by the District to fund the Program is allocated to the properties receiving special benefits on the basis of development intensity and density. The responsibility for the repayment of the District s debt through assessments will ultimately be distributed in proportion to the special benefit peculiar to each parcel of land within the District, as it may be classified within each of the land use categories. In this case, debt related to the Stormwater Infrastructure has been allocated by the District s Consulting Engineer based on total benefited areas and their proportionate share of impervious coverage in the assessable areas, as shown in Table 6 of the Appendix. The Water and Wastewater Infrastructure has been allocated based on Equivalent Residential Connections (ERC s) per unit. The base unit used is the single-family lot product, which is comprised of the residential units listed in Table 7 of the Appendix. Single-family residential units have been assigned an Equivalent Residential Connection (ERC) value of 1. The Roadway Infrastructure costs, consisting of the construction of the entrance road from Gatlin Boulevard to the proposed guardhouse, have been allocated to the land within the CDD as well as to the Commercial property located outside of the boundaries of the CDD. It is anticipated the roadway costs will be reimbursed to the CDD in one of two ways. First, the costs will be reimbursed to the CDD by the Special Assessment District (the SAD ) to be created by the City of Port St. Lucie. In the event the SAD is not created and the roadway debt has not been reimbursed to the CDD prior to the sale of the first lot, parcel or tract within the CDD, then the second source of funds for the reimbursement of the roadway costs will be a due on sale amount required from the Developer at the rate of $687 per unit. This amount will be due and payable to the CDD prior to the transfer of the property to another owner. This amount is calculated by dividing the total Series B (roadway) debt of $520,000 by the proposed total units to be developed of 757. In accordance with the benefit allocation suggested by the Infrastructure costs allocated to each product type shown in Table 9, a Total Debt per Unit and an Average Permanent Annual Assessment per Unit have been calculated for each product type (Tables 10 and 11). These amounts are based on the debt requirements outlined in Table 5, and represent the anticipated per unit debt allocations assuming all anticipated units are built and sold in the proportions planned, and the entire proposed infrastructure program is developed or acquired and financed by the District. 2.4 Allocation of Infrastructure Costs The assessment methodology directly allocates debt to specific property categories (or land use types) based upon an estimated benefit that each category receives from the development of the District s infrastructure. 5

88 It is reasonable to measure benefit bestowed upon platted land by District improvements by taking into consideration certain characteristics accruing to each category of land use, average cost of the vertical construction to be located on the parcel, and the average amount of District roadway usage emanating from the improved parcel of land. Each of these characteristics impacts on the amount of benefit received from the construction of the District infrastructure. For example, a single-family residential unit would derive more benefit from surface water drainage improvements than would a smaller residential unit such as a townhouse because of the larger land area associated with the single-family residential unit. Similarly, the number of Trips generated for a single-family residential unit is greater than the Trips generated for a townhouse resulting in a greater benefit derived for the single family unit for the usage of the roads to be constructed. In summary, it is fair to assume that the single-family lot receives the highest proportion of benefit, followed by the townhouse units. Tables 6, 7, and 8 in the Appendix provides an illustration of how the benefit allocation methodology is designed to work. This illustration is based upon the latest land use plan described above and calculates both the total debt allocation per land use type as well as the assessment amounts necessary to pay off the debt allocated to each type of residential unit. Table 10 provides a summary of the annual assessments required to amortize the Series 2003A debt, based on the target not-to-exceed annual costs provided by the Developer. Table 11 provides a summary of the allocation of both the Series 2003A and 2003B par amount of debt to each Land Use Type planned for development within the District. 2.5 Lienability Test: Special and Peculiar Benefit to the Property Construction and/or acquisition by the District of its proposed infrastructure program will provide several types of systems, facilities and services for its residents. These include surface water management, roadways, landscaping and entrance features, and the provision of potable water, and wastewater facilities. These improvements confer benefit on different parcels in differing amounts and the benefit to an individual parcel is dependent on the proposed land use of the parcel. It is anticipated that the District will acquire the improvements valued at $7,617,841 at a discount in the amount of $6,279,780, in accordance with the Acquisition Agreement dated February, 2003, which is incorporated herein by reference. An example of this differentiation, is that the average daily road trip rate (as cited in the 6 th Edition of the Institute of Transportation Engineers, 1997 ( ITE ) is 4.2 average daily trips for a residential condominium/townhouse unit, and 9.57 average daily trips for the single family residential category. Similarly, water and wastewater benefits received by townhouse units are also less than those received by the single-family residences. 6

89 Once these determinations are made, they are reviewed in the light of the special benefits peculiar to the property, which flow to the properties as a result of their logical appreciation from the improvements in fact actually provided. For the provision of the: a. Storm Water Management Facilities; b. Potable Water; c. Wastewater; d. Roadway Infrastructure; and related e. Engineering, Permitting Design, Survey and Contingencies; the special and peculiar benefits are (1) the added use of the property, (2) the added enjoyment of the property, and (3) the probability of increased marketability and value of the property. These special and peculiar benefits are real and ascertainable, but are not yet capable of being calculated as to value with mathematical certainty. However, each is by order of magnitude more valuable than the cost of the actual non-ad valorem special assessment levied for the improvement, or the debt, as allocated. 2.6 Lienability Test: Reasonable and Fair Apportionment of the Duty to Pay Non Ad Valorem Assessments A reasonable estimate of the proportion of special and peculiar benefits received from the Improvements is delineated in Tables 6, 7 and 8, expressed in Benefiting Acres, Equivalent Residential Connections and Trips. The determination has been made that the duty to pay the non-ad valorem special assessments is fairly and reasonably apportioned because the special and peculiar benefits to the property derived from the acquisition and/or construction of the District s Improvements (and the concomitant responsibility for the payment of the resultant assessment and allocated debt) have been apportioned to the property according to reasonable estimates of the special and peculiar benefits provided consistent with each land use category. Accordingly, no acre or parcel of property within the boundaries of the District will be liened for the payment of any non-ad valorem special assessment in excess of the amount of the determined special benefit peculiar to that property. In accordance with the benefit allocation assigned to each land use, a Total Debt per Unit and an Annual Assessment per Unit have been calculated for each land use (Tables 10 & 11). These amounts represent the final anticipated per unit debt allocations assuming all anticipated units are built and sold in the proportions 7

90 planned, and the entire proposed infrastructure program is developed or acquired and financed by the District. 2.7 Processing Site Plan Revisions at the District Level Although the District does not process plats, site plans or revisions for the developer, it does have an important role to play during the course of platting and site planning. Whenever a plat or site plan or revision is processed, the District must allocate a portion of its debt to the property according to the methodology outlined above. In addition, the District must also prevent any buildup of debt on unsold land. Otherwise, the land could be fully conveyed without all of the debt being allocated. To preclude this, at each plat or site plan approval or revision, the Developer acknowledges that the District will determine the amount of debt per acre that remains on the unsold land, taking into account the proposed plat or site plan approval. If the debt per assessable acre on the unsold property does not increase above its initial level ($54,118 per acre), then the Developer may proceed to the City for plat or site plan approval. 2.8 True-Up Mechanism In order to assure that the District s debt will not build up on the unsold acres, and to assure that the legal requirements are met in order for the non-ad valorem special assessments to be a valid lien on the property, the District shall determine the following: To assure that there will always be sufficient development potential remaining in the undivided property to assure payment of debt service after a plat or site plan approval, the following test will be applied. The test is that the debt per acre remaining on the unsold land is never allowed to increase above its maximum debt per acre level. Initially, the maximum level of debt per acre is calculated as the total amount of debt for the District s improvement program divided by the number of developable acres in the District. In this case it is $7,655,000 divided by assessable acres, equaling $54,118 per acre. Thus, if the initial debt level (Series 2003 debt) is $54,118 per acre, every time a plat or site plan approval is presented, the debt on the land remaining after the plat or site plan approval must remain at or below $54,118 per acre. If not, then prior to the Developer receiving plat or site plan approval from the City of Port St. Lucie, the Developer agrees that the District will require a density reduction payment so that the initial $54,118 per acre debt level is not exceeded. Thus, the debt allocation methodology provided above is really a process by which the District can allocate debt to particular parcels of land at the time of plat and/or site plan approval. The procedures also assure that the debt will not build up on the unsold properties creating potential assessment problems. 8

91 2.9 Bond Sizing As mentioned previously in Section 2.1, the District s anticipates issuing bonds totaling $7,655,000. The proceeds from these bonds will: (a) fund the District s proposed Infrastructure; (b) provide for capitalized interest; (c) fund the debt service reserve fund; and (d) fund the estimated costs of issuance of the bonds. The bond structure for the bond issue in connection with the funding of the District s infrastructure (the Series 2003 Bonds) is a Series 2003A Bond in the amount of $7,135,000 with level annual amortization of principal and interest over a 30-year period. The balance of the infrastructure costs not funded through the issuance of the Series 2002A Bonds are to be funded through the issuance of the Series 2003B Bonds estimated to be $520,000 with semi-annual interest payments over a 3 year period and a principal balloon on 5/1/ Preliminary Assessment Roll Table 12 in the Appendix is the Preliminary Special Assessment Roll for the District s Proposed Series 2003 Bonds and indicates the assessments derived from the Series 2003 bond issue accruing to each land parcel presently on the St. Lucie County tax roll as of the time of this report, prior to bond issuance. 9

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93 Portofino Isles Community Development District Land Use Summary Table 1 Land Use Type Gross Acres # Units (1) Single Family Multi-family Library 2.5 Wetlands & Lakes Native Upland Total Acres (PUD) Delete Library & Access Road Add FP & L Easement Add Montebello Drive from Guardhouse to Gatlin 4.2 Additional Lake Areas Total Acres in CDD (1) Preliminary, subject to change. App B - Part 2 Methodology Tables Final xls 1 3/7/2003

94 Portofino Isles Community Development District Projected Assessable Acres Table 2 Land Use Type Assessable Acres Total Units (1) Single Family Multi-family Total Residential Total Commercial Sq. Ft. 0 0 Total Assessable Acres (1) Preliminary, subject to change. App B - Part 2 Methodology Tables Final xls 2 3/7/2003

95 Portofino Isles Community Development District Limit on Capital Assessments * Table 3 Lot Size Maximum Annual Assessment A. Single Family $ B. Multi-family $ *Target Amount for Annual Assessment to Lot Purchasers. App B - Part 2 Methodology Tables Final xls 3 3/7/2003

96 Portofino Isles Community Development District Estimated Cost of Infrastructure Table 4 Description of Work Estimated Costs (1) Backbone Infrastructure Costs Local Parcel Specific Infrastructure Costs Stormwater Management System $ 4,656,469 $ 4,656,469 $ - Potable Water Distribution System $ 687,941 $ 253,586 $ 434,355 Wastewater Collection System $ 1,856,285 $ 485,227 $ 1,371,058 Roadway Infrastructure $ 417,146 $ 417,146 $ - Total $ 7,617,842 $ 5,812,429 $ 1,805,413 (1) See Engineer's Report dated January, 2003 for details on estimated costs. App B - Part 2 Methodology Tables Final xls 4 3/7/2003

97 Portofino Isles Community Development District Proposed Bond Sizing Table 5 Uses of Funds Series A Series B Total Underwriters Discount 1.000% $ 71,350 $ 5,200 $ 76,550 Costs of Issuance $ 323,428 $ 23,572 $ 347,000 Debt Service Reserve $ 559,125 $ 52,000 $ 611,125 Capitalized Interest $ 295,616 $ 18,893 $ 314,509 Net Construction Fund $ 5,885,480 $ 420,336 $ 6,305,816 Contingency $ - $ - $ - Total Par Amount of Bonds $ 7,135,000 $ 520,000 $ 7,655,000 Average Coupon 6.50% 5.70% Capitalized Interest Through 11/01/03 11/01/03 Net Funded Construction Costs $ 5,885, $ 420, $ 6,305, Final Maturity 05/01/33 05/01/06 Series 2003A Principal will be due annually on May 1 beginning May 1, Interest payments will be due semi-annually on May 1 and November 1. Series 2003B Debt will be interest only with principal due on May 1, App B - Part 2 Methodology Tables Final xls 5 3/7/2003

98 Portofino Isles Community Development District Allocation of Infrastructure Costs Backbone Stormwater Attenuation by Land Use Table 6 Land Use Type Net Area in AC (1) Impervious Coverage Total Impervious Area Total Stormwater Infrastructure Costs (3) Single Family % $ 2,994, Multi-Family % $ 1,661, Total Residential $ 4,656, (1) Taken from approved PUD. (3) Engineer's Estimate of Probable Cost. App B - Part 2 Methodology Tables Final xls 6 3/7/2003

99 Portofino Isles Community Development District Allocation of Infrastructure Costs Backbone Water and Wastewater System by Land Use Table 7 ERC's Per Unit Total ERCs Percentage of Total Benefiting ERCs Backbone Water Infrastructure Costs Local Water Infrastructure Costs Land Use Type (1) Units (2) Single Family % $ 181,899 $ 434,355 Multi-Family % $ 71,687 $ - Total Residential % $ 253,586 $ 434,355 Land Use Type (1) Units (2) ERC's Per Unit Total ERCs Percentage of Total Benefiting ERCs Backbone Wastewater Infrastructure Costs Local Wastewater Infrastructure Costs Single Family % $ 348,056 $ 1,371,058 Multi-Family % $ 137,171 $ - Total Residential % $ 485,227 $ 1,371,058 (1) Taken from approved PUD. (2) Preliminary, subject to change. (3) Engineer's Estimate of Probable Cost. App B - Part 2 Methodology Tables Final xls 7 3/7/2003

100 Portofino Isles Community Development District Allocation of Infrastructure Costs Roadway Infrastructure Allocated by Land Use Table 8 Land Use Type (1) Units/Acre (2) Trips/Unit or Sq. Ft. Total Trips Percentage of Total Benefiting Trips Allocation of Roadway Costs (3) Single Family % $ 96,132 Multi-Family % $ 16,627 Commercial % $ 304,387 Totals % $ 417,146 (1) Taken from approved PUD. (2) Preliminary, subject to change. (3) Engineer's Estimate of Probable Cost. App B - Part 2 Methodology Tables Final xls 8 3/7/2003

101 Portofino Isles Community Development District Allocation of Total Infrastructure Costs by Land Use Table 9 Land Use Type (1) Units (2) Total Stormwater Infrastructure Costs Total Water Infrastructure Costs Total Wastewater Infrastructure Costs Total Roadway Infrastructure Costs Total All Infrastructure Costs Single Family 543 $ 2,994,924 $ 616,254 $ 1,719,114 $ 96,132 $ 5,426,423 Multi-Family 214 $ 1,661,545 $ 71,687 $ 137,171 $ 16,627 $ 1,887,030 Commercial $ 304,387 $ 304,387 Total Residential 757 $ 4,656,469 $ 687,941 $ 1,856,285 $ 417,146 $ 7,617,841 (1) Taken from approved PUD. (2) Preliminary, subject to change. (3) Engineer's Estimate of Probable Cost. App B - Part 2 Methodology Tables Final xls 9 3/7/2003

102 Portofino Isles Community Development District Series A Debt Capacity Table 10 Land Use Type Total Units (1) Maximum Annual Capital Assmt. Per Unit Net Capital Assessment Per Unit Annual Assessment Per Unit Available for Debt Total Net Annual Assessment Revenue Available to Pay Debt* Single Family 543 $ $ $ $ 399, Multi-family 214 $ $ $ $ 146, Total Residential 757 $ 545, Maximum Annual Debt Requirement $ 542, Bond Financing Assumptions: Coupon Rate 6.50% No. of Years 30 Par Amount $ 7,135,000 (1) Preliminary and Subject to Change. (2) Total Annual Debt Assessments will be grossed-up 4% to allow for discounts for early payment and an additional 2% for collection costs, a total of 6%. App B - Part 2 Methodology Tables Final xls 10 3/7/2003

103 Portofino Isles Community Development District Series B Capital Reduction Assessments Table 11 Land Use Type Units/SF Total Costs Allocated by Land Use Total Debt Allocated by Land Use Series 2003A Debt Total Series 2003B Debt by Land Use Series 2003B Debt Per Unit Single Family 543 $ 5,426,423 $ 5,452,893 $ 5,216,280 $ 119,835 $ Multi-family 214 $ 1,887,030 $ 1,896,235 $ 1,918,720 $ 20,727 $ Commercial $ 304,387 $ 305,872 $ 379,438 $ 379, Total Residential 757 $ 7,617,841 $ 7,655,000 $ 7,135,000 $ 520,000 Notes: The Commercial Property is outside the boundaries of the CDD. Roadway Infrastructure Costs allocated to Commercial Property will be repaid to the CDD either by (1) reimbursement from the City of Port St. Lucie/Glassman SAD, or (2) by the developer upon transfer of each lot to another owner at the rate of $ per lot. App B - Part 2 Methodology Tables Final xls 11 3/7/2003

104 Portofino Isles Community Development District Preliminary Assessment Roll Table 12 Parcel Number(s) Owner Acres Within Parcel Acres Within CDD Total Par Amount of Debt Series 2003A Maximum Annual Assessment Series 2003B Maximum Annual Assessment Glassman Corp $ 7,655,000 $ 542, $ 29, S Federal Hwy Boynton Beach, FL Totals $ 7,655,000 $ 542, $ 29,640 Terms: 2003A 2003B Average Coupon 6.50% 5.70% No. Years 30 3 PV $7,135,000 $520,000 Final Maturity 5/1/2033 5/1/2006 App B - Part 2 Methodology Tables Final xls 12 3/7/2003

105 APPENDIX C Form of the Indenture

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107 TRUST INDENTURE BETWEEN PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT AND WACHOVIA BANK, NATIONAL ASSOCIATION As Trustee Dated as of March 1, 2003 Securing $7,135,000 PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT (PORT ST. LUCIE, FLORIDA) SPECIAL ASSESSMENT BONDS, SERIES 2003A and $520,000 PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT (PORT ST. LUCIE, FLORIDA) SPECIAL ASSESSMENT BONDS, SERIES 2003B

108 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS... 3 ARTICLE II THE BONDS Section 2.01 Amounts and Terms of Series 2003 Bonds; Details of Series 2003 Bonds Section 2.02 Execution Section 2.03 Authentication; Authenticating Agent Section 2.04 Appointment of Registrar and Paying Agent Section 2.05 Mutilated, Destroyed, Lost or Stolen Bonds Section 2.06 Temporary Bonds Section 2.07 Cancellation and Destruction of Surrendered Bonds Section 2.08 Registration, Transfer and Exchange Section 2.09 Persons Deemed Owners Section 2.10 Limitation on Incurrence of Indebtedness Section 2.11 Qualification for the Depository Trust Company ARTICLE III ISSUE OF BONDS Section 3.01 Issue of Series 2003 Bonds Section 3.02 Additional Bonds Section 3.03 Comp letion Bonds Section 3.04 Refunding Bonds ARTICLE IV ACQUISITION AND CONSTRUCTION OF 2003 PROJECT Section Project to Conform to Plans and Specifications; Changes Section 4.02 Compliance Requirements ARTICLE V CONSTRUCTION FUND Section 5.01 Establishment of and Payments from Construction Fund Section 5.02 Construction Fund Disbursements Section 5.03 Records and Reports During Construction Period Section 5.04 Completion of Construction ARTICLE VI SPECIAL ASSESSMENTS; APPLICATION OF PLEDGED REVENUES TO FUNDS AND ACCOUNTS Section 6.01 Special Assessments; Lien of Indenture on Pledged Revenues Section 6.02 Funds and Accounts Section 6.03 Revenue Fund Section 6.04 Debt Service Fund Section 6.05 Debt Service Reserve Fund Section 6.06 Bond Redemption Fund Section 6.07 Reserved Section 6.08 Procedure When Funds are Sufficient to Pay all Bonds Section 6.09 Moneys to be Held For Owners Only ARTICLE VII SECURITY FOR AND INVESTMENT OR DEPOSIT OF FUNDS Section 7.01 Deposits and Security Therefor Section 7.02 Investment or Deposit of Funds Section 7.03 Valuation of Funds ARTICLE VIII REDEMPTION AND PURCHASE OF BONDS Section 8.01 Redemption Dates and Prices Section 8.02 Notice of Redemption ARTICLE IX RESERVED ARTICLE X RESERVED i-

109 TABLE OF CONTENTS (continued) Page ARTICLE XI COVENANTS OF THE DISTRICT Section Power to Issue Bonds and Create Lien Section Payment of Principal and Interest on Bonds Section Special Assessments; Re-Assessments Section Application of Special Assessments Section Delinquent Special Assessments Section Purchase of Land by District Section Books and Records with Respect to Special Assessments Section Removal of Special Assessment Liens Section User Fees and Maintenance Assessments Section Completion of the 2003 Project Section Construction to be on District Lands Section Operation, Use and Maintenance of Project Section Observance of and Compliance with Valid Requirements Section Payment of Operating or Maintenance Costs by State or Others Section Public Liability and Property Damage Insurance; Maintenance of Insurance; Use of Insurance and Condemnation Proceeds Section Collection of Insurance Proceeds Section Use of Pledged Revenues for Authorized Purposes Only Section Books, Records and Annual Reports Section Observance of Accounting Standards Section Employment of Certified Public Accountant Section Establishment of Fiscal Year, Annual Budget Section Employment of Consulting Engineer; Consulting Engineer s Report Section Audit Reports Section Covenant Against Sale or Encumbrance; Exc eptions Section Fidelity Bonds Section No Loss of Lien on Pledged Revenues Section Compliance with Other Contracts and Agreements Section Issuance of Additional Obligations Section Extension of Time for Payment of Interest Prohibited Section Further Assurances Section Investments to Comply with Internal Revenue Code Section Compliance with Section 148(f) of the Code; Rebate Fund Section Corporate Existence and Maintenance of Properties ARTICLE XII EVENTS OF DEFAULT AND REMEDIES Section Reserved Section Events of Default Defined Section No Acceleration Section Legal Proceedings by Trustee Section Discontinuance of Proceedings by Trustee Section Owners May Direct Proceedings Section Limitations on Actions by Owners Section Trustee May Enforce Rights Without Possession of Bonds Section Remedies Not Exclusive Section Delays and Omissions not to Impair Rights Section Application of Moneys in Event of Default Section Trustee s Right to Receiver; Compliance with Act Section Trustee and Owners Entitled to all Remedies Under Act ii-

110 TABLE OF CONTENTS (continued) Page ARTICLE XIII THE TRUSTEE; THE PAYING AGENT AND REGISTRAR Section Acceptance of Trust Section No Responsibility for Recitals Section Trustee May Act Through Agents; Answerable only for Willful Misconduct or Negligence Section Compensation and Indemnity Section No Duty to Renew Insurance Section Notice of Default; Right to Investigate Section Obligation to Act on Defaults Section Reliance by Trustee Section Trustee May Deal in Bonds Section Construction of Ambiguous Provisions Section Resignation of Trustee Section Removal of Trustee Section Appointment of Successor Trustee Section Qualification of Successor Section Instruments of Succession Section Merger of Trustee Section Extension of Rights And Duties of Trustee to Paying Agent and Registrar Section Resignation of Paying Agent or Registrar Section Removal of Paying Agent or Registrar Section Appointment of Successor Paying Agent or Registrar Section Qualifications of Successor Paying Agent or Registrar Section Judicial Appointment of Successor Paying Agent or Registrar Section Acceptance of Duties by Successor Paying Agent or Registrar Section Successor by Merger or Consolidation ARTICLE XIV ACTS OF OWNERS; EVIDENCE OF OWNERSHIP OF BONDS Section Acts of Owners; Evidence of Ownership of Bonds ARTICLE XV AMENDMENTS AND SUPPLEMENTS Section Amendments and Supplements without Owners Consent Section Amendments with Owner Consent Section Trustee Authorized to Join in Amendments and Supplements; Reliance on Counsel ARTICLE XVIDEFEASANCE Section Defeasance Section Deposit of Funds for Payment of Bonds Section Survival of Tax Covenants ARTICLE XVIIMISCELLANEOUS PROVISIONS Section Limitations on Recourse Section Payment Dates Section No Rights Conferred on Others Section Illegal Provisions Disregarded Section Substitute Notice Section Notices Section Controlling Law Section Successors and Assigns Section Headings for Convenience Only Section Counterparts Section Appendices and Exhibits iii-

111 TABLE OF CONTENTS (continued) Page E EX A EX B EX C EX D GLEGAL DESCRIPTION OF PORTOFINO ISLES COMMUNITY VDEVELOPMENT DISTRICT RFORM OF SERIES 2003 BONDS SDESCRIPTION OF 2003 PROJECT RPORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT REQUISITION FOR PAYMENT SPECIAL ASSESSMENT BOND CONSTRUCTION FUND -iv-

112 This Trust Indenture, Dated as of March 1, 2003 (the Indenture ) by and between PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT (the District ), a local unit of special-purpose government organized and existing under the laws of the State of Florida, and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, having its designated corporate trust office in Miami, Florida (said national banking association and any bank or trust company becoming successor trustee under the Indenture (hereinafter defined) being hereinafter referred to as the Trustee ); W I T N E S S E T H: Whereas, the District is a local unit of special-purpose government created in accordance with the Uniform Community Development District Act of 1980, Chapter 190, Florida Statutes, as amended (the Act ); and Whereas, the premises governed by the District are described more fully in Exhibit A hereto (the District ) and presently consist of approximately 295 acres of land located entirely within the City of Port St. Lucie, Florida; and Whereas, the District has been created for the purpose of delivering certain community development services and facilities under the Act and the District has decided to undertake the financing, funding, planning, acquisition, construction, reconstruction, equipping and installation of certain roadway and recreational improvements under the Act, as more specifically described herein; and Whereas, pursuant to Resolution No , adopted October 14, 2002, as supplemented by Resolution No , adopted December 3, 2002, as supplemented by Resolution , adopted February 4, 2003, and Resolution No , adopted March 4, 2003 (collectively, the Resolution ), and this Indenture, the District has determined to issue $7,135,000 aggregate principal amount of Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003A (the Series 2003A Bonds ) and $520,000 aggregate principal amount of Portofino Isles Lucie Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003B (the Series 2003B Bonds and, together with the Series 2003A Bonds, the Series 2003 Bonds ); and Whereas, the proceeds of the Series 2003A Bonds will be used to provide funds for (i) the payment of a portion of the costs of the Project, (ii) the payment of interest on the Series 2003A Bonds through November 1, 2003, (iii) the funding of the Series 2003A Debt Service Reserve Account, and (iv) payment of a portion of the costs of issuance of the Series 2003 Bonds; and Whereas, the proceeds of the Series 2003B Bonds will be used to provide funds for (i) the payment of a portion of the costs of the Project, (ii) the payment of interest on the Series 2003B Bonds through November 1, 2003, (iii) the funding of the Series 2003B Debt Service Reserve Account, and (iv) payment of a portion of the costs of issuance of the Series 2003 Bonds; and Whereas, the Series 2003A Bonds will be secured solely by a lien upon and pledge of the Series 2003A Pledged Revenues and the Series 2003B Bonds will be secured solely by a lien upon the Series 2003B Pledged Revenues, respectively; (all as hereinafter defined); Whereas, the District has previously, by Resolution No , adopted on December 3, 2002, approved the form of Trust Indenture between the District and the Trustee; Now, Therefore, This Indenture, Witnesseth: that in consideration of the premises, of the acceptance by the Trustee of the trusts hereby created, and of the purchase and acceptance of the Bonds by the Owners thereof, and also for and in consideration of the sum of Ten Dollars ($10.00) by the District in hand paid to the Trustee at or before the execution and delivery of this Indenture, the receipt of which is hereby acknowledged, and for the purpose of fixing and declaring the terms and conditions upon which the Bonds are to be issued, authenticated, delivered, secured and accepted by all persons who shall from time to time be or become Owners thereof, and in order to secure the payment of the principal of all the Bonds at any time issued and outstanding hereunder and the premium, if any, and interest thereon according to their tenor, purport and effect, and in order to secure the performance and observance of all the covenants, agreements and conditions therein and herein contained, the District has executed and delivered this Indenture and has pledged and assigned and does hereby pledge and assign to the Trustee the District s rights in and to the Pledged Revenues and other moneys to the extent provided in this Indenture and under the Agreement, and has granted and does hereby grant a security interest in the Funds established hereby (excluding the Rebate Fund), all as security for the payment of the Bonds and the premium, if any, and interest thereon and as C-1

113 security for the satisfaction of any other obligation assumed by it in connection with such Bonds, and it is so mutually agreed and covenanted by and between the parties hereto; To Have And To Hold all the same with all privileges and appurtenances hereby conveyed and assigned, or agreed or intended so to be, to the Trustee, its successors in trust and their assigns forever; In Trust, Nevertheless, upon the terms and trusts herein set forth for the equal and proportionate benefit and security, except as otherwise hereinafter expressly provided, of all and singular the present and future holders of the Bonds of each Series issued and to be issued under this Indenture, without preference, priority or distinction as to lien or otherwise within a Series, except as otherwise hereinafter expressly provided, of any one Bond of a Series over any other Bond of such Series, by reason of priority in the issue, sale or negotiation thereof or otherwise; Provided, However, that if, after the rights, title and interest of the Trustee in and to the estate pledged and assigned to it under this Indenture shall have ceased, terminated and become void in accordance with Article XVI hereof, the principal of and premium, if any, and interest on all of the Bonds shall have been paid to the Owners or shall have been paid to the District pursuant to Section 505 hereof, then this Indenture and all covenants, agreements and other obligations of the District hereunder shall cease, determine and be void, and thereupon the Trustee shall cancel and discharge this Indenture and shall execute and deliver to the District such instruments in writing prepared by or on behalf of the District as shall be required to evidence the discharge hereof; otherwise this Indenture shall be and remain in full force and effect. This Indenture, Further Witnesseth: it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered and all said Special Assessment Revenues and other income and moneys hereby pledged are to be dealt with and disposed of under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes as hereinafter expressed, and the District has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective Owners, from time to time, of the Bonds, or any part thereof, as follows: ARTICLE I DEFINITIONS In this Indenture (including the recitals hereto) and any indenture supplemental hereto (except as otherwise expressly provided or unless the context otherwise requires) the following terms shall have the meanings specified below: Account shall mean any designated account or subaccount established within a Fund pursuant to this Indenture. Accredited Investor shall mean a person or entity described in Section (11)(b)(5), Florida Statutes, or any successor provision, as the same may be amended from time to time. Acquisition Agreement shall mean the agreement between the Developer and the District dated as of March 1, 2003, relating to properties and improvements sold by the Developer to the District. Act shall mean the Uniform Community Development District Act of 1980, Chapter 190, Florida Statutes, as amended from time to time, and any successor statute thereto. Additional Bonds shall mean Completion Bonds and Refunding Bonds issued pursuant to Article II hereof. Annual Budget shall mean the District s budget of current operating and maintenance expenses for the Project for a Fiscal Year, adopted pursuant to the provisions of Section of this Indenture, as the same may be amended from time to time. Assessment Resolutions means collectively, Resolutions Nos and , adopted October 14, 2002, and Resolutions Nos and , adopted by the Board on December 3, 2002, providing for the levy of the Special Assessments. Authenticating Agent shall mean the agent so described in, and appointed pursuant to, Section 2.03 hereof. C-2

114 Authorized Denominations shall mean $5,000 and integral multiples thereof; provided that the Bonds shall be issuable to the Initial Purchaser only in denominations of $50,000 and integral multiples of $5,000 in excess thereof. Authorized Newspaper shall mean a newspaper printed in English and customarily published at least once a day at least five days a week and generally circulated in New York, New York or Port St. Lucie, Florida or such other city or cities as the District from time to time may determine by written notice provided to the Trustee. When successive publications in an Authorized Newspaper are required, they may be made in the same or different Authorized Newspapers. Board shall mean the Board of Supervisors, as the governing body of the District. Bonds shall mean, collectively, the Outstanding Series 2003 Bonds, any Outstanding Completion Bonds and any Outstanding Refunding Bonds. Bond Counsel shall mean Counsel of nationally recognized standing in matters pertaining to the exclusion from gross income for federal income tax purposes of interest on obligations issued by states and their political subdivisions. Bond Redemption Fund shall mean the Fund so designated, which is established pursuant to Section 6.06 hereof. Bond Year means the annual period beginning each May 2 and ending the following May 1. Business Day shall mean any day other than (a) a Saturday or Sunday or legal holiday or a day on which the principal office of the District, Trustee, the Registrar or any Paying Agent (as defined in any Supplemental Indenture) is closed, or (b) a day on which the New York Stock Exchange, Inc. is closed. Capital Additions shall mean all property or interests in property, real, personal and mixed, comprising any and all additions, improvements or extraordinary repairs to or replacements of all or any part of the Project after the date of issuance of the Series 2003 Bonds, the Cost of which is properly chargeable to plant or property account under Generally Accepted Governmental Accounting Principles. Capitalized Interest shall mean interest due or to become due on the Series 2003A Bonds and the Series 2003B Bonds, which will be paid, or is expected to be paid, from the proceeds of the Series 2003A Bonds and the Series 2003B Bonds, respectively. Certified Public Accountant shall mean a Person, who shall be Independent, appointed by the Board, actively engaged in the business of public accounting and duly certified as a certified public accountant under the laws of the State. Certified Resolution or Certified Resolution of the District shall mean a copy of one or more resolutions certified by the Secretary or an Assistant Secretary of the District, under its seal, to have been duly adopted by the Board and to be in full force and effect as of the date of such certification. City shall mean the City of Port St. Lucie, Florida. Code shall mean the Internal Revenue Code of 1986, the Treasury Regulations (whether temporary or final) under that Code or the statutory predecessor of that Code, any amendments of, or successor provisions to, the foregoing, and any official rulings, announcements, notices, procedures and judicial determinations regarding any of the foregoing, all as and to the extent applicable. Unless otherwise indicated, reference to a Section includes any applicable successor section or provision and such applicable Treasury Regulations, rulings, announcements, notices, procedures and determinations pertinent to that Section. Completion Bonds shall mean additional obligations of the District issued under Section 3.03 of this Indenture. Construction Fund shall mean the Fund so designated which is established pursuant to Section 5.01 hereof. Consulting Engineer shall mean the Independent engineer or engineering firm or corporation at the time employed by the District under the provisions of Section of this Indenture to perform and carry out duties imposed on the Consulting Engineer hereunder, which engineer or engineering firm or corporation shall be duly certified as an engineer under C-3

115 the laws of the State. The Independent engineer or engineering firm or corporation at the time serving as the engineer to the District may serve as Consulting Engineer under the Indenture. Continuing Disclosure Agreement shall mean collectively, the Continuing Disclosure Agreements Dated as of March 1, 2003, executed by the District and by the Developer, respectively, as amended and supplemented from time to time. Cost or Costs, in connection with the Project or any portion thereof or any Capital Addition shall mean all expenses which are properly chargeable thereto under Generally Accepted Governmental Accounting Principles or which are incidental to the planning, financing, funding, acquisition, construction, reconstruction, equipping and installation thereof, including, without limiting the generality of the foregoing: (a) reconstruction; charges; (b) (c) (d) expenses of determining the feasibility or practicability of acquisition, construction, or cost of surveys, estimates, plans, and specifications; cost of improvements; engineering, architectural, fiscal, legal, accounting and other professional and advisory expenses and (e) cost of all labor, materials, machinery, and equipment (including, without limitation, (i) amounts payable to contractors, builders and materialmen and costs incident to the award of contracts and (ii) the cost of labor, facilities and services furnished by the District and its employees, materials and supplies purchased by the District); (f) cost of all lands, properties, rights, easements, and franchises acquired, including, without limitation, any and all costs associated with acquiring lands, properties, rights, easements or franchises through eminent domain proceedings; (g) (h) (i) financing charges; creation of initial reserves and debt service funds; working capital; (j) interest charges incurred or estimated to be incurred on money borrowed prior to and during construction and acquisition and for such reasonable period of time after completion of construction or acquisition as the Board may determine; (k) (l) (m) (n) under the Act; Project; (o) (p) the Cost of Issuance of Bonds, including, without limitation, advertisements and printing; the cost of any election held pursuant to the Act and all other expenses of issuance of Bonds; the discount, if any, on the sale or exchange of Bonds; amounts required to repay temporary or bond anticipation loans made to finance any costs permitted costs of prior improvements made or acquired by the District in anticipation of the Project; taxes, assessments and similar governmental charges during construction or reconstruction of a C-4

116 (q) costs incurred to enforce remedies against contractors, subcontractors, any provider of labor, material, services, or any other Person, for a default or breach under the corresponding contract, or in connection with any other dispute; (r) premiums for contract bonds and insurance during construction and costs on account of personal injuries and property damage in the course of construction and insurance against the same; (s) payments, contributions, dedications, and any other exactions required as a condition to receive any government approval or permit necessary to accomplish any District purpose; (t) (u) (v) cost of permits and licenses obtained by the District; mitigation costs; administrative expenses; (w) such other expenses as may be necessary or incidental to the acquisition, construction, or reconstruction of any project or to the financing thereof, or to the development of any lands within the District; and (x) any other cost or expense as provided by the Act. In connection with the refunding or redeeming of any Bonds, Cost includes, without limiting the generality of the foregoing, the items listed in (d), (k), (l), (m) and (n) above, and other expenses related to the redemption of the Bonds to be redeemed and the Redemption Price of such Bonds (and the accrued interest payable on redemption to the extent not otherwise provided for). Whenever Costs are required to be itemized, such itemization shall, to the extent practicable, correspond with the items listed above. Whenever Costs are to be paid hereunder, such payment may be made by way of reimbursement to the District or any other Person who has paid the same. Cost of Issuance shall mean all expenses incurred by the District in connection with the authorization, sale, and issuance of Bonds including, but not limited to, the fees and expenses of the District Manager, the Financial Advisor, the Consulting Engineer, District Counsel, Disclosure Counsel, and Bond Counsel; the cost of preparation of the Limited Offering Memorandum for the Bonds, including printing and mailing expenses; the cost of preparation of reports and information included in the Limited Offering Memorandum, the cost of advertising and meetings with potential investors; discount on the sale of the Bonds; and any other costs and expenses associated with the issuance, sale and delivery of the Bonds. Counsel shall mean an attorney-at-law or law firm (who may be counsel for the District). County shall mean St. Lucie County, Florida. Debt Service Fund shall mean the Fund so designated which is established pursuant to Section 6.04 hereof. mean: Debt Service Requirement, with reference to a specified period, and with respect to the Series 2003 Bonds, shall (a) interest payable on such Bonds during such period, subject to reduction for amounts held as capitalized interest in the Funds and Accounts established under the Indenture; (b) during such period; and amounts required to be paid into any mandatory sinking fund account with respect to such Bonds (c) amounts required to pay the principal of such Bonds maturing during such period and not to be redeemed prior to or at maturity through any sinking fund account. Debt Service Reserve Fund shall mean the Fund so designated which is established pursuant to Section 6.05 hereof. C-5

117 Debt Service Reserve Requirement shall mean initially, (a) with respect to the Series 2003A Bonds, an amount (initially $559,125) equal to seven and 84/100 percent (7.84%) of the maximum annual Debt Service Requirement for the Outstanding Series 2003A Bonds and (b) with respect to the Series 2003B Bonds, an amount equal (initially $52,000) to ten percent (10%) of the aggregate principal amount from time to time of the Outstanding Series 2003B Bonds; provided that the aggregate Series 2003 Debt Service Reserve Requirement shall not exceed the lesser of (i) the maximum annual Debt Service Requirements for the Outstanding Series 2003 Bonds, (ii) 125% of the average of the annual Debt Service Requirements for the Series 2003 Bonds, and (iii) ten percent (10%) of the original stated principal amount (within the meaning of the Code) of the Series 2003 Bonds. In calculating the initial Debt Service Reserve Require ment, the calculations described above shall be done on an individual basis with respect to each of the Series 2003A Bonds and the Series 2003B Bonds. Defeasance Securities shall mean, to the extent permitted by law, non-callable Government Obligations. Deferred Acquisition Amount means the portion of the amount due from the District to the Developer not paid to the Developer pursuant to the Acquisition Agreement. Developer shall mean Prime Investors and Developers, Inc. a Florida corporation. District shall mean the Portofino Isles Community Development District, acting by and through its Board of Supervisors and their employees, agents and representatives. District Expenses shall mean the expenses incurred or paid by the District related to the Bonds or the Special Assessments and, without limiting the generality of the foregoing, shall be deemed to include the fees of the Trustee, the fees of the St. Lucie County Property Appraiser and Tax Collector, the fees of any rebate consultant and fees of the District Manager. District Lands shall mean the lands and improvements from time to time under the jurisdiction of the Board, which currently consist of approximately 295 acres of land located entirely within the City, as more fully described in Exhibit A hereto. The District Lands may be expanded or contracted from time to time in accordance with the provisions of the Act. District Manager shall mean the Person appointed by the Board to serve as District Manager or acting District Manager of the District. Engineer s Report shall mean the Portofino Isles Engineer s Report of Capital Improvements dated February 2003 as the same may be amended from time to time, prepared by the Consulting Engineer and describing the 2003 Project to be undertaken by the District and financed through the Series 2003 Bonds under the Indenture. Event of Default shall mean any of the events described in Section hereof. Expenses means the expenses incurred by the District in connection with the Bonds and the Special Assessments including the fees and expenses of the Trustee, the Tax Collector, and the District Manager. Financial Advisor means the Person appointed by the Board to serve as Financial Advisor to the District. Fiscal Year shall mean the period of twelve (12) months beginning October 1 of each calendar year and ending on September 30 of the following calendar year, and also shall mean the period from actual execution hereof to and including the next succeeding September 30; or such other consecutive twelve-month period as may hereafter be established by Florida law. Fund shall mean any designated fund established pursuant to this Indenture. Generally Accepted Governmental Accounting Principles shall mean those accounting principles applicable in the preparation of financial statements of governmental entities. Government Obligations shall mean direct obligations of, or obligations the timely payment of principal of and interest on which are unconditionally guaranteed by, the United States of America. Improvements means the improvements acquired and constructed as part of the Project and any other land or improvements of the District. C-6

118 Indenture or Trust Indenture shall mean this Trust Indenture, dated as of March 1, 2003, by and between the District and the Trustee, as supplemented and amended from time to time. Independent shall mean a Person who is not a member of the District s Board or an officer of the District, the Developer or any affiliate thereof or which is not a partnership, corporation or association having a partner, director, officer, member or substantial stock Owner who is a member of the District s Board or a member of the board of directors of the Developer or any affiliate thereof, or an officer or employee of the Developer or any affiliate thereof; provided, however, that the fact that such Person is retained regularly by or regularly transacts business with the Developer shall not make such Person an employee within the meaning of this definition. Initial Purchaser shall mean each Person to whom the Series 2003 Bonds are originally sold by the Underwriter as reflected on the records of the Underwriter. Interest Account shall mean the Account so designated, established as a separate account within the Debt Service Fund pursuant to Section 6.04 hereof. Interest Payment Date shall mean the date or dates on which interest or principal on the Series 2003 Bonds or a portion thereof is scheduled to be due and payable, which dates shall be May 1 and November 1 of each year, beginning November 1, Investment Securities shall mean and include any of the following securities, if and to the extent the same are at the time legal investments for funds of the District: (a) Government Obligations; (b) Bonds, debentures, notes or other evidences of indebtedness issued by any of the following agencies or such other government-sponsored agencies which may presently exist or be hereafter created; provided that, such bonds, debentures, notes or other evidences of indebtedness are fully guaranteed as to both principal and interest by the United States of America: Bank for Cooperatives; Federal Intermediate Credit Banks; Federal Financing Bank; Federal Home Loan Bank System; Export-Import Bank of the United States; Farmers Home Administration; Small Business Administration; Inter- American Development Bank; International Bank for Reconstruction and Development; Federal Land Banks; the Federal National Mortgage Association; the Government National Mortgage Association; the Tennessee Valley Authority; or the Washington Metropolitan Area Transit Authority; (c) Negotiable or non-negotiable certificates of deposit, time deposits or other similar banking arrangements issued by any bank or trust company, including the Trustee, or any federal savings and loan association, the deposits of which are insured by the Federal Deposit Insurance Corporation (including the FDIC s Savings Association Insurance Fund), which securities, to the extent that the principal thereof exceeds the maximum amount insurable by the Federal Deposit Insurance Corporation and, therefore, are not so insured, shall be fully secured to the extent permitted by law as to principal and interest by the securities listed in subsections (a) or (b) above; (d) Any short term government fund whose assets consist of (a) and (b) above; (e) shares of an open-end, diversified investment company which is registered under the Investment Company Act of 1940, as amended, and which invests its assets in any of the securities described in clauses (a), (b) or (c) hereof; (f) shares of any open-end, SEC-registered money market mutual funds which fund invests its assets in any of the securities described in clauses (a) or (b) hereof. Maximum Debt Service Requirement means with respect to either Series or all Bonds, as the case may be, the Debt Service Requirement for the then current or any future Bond Year which is largest in dollar amount. Outstanding, in connection with Bonds, shall mean, as of the time in question, all Bonds authenticated and delivered under the Indenture, except: C-7

119 (a) all Bonds theretofore canceled or required to be canceled under Section 2.07 hereof; (b) Bonds for the payment, redemption or purchase of which moneys and/or Defeasance Securities, the principal of and interest on which, when due, will provide sufficient moneys to fully pay such Bonds in accordance with Article XVI hereof, shall have been or shall concurrently be deposited with the Trustee; provided that, if such Bonds are being redeemed, the required notice of redemption shall have been given or provision shall have been made therefor, and that if such Bonds are being purchased, there shall be a firm commitment for the purchase and sale thereof; and (c) Article II hereof. Bonds in substitution for which other Bonds have been authenticated and delivered pursuant to In determining whether the Owners of a requisite aggregate principal amount of Bonds Outstanding have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions of the Indenture, Bonds which are known by the Trustee to be held on behalf of the District or which are held by the Trustee shall be disregarded for the purpose of any such determination. Owner, Owner of Bonds, Owner or Registered Owner or any similar term shall mean any Person who shall be the registered owner of any Outstanding Bond or Bonds, as evidenced on the Register of the District kept by the Registrar. Owner or Registered Owner shall mean any Person who at the time is entitled to receive payments of principal of and interest on Bonds as determined by reference to the Register. Paying Agent shall mean the Person or Persons authorized by the District herein to pay the principal or Redemption Price of and interest on the Series 2003 Bonds on behalf of the District. Person shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, governmental body, political subdivision, municipality, municipal authority or any other group or organization of individuals. Pledged Revenues means the interest of the District in the Special Assessment Revenues and the moneys and investments from time to time on deposit in the Funds and Accounts established hereunder (excluding the Rebate Fund) conveyed in trust to the Trustee for the benefit of the Owners from time to time of the Series 2003 Bonds, and refers collectively to the Series 2003A Pledged Revenues and the Series 2003B Pledged Revenues; provided that no use of the term Pledged Revenues is intended to suggest that the Series 2003A Bonds are secured by the Series 2003B Pledged Revenues or that the Series 2003B Bonds are secured by the Series 2003A Pledged Revenues. Prepayment shall mean the payment by any owner of property of the amount of Special Assessments encumbering its property, in whole or in part, prior to its scheduled due date, including optional prepayments and prepayments which become due pursuant to the true-up mechanism contained in the Assessment Resolution. Prepayments shall include, without limitation, Series 2003A Prepayment Principal and Series 2003B Prepayment Principal. Principal Account shall mean the Account so designated, established as a separate account within the Debt Service Fund pursuant to Section 6.04 hereof. Project or 2003 Project shall mean certain capital improvements to be acquired and/or constructed by the District, including without limitation, the planning, design, construction and acquisition of Utility System improvements and Road System improvements and such other improvements as more particularly described in the Portofino Isles Engineer s Report of Capital Improvements, dated February 2003, as amended from time to time, together with the associated real property and interest therein, all as more particularly described in Exhibit C attached hereto. Property Appraiser shall mean the property appraiser of the County. Property Appraiser and Tax Collector Agreement shall mean the Property Appraiser and Tax Collector Agreement described in Section hereof. Rebate Fund shall mean the Fund so designated, which is established pursuant to Section hereof. C-8

120 Record Date shall mean, as the case may be, the applicable Regular or Special Record Date. Redemption Price shall mean the principal amount of any Bond plus the applicable premium, if any, payable upon redemption thereof pursuant to the Indenture. Refunding Bonds shall mean Bonds issued pursuant to Section 3.03 hereof and as more specifically described in a Supplemental Indenture authorizing the refunding or advance refunding of all or any portion of one or more Series (or any portion thereof) of Bonds Outstanding. Register means the books maintained by the Registrar showing the names and addresses of Owners and shall have the meaning specified in Section 2.04 of this Indenture. Registrar, in respect of the Series 2003 Bonds, shall have the meaning specified in Section 2.04 of this Indenture. Regular Record Date shall mean the fifteenth day (whether or not a Business Day) of the calendar month next preceding each Interest Payment Date. Regulatory Body shall mean and include (a) the United States of America and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the United States of America, (b) the State, any political subdivision thereof and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the State, (c) the City and any department of or corporation, agency or instrumentality heretofore or hereafter created, designated or established by the City, and (d) any other public body, whether federal, state or local or otherwise having regulatory jurisdiction and authority over the District. Resolution shall mean, collectively, (i) Resolution No of the District adopted October 14, 2002, pursuant to which the District authorized the issuance of the Series 2003 Bonds to finance certain improvements including the 2003 Project, (ii) Resolution No of the Dis trict adopted December 3, 2002, pursuant to which the District approved the form of this Indenture and delegated to the Chairman of the Board the authority to fix and determine the details of the Series 2003 Bonds and to execute a contract for the sale of the Series 2003 Bonds and other matters, (iii) Resolution No , of the District adopted February 4, 2003, pursuant to which the District approved the form of this Indenture and its execution by the Chairman of the Board and its delivery to the Trustee and the other matters referred to therein, and (iv) Resolution No , of the District adopted March 4, 2003, pursuant to which the District approved the final form of this Indenture and the financing structure. Responsible Officer shall mean any member of the Board or any other officer of the District or other person designated by Certified Resolution of the District, a copy of which shall be on file with the Trustee, to act for any of the foregoing, either generally or with respect to the execution of any particular document or other specific matter. Revenue Fund shall mean the Fund so designated which is established pursuant to Section 6.03 hereof. Road System shall mean all or any part of the internal road system described in the Engineer s Report, including, without limitation, highways, streets, alleys or any other thoroughfares, to be planned, financed, acquired, constructed, reconstructed, equipped or installed by the District or on behalf of the District, together with any and all additions, extensions and improvements hereafter made to said system, including, without limitation, any and all clearing, grubbing, excavation, borrow excavation, utility relocation, pipe, end sections, curb inlets, catch basins, storm manholes with covers, sub-base, limerock base, pavement, curb and gutter, underdrains, cleanouts, retention ponds, top soil, seed and mulch, street lighting, sidewalks and other pedestrian or bike ways, trees, shrubbery and other landscaping, medians, striping, signing and signalization, fencing, bridges, culverts, on-site or off-site mitigation requirements and all property, real or personal, tangible or intangible, now or hereafter owned or used in connection with said system. Series shall mean the Series 2003A Bonds or Series 2003B Bonds (or either of them) authenticated and delivered at one time on original issuance and pursuant to any Certified Resolution of the District authorizing such Bonds as a separate Series of Bonds, or any Bonds thereafter authenticated and delivered in lieu of or in substitution for such Bonds pursuant to Article II hereof, regardless of variations in maturity, interest rate or other provisions. Series Subaccounts shall mean the Accounts or subaccounts established pursuant to Section 6.02 hereof with respect to both or each Series of the Series 2003 Bonds. C-9

121 Series 2003 Bonds shall mean collectively, the Series 2003A Bonds and the Series 2003B Bonds. Series 2003A Bond Amortization Subaccount shall mean the subaccount so designated established within the Bond Amortization Account of the Debt Service Fund pursuant to Section 6.02 of this Indenture. Series 2003A Bonds shall mean the $7,135,000 aggregate principal amount of Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003A, to be issued as fully registered Bonds in accordance with the provisions of this Indenture, and secured and authorized by this Indenture. Series 2003A Capitalized Interest Subaccount shall mean the subaccount so designated, established within the Interest Account of the Debt Service Fund pursuant to Section 6.02 of this Indenture. Series 2003A Debt Service Reserve Account shall mean the Account so designated, established within the Debt Service Reserve Fund pursuant to Section 6.02 of this Indenture. Series 2003A General Subaccount shall mean the subaccount so designated, established within the Series 2003A Redemption Account of the Bond Redemption Fund pursuant to Section 6.02 of this Indenture. Series 2003A Interest Subaccount shall mean the subaccount so designated, established within the Interest Account of the Debt Service Fund pursuant to Section 6.02 of this Indenture. Series 2003A Pledged Revenues shall mean (a) the Series 2003A Special Assessment Revenues; (b) all moneys on deposit in the Series Subaccounts established for the benefit of the Series 2003A Bonds under this Indenture; and (c) the portion of the moneys on deposit in the Construction Fund determined by multiplying such moneys by the percentage of the amounts deposited into the Construction Fund from the proceeds of the Series 2003A Bonds on original issuance; provided, however, that the Series 2003A Pledged Revenues shall not include (A) any moneys transferred to the Rebate Fund, or investment earnings thereon and (B) special assessments levied and collected by the District under Section of the Act for maintenance purposes or maintenance special assessments levied and collected by the District under Section (3) of the Act (it being expressly understood that the lien and pledge of this Indenture shall not apply to any of the moneys described in the foregoing clauses (A) and (B) of this proviso). Series 2003A Prepayment Principal shall mean the portion of a Prepayment corresponding to the principal amount of Series 2003A Special Assessments being prepaid. Series 2003A Prepayment Subaccount shall mean the subaccount so designated, established in the Series 2003A Redemption Account of the Bond Redemption Fund pursuant to Section 6.02 of this Indenture. Series 2003A Principal Subaccount shall mean the subaccount so designated, established in the Principal Account of the Debt Service Fund pursuant to Section 6.02 of this Indenture. Series 2003A Revenue Account shall mean the Account so designated established within the Revenue Fund pursuant to Section 6.02 of this Indenture. Series 2003A Special Assessment Revenues shall mean the Special Assessment Revenues derived from the levy and collection of the Series 2003A Special Assessments. Series 2003A Special Assessments shall mean a portion of the Special Assessments levied, corresponding in amount to the debt service on the Series 2003A Bonds. Series 2003B Bonds shall mean the $520,000 aggregate principal amount of Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003B, to be issued as fully registered Bonds in accordance with the provisions of this Indenture, and secured and authorized by this Indenture. Series 2003B Capitalized Interest Subaccount shall mean the subaccount so designated, established within the Interest Account of the Debt Service Fund pursuant to Section 6.02 of this Indenture. C-10

122 Series 2003B Debt Service Reserve Account shall mean the account so designated, established within the Debt Service Reserve Fund pursuant to Section 6.02 of this Indenture. Series 2003B General Subaccount shall mean the subaccount so designated, established within the Series 2003B Redemption Account of the Bond Redemption Fund pursuant to Section 6.02 of this Indenture. Series 2003B Interest Subaccount shall mean the subaccount so designated, established within the Interest Account pursuant to Section 6.02 of this Indenture. Series 2003B Pledged Revenues shall mean (a) the Series 2003B Special Assessment Revenues; (b) all moneys on deposit in the Series Subaccounts established for the benefit of the Series 2003B Bonds under this Indenture; and (c) the portion of the moneys on deposit in the Construction Fund determined by mu ltiplying such moneys by the percentage of the amounts deposited into the Construction Fund from the proceeds of the Series 2003B Bonds on original issuance; provided, however, that the Series 2003B Pledged Revenues shall not include (A) any moneys transferred to the Rebate Fund, or investment earnings thereon and (B) special assessments levied and collected by the District under Section of the Act for maintenance purposes or maintenance special assessments levied and collected by the District under Section (3) of the Act (it being expressly understood that the lien and pledge of this Indenture shall not apply to any of the moneys described in the foregoing clauses (A) and (B) of this proviso). Series 2003B Prepayment Principal shall mean the portion of a Prepayment corresponding to the principal amount of Series 2003B Special Assessments being prepaid. Series 2003B Prepayment Subaccount shall mean the subaccount so designated and established in the Series 2003B Redemption Account of the Bond Redemption Fund pursuant to Section 6.02 of this Indenture. Series 2003B Principal Subaccount shall mean the Account so designated, established in the Principal Account of the Debt Service Fund pursuant to Section 6.02 of this Indenture. Series 2003B Revenue Account shall mean the Account so designated, established within the Revenue Fund pursuant to Section 6.02 of this Indenture. Series 2003B Special Assessment Revenues shall mean the Special Assessment Revenues derived from the levy and collection of the Series 2003B Special Assessments. Series 2003B Special Assessments shall mean a portion of the Special Assessments levied, corresponding in amount to the debt service on the Series 2003B Bonds. Special Assessments shall mean the special assessments levied and collected, as provided for in Sections (14) and of the Act, against the District Lands that are subject to assessment as a result of the 2003 Project or any portion thereof, to the extent levied and collected to enable the District to pay the Debt Service Requirements on the Series 2003 Bonds. Special Assessments shall not include special assessments levied and collected by the District under Section of the Act for maintenance purposes or maintenance special assessments levied and collected by the District under Section (3) of the Act. Special Assessments also shall not include any special assessments levied and collected, as provided for in Sections (14) and of the Act, or benefit special assessments levied and collected, as provided for in Section (2) of the Act, against the District Lands that are subject to the Special Assessments, to the extent that such other special assessments or benefit special assessments are levied and collected on the District Lands in respect of a project other than the 2003 Project or bonds other than the Series 2003 Bonds. Special Assessment Revenues shall mean the net proceeds derived from the levy and collection of Special Assessments, including amounts received as prepayments of Special Assessments and any interest and penalties on such Special Assessments pursuant to all applicable provisions of the Act, Chapter 170, Florida Statutes, as amended, and Chapter 197, Florida Statutes, as amended (and any successor statutes thereto), including, without limitation, any amounts received from any foreclosure proceedings for the enforcement of collection of such Special Assessments or from the issuance and sale of tax certificates with respect to such Special Assessments, less (to the extent applicable) the fees and costs of collection thereof. C-11

123 Special Record Date shall mean such date as shall be fixed for the payment of defaulted interest on the Bonds in accordance with Section 2.01 hereof. State shall mean the State of Florida. Supplemental Indenture and indenture supplemental hereto shall mean any indenture amending or supplementing this Indenture as provided in Article XV hereof or which may be entered into in accordance with the provisions of this Indenture for the purpose of creating one or more Series of Refunding Bonds and any indenture amending or supplementing such Supplemental Indenture. Tax Collector shall mean the tax collector of the County. Trustee shall mean Wachovia Bank, National Association, a national banking association duly organized and existing under the laws of the United States, and duly authorized to exercise corporate trust powers in the State, having its designated corporate trust office in Miami, Florida, together with its successor or successors as Trustee under the Indenture. Utility System means, collectively, the facilities for the transmission and distribution of water within the District, the facilities for the collection and transmission of wastewater within the District, and the facilities for the collection of stormwater within the District. The words hereof, herein, hereto, hereby, and hereunder (except in the form of Bond), refer to the entire Indenture. Every request, requisition, order, demand, application, notice, statement, certificate, or consent, hereunder by the District shall, unless the form or execution thereof is otherwise specifically provided, be in writing signed by a Responsible Officer of the District. References herein to specific sections of the Florida Statutes shall be deemed to include any and all subsequent amendments to such section of the Florida Statutes and, if such section of the Florida Statutes were to be renumbered or repealed and replaced with another statutory provision, such reference shall be deemed to include the section as renumbered or the successor statutory provision, as applicable. All words and terms importing the singular number shall, where the context requires, import the plural number and vice versa. [End Of Article I] ARTICLE II THE BONDS Section 2.01 Amounts and Terms of Series 2003 Bonds; Details of Series 2003 Bonds. The Series 2003 Bonds may be issued hereunder in an aggregate principal amount not exceeding Seven Million Six Hundred Fifty-five Thousand Dollars ($7,655,000) (excluding Refunding Bonds and Completion Bonds). No Series 2003 Bonds may be issued hereunder except in accordance with the provisions of Articles II and III hereof. The Series 2003 Bonds shall be designated Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003A and Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003B, shall be issued as fully registered bonds without coupons in Authorized Denominations, and shall be substantially in the forms attached hereto as Exhibits B-1 and B-2, respectively, with such appropriate variations, omissions and insertions as are permitted or required by the Indenture and with such additional changes as may be necessary or appropriate to conform to the provisions of the Resolution. The Series 2003A Bonds shall be numbered consecutively from AR-1 and upwards and Series 2003B Bonds shall be numbered consecutively from BR-1 and upwards. The District shall issue the Series 2003 Bonds upon execution hereof and satisfaction of the requirements of Section 3.01 hereof; and the Trustee shall, at the District s request, authenticate such Series 2003 Bonds and deliver them as specified in the request. (a) The Series 2003A Bonds are being issued hereunder in order to provide funds (i) for the payment of a portion of the costs of the Project, (ii) for the payment of a portion of the interest on the Series 2003A Bonds through C-12

124 November 1, 2003, (iii) to fund the Series 2003A Debt Service Reserve Account, and (iv) to pay a portion of the costs of issuance of the Series 2003 Bonds. The Series 2003A Bonds shall be designated Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003A, and shall be issued as fully registered bonds without coupons in Authorized Denominations. (b) The Series 2003B Bonds are being issued hereunder in order to provide funds (i) for the payment of a portion of the costs of the Project, (ii) for the payment of a portion of the interest on the Series 2003B Bonds through November 1, 2003, (iii) to fund the Series 2003B Debt Service Reserve Account, and (iv) to pay a portion of the costs of issuance of the Series 2003 Bonds. The Series 2003B Bonds shall be designated Portofino Isles Community Development District (Port St. Lucie, Florida) Special Assessment Bonds, Series 2003B, and shall be issued as fully registered bonds without coupons in Authorized Denominations. (c) The total principal amount of Series 2003A Bonds that may be issued under this Indenture is expressly limited to $7,135,000. (d) The total principal amount of Series 2003B Bonds that may be issued under this Indenture is expressly limited to $520,000. (e) The principal or Redemption Price of the Series 2003 Bonds shall be payable in lawful money of the United States of America at the corporate trust office of the Paying Agent upon presentation of such Series 2003 Bonds. The payment of interest on the Series 2003 Bonds shall be made on each Interest Payment Date to the Owners of the Series 2003 Bonds by check or draft drawn on the Paying Agent and mailed on the applicable Interest Payment Date to each Owner as such Owner appears on the Register maintained by the Registrar as of the close of business on the Regular Record Date, at his address as it appears on the Register. Any interest on any Series 2003 Bond which is payable, but is not punctually paid or provided for on any Interest Payment Date (hereinafter called Defaulted Interest ) shall be paid to the Owner in whose name the Series 2003 Bond is registered at the close of business on a Special Record Date to be fixed by the Trustee, such date to be not more than fifteen (15) nor less than ten (10) days prior to the date of proposed payment. The Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class, postageprepaid, to each Owner of record as of the fifth (5th) day prior to such mailing, at his address as it appears in the Register not less than ten (10) days prior to such Special Record Date. The foregoing notwithstanding any Owner of Series 2003 Bonds in an aggregate principal amount of at least $1,000,000 shall be entitled to have interest paid by wire transfer to such Owner to the bank account number on file with the Trustee and Paying Agent, upon requesting the same in a writing received by the Trustee and Paying Agent at least fifteen (15) days prior to the relevant Record Date, which writing shall specify the bank, which shall be a bank within the continental United States, and bank account number to which interest payments are to be wired. Any such request for interest payments by wire transfer shall remain in effect until rescinded or changed, in a writing delivered by the Owner to the Trustee and Paying Agent, and any such rescission or change of wire transfer instructions must be received by the Trustee and Paying Agent at least fifteen (15) days prior to the relevant Record Date. (f) The Series 2003A Bonds will mature on May , with amortization installments due in the years 2004 through 2033, inclusive, subject to the right of prior redemption in accordance with their terms and as set forth herein, shall bear interest at an annual interest rate of 6.50% and shall have a CUSIP of A A0. The Series 2003B Bonds will mature on May 1, 2006, subject to the right of prior redemption in accordance with their terms and as set forth herein, shall bear interest at an annual interest rate of 5.70% and shall have a CUSIP of A B8. Interest on the Series 2003 Bonds will be computed in all cases on the basis of a 360-day year of twelve 30-day months. Interest on overdue principal and, to the extent lawful, on overdue premium and interest will be payable at the numerical rate of interest borne by the Series 2003 Bonds on the day before the default occurred. (g) From the net proceeds of the Series 2003A Bonds, (i) accrued interest in the amount of $11, in the Interest Account shall be deposited in the Series 2003A Interest Subaccount of the Debt Service Fund, (ii) capitalized interest in the amount of $295, shall be deposited in the Series 2003A Capitalized Interest Subaccount in the Interest Account of the Debt Service Fund, (iii) $559, (which is an amount equal to the Debt Service Reserve Requirement in respect of the Series 2003A Bonds) shall be deposited in the Series 2003A Debt Service Reserve Account of the Debt Service Reserve Fund, and (iv) $6,208, constituting all remaining proceeds of the Series 2003A Bonds, shall be deposited in the Construction Fund to be applied to pay costs of the Project, including $323,428.48, representing costs of issuance of the Series 2003A Bonds, in accordance with Article V hereof. C-13

125 (h) From the net proceeds of the Series 2003B Bonds, (i) accrued interest in the amount of $ in the Interest Account shall be deposited in the Series 2003B Interest Subaccount of the Debt Service Fund, (ii) capitalized interest in the amount of $18, shall be deposited in the Series 2003B Capitalized Interest Subaccount in the Interest Account of the Debt Service Fund, (iii) $52, (which is an amount equal to the Debt Service Reserve Requirement in respect of the Series 2003B Bonds) shall be deposited in the Series 2003B Debt Service Reserve Account of the Debt Service Reserve Fund, and (iv) $443, constituting all remaining proceeds of the Series 2003B Bonds, shall be deposited in the Construction Fund to be applied to pay costs of the Project, including $23,571.52, representing costs of issuance of the Series 2003B Bonds, in accordance with Article V hereof. Section 2.02 Execution. The Bonds shall be executed by the manual or facsimile signature of the Chairman or Vice Chairman of the Board, and the corporate seal of the District or the Board shall appear thereon (which may be in facsimile) and shall be attested by the manual or facsimile signature of its Secretary or Assistant Secretary. Bonds executed as above provided may be issued and shall, upon request of the District, be authenticated by the Trustee, notwithstanding that one or both of the officers of the District whose signatures appear on such Bonds shall have ceased to hold office at the time of issuance or authentication or shall not have held office at the date of the Bonds. Section 2.03 Authentication; Authenticating Agent. No Bond shall be valid until the certificate of authentication shall have been duly executed by the Trustee, and such authentication shall be proof that the Owner is entitled to the benefit of the trust hereby created. In the case of any Series of Bonds for which the Registrar is other than the Trustee for such Series of Bonds or the District, the Trustee may appoint the Registrar as an Authenticating Agent, with the power to act on such Trustee s behalf, and such Authenticating Agent shall be subject to the direction of the Trustee in the authentication and delivery of Bonds in connection with transfers and exchanges hereunder; the authentication and delivery of Bonds by an Authenticating Agent pursuant to this Section shall, for all purposes of the Indenture, be deemed to be authentication and delivery by the Trustee. The Trustee shall be entitled to be reimbursed by the District for payments made to any Authenticating Agent as reasonable compensation for its services. Any corporation into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be party, or any corporation succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation. Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee, the District and any Paying Agent. The Trustee may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent, the District and any Paying Agent. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section, the Trustee shall promptly appoint a successor Authenticating Agent, shall give written notice of such appointment to the District and the Paying Agent, shall mail a notice of such appointment to all Owners of Bonds of the applicable Series as the names and addresses of such Owners appear on the Register and shall publish notice of such appointment at least once in an Authorized Newspaper in the place where such successor Authenticating Agent has its principal office. Section 2.04 Appointment of Registrar and Paying Agent. The District shall keep, at the corporate trust office of the Registrar, books (the Register ) for the registration, transfer and exchange of the Series 2003 Bonds, and hereby appoints Wachovia Bank, National Association, as its Registrar to keep such books and make such registrations, transfers, and exchanges as required hereby. Wachovia Bank, National Association hereby accepts its appointment as Registrar and its duties and responsibilities as such hereunder. Registrations, transfers and exchanges shall be without charge to the Owner requesting such registration, transfer or exchange, but such Owner shall pay any taxes or other governmental charges on all registrations, transfers and exchanges. The District hereby appoints Wachovia Bank, National Association, as Paying Agent for the Series 2003 Bonds. Wachovia Bank, National Association hereby accepts its appointment as Paying Agent and its duties and responsibilities as such hereunder. C-14

126 Section 2.05 Mutilated, Destroyed, Lost or Stolen Bonds. If any Bond shall become mutilated, the District shall execute and the Trustee or Authenticating Agent, as the case may be, shall thereupon authenticate and deliver a new Bond of like tenor and denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee or Authenticating Agent, as the case may be, of such mutilated Bond for cancellation, and the District and the Trustee or Authenticating Agent, as the case may be, shall require reasonable indemnity therefor. If any Bond shall be reported lost, stolen or destroyed, evidence as to the ownership and the loss, theft or destruction thereof shall be submitted to the District and the Trustee or Authenticating Agent, as the case may be; and if such evidence shall be satisfactory to both and indemnity satisfactory to both shall be given, the District shall execute, and thereupon the Trustee or Authenticating Agent, as the case may be, shall authenticate and deliver a new Bond of like tenor and denomination. The cost of providing any substitute Bond under the provisions of this Section shall be borne by the Owner for whose benefit such substitute Bond is provided. If any such mutilated, lost, stolen or destroyed Bond shall have matured or be about to mature, the District may, with the consent of the Trustee or Authenticating Agent, as the case may be, pay to the Owner the principal amount of and accrued interest on such Bond upon the maturity thereof and compliance with the aforesaid conditions by such Owner, without the issuance of a substitute Bond therefor. Every substituted Bond issued pursuant to this Section 2.05 shall constitute an additional contractual obligation of the District, whether or not the Bond alleged to have been destroyed, lost or stolen shall be at any time enforceable by anyone, and shall be entitled to all the benefits of the Indenture equally and proportionately with any and all other Bonds duly issued hereunder. All Bonds shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights or remedies with respect to the replacement or payment of negotiable instruments, investments or other securities without their surrender. Section 2.06 Temporary Bonds. Pending preparation of definitive Bonds, or by agreement with the original purchasers of all Bonds, the District may issue and, upon its request, the Trustee shall authenticate in lieu of definitive Bonds one or more temporary printed or typewritten Bonds of substantially the tenor recited above. Upon request of the District, the Trustee shall authenticate definitive Bonds in exchange for and upon surrender of an equal principal amount of temporary Bonds. Until so exchanged, temporary Bonds shall have the same rights, remedies and security hereunder as definitive Bonds. Section 2.07 Cancellation and Destruction of Surrendered Bonds. All Bonds surrendered for payment or redemption and all Bonds surrendered for exchange shall, at the time of such payment, redemption or exchange, be promptly transferred by the Registrar, Paying Agent or Authenticating Agent to, and canceled and destroyed by, the Trustee. At the request of the District, the Trustee shall deliver to the District a certificate of destruction in respect of all Bonds destroyed in accordance with this Section. Section 2.08 Registration, Transfer and Exchange. As provided in Section 2.04 hereof, the District shall cause a Register in respect of the Bonds to be kept at the designated office of the Registrar for such Bonds. The District shall provide (through the designation of an appropriate Paying Agent) in respect of the Bonds for the maintenance of an office or agency in each place where such Bonds are payable where Bonds may be presented or surrendered for transfer or exchange. Upon surrender for transfer of any Bond at any such office or at the designated office of the Registrar, the District shall execute and the Trustee (or Registrar or Authenticating Agent as described in Section 2.03 hereof) shall authenticate and deliver, in the name of the designated transferees, one or more new Bonds of any authorized denominations of a like aggregate principal amount and of the same maturity. At the option of the Owner, Bonds may be exchanged for other Bonds of any authorized denomination, of a like aggregate principal amount and of the same maturity, upon surrender of the Bonds to be exchanged at any such office or agency. Whenever any Bonds are so surrendered for exchange, the District shall execute and the Trustee (or Registrar or Authenticating Agent as described in Section 2.03 hereof) shall authenticate and deliver the Bonds which the Owner making the exchange is entitled to receive. All Bonds issued upon any transfer or exchange of Bonds shall be valid obligations of the District, evidencing the same debt and entitled to the same benefits under the Indenture as the Bonds surrendered upon such transfer or exchange. C-15

127 Every Bond presented or surrendered for transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee, Paying Agent or the Registrar, duly executed by the Owner or his attorney duly authorized in writing. Transfers and exchanges shall be made without charge to the Owner, except that the District or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Bonds. Neither the District nor the Registrar on behalf of the District shall be required (i) to issue, transfer or exchange any Bond during a period beginning at the opening of business fifteen (15) days before the day of mailing of a notice of redemption of Bonds selected for redemption and ending at the close of business on the day of such mailing, or (ii) to transfer or exchange any Bond so selected for redemption in whole or in part. Section 2.09 Persons Deemed Owners. The District, the Trustee, any Paying Agent, the Registrar, or the Authenticating Agent shall deem and treat the person in whose name any Bond is registered as the absolute Owner thereof (whether or not such Bond shall be overdue and notwithstanding any notation of ownership or other writing thereon made by anyone other than the District, the Trustee, any Paying Agent, the Registrar or the Authenticating Agent) for the purpose of receiving payment of or on account of the principal or Redemption Price of and interest on such Bond, and for all other purposes, and the District, the Trustee, any Paying Agent, the Registrar and the Authenticating Agent shall not be affected by any notice to the contrary. All such payments so made to any such Owner, or upon his order, shall be valid and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Bond. Section 2.10 Limitation on Incurrence of Indebtedness. (a) The District may not issue bonds or other obligations secured by or payable from the Pledged Revenues, except for the Series 2003 Bonds, Completion Bonds, and any Refunding Bonds issued in accordance with the provisions of Section 3.03 of this Indenture. (b) The District may, in its sole discretion, issue additional bonds or other obligations secured by special assessments or benefit special assessments levied on and collected from the same District Lands (or any portion of said District Lands) that are subject to Special Assessments in respect of the 2003 Project, which special assessments or benefit special assessments are on a parity with the lien of the Special Assessments, but only (i) to the extent that the principal amount of such bonds or other obligations, when aggregated with the principal amount of the Series 2003 Bonds originally issued hereunder and the amount of any Completion Bonds does not exceed $8,420,500 and (ii) with the written consent of the Owners of at least fifty-one percent (51%) in principal amount of the Series 2003 Bonds then Outstanding. Notwithstanding the limitations on the aggregate principal amount of bonds or other obligations that may be issued or incurred by the District contained in this Section 2.10(b), the District may issue bonds or incur other indebtedness in excess of such limitations with the prior written consent of the Owners of at least 51% of the Series 2003 Bonds Outstanding. For purposes of the Owners consent referred to in this Section 2.10(b), within 20 Business Days after receipt by the Owners (other than the Initial Purchaser) of a written request for such consent, the Owners shall provide a written response to the District and to the Trustee; and, if no such written response is received by the District and the Trustee by the end of such 20 Business Day period, the Owners shall be deemed to have consented to the issuance of the bonds or the incurrence of the other obligations described in such request. So long as the Initial Purchaser is the Owner of the Series 2003 Bonds, actual written consent of such Initial Purchaser shall be required for purposes of this Section 2.10(b) (c) Nothing contained in this Section 2.10 or elsewhere in this Indenture is intended to limit or restrict the ability of the District to issue bonds or incur other indebtedness secured by or payable from sources other than the Special Assessment Revenues or special assessments or benefit special assessments as described in subsection (b) hereof. Section 2.11 Qualification for The Depository Trust Company. The Series 2003 Bonds shall be issued only as one fully registered bond per maturity and deposited with The Depository Trust Company, New York, New York ( DTC ) pursuant to the book-entry only system maintained by DTC. DTC shall be responsible for establishing and maintaining records of ownership for its participants. During any and all times that the Series 2003 Bonds are registered in the name of DTC or its nominee pursuant to DTC s book-entry only system of registration, DTC shall for all purposes under this Indenture be considered the registered owner of such Bonds and all references herein to the registered owners or Owners shall mean DTC. Neither the District nor the Trustee shall have any obligation with respect to any DTC participant or beneficial owner of the C-16

128 Bonds during such time as the Bonds are registered in the name of DTC or its nominee pursuant to DTC s book-entry only system of registration. The Trustee shall be authorized to enter into agreements with DTC including, but not limited to, agreements necessary for wire transfers of interest and principal payments with respect to the Series 2003 Bonds, utilization of electronic book entry data received from DTC in place of actual delivery of Series 2003 Bonds and provision of notices with respect to Series 2003 Bonds registered by DTC (or any of their designees identified to the Trustee) by overnight delivery, courier service, telegram, telecopy or other similar means of communication. In the event that DTC discontinues providing its services as securities depository with respect to the Series 2003 Bonds, and a successor securities depository is not obtained, certificates representing such Bonds will be printed and delivered to the Owners thereof. The District may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository) with respect to the Series 2003 Bonds and in such event certificates will be printed and delivered to the Owners thereof. If certificates for the Series 2003 Bonds are printed, no charge shall be made to any owner for registration and transfer of such Bonds, but any Owner requesting such registration and transfer shall pay any tax or other governmental charge required to be paid with respect thereto. [End Of Article II] ARTICLE III ISSUE OF BONDS Section 3.01 Issue of Series 2003 Bonds. The Trustee shall, at the request of the District, authenticate the Series 2003 Bonds and deliver or cause them to be authenticated and delivered, as specified in the request, but only upon receipt of: (1) a Certified Resolution of the District (a) stating the purpose of the issue; (b) specifying or providing for the determination by a Responsible Officer of the terms and form of Bonds and directing the payments to be made into the Funds and Accounts in respect thereof as provided in Article VI hereof; (c) authorizing the execution and delivery of the Bonds to be issued; (2) an Officers Certificate of the District stating (a) the intended use of the proceeds of the issue; (b) any other amounts available for such use; (c) that the proceeds of the issue plus the other amounts, if any, stated to be available for the 2003 Project are estimated to be sufficient to pay the Costs thereof; and (d) that the District expects to enter into contracts to cover substantially all portions of the construction of the 2003 Project not completed at the time of issuance of the Bonds. (3) a written opinion or opinions of Counsel to the District addressed to the Trustee stating that (a) the 2003 Project is one for which Bonds may be issued under the Indenture; (b) all conditions prescribed herein as precedent to the issuance have been fulfilled; (c) the Bonds have been validly authorized and executed and when authenticated and delivered pursuant to the request of the District will be valid obligations of the District entitled to the benefit of the trust created hereby and enforceable in accordance with their terms, with customary bankruptcy exceptions; (d) any consents of any Regulatory Bodies required in connection with the issuance of the Bonds or in connection with the 2003 Project have been obtained or can be reasonably expected to be obtained; and (e) if the acquisition of any real property or interest therein is included in the purpose of such issue, (i) the District has or can acquire good and marketable title thereto or (ii) the District has or can reasonably be expected to acquire a valid, subsisting and enforceable leasehold, easement, right-of-way or other interest in real property sufficient to effectuate the 2003 Project (which opinion may be stated in reliance on the opinion of other Counsel satisfactory to the signer or on a title insurance policy issued by a reputable title company); (4) a Consulting Engineer s certificate stating, in the signer s opinion, that (a) the 2003 Project improvements are reasonable and practicable; and (b) (i) the construction items and the Costs thereof stated in the certificate of the District are reasonable, (ii) the 2003 Project can reasonably be expected to be acquired, constructed, reconstructed, equipped and installed in accordance with the plans and specifications for the 2003 Project approved by the Board, (iii) the plans and specifications therefor have been approved or will be approved prior to completion of construction of the 2003 Project by the signer, and (iv) the plans and specifications therefor have been approved by all Regulatory Bodies required to approve them (specifying such Regulatory Bodies) or such approval can reasonably be expected to be obtained; C-17

129 (5) the net proceeds of the sale of the Series 2003 Bonds; (6) one or more Certified Resolutions of the District relating to the levy of Special Assessments with respect to the Costs of the 2003 Project to be financed with the Series 2003 Bonds, and evidencing that the District has undertaken and, to the ext ent then required under applicable law, completed all necessary proceedings, including, without limitation, the approval of assessment rolls, the holding of public hearings, the adoption of resolutions and the establishment of all necessary collection procedures, in order to levy Special Assessments upon the District Lands and collect Special Assessment Revenues in an amount sufficient to pay the Debt Service Requirements on the Series 2003 Bonds; and (7) a letter from the underwriter of such Series 2003 Bonds to the effect that the Bonds have been sold to one or more Accredited Investors; (8) an opinion of Bond Counsel regarding the tax-exempt status of the 2003 Bonds; and (9) such other documents, certifications and opinions, as shall be required by this Indenture. Section 3.02 Additional Bonds. The District may not issue additional bonds under this Indenture other than Completion Bonds issued pursuant to Section 3.03 hereof and Refunding Bonds pursuant to the provisions of Section 3.04 hereof. Except as expressly provided otherwise in Section 2.10 hereof, the District may, in its sole discretion, issue additional bonds under the provisions of one or more separate trust indentures. Section 3.03 Completion Bonds. The District may issue Completion Bonds under and secured by the Indenture at any time or times, subject to the conditions hereinafter provided in this Section, for the purpose of providing funds to (i) complete the 2003 Project, to the extent that the proceeds of the Series 2003 Bonds deposited into the Construction Trust Fund together with other available moneys are insufficient therefor, (ii) deposit such amount as may be required to be deposited to the credit of the Debt Service Reserve Fund upon the issuance of such Completion Bonds and (iii) pay any expenses in connection with such Completion Bonds, including, without limitation, the Costs of Issuance thereof. The Trustee shall, at the request of the District, authenticate the Completion Bonds and provide for delivery of such Completion Bonds as specified in the request, but only upon receipt of: (1) As long as the Initial Purchaser is the Owner of the Series 2003 Bonds, written consent of such Initial Purchaser to the issuance of such Completion Bonds. (2) an Officer s Certificate of the District, concurred in by the Consulting Engineer, stating (a) the intended use of the proceeds of the issue; (b) any other amounts available for the purpose; (c) that the proceeds of the issue plus the other amounts, if any, stated to be available for the purpose will be sufficient to complete the 2003 Project, and to pay the Costs of issuance of such Completion Bonds; and (d) that the aggregate principal amount of Completion Bonds does not exceed the difference between (i) $8,420,500 and (ii) (a) the aggregate principal amount of Series 2003 Bonds upon original issuance and (b) the aggregate of any Completion Bonds theretofore issued; (3) a Certificate signed by the District Manager to the effect that the District has provided for the levy and collection of Special Assessments (if necessary, in addition to the Series 2003A Special Assessments and Series 2003B Special Assessments, whether though amendment to the proceedings for the levy and collection of the Series 2003A Special Assessments and Series 2003B Special Assessments or otherwise) projected to provide sufficient additional Special Assessment Revenues to pay the Debt Service Requirement on such Completion Bonds; (4) such amendments to this Indenture, made in compliance with the provisions of Article XV hereof, as are necessary, in the opinion of Bond Counsel, to provide for the receipt and application of such additional Special Assessments; (5) an opinion of Bond Counsel to the effect that any such amendments (a) have been duly and properly approved and made and (b) will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds; and C-18

130 (6) items corresponding to those required by paragraphs (3) through (9) of Section 3.01 hereof in connection with the issuance of the Series 2003 Bonds. Section 3.04 Refunding Bonds. The District may issue Refunding Bonds under and secured by the Indenture at any time or times, subject to the conditions hereinafter provided in this Section, for the purpose of providing funds to (i) refund, including advance refunding (so long as the exclusion from gross income for federal income tax purposes of interest on the Bonds to be refunded is not adversely affected), all or part of the Bonds then Outstanding, or maturities thereof, including the payment of any redemption premium thereon and interest which will accrue on such Outstanding Bonds to the selected redemption date or stated maturity dates, as the case may be, (ii) deposit such amount as may be required to be deposited to the credit of the Debt Service Reserve Fund upon the issuance of such Refunding Bonds and (iii) pay any expenses in connection with such refunding, including, without limitation, the Costs of issuance of such Refunding Bonds. The Trustee shall, at the request of the District, authenticate the Refunding Bonds and provide for delivery of such Refunding Bonds as specified in the request, but only upon receipt of: (1) an Officer s Certificate of the District stating (a) the intended use of the proceeds of the issue; (b) any other amounts available for the purpose; (c) that the proceeds of the issue plus the other amounts, if any, stated to be available for the purpose will be sufficient to refund the Bonds to be refunded in accordance with the refunding plan and in compliance with Article XVI of this Indenture, including, without limitation, to pay the Costs of issuance of such Refunding Bonds; (d) that notice of redemption, if applicable, of the Bonds to be refunded has been duly given or that provision has been made therefor, as applicable; and (e)(i) the Debt Service Requirements for the current and each Fiscal Year (A) with respect to all Bonds Outstanding immediately prior to the authentication and delivery of Refunding Bonds and (B) with respect to all Bonds to be Outstanding immediately thereafter, and (ii) that the Debt Service Requirements for each such Fiscal Year is no greater in (i)(b) than in (i)(a) of this subsection; (2) a written opinion of Bond Counsel to the effect that the issuance of such Refunding Bonds will not adversely affect the exclusion from gross income for federal income tax purposes of interest on any Bonds issued pursuant to the Indenture (to the extent that upon original issuance thereof such Bonds were issued as Bonds the interest on which is excludable from gross income for federal income tax purposes); and (3) to the extent that the proceeds of the Refunding Bonds are to be applied to defease all or a portion of the Bonds Outstanding, a verification report of a firm of certified public accountants selected by the District and having a favorable reputation in the preparation of such reports, to the effect that the moneys and/or Defeasance Securities deposited with the escrow agent to effect such defeasance are sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds, or portion thereof, to be defeased. Section Closing Statement; Payment by Trustee. The Trustee is authorized to pay from the Construction Fund, in connection with the issuance of the Series 2003 Bonds, in amounts set forth in a closing statement signed by a Responsible Officer, amounts representing the Costs of Issuance of the Series 2003 Bonds and amounts, if any, to be reimbursed to the District for advances on account of Costs of the 2003 Project or portion thereof, all as more specifically provided in Section 5.02 hereof. [End Of Article III] ARTICLE IV ACQUISITION AND CONSTRUCTION OF 2003 PROJECT Section Project to Conform to Plans and Specifications; Changes. The District will proceed to complete the 2003 Project in accordance with the plans and specifications therefor, as such plans and specifications may be amended from time to time, and subject to the specific requirements of this Indenture. Section 4.02 Compliance Requirements. The District will comply with all present and future laws, acts, rules, regulations, orders and requirements lawfully made and applicable in fact to any acquisition or construction hereby undertaken and shall obtain all necessary approvals under federal, state and local laws, acts, rules and regulations necessary for the C-19

131 completion and operation of the 2003 Project and shall complete the 2003 Project in conformity with such approvals, laws, rules and regulations. [End Of Article IV] ARTICLE V CONSTRUCTION FUND Section 5.01 Establishment of and Payments from Construction Fund. The Trustee shall establish a Construction Fund, including a Cost of Issuance Account therein, into which shall be deposited the portion of the proceeds of the Series 2003 Bonds specified in Section 2.01 hereof and from which Costs may be paid as set forth herein. The amounts in the Construction Fund, until applied as hereinafter provided, shall be held for the security of Series 2003 Bonds. In addition to the specific requirements of this Indenture, the Trustee shall maintain a separate Account within the Construction Fund into which any governmental grant or payment may be deposited in accordance with any applicable regulations or standards required under the terms of such grant. Payments shall be made from the Cost of Issuance Account of any unpaid Costs of Issuance, including amounts to be reimbursed to the District for Costs of Issuance previously advanced, and thereafter to pay Costs of planning, financing, acquisition, construction, reconstruction, equipping and installation of the 2003 Project. Notwithstanding anything to the contrary contained herein, the Construction Fund shall be established and held hereunder until expended to pay Costs of the 2003 Project solely for the benefit of the Series 2003 Bonds. For the purposes of this Section 5.01, Costs of the 2003 Project or portion thereof shall emb race the Cost of financing, funding, planning, acquisition, construction, reconstruction, equipping or installing and all other items of Cost incident to such financing, funding, planning, acquisition, construction, reconstruction, equipping or installing and the financing thereof, and shall include, without intending thereby to limit or restrict any proper definition of such Cost (as defined in this Indenture) under the provisions of the Act or the Indenture, the following: (a) obligations incurred for labor and materials and to contractors, builders and materialmen in connection with such construction, for machinery and equipment, and for the restoration or relocation of property damaged or destroyed in connection with such construction; (b) the Cost of acquiring by purchase, if such purchase shall be deemed expedient, and the amount of any award or final judgment in or any settlement or compromise of any proceeding to acquire by condemnation, such property, lands, rights, rights of way, franchises, easements and other interests in land constituting a part of, or as may be deemed necessary or convenient for the acquisition or construction of, the 2003 Project or portion thereof, options and partial payments thereon, the Cost of filling, draining or improving any lands so acquired, and the amount of any damages incident to or consequent upon the acquisition, construction, reconstruction, installing or equipping of the 2003 Project or portion thereof; (c) the fees and expenses of the Trustee, the Registrar, any Paying Agent under the Indenture, including fees for services in connection with the acceptance of the trusts hereby created, legal expenses and fees (including appellate fees), fees and expenses of consultants, financing charges, Costs of preparing and issuing Bonds, taxes or other municipal or governmental charges lawfully levied or assessed upon the Project or portion thereof during construction, or any property acquired therefor, and premiums on insurance (if any) on Bonds issued in connection with the Project or portion thereof, during construction; (d) fees and expenses of engineers for making studies, surveys and estimates of Costs and of revenues and for preparing plans and supervising construction, as well as for the performance of all other duties of engineers set forth herein in relation to the construction of the Project or portion thereof or the issuance of Bonds therefor; (e) expenses of administration properly chargeable to the 2003 Project or portion thereof and all other items of expense not elsewhere in this Section specified, incident to the acquisition, construction, reconstruction, equipping and installation of the Project or portion thereof and the placing of the same in operation and to the acquisition of real estate, franchises and rights of way therefor, including abstracts of title and title insurance; and (f) any amounts heretofore or hereafter advanced by the District or any other Person for any of the foregoing purposes, including, without limitation, advances made for the purpose of paying costs associated with the issuance C-20

132 of Bonds and the payment of principal of and interest on any notes which may have been issued in anticipation of proceeds of Bonds. Section 5.02 Construction Fund Disbursements. (a) The Trustee shall make payments from the Construction Fund (and any accounts and subaccounts therein) only upon receipt of, in every case, a requisition (in substantially the form thereof attached hereto as Exhibit D and made a part hereof) signed by a Responsible Officer and by the Consulting Engineer. The District s certifications contained in such requisition may be based upon certificates satisfactory to it provided by the Consulting Engineer. (b) Notwithstanding the foregoing requisition procedure, Costs of Issuance of the Series 2003 Bonds and amounts to be reimbursed by the District to any other Person for moneys advanced to or on behalf of the District for payment of Costs of the Project or any portion thereof shall be paid by the Trustee from the Construction Fund upon delivery to the Trustee, on the date of issuance and delivery of such Bonds, of a closing statement signed by a Responsible Officer of the District, specifying the Person to whom payment is to be made, the obligation on account of which the payment is to be made and the amount payable with respect thereto. Costs of issuance of the Series 2003 Bonds and amounts to be reimbursed by the District to third parties for moneys advanced to the District for payment of Costs of any portion of the 2003 Project, presented to the Trustee for payment subsequent to the date of issuance and delivery of such Bonds, shall be paid by the Trustee from the Construction Fund in accordance with the requisition procedures set forth in this Section. Section 5.03 Records and Reports During Construction Period. All requisitions and certificates received by the Trustee, as required by this Article V as conditions of payment from the Construction Fund, shall be retained in the possession of the Trustee, subject at all times to the inspection of the District and the Consulting Engineer, for a period ending no earlier than three (3) years from the date of completion of the 2003 Project. Section 5.04 Completion of Construction. (a) The date of completion of the 2003 Project (the Completion Date ) shall be evidenced to the Trustee by a certificate signed by the Consulting Engineer and the District Manager stating that, except for amounts retained by the Trustee for Costs of the 2003 Project not then due and payable: (i) The 2003 Project has been completed in accordance with the specifications therefor and all labor, services, materials and supplies used in the 2003 Project have been paid for and acknowledgments of such payments have been obtained from all contractors and suppliers; and (ii) All other facilities necessary in connection with the 2003 Project have been constructed, acquired and installed in accordance with the specifications therefor, and all Costs and expenses incurred in connection therewith have been paid. (b) In addition to the foregoing, in the event that the District determines that the 2003 Project cannot be completed even with the proceeds of Completion Bonds and the Consulting Engineer delivers a certificate to the Trustee to such effect (stating the reason for the inability to complete the Project), then the date of such certificate shall be deemed to be the Completion Date for the 2003 Project. (c) Each certificate described in such subsections shall state that it is given without prejudice to any rights against third parties which exist at the date of such certificate or which may subsequently come into being. Within ten (10) days following the Completion Date of the Project, the Trustee shall transfer any balance (except for amounts to be retained to pay Costs not then due and payable) in the Construction Fund and shall deposit the same in the Bond Redemp tion Fund to be used to redeem Series 2003 Bonds of both series on a basis proportionate to the original amount of proceeds deposited to the Construction Fund from each series; provided that such balance may be used to redeem more Series 2003B Bonds if the District delivers to the Trustee an opinion of Bond Counsel to the effect that the use of such proceeds in such manner will not adversely affect the exclusion from gross income of interest on the Series 2003 Bonds. [End Of Article V] C-21

133 ARTICLE VI SPECIAL ASSESSMENTS; APPLICATION OF PLEDGED REVENUES TO FUNDS AND ACCOUNTS Section 6.01 Special Assessments; Lien of Indenture on Pledged Revenues. (a) The Pledged Revenues are hereby pledged, and a lien prior to any other liens thereon is hereby imposed upon the Pledged Revenues, for the payment of the principal or Redemption Price of and interest on all Bonds issued and Outstanding under the Indenture. This pledge to the Trustee of the Pledged Revenues as security for the performance of any obligation of the District under the Indenture shall be valid and binding from the time such pledge is made, and the covenants and agreements set forth herein to be performed by or on behalf of the District shall be, except as otherwise expressly provided or permitted herein, for the equal and ratable benefit, protection and security of the Owners of the Bonds, all of which, regardless of their times of issue and maturity, shall be of equal rank, without preference, priority or distinction of any one Bond over any other Bond; provided, however, that the lien and pledge of the Indenture shall not apply to any moneys that are transferred to the Rebate Fund. The Pledged Revenues and all income and receipts in the Funds and Accounts (except for the Rebate Fund) held by the Trustee for the District under the Indenture shall immediately be subject to the lien and pledge of the Indenture without any physical delivery thereof or further act. (b) The District hereby covenants that it shall levy and collect the Special Assessments pursuant to the Act, Chapter 170, or Chapter 197, Florida Statutes, as amended, or any successor statutes, as applicable, to the extent and in the amount necessary to pay the Debt Service Requirements on Bonds issued and Outstanding hereunder. The District shall use the uniform method afforded by Sections , and , Florida Statutes, or any successor statutes thereto for the levy, collection and enforcement of the Series 2003A Special Assessments. The District may, but shall not be required to, use the uniform method for the collection of the Series 2003B Special Assessments or may collect such assessments pursuant to the provisions of the Act or Chapter 170, Florida Statutes, or other applicable provisions of law as determined by the Board of Supervisors of the District; provided that, to the extent that the District does not levy the Series 2003B Special Assessments pursuant to the uniform method, the District shall require that such Series 2003B Special Assessments be paid in monthly installments calculated to be sufficient to pay the semi -annual amount due for the Debt Service Requirements of the Series 2003B Bonds on May 1 and November 1, respectively, in each Bond Year. The District shall deposit the Special Assessments with the Trustee within five business days of the receipt thereof. (c) It is hereby expressly acknowledged that the District expects to levy and collect special assessments, as provided for in Section (14) and of the Act, and/or benefit special assessments, as provided for in Section (2) of the Act, against the District Lands that are subject to the Special Assessments, in respect of projects other than the 2003 Project or bonds other than the Series 2003 Bonds, the lien of which such special assessments and/or benefit special assessments on the District Lands shall be on a parity and of equal dignity with the lien of the Special Assessments. No proceeds of any such other special assessments or benefit special assessments shall be deposited in the Revenue Fund established under this Indenture, nor shall any revenues derived from such other special assessments or benefit special assessments constitute Pledged Revenues for any purpose under this Indenture. No revenues derived from the Special Assessments shall constitute s ecurity for any bonds other than the Series 2003 Bonds. Section 6.02 Funds and Accounts. The Funds and Accounts specified in this Article VI shall be established under this Indenture for the benefit of the Series 2003 Bonds and any Refunding Bonds issued hereunder. Subject to the foregoing sentence, all moneys, including, without limitation, proceeds of Bonds, on deposit to the credit of the Funds, Accounts and/or subaccounts established hereunder (except for moneys transferred to the Rebate Fund) are hereby pledged (and a prior lien is hereby imposed thereon) to the payment of the principal, redemption or purchase price of (as the case may be) and interest on the Series 2003 Bonds issued hereunder. (a) The Trustee is hereby authorized and directed to establish a Revenue Fund and within such fund (i) the Series 2003A Revenue Account and (ii) the Series 2003B Revenue Account. The Revenue Fund shall be held by the Trustee separate and apart from all other Funds and Accounts held under the Indenture and from all other moneys of the Trustee. (b) The Trustee is hereby authorized and directed to establish a Debt Service Fund. The Debt Service Fund shall be held by the Trustee separate and apart from all other funds and accounts held under this Indenture and from all C-22

134 other moneys of the Trustee. The Trustee shall establish within the Debt Service Fund (i) a separate account designated as the Interest Account and within such Account, (A) the Series 2003A Interest Subaccount, (B) the Series 2003A Capitalized Interest Subaccount, (C) the Series 2003B Interest Subaccount, and (D) the Series 2003B Capitalized Interest Subaccount ; and (ii) a separate account designated as the Principal Account and within such Account (A) the Series 2003A Bond Amortization Account and (B) the Series 2003B Bond Amortization Account. (c) The Trustee is hereby authorized and directed to establish a Debt Service Reserve Fund for the Series 2003 Bonds. The Debt Service Reserve Fund shall be held by the Trustee separate and apart from all other Funds and Accounts held under this Indenture and from all other moneys of the Trustee. Within the Debt Service Reserve Fund, the Trustee shall establish (i) a Series 2003A Debt Service Reserve Account and (ii) a Series 2003B Debt Service Reserve Account. (d) The Trustee is hereby authorized and directed to establish a Bond Redemption Fund. Within the Redemption Fund, the Trustee shall establish (i) a Series 2003A Redemption Account and within such account (A) a Series 2003A General Account and (B) a Series 2003A Prepayment Account ; and (ii) a Series 2003B Redemption Account and within such account (A) a Series 2003B General Subaccount and (B) a Series 2003B Prepayment Subaccount. Section 6.03 Revenue Fund. Series 2003A Special Assessments (except for Prepayments of Series 2003A Special Assessments which shall be deposited in the Series 2003A Prepayment Subaccount in the Redemption Fund) shall be deposited by the Trustee into the Series 2003A Revenue Account, and Series 2003B Special Assessments (except for Prepayments of Series 2003B Special Assessments which shall be deposited in the Series 2003B Prepayment Subaccount in the Redemption Fund) shall be deposited by the Trustee into the Series 2003B Revenue Account. The Trustee shall transfer from amounts on deposit in the Series 2003A Revenue Account and the Series 2003B Revenue Account, respectively, of the Revenue Fund to the Funds and Accounts designated below, the following amounts, at the following times and in the following order of priority: FIRST, on the Business Day preceding the first May 1 for which there remains an insufficient amount (A) from Series 2003A Bond proceeds (or investment earnings thereon) on deposit in the Series 2003A Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003A Bonds due on [the next succeeding] such May 1, and (B) from Series 2003B Bond proceeds (or investment earnings thereon) on deposit in the Series 2003B Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003B Bonds due on such May 1, and no later than the Business Day next preceding each May 1 thereafter, to the Series 2003A Interest Subaccount and the Series 2003B Interest Subaccount, respectively, in the Interest Account of the Debt Service Fund, an amount from the Series 2003A Revenue Account equal to the interest on the Series 2003A Bonds and an amount from the Series 2003B Revenue Account equal to the interest on the Series 2003B Bonds becoming due on such May 1, less any amounts on deposit in the Series 2003A Interest Subaccount or the Series 2003B Interest Subaccount not previously credited; SECOND, no later than the Business Day next preceding each May 1, commencing May 1, 2004, to the Series 2003A Bond Amortization Subaccount of the Bond Amo rtization Account in the Debt Service Fund, an amount from the Series 2003A Revenue Account equal to the principal amount of Series 2003A Bonds subject to mandatory redemption on such May 1, less any amount on deposit in the Series 2003A Bond Amortization Subaccount not previously credited; THIRD, no later than the Business Day next preceding each May 1, commencing May 1, 2006, to the Series 2003B Bond Amortization Subaccount of the Bond Amortization Account in the Debt Service Fund, an amount from the Series 2003B Revenue Account equal to the principal amount of Series 2003B Bonds subject to mandatory redemption on such May 1, less any amount on deposit in the Series 2003B Bond Amortization Subaccount not previously credited; FOURTH, on the Business Day preceding the first November 1 for which there remains an insufficient amount (A) from Series 2003A Bond proceeds (or investment earnings thereon) on deposit in the Series 2003A Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003A Bonds due on such November 1, and (B) from Series 2003B Bond proceeds (or investment earnings thereon) on deposit in the Series 2003B Capitalized Interest Subaccount to be applied to the payment of interest on the Series 2003B Bonds due on such November 1, and no later than the Business Day next preceding each November 1 thereafter, to the Series 2003A Interest Subaccount and the Series 2003B Interest Subaccount, respectively, in the Interest Account of the Debt Service Fund, an amount from the Series 2003A Revenue Account equal to the interest on the Series 2003A Bonds and an amount from the Series 2003B Revenue Account equal to the interest on the Series 2003B C-23

135 Bonds becoming due on such November 1, less any amounts on deposit in the Series 2003A Interest Subaccount or the Series 2003B Interest Subaccount not previously credited; FIFTH, on the Business Day next succeeding each November 1 (A) while Series 2003A Bonds remain Outstanding, to the Series 2003A Debt Service Reserve Account, an amount from the Series 2003A Revenue Account equal to the amount, if any, which is necessary to make the amount on deposit therein equal to the Debt Service Reserve Requirement for the Series 2003A Bonds and (B) while Series 2003B Bonds remain Outstanding, to the Series 2003B Debt Service Reserve Account, an amount from the Series 2003B Revenue Account equal to the amount, if any, which is necessary to make the amount on deposit therein equal to the Debt Service Reserve Requirement for the Series 2003B Bonds; SIXTH, subject to the following paragraph, the balance of any moneys in the Revenue Fund after making the foregoing deposits shall remain therein. (1) The Trustee shall within ten (10) days after the last Interest Payment Date in each calendar year, upon requis ition of the District Manager, pay District Expenses. (2) The Trustee shall within sixty (60) days after the end of each Bond Year, deposit to the Rebate Fund the amount shown in the report of the Rebate Consultant for such Bond Year as the recommended deposit to the Rebate Fund; (3) The Trustee shall within sixty (60) days preceding each May 1 deposit to the Bond Redemption Fund such amounts, if any, as shall be determined by the District Manager to be necessary to provide for redemption of Series 2003 Bonds in $5,000 principal increments; (4) The Trustee shall, at the direction of the District Manager, pay any remaining moneys to the Developer as an installment of the Deferred Acquisition Amount, unless such payment would reduce the amount remaining on deposit in the Revenue Fund below the sum of Five Thousand Dollars ($5,000). Section 6.04 Debt Service Fund. The Trustee at all times shall make available to any Paying Agent the funds in the Principal Account, the Interest Account and the Bond Amortization Account of the Debt Service Fund to pay the principal of the Bonds as they mature or become subject to mandatory redemption and the interest on the Bonds as it becomes payable, respectively. When Bonds of any Series are redeemed, the amount, if any, in the Interest Account in the Debt Service Fund representing interest thereon shall be applied to the payment of accrued interest in connection with such redemption. The Trustee shall apply the portion of the moneys deposited in the Bond Amortization Account in respect of the principal amount of Bonds subject to mandatory redemption for purchase or redemption of Bonds in amounts and maturities set forth in Article VIII hereof. Whenever Bonds are to be purchased from such moneys, if the District shall notify the Trustee that the District wishes to arrange for such purchase, the Trustee shall comply with the District s arrangements provided they conform to the Indenture. Purchases and redemptions from the portion of the moneys deposited in the Bond Amortization Account in respect of the principal amount of Bonds subject to mandatory sinking fund redemption, shall be made as follows: (a) The Trustee shall apply such amounts (less any moneys applied to the purchase of Bonds pursuant to the next sentence hereof) on the principal payment date in each of the years set forth in Article VIII hereof to the redemption of Bonds in the amounts, manner and maturities and on the dates set forth therein, at a Redemption Price of 100% of the principal amount thereof. At the written direction of the District, the Trustee shall apply all or any portion of such moneys from time to time available to the purchase of Bonds which mature in the aforesaid years, at prices not higher than the principal amount thereof, in lieu of redemption as aforesaid, provided that firm purchase commitments can be made before the notice of redemption would otherwise be required to be given. In the event of purchases at less than the principal amount thereof, the difference between the amount in the Series Subaccount in the Principal Account representing the principal amount of the Bonds if a Series so purchased and the purchase price thereof (exclusive of accrued interest) shall be retained in the Series Subaccount in the Bond Amortization Account and shall be applied on the next Interest Payment Date to the payment of all or any portion of the principal amount of the Bonds of such series maturing or subject to mandatory redemption transferred to the Series Subaccount in the Interest Account of the Debt Service Fund. C-24

136 (b) Accrued interest on purchased Bonds of a Series shall be paid from the Series Subaccount in the Interest Account of the Debt Service Fund. (c) In lieu of paying the Debt Service Requirements necessary to allow any mandatory redemption of Bonds from the Bond Amortization Account, the District may present to the Trustee Bonds purchased by the District pursuant to subparagraph (a) above and furnished for such purposes; provided, however, that no Bonds so purchased shall be credited towards the Debt Service Requirements in respect of the mandatory redemption of Bonds for which notice of redemption has been given pursuant to Section 8.02 of this Indenture. Notwithstanding any provision of this Indenture to the contrary, the District may only purchase Series 2003 Bonds for cancellation. Any Bond so purchased immediately shall be presented to the Trustee for cancellation. In such event, the Debt Service Requirements with respect to the Bonds purchased shall be reduced as specified by the District by an amount equal to the aggregate principal amount of any such Bonds so purchased and presented to the Trustee. Section 6.05 Debt Service Reserve Fund. On the date of issuance and delivery of the Series 2003 Bonds, proceeds from the sale of the Series 2003 Bonds shall be deposited in the Debt Service Reserve Fund as follows: (a) Proceeds of the Series 2003A Bonds shall be deposited into the Series 2003A Debt Service Reserve Account in the amount set forth in Section 2.01(g) of this Indenture, and such moneys, together with any other mo neys deposited into the Series 2003A Debt Service Reserve Account shall be applied for the purposes provided in this Section 6.05 of this Indenture. On each November 2 (or, if such date is not a Business Day, on the Business Day next preceding such day), the Trustee shall determine the amount on deposit in the Series 2003A Debt Service Reserve Account and, upon certification to the Trustee in the manner provided in Section 6.03, Paragraph SIXTH, above, pay any excess therein above the Debt Service Reserve Requirement for the Series 2003A Bonds to the Developer as a portion of the Deferred Acquisition Amount; provided that such payment shall not be made at any time that any amounts due and owing with respect to the Series 2003B Special Assessments have not been paid. (b) Proceeds of the Series 2003B Bonds shall be deposited into the Series 2003B Debt Service Reserve Account in the amount set forth in Section 2.01(h) of this Indenture, and such moneys, together with any other moneys deposited into the Series 2003B Debt Service Reserve Account shall be applied for the purposes provided in this Section 6.05(b) of this Indenture. On each November 2 (or, if such date is not a Business Day, on the Business Day next preceding such day), the Trustee shall determine the amount on deposit in the Series 2003B Debt Service Reserve Account and, upon certification by the District Manager in the manner set forth in Section 6.03, Paragraph SIXTH, above, pay any excess therein above the Debt Service Reserve Requirement for the Series 2003B Bonds to the Developer as a portion of the Deferred Acquisition Amount; provided that such payment shall not be made at any time that the payment of any amounts due and owing with respect to the Series 2003B Special Assessments have not been paid. (c) Whenever for any reason on an Interest Payment Date the amounts in the Series Subaccounts in the Interest Account or the Bond Amortization Account, as the case may be, are insufficient to pay all amounts payable on the Series of Bonds on such payment dates, the Trustee shall, without further instructions, withdraw the amount of any such deficiency from the corresponding Series Subaccount in the Debt Service Reserve Fund and deposit such amount into the Series Subaccount in the Interest Account or the Bond Amortization Account, as the case may be, with priority to the Interest Account and then, to the Bond Amortization Account, to be applied to pay interest on and the amortization installment of the Series of Bonds. Upon the making of any such withdrawal from the Debt Service Reserve Fund, the Trustee shall give immediate written notice thereof to the District Manager with a copy to the District Counsel. (d) Earnings on investments in the Series Subaccounts in the Debt Service Reserve Fund shall be retained to the credit of such Subaccounts until applied as set forth herein. (e) Subsequent to the initial deposit of the full amount of the Debt Service Reserve Requirement in each of the Series Subaccounts in the Debt Service Reserve Fund, the District shall be required to deposit additional moneys into the Debt Service Reserve Fund if the amount on deposit to the credit of either Series Subaccount in the Debt Service Reserve Fund falls below the Debt Service Reserve Requirement to the extent moneys are available for such deposit pursuant to clause FIFTH of Section 6.03 hereof. Section 6.06 Bond Redemption Fund. The Trustee shall deposit into the Bond Redemption Fund certain excess moneys remaining in the Revenue Fund as provided in clause SIXTH of Section 6.03 hereof and other mo neys, including, C-25

137 without limitation, amounts constituting prepayments of Special Assessments, as provided hereunder. Except as otherwise provided in this Indenture, moneys to be deposited into the Bond Redemption Fund shall be deposited to the Series 2003A or Series 2003B General Subaccount of the Bond Redemption Fund. (a) Moneys in the Series 2003A General Subaccount and the Series 2003B General Subaccount of the Bond Redemption Fund (including all earnings on investments held therein) shall be accumulated therein to be used in the following order of priority, to the extent that the need therefor arises: FIRST, to make such deposits into the Rebate Fund, if any, as the District may direct in accordance with the Tax Compliance Certificate, such moneys thereupon to be used solely for the purposes specified in the Tax Compliance Certificate. Any moneys so transferred from the Series 2003A or Series 2003B General Subaccount of the Bond Redemption Fund to the Rebate Fund shall thereupon be free from the lien and pledge of the Indenture; SECOND, to be used to call for redemption pursuant to Section 8.01(b) hereof an amount of Series 2003A Bonds or Series 2003B Bonds, as the case may be, equal to the amount of money transferred to the Series 2003A and Series 2003B General Accounts of the Bond Redemption Fund pursuant to the aforesaid clauses or provisions, for the purpose of such extraordinary mandatory redemption on the dates and at the prices provided in such clauses or provisions, as appropriate; and THIRD, the remainder of moneys in the Series 2003A General Subaccount to be utilized by the Trustee, at the direction of a Responsible Officer, to call for redemption on each Interest Payment Date on which Series 2003A Bonds are subject to optional redemption pursuant to Section 8.01(a) hereof such amount of Series 2003A Bonds as, with the redemption premium, may be practicable; provided, however, that not less than $5,000 principal amount of Series 2003A Bonds shall be called for redemption at one time. (b) Moneys in the Series 2003A Prepayment Subaccount and the Series 2003B Prepayment Subaccount in the Bond Redemption Fund (including all earnings on investments held in either such Prepayment Subaccount of the Bond Redemption Fund) shall be accumulated therein to be used as follows; (i) The moneys in the Series 2003A Prepayment Subaccount to be used to call for redemption pursuant to Section 8.01(b) hereof an amount of Series 2003A Bonds equal to the amount of money transferred to the Series 2003A Prepayment Subaccount of the Bond Redemption Fund pursuant to the aforesaid clauses or provisions as directed in writing by the District Manager pursuant to the Special Assessment Report on the dates and at the prices provided in such clauses or provisions, as appropriate. (ii) Moneys in the Series 2003B Prepayment Subaccount to be used to call for redemption pursuant to Section 8.01(b) hereof an amount of Series 2003B Bonds equal to the amount of money transferred to the Series 2003B Prepayment Subaccount of the Bond Redemption Fund pursuant to the aforesaid clauses or provisions as directed in writing by the District Manager pursuant to the Special Assessment Report on the dates and at the prices provided in such clauses or provisions, as appropriate. (c) All earnings on investments held in the Series Subaccounts in the Bond Redemption Fund shall be deposited into the corresponding General Accounts and applied, together with other amounts therein, as set forth above. Notwithstanding anything to the contrary contained herein, the Bond Redemption Fund shall be established and held hereunder solely for the benefit of the Series 2003 Bonds. Section 6.07 [Reserved.] Section 6.08 Procedure When Funds are Sufficient to Pay all Bonds. If at any time the moneys held by the Trustee in the Funds and Accounts (other than the Rebate Fund) hereunder are sufficient to pay the principal or Redemption Price of, as the case may be, and interest on all Bonds then Outstanding hereunder to maturity or prior redemption, together with any amounts due the District and the Trustee, Paying Agent and Registrar, the Trustee, at the direction of the District, shall transfer the amounts in the Funds and Accounts (other than the Rebate Fund) to the Bond Redemption Fund and such amounts shall be applied to the redemption of the Outstanding Bonds and accrued interest thereon in accordance with Article VIII hereof; provided that the amounts, if any, due to the District, the Trustee, the Paying Agent or the Registrar shall be paid to each such Person prior to the transfer to the Bond Redemption Fund. Thereafter, the District shall not be required to pay over C-26

138 any further Special Assessment Revenues with respect to such Bonds unless and until it shall appear that there is a deficiency in the Funds and Accounts held by the Trustee. Section 6.09 Moneys to be Held For Owners Only. The Series 2003 Bonds shall be secured by Pledged Revenues, as set forth in Section hereof. Moneys and investments in the various Funds and Accounts (other than the Rebate Fund) created hereunder shall be held in trust by the Trustee solely for the benefit of the Owners of the Series 2003 Bonds. [End of Article VI] ARTICLE VII SECURITY FOR AND INVESTMENT OR DEPOSIT OF FUNDS Section 7.01 Deposits and Security Therefor. All moneys received by the Trustee for deposit in any Fund established under the Indenture shall be considered trust funds, shall not be subject to lien or attachment, except for the lien created by the Indenture, and shall, except as hereinafter provided, be deposited in the trust department of the Trustee, until or unless invested or deposited as provided in Section 7.02 hereof. All deposits of moneys received by the Trustee under the Indenture in the trust department of the Trustee (whether original deposits under this Section 7.01 or deposits or redeposits in time accounts under Section 7.02) shall, to the extent not insured, and to the extent permitted by law, be fully secured as to both principal and interest earned, by Investment Securities. If at any time the trust department of the Trustee is unwilling to accept such deposits or unable to secure them as provided above, the Trustee may deposit such moneys with any other depositary which is authorized to receive them and the deposits of which are insured by the Federal Deposit Insurance Corporation (including the FDIC S Savings Association Insurance Fund). All deposits in any other depositary in excess of the amount covered by insurance (whether under this Section 7.01 or Section 7.02 as aforesaid) shall, to the extent permitted by law, be fully secured as to both principal and interest earned, in the same manner as required herein for deposits with the Trustee. Such security shall be deposited with a Federal Reserve Bank, with the trust department of the Trustee as authorized by law with respect to trust funds in the State, or with a bank or trust company having a combined net capital and surplus of not less than $50,000,000. Section 7.02 Investment or Deposit of Funds. The Trustee shall, as directed by the District in writing, invest moneys held in any Fund or Account established under this Indenture in Investment Securities; provided, however, that, amounts on deposit to the credit of the Accounts within the Debt Service Fund shall be invested only in Government Obligations or a fund described in paragraph (f) of the definition of Investment Securities. All deposits in time accounts shall be subject to withdrawal without penalty and all investments shall mature or be subject to redemption by the Trustee without penalty, not later than the date when the amounts will foreseeably be needed for purposes of this Indenture (for purposes of this section the term penalty shall mean a contractual payment or forfeiture paid for early redemption of an investment and shall not mean a loss on the sale of an investment due to a decline in the market value thereof). All securities securing investments under this Section shall be deposited with a Federal Reserve Bank, with the trust department of the Trustee, as authorized by law with respect to trust funds in the State, or with a bank or trust company having a comb ined net capital and surplus of not less than $50,000,000. The interest and income received upon such investments and any interest paid by the Trustee or any other depositary of any Fund or Account (and subaccount) and any profit or loss resulting from the sale of securities shall be added or charged to the Fund or Account (and subaccount) for which such investments are made. Upon request of the District, or on its own initiative whenever payment is to be made out of any Fund or Account, the Trustee shall sell such securities as may be requested to make the payment and restore the proceeds to the Fund or Account in which the securities were held. The Trustee shall not be accountable for any depreciation in the value of any such security or for any loss resulting from the sale thereof, except as provided hereinafter. Notwithstanding the foregoing provisions of this Section 7.02, the District shall not direct the making of, any investments of any moneys held in any Fund or Account inconsistent with Section of this Indenture relating to arbitrage bonds. If net proceeds from the sale of securities held in any Fund or Account shall be less than the amount invested and, as a result, the amount on deposit in such Fund or Account is less than the amount required to be on deposit in such Fund or Account, the amount of such deficit shall be transferred to such Fund or Account from the Revenue Fund at the times and in the manner set forth in Section 6.03 hereof. The Trustee shall not invest moneys held hereunder absent specific instructions from the District; provided, however, that the Trustee hereby acknowledges standing instructions regarding the short-term investment of uninvested funds in order to minimize instances of uninvested funds. Moneys in any of the Funds and Accounts established pursuant to the Indenture, when held by the Trustee, shall be immediately invested by the Trustee as set forth herein and, thereafter, shall be continuously C-27

139 invested and reinvested and deposited and redeposited by the Trustee in accordance with the written directions from the District, as aforesaid. The Trustee shall not be liable or responsible for any loss or entitled to any gain resulting from any investment or sale upon the investment instructions of the District or otherwise. Section 7.03 Valuation of Funds. The Trustee shall value the assets in each of the Funds and Accounts (and subaccounts) established hereunder as of September 30 of each Fiscal Year, and as soon as practicable after each such valuation date (but no later than ten (10) days after each such valuation date) shall provide the District a report of the status of each Fund and Account as of the valuation date; provided, however, that if such valuations are already contained in the monthly Funds and Accounts report provided by the Trustee to the District, a separate valuation report shall not be required. In computing the assets of any Fund or Account, investments and accrued interest thereon shall be deemed a part thereof, subject to Section 7.02 hereof. For the purpose of determining the amount on deposit to the credit of any Fund or Account established hereunder, with the exception of the Debt Service Reserve Fund, obligations in which money in such Fund or Account shall have been invested shall be valued at the market value or the amortized cost thereof, whichever is lower, or at the redemption price thereof, to the extent that any such obligation is then redeemable at the option of the Owner. For the purpose of determining the amount on deposit to the credit of the Debt Service Reserve Fund, obligations in which money in such Fund shall have been invested shall be valued at par, if purchased at par, or at amortized cost, if purchased at other than par, plus, in each case, accrued interest. Amortized cost, when used with respect to an obligation purchased at a premium above or a discount below par, means the value as of any given time obtained by dividing the total premium or discount at which such obligation was purchased by the number of days remaining to maturity on such obligation at the date of such purchase and by multiplying the amount thus calculated by the number of days having passed since such purchase; and (1) in the case of an obligation purchased at a premium by deducting the product thus obtained fro m the purchase price, and (2) in the case of an obligation purchased at a discount by adding the product thus obtained to the purchase price. [End of Article VII] ARTICLE VIII REDEMPTION AND PURCHASE OF BONDS Section 8.01 Redemption Dates and Prices. The Series 2003 Bonds shall be subject to redemption at the times and in the manner provided in this Article VIII. All payments of the Redemption Price of the Series 2003 Bonds shall be made on the dates hereinafter required. Except as otherwise provided in this Section 8.01, if less than all the Series 2003 Bonds are to be redeemed pursuant to an Extraordinary Mandatory Redemption, the Trustee shall select the Series 2003 Bonds or portions of the Series 2003 Bonds to be redeemed pro rata between the Series 2003A Bonds and the Series 2003B Bonds based on the original principal amounts of each Series and within each Series, by lot. Partial redemptions of Series 2003 Bonds shall be made in such a manner that the remaining Series 2003 Bonds held by each Bondholder shall be in Authorized Denominations, except for the last remaining Series 2003 Bond of each series. (a) Optional Redemption. (i) Series 2003A Bonds. The Series 2003A Bonds may, at the option of the District be called for redemption prior to maturity as a whole, at any time, or in part on any Interest Payment Date, on or after May 1, 2013 (less than all Series 2003A Bonds to be selected by lot), at the Redemption Price (expressed as a percentage of principal amount) of 100% plus accrued interest from the most recent Interest Payment Date to the redemption date. (ii) Series 2003B Bonds. The Series 2003B Bonds are not subject to optional redemption prior to maturity at the option of the District. (b) Extraordinary Mandatory Redemption in Whole or in Part. The Series 2003 Bonds are subject to extraordinary mandatory redemption prior to maturity by the District in whole, on any date, or in part, on any Interest Payment Date, at an extraordinary mandatory redemption price equal to 100% of the principal amount of the Series 2003 Bonds to be redeemed, plus interest accrued to the redemption date, as follows: (i) Series 2003A Bonds are redeemable from Series 2003A Prepayment Principal deposited into the Series 2003A Prepayment Subaccount in the Series 2003A Redemption Account of the Bond Redemption Fund following the C-28

140 payment in whole or in part of Special Assessments on any portion of the District Lands in accordance with the provisions of Section 6.06 of this Indenture. (ii) Series 2003A Bonds are redeemable from moneys, if any, on deposit in the Series 2003A Accounts and Subaccounts in the Series 2003 Funds and Accounts (other than the Rebate Fund) when such moneys are sufficient to pay and redeem all Series 2003A Outstanding Bonds, and accrued interest thereon to the redemption date or dates in addition to all amounts (other than amounts to be paid pursuant to Subparagraph (vii) below) owed to Persons under this Indenture. (iii) Series 2003 Bonds are redeemable on or after the Completion Date of the Project, by application of moneys remaining in the Construction Fund not reserved by the District for the payment of any remaining part of the Cost of the Project, and by application of any moneys remaining in the Series 2003A Capitalized Interest Subaccount or the Series 2003B Capitalized Interest Subaccount representing Capitalized Interest in excess of the amount required to pay a portion of the interest on the Series 2003A Bonds through November 1, 2003 or the Series 2003B Bonds through November 1, 2003, as the case may be, all of which shall be transferred to the Series 2003A General Account or the Series 2003B General Account of the Redemption Fund pursuant to Section 5.04(c) of this Indenture, and applied by the District toward the redemption of the Series 2003A Bonds and/or the Series 2003B Bonds in accordance with the manner it has credited such excess moneys toward extinguishment of Series 2003A Special Assessments and/or Series 2003B Special Assessments, which manner the District Manager shall describe to the Trustee in writing. (iv) Series 2003 Bonds are redeemable from excess moneys transferred from the Series 2003A Revenue Subaccount and the Series 2003B Revenue Subaccount to the Series 2003A and Series 2003B General Accounts of the Series 2003 Bond Redemption Fund, respectively, in accordance with Section 6.06 of this Indenture. (v) Series 2003 Bonds are redeemable following condemnation or the sale of any portion of the Project to a governmental entity under threat of condemnation by such governmental entity and the payment of moneys which are not to be used to rebuild, replace or restore the taken portion of the Project to the Trustee by or on behalf of the District for deposit into the Series 2003A General Account or the Series 2003B General Account of the Series 2003 Bond Redemption Fund in order to effectuate such redemption and, which moneys shall be applied by the District to redeem Series 2003A Bonds or Series 2003B Bonds in accordance with the manner it has credited such moneys toward extinguishment of Series 2003A Special Assessments and/or Series 2003B Special Assessments which the District shall describe to the Trustee in writing. (vi) Series 2003 Bonds are redeemable following the damage or destruction of all or substantially all of the Project to such extent that, in the reasonable opinion of the District, the repair and restoration thereof would not be economical or would be impracticable, to the extent of amounts paid by the District to the Trustee for deposit to the Series 2003A General Account or the Series 2003B General Account of the Series 2003 Bond Redemption Fund which moneys shall be applied by the District to redeem Series 2003A Bonds or Series 2003B Bonds in accordance with the manner it has credited such moneys toward extinguishment of Series 2003A Special Assessments and/or Series 2003B Special Assessments; provided, however, that at least forty-five (45) days prior to such extraordinary mandatory redemption, the District shall cause to be delivered to the Trustee (x) notice setting forth the redemption date and (y) a certificate of the Consulting Engineer confirming that the repair and restoration of the Project would not be economical or would be impracticable. (vii) Series 2003B Bonds are redeemable from Series 2003B Prepayment Principal deposited into the Series 2003B Prepayment Subaccount in the Series 2003B Redemption Account of the Bond Redemption Fund following the payment in whole or in part of Special Assessments on any portion of the District Lands in accordance with the provisions of Section 6.06 of this Indenture. (viii) Series 2003B Bonds are redeemable from moneys, if any, on deposit in the Series 2003B Accounts and Subaccounts in the Series 2003 Funds and Accounts (other than the Rebate Fund) when such moneys are sufficient to pay and redeem all Series 2003B Outstanding Bonds, and accrued interest thereon to the redemption date or dates in addition to all amounts (other than amounts to be paid pursuant to Subparagraph (ii) above) owed to Persons under this Indenture. (c) Mandatory Bond Amortization Account Redemption. (i) The Series 2003A Bonds are subject to mandatory redemption in part by the District by lot prior to their scheduled maturity from moneys in the Series 2003A Bond Amortization Account in satisfaction of applicable Amortization Installments at the Redemption Price of 100% of the principal amount thereof, without premium, together with accrued interest to the date of redemption on May 1 of the years and in the principal amounts set forth below: C-29

141 Year (May 1) Principal Amount Year (May 1) Principal Amount 2004 $80, $210, , , , , , , , , , , , , , , , , , , , , , , , , , , , * 525,000 * Maturity. (ii) The Series 2003B Bonds are not subject to mandatory Bond Amortization Account redemption. (d) Re -amortization. The District will provide Trustee with a new bond amortization schedule subsequent to any extraordinary mandatory redemption pursuant to Section 8.01(b) above. Section 8.02 Notice of Redemption. When required to redeem Series 2003 Bonds under any provision of this Indenture or directed to redeem Series 2003 Bonds by the District, the Trustee shall give or cause to be given to Owners of the Series 2003 Bonds to be redeemed notice of the redemption, as follows: When required to redeem or purchase Bonds under any provision of the Indenture or directed to do so by the District, the Trustee shall cause notice of the redemption, either in whole or in part, to be mailed at least thirty (30) but not more than sixty (60) days prior to the redemption or purchase date to all Owners of Bonds to be redeemed or purchased as such Owners appear on the Bond Register on the fifth (5th) day prior to such mailing, at their registered addresses, but failure to mail any such notice or defect in the notice or in the mailing thereof shall not affect the validity of the redemption or purchase of the Bonds for which notice was duly mailed in accordance with the Indenture. Such notice shall be given in the name of the District, shall be dated, shall set forth the Bonds Outstanding which shall be called for redemption or purchase and shall include, without limitation, the following additional information: (a) (b) (c) the redemption date or purchase date; the Redemption Price or purchase price; CUSIP numbers, to the extent applicable, and any other distinctive numbers and letters; (d) if less than all Outstanding Bonds to be redeemed or purchased, the identification (and, in the case of partial redemption, the respective principal amounts) of the Bonds to be redeemed or purchased; (e) that on the redemption date or purchase date the Redemption Price or purchase price will become due and payable upon surrender of each such Bond or portion thereof called for redemption or purchase, and that interest thereon shall cease to accrue from and after said date; and C-30

142 (f) the place where such Bonds are to be surrendered for payment of the Redemption Price or purchase price, which place of payment shall be a corporate trust office of the Trustee. If at the time of mailing of notice of an optional redemption or purchase, the District shall not have deposited with the Trustee or Paying Agent moneys sufficient to redeem or purchase all the Bonds called for redemption or purchase, such notice shall state that it is subject to the deposit of the redemption or purchase moneys with the Trustee or Paying Agent, as the case may be, not later than the opening of business on the redemption or purchase date, and such notice shall be of no effect unless such moneys are so deposited. If the amount of funds deposited with the Trustee for such redemption, or otherwise available, is insufficient to pay the Redemption Price and accrued interest on the Bonds so called for redemption on the redemption date, the Trustee shall redeem and pay on such date an amount of such Bonds for which such funds are sufficient, selecting the Bonds to be redeemed by lot from among all such Bonds called for redemption on such date, in the same manner as the initial selection of Bonds to be redeemed, and from and after such redemption date, interest on the Bonds or portions thereof so paid shall cease to accrue and become payable; but interest on any Bonds or portions thereof not so paid shall continue to accrue until paid at the same rate as it would have had such Bonds not been called for redemption. Under the Indenture, the District is authorized to provide conditional notices of redemption. [End Of Article VIII] ARTICLE IX [RESERVED] ARTICLE X [RESERVED] ARTICLE XI COVENANTS OF THE DISTRICT Section Power to Issue Bonds and Create Lien. The District is duly authorized under the Act and all applicable laws of the State to issue the Bonds, to adopt and execute the Indenture and to pledge the Pledged Revenues for the benefit of the Bonds. The Pledged Revenues are not and shall not be subject to any other lien senior to or on a parity with the lien created in favor of the Bonds. The Bonds and the provisions of the Indenture are and will be valid and legally enforceable obligations of the District in accordance with their respective terms, subject to the provisions of applicable laws regarding bankruptcy, insolvency, and the exercise of creditor s rights and subject to the exercise of judicial discretion. The District shall, at all times, to the extent permitted by law, defend, preserve and protect the pledge created by the Indenture and all the rights of the Owners under the Indenture against all claims and demands of all other Persons whomsoever. Section Payment of Principal and Interest on Bonds. The payment of the principal or Redemption Price of and interest on all of the Bonds issued hereunder shall be secured forthwith equally and ratably by a lien on and pledge of the Pledged Revenues prior to any and all liens and encumbrances thereon. Subject to the preceding sentence, Pledged Revenues in an amount sufficient to pay the principal or Redemption Price of and interest on the Bonds authorized by this Indenture are hereby irrevocably pledged to the payment of the principal or Redemption Price of and interest on the Bonds authorized under this Indenture, and the payment of all other amounts owed hereunder, as the same become due and payable. The District shall promptly pay the interest on and the principal or Redemption Price of every Bond issued hereunder according to the terms thereof, but shall be required to make such payment only out of the Pledged Revenues. C-31

143 The Bonds authorized under this Indenture and the obligation evidenced hereby shall not constitute a lien upon any property of the District, including, without limitation, the 2003 Project or any portion thereof in respect of which any such Bonds are being issued, or any part thereof, but shall constitute a lien only on the Pledged Revenues as set forth in this Indenture. Nothing in the Bonds authorized under this Indenture or in this Indenture shall be construed as obligating the District to pay the Bonds or the redemption price thereof or the interest thereon except from the Pledged Revenues, or as pledging the faith and credit of the District, the County or the State or any political subdivision thereof, or as obligating the District, the City or the State or any of its political subdivisions, directly or indirectly or contingently, to levy or to pledge any form of taxation whatever therefor. The District shall require any Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee that such Paying Agent will (i) hold all sums held by it for the payment of the principal or Redemption Price of and interest on the Bonds, as applicable, in trust for the benefit of the Owners of such Bonds until such sums shall be paid to such Owners or otherwise disposed of as provided in the Indenture; and (ii) at any time during the continuance of an Event of Default under this Indenture, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. Section Special Assessments; Re-Assessments. (a) The District shall levy the Series 2003A Special Assessments, and shall cause the Property Appraiser to certify the Series 2003A Special Assessments on the tax roll to the Tax Collector for collection and enforcement by the Tax Collector pursuant to Chapter 170 or Chapter 197, Florida Statutes, or any successor statutes, as applicable, and Section hereof, to the extent and in an amount to produce Special Assessment Revenues sufficient to pay Debt Service Requirements on all Outstanding Series 2003A Bonds. The District shall use the uniform method for the levy, collection and enforcement of special assessments afforded by Sections , and , Florida Statutes, or any successor statutes thereto to bill and collect the Series 2003A Special Assessments. The District shall use its best efforts to enter into one or more written agreements with the Property Appraiser and the Tax Collector, either individually or jointly (together, the Property Appraiser and Tax Collector Agreement ) in order to effectuate the provisions of this Section. The District shall use its best efforts to ensure that any such Property Appraiser and Tax Collector Agreement remains in effect for at least as long as the final maturity of the Series 2003A Bonds. (b) The District shall levy and collect the Series 2003B Special Assessments in accordance with the provisions of the Act and Chapter 170, Florida Statutes. The District shall contract with the District Manager (i) to prepare and maintain an assessment roll with respect to the Series 2003B Special Assessments, and (ii) to bill, collect and pay or cause to be paid to the Trustee the Series 2003B Special Assessments. (c) If any Special Assessment shall be either in whole or in part annulled, vacated or set aside by the judgment of any court, or if the District shall be satisfied that any such Special Assessment is so irregular or defective that the same cannot be enforced or collected, or if the District shall have omitted to make such Special Assessment when it might have done so, the District shall either (i) take all necessary steps to cause a new Special Assessment to be made for the whole or any part of said improvement or against any property benefited by said improvement, or (ii) in its sole discretion, make up the amount of such Special Assessment from legally available moneys, which moneys shall be deposited into the Revenue Fund. In case such second Special Assessment shall be annulled, the District shall obtain and make other Special Assessments until a valid Special Assessment shall be made. Section Application of Special Assessments. The District covenants to cause any Special Assessments collected or otherwise received by it to be deposited with the Trustee within five (5) Business Days after receipt thereof for deposit into the Revenue Fund (provided that amounts received as prepayments of Special Assessments are to be identified as such and deposited directly into the Bond Redemption Fund). Section Delinquent Special Assessments. If the owner of any lot or parcel of land assessed for the 2003 Project shall be delinquent in the payment of any Special Assessment, then such Special Assessment shall be enforced pursuant to the provisions of Chapter 170 or Chapter 197, Florida Statutes, or any successor statute thereto, as applicable, by means including, but not limited to, the sale of tax certificates and tax deed as regards such delinquent Special Assessment and the foreclosure of the lien of such delinquent Special Assessment. In the event the provisions of Chapter 197, Florida Statutes, and any provisions of the Act with respect to such sale are inapplicable by operation of law, then upon the delinquency of any Special Assessment the District shall, to the extent permitted by law, utilize any other method of enforcement as provided in Section hereof, including, without limitation, declaring the entire unpaid balance of such Special Assessment to be in C-32

144 default and, at its own expense, cause such delinquent property to be foreclosed, pursuant to the provisions of Section , Florida Statutes, in the same manner and by the same method now or hereafter provided by law for the foreclosure of mortgages on real estate, or pursuant to the provisions of Chapter 173, Florida Statutes, and Sections and , Florida Statutes, or otherwise as provided by law. Section Purchase of Land by District. If (a) the Special Assessments are delinquent, and (b) the uniform method of levy and collection is not being used by the District, and (c) any property shall be offered for sale for the nonpayment of any Special Assessment, and no person or persons shall purchase the same for an amount at least equal to the full amount due on the Special Assessment (principal, interest, penalties and costs, plus attorneys fees, if any), then the property may then be purchased by the District for an amount equal to the balance due on the Special Assessment (principal, interest, penalties and costs, plus attorneys fees, if any), and the District shall thereupon receive in its corporate name the title to the property for the benefit of the Registered Owners. The District, either through its own actions or actions caused to be done through the Trustee, shall have the power and shall use its best efforts to lease or sell such property and deposit all of the net proceeds of any such lease or sale into the Revenue Fund. Not less than ten (10) days prior to the filing of any foreclosure action or any sale of tax deed as herein provided, the District shall cause written notice thereof to be mailed to the Registered Owners. Not less than thirty (30) days prior to the proposed sale of any lot or tract of land acquired by foreclosure by the District, it shall give written notice thereof to such Registered Owners. The District, either through its own actions or actions caused to be done through the Trustee, agrees that it shall be required to take the measures provided by law for sale of the property acquired by it as trustee for the Registered Owners within thirty (30) days after the receipt of the request therefor signed by the Registered Owners of twenty-five percent (25%) of the aggregate principal amount of all Outstanding Bonds payable from Special Assessments assessed on such property. Section Books and Records with Respect to Special Assessments. In addition to the books and records required to be kept by the District pursuant to the provisions of Section hereof, the District shall keep books and records for the collection of the Special Assessments on the District Lands, which such books, records and accounts shall be kept separate and apart from all other books, records and accounts of the District including any books, records and accounts of the District relating to special assessments or benefit special assessments levied on and collected from the District Lands that are subject to the Special Assessments in respect of projects other than the 2003 Project or bonds other than the Series 2003 Bonds. The District Manager or the District Manager s designee, at the end of each Fiscal Year, shall prepare a written report setting forth the collections received, the number and amount of delinquencies, the proceedings taken to enforce collections and cure delinquencies and an estimate of time for the conclusion of such legal proceedings. A copy of such information shall be filed with the Dissemination Agent as specified in the Continuing Disclosure Agreement and shall be mailed (i) to any Registered Owner who owns at least 51% of the Series 2003 Bonds Outstanding and (ii) upon written request, shall be mailed to any other Registered Owner of Series 2003 Bonds. Section Removal of Special Assessment Liens. (a) Upon completion of the 2003 Project (as provided in Section 5.04 hereof), the Board of Supervisors of the District shall adopt a resolution accepting the 2003 Project. At any time from the date of levy of Special Assessments on a parcel of District Lands through the date that is thirty (30) days after the 2003 Project has been completed and the Board has adopted a resolution accepting such Project, any owner of property subject to the Special Assessments may, at its option, if it has not waived such right in writing, require the District to release and extinguish the lien upon its property by virtue of the levy of the Special Assessments by paying to the District the entire amount of such Special Assessment on such property, without interest. (b) At any time subsequent to thirty (30) days after the 2003 Project has been completed and the Board of Supervisors of the District has adopted a resolution accepting such Project as provided in (a) above, any owner of property subject to the Special Assessments may, at its option, require the District to release and extinguish the lien upon its property by virtue of the levy of the Special Assessments by paying to the District the entire amount of the Special Assessment attributable to the property subject to the Special Assessment and owned by such owner, plus accrued interest to the next succeeding Interest Payment Date (or the second succeeding Interest Payment Date if such prepayment is made within forty-five (45) calendar days before an Interest Payment Date) on which Series 2003 Bonds may be redeemed. (c) Upon receipt of a prepayment as described in (a) or (b) above, the District shall notify the Trustee that such amounts are prepayments of Special Assessments and shall immediately pay the amount so received to the Trustee, and the District shall take such action as is necessary to record in the official records of the County an affidavit or affidavits, as the case may be, executed by an authorized officer of the District, to the effect that the Special Assessment has been paid and C-33

145 that such Special Assessment lien is thereby released and extinguished. Upon receipt of any such moneys from the District the Trustee shall immediately deposit the same into the Bond Redemption Fund to be applied to the redemption of Series 2003 Bonds in accordance with the provisions of this Indenture. Section User Fees and Maintenance Assessments. The District covenants that it will impose and collect user fees (hereinafter referred to as User Fees ) and/or levy and collect maintenance assessments (hereinafter referred to as Maintenance Assessments ) from users of the Recreation Facilities and continue to impose and collect User Fees and/or levy and collect Maintenance Assessments in such amounts as are sufficient to enable the District to pay the costs of operation and maintenance of the Improvements. The District shall establish a schedule of User Fees (which may provide for a differential in the User Fees charged to residents and non-residents of the District) and a schedule of Maintenance Assessments which shall produce sufficient moneys to maintain the Improvements in good repair and sound operating condition. The revenues received by the District through the imposition of User Fees and the levy of Maintenance Assessments shall not be part of the Pledged Revenues hereunder. Section Completion of the 2003 Project. The District shall forthwith proceed to complete the 2003 Project, all in accordance with plans and specifications which shall have been approved by the Consulting Engineer and in conformity with law and all requirements of all Regulatory Bodies having jurisdiction thereover, and shall complete the 2003 Project with all due diligence. The District shall, before entering into any contract or incurring any obligation which will become a charge against the Construction Fund, secure the approval of the Consulting Engineer of such contract or the incurring of such obligation and of the plans and specifications referred to in any such contract and shall require each person, firm or corporation with whom it may contract for labor or materials in connection with the construction of the 2003 Project or portion thereof, as applicable, before such person, firm or corporation commences said work (i) to execute a payment and performance bond with a surety authorized to do business in the State in the full amount of any contract exceeding One Hundred Thousand Dollars ($100,000), which payment and performance bond shall be in substantially the form set forth in Section , Florida Statutes and shall otherwise be in accordance with such Section; and (ii) to obtain and carry worker s compensation or employers liability insurance as may be required by law and, for any contract exceeding One Hundred Thousand Dollars ($100,000), public liability and property damage insurance (including provisions to indemnify and save the District harmless) and builders risk insurance. In the event of any default under any such contract, the proceeds of such payment and performance bond shall forthwith, upon receipt of such proceeds, be deposited to the credit of the Construction Fund and shall be applied toward the completion of the contract in connection with which such payment and performance bond shall have been furnished. Section Construction to be on District Lands. The District covenants that no part of the 2003 Project will be constructed on, over or under lands other than (i) lands good and marketable title to which is owned by or can be acquired by the District or other appropriate entity in fee simple, (ii) lands on, over or under which the District or other appropriate entity shall have acquired or can acquire perpetual easements for the purposes of the 2003 Project, or (iii) lands, including public streets and highways, the right to the use and occupancy of which for such purposes shall be vested in the District or other appropriate entity by law or by valid franchises, licenses, easements or rights of way or other legally effective permissions or approval. Section Operation, Use and Maintenance of Project. The District shall establish and enforce reasonable rules and regulations governing the use and the operation of the 2003 Project, such rules and regulations to be adopted in accordance with the Act, and the District shall operate, use and maintain the 2003 Project in accordance with (a) the Act, (b) all other applicable federal and State laws, rules and regulations, including the Code and (c) the Tax Compliance Certificate delivered in connection with the issuance of the Series 2003 Bonds; the District shall maintain and operate the 2003 Project in an efficient and economical manner, shall at all times maintain the same in good repair and in sound operating condition and shall make all necessary repairs, renewals and replacements thereto. The District shall use its best efforts to ensure that any portion of the 2003 Project not owned by the District is maintained in good repair and in sound operating condition and that all necessary repairs, renewals and replacements are made thereto. Section Observance of and Compliance with Valid Requirements. The District shall pay all municipal or governmental charges lawfully levied or assessed upon the 2003 Project or any part thereof or upon any revenues when the same shall become due, and the District shall duly observe and comply with all valid requirements of any municipal or governmental authority relative to the 2003 Project. The District shall not create or suffer to be created any lien or charge upon any Pledged Revenues, except the lien and charge of the Bonds, and from the moneys in the Construction Fund or other available funds, the District shall pay or cause to be discharged all lawful claims and demands for labor, materials, supplies or C-34

146 other objects which, if unpaid, might by law become a lien upon the 2003 Project or the Pledged Revenues; provided, however, that nothing in this Section contained shall require the District to pay or cause to be discharged, or make provision for, any such lien or charge so long as the validity thereof shall be contested in good faith. Section Payment of Operating or Maintenance Costs by State or Others. The District may permit the United States of America, the State, or any of their agencies, departments or political subdivisions to pay all or any part of the cost of construction or of maintaining, repairing and operating the 2003 Project out of funds other than Pledged Revenues. Section Public Liability and Property Damage Insurance; Maintenance of Insurance; Use of Insurance and Condemnation Proceeds. (a) Except as otherwise provided in subsection (d) of this Section, the District will carry or cause to be carried, in respect of the 2003 Project, comprehensive general liability insurance (covering bodily injury and property damage) issued by one or more insurance companies authorized and qualified to do business under the laws of the State, in such amounts as is customary for similar operations, or as is more specifically set forth hereinbelow. (b) During the period of construction of the 2003 Project or any portion thereof, the District will cause the appropriate liability and builders risk insurance, as set forth in Section hereof, to be maintained until the 2003 Project is completed and accepted by the District. At all times, the District shall maintain a practical insurance program, with reasonable terms, conditions, provisions and costs which the District Manager determines, in consultation with such insurance and other professionals as the District Manager deems appropriate, will afford adequate protection against loss caused by damage to or destruction of the 2003 Project owned by the District; provided that it is expressly recognized that said insurance program may provide, if deemed appropriate by the District Manager, that one or more component of the 2003 Project need not be insured. Limits for such coverage will be subject to the Consulting Engineer s recommendations which are to be provided in an annual report, as required by Section hereof, establishing value. The District shall also, at all times, maintain a practical comprehensive general liability insurance program with respect to the 2003 Project with such reasonable terms, conditions, provisions and costs as the District Manager determines, in consultation with such insurance and other professionals as the District Manager deems appropriate, will afford adequate protection against bodily injury and property damage. Such comprehensive general liability insurance coverages shall be maintained in such amounts as approved by the Consulting Engineer. All insurance policies of the District relating to the 2003 Project shall be carried with companies authorized to do business in the State, with a Best rating of no less than A as to management and Class V as to financial strength; provided, however, that if, in the opinion of the District Manager, adequate insurance protection under reasonable terms, conditions, provisions and cost cannot be purchased from an insurance company with the above-designated ratings, then the District Manager, on behalf of the District, may secure such insurance protection as the District determines to be in its best interests and otherwise consistent with this Indenture; provided further, however, that the District may act as a self-insurer in accordance with the requirements of subsection (d) hereof. All policies providing the insurance coverages required by this Section shall designate the District as the loss-payee and shall be made payable to the District. (c) All proceeds received from property damage or destruction insurance and all proceeds received from the condemnation of the 2003 Project or any part thereof are hereby pledged by the District as security for the Series 2003 Bonds. Upon the District s written instructions to the Trustee, such amounts shall be deposited by the Trustee into either (i) the Construction Fund or (ii) the Bond Redemption Fund. Amounts so deposited in the Construction Fund shall be used to remedy the loss, damage or taking for which such proceeds are received, either by repairing the damaged property or replacing the destroyed or taken property, to the greatest extent possible, as soon as practicable after the receipt of such proceeds; provided that the Consulting Engineer shall deliver to the Trustee a certificate confirming the extent to which the damaged or condemned property can be repaired or restored. Amounts so deposited into the Bond Redemption Fund shall be applied to the purchase or redemption of Bonds according to the provisions set forth in Article VIII hereof. (d) The District shall be entitled to provide all or a portion of the insurance coverage required by subsections (a) and (b) of this Section through Qualified Self Insurance, provided that the requirements hereinafter set forth in this subsection (d) are satisfied; and, provided further, that prior to undertaking any such Qualified Self Insurance, the District shall have obtained from the Owners of at least 51% of the Series 2003 Bonds Outstanding written consent to such Qualified Self Insurance. Qualified Self Insurance means insurance maintained through a program of self insurance or insurance maintained with a company or association in which the District has a material interest or of which the District has control, C-35

147 either singly or with others; provided, however, that no such insurance may be provided directly or indirectly through arrangements with the Developer. Prior to participation in any plan of Qualified Self Insurance not currently in effect, the District shall deliver to the Trustee (i) a copy of the proposed plan, and (ii) from the District Manager, an evaluation of the proposed plan which evaluation shall state, among other things, that (A) the proposed Qualified Self Insurance plan will provide the coverage required by subsections (a) and (b) of this Section, and (B) the proposed Qualified Self Insurance plan provides for the creation of actuarially sound reserves. Each plan of Qualified Self Insurance shall be in written form, shall provide that upon the termination of such plan reserves will be established or insurance acquired in amounts adequate to cover any potential retained liability in respect of the period of self insurance, and shall be reviewed annually by the District Manager or registered actuary who shall deliver to the District a report on the adequacy of the reserves established thereunder in light of claims made. If the District Manager or registered actuary determines that such reserves are inadequate in light of the claims made, he shall make recommendations as to the amount of reserves that should be established and maintained, and the District shall comply with such recommendations unless it can establish to the satisfaction of the Trustee that such recommendations are unreasonable in light of the nature of the claims or the history of recovery against the District for similar claims. A copy of each Qualified Self Insurance plan and of each annual report thereon shall be delivered to the Trustee. (e) Copies of all recommendations and approvals under this Section shall be provided to the Trustee. Notwithstanding anything to the contrary contained herein, to the extent that any of the information required by this Section is included in the Annual Budget adopted by the District, it shall not have to be separately stated in another report. Within the first six (6) months of each Fiscal Year the District Manager shall file with the Trustee a complete report of the status of the insurance coverages relating to the 2003 Project, such report to include, without being limited thereto, a schedule of all insurance policies required by the Indenture which are then in effect, stating with respect to each policy the name of the insurer, the amount, number and expiration date, and the hazards and the risks covered thereby. The Trustee shall have no duty to review such report, but shall hold such report solely as a repository for the Bondholders. Section Collection of Insurance Proceeds. Copies of all insurance policies referred to in Section of this Article shall be available at the offices of the District at all reasonable times to the inspection of the Owners of $100,000 or more in aggregate principal amount of Bonds and their agents and representatives duly authorized in writing. The District covenants that it will take such action as may be necessary to demand, collect and sue for any insurance money which may become due and payable under any policy of insurance required under the Indenture, whether such policy is payable to the District or to the Trustee. The Trustee is hereby authorized in its own name to demand, collect, sue and receive any insurance money which may become due and payable under any policies payable to it. Any appraisal or adjustment of any loss or damage under any policy of insurance required under the Indenture, whether such policy is payable to the District or to the Trustee, and any settlement or payment of indemnity under any such policy which may be agreed upon by the District and any insurer shall be evidenced by a certificate, signed by the District Manager approved by the Consulting Engineer, and filed with the Trustee. The Trustee shall in no way be liable or responsible for the collection of insurance moneys in case of any loss or damage. Section Use of Pledged Revenues for Authorized Purposes Only. None of the Pledged Revenues shall be used for any purpose other than as provided in this Indenture and no contract or contracts shall be entered into or any action taken by the Trustee which will be inconsistent with the provisions of this Indenture. Section Books, Records and Annual Reports. The District shall keep proper books of record and account in accordance with Generally Accepted Governmental Accounting Principles (separate from all other records and accounts) in which complete and correct entries shall be made of its transactions relating to the 2003 Project, and which, together with all other books and records of the District, including, without limitation, insurance policies, relating to the 2003 Project, shall at all times be subject during regular business hours to the inspection of the Trustee. Included in such books and records shall be copies of the current schedules of User Fees imposed by the District. C-36

148 The District shall annually, within the time period provided by Florida law and as specified in the Continuing Disclosure Agreement, file with the Dissemination Agent, any rating agency that shall have then in effect a rating on any of the Bonds, any Owner that shall have, in writing, requested a copy thereof, and otherwise as provided by law, a copy of an annual report for such year, prepared in accordance with Generally Accepted Governmental Accounting Principles, accompanied by an opinion thereon of a Certified Public Accountant. The District shall file with the Trustee annually within 180 days after the close of each Fiscal Year, and include in the immediately subsequent quarterly report, a certificate of a Responsible Officer setting forth (i) a description in reasonable detail of the insurance then in effect pursuant to the requirements of Section hereof and that the District has complied in all respects with such requirements, (ii) whether during such year any material part of the 2003 Project has been damaged or destroyed and, if so, the amount of insurance proceeds covering such loss or damage and specifying the District s reasonable and necessary replacement costs, and (iii) whether or not to the knowledge of the signed, the District is in default with respect to any of the covenants, agreements or conditions on its part contained in this Indenture, and if so, the nature of such default. The report, statements and other documents required to be furnished by the District to the Trustee pursuant to any provisions of the Indenture and the Continuing Disclosure Agreement shall be available for the inspection of Owners at the office of the Dissemination Agent or the Trustee, as the case may be. The District covenants and agrees that it will comply with the provisions of Chapter et seq., Florida Statutes, as amended, the Uniform Special District Accountability Act of 1989, to the extent applicable to the District, including any reporting requirements contained therein which are applicable to the District. Section Observance of Accounting Standards. The District covenants that all the accounts and records of the District relating to the 2003 Project will be kept according to Generally Accepted Governmental Accounting Principles consistently applied and consistent with the provisions of the Indenture. Section Employment of Certified Public Accountant. The District shall employ or cause to be employed a Certified Public Accountant as required for the purposes of this Indenture. Section Establishment of Fiscal Year, Annual Budget. The District has established a Fiscal Year beginning October 1 of each year and ending September 30 of the following year. The reports and budget of the District shall relate to such Fiscal Year unless and until, in accordance with applicable law, a different Fiscal Year is established by the District. On or before the first day of each Fiscal Year the District shall adopt a final Annual Budget with respect to the 2003 Project for such Fiscal Year for the payment of anticipated operating and maintenance expenses and shall supply a copy of such budget promptly upon the adoption thereof to the Trustee and to any Owners who shall have so requested in writing and shall have filed their names and addresses with the Secretary of the Board for such purpose. If for any reason the District shall not have adopted the Annual Budget with respect to the 2003 Project on or before the first day of any Fiscal Year, the Annual Budget for the preceding Fiscal Year shall, until the adoption of the new Annual Budget, be deemed in force for the ensuing Fiscal Year. The District may at any time adopt an amended or supplemental Annual Budget for the remainder of the current Fiscal Year, and when such amended or supplemental Annual Budget is approved it shall be treated as the official Annual Budget under the Indenture. Copies of such amended or supplemental Annual Budget shall be filed with the Trustee and mailed to any Owners who shall have so requested in writing and shall have filed their names and addresses with the Secretary of the Board for such purpose. Section Employment of Consulting Engineer; Consulting Engineer s Report. (a) The District shall, for the purpose of performing and carrying out the duties imposed on the Consulting Engineer by the Indenture, employ one or more Independent engineers or engineering firms or corporations having a favorable repute for skill and experience in such work. (b) The District shall cause the Consulting Engineer to make an inspection of the portions of the 2003 Project owned by the District at least once in each Fiscal Year and, on or before the first day of July in each Fiscal Year, to submit to the Board a report setting forth (i) its findings as to whether such portions of the 2003 Project owned by the District have been maintained in good repair, working order and condition, and (ii) its recommendations as to the proper maintenance, C-37

149 repair and operation of the 2003 Project during the ensuing Fiscal Year and an estimate of the amount of money neces sary for such purposes. Promptly after the receipt of such reports by the District, copies thereof shall be filed with the Trustee and mailed by the District to all Owners who shall have filed their names and addresses with the Secretary of the Board for such purpose. If the information required to be submitted pursuant to this subsection (b) is included in the Annual Budget adopted by the District and submitted to the Trustee, a separate report or report shall not be required hereunder. Section Audit Reports. The District covenants that, within 180 days after the close of each Fiscal Year, it will cause an audit to be made by a Certified Public Accountant covering all receipts and moneys then on deposit with or in the name of the Trustee or the District and any security held therefor, any investments thereof and all disbursements made pursuant to the provisions of Article V hereof. Copies of such audit reports shall be filed with the Trustee, the District Manager and the Secretary of the Board, and mailed by said Secretary to the Consulting Engineer and to all Owners who shall have filed their names and addresses with him for such purpose. If the material required to be in such audit also appears in the annual report of the District provided for in Section hereof, then the filing of a copy of such annual audit shall satisfy the requirement of this Section. Section Covenant Against Sale or Encumbrance; Exceptions. The District covenants that, (a) except for those improvements comprising the 2003 Project that are to be conveyed by the District to the City or another governmental entity and (b) except as in this Section otherwise permitted, it will not sell, lease or otherwise dispose of or encumber the 2003 Project or any part thereof. The District may, however, from time to time, sell any machinery, fixtures, apparatus, tools, instruments or other movable property acquired by it from the proceeds of Bonds or from Pledged Revenues, if the District Manager shall determine, with the approval of the Consulting Engineer, that such items are no longer needed or are no longer useful in connection with the construction, maintenance and operation of the 2003 Project, and the proceeds thereof shall be applied to the replacement of the properties so sold or disposed of or, prior to the Completion Date for the 2003 Project shall be deposited to the credit of the Construction Fund or, after the Completion Date for such 2003 Project, shall be deposited to the credit of the Revenue Fund. Upon any sale of property relating to the 2003 Project, the aggregate of which in any thirty (30) day period exceeds Fifty Thousand Dollars ($50,000) under the provisions of this Section, the District shall provide written notice to the Trustee of the property so sold and the amount and disposition of the proceeds thereof. The District may lease or grant easements, franchises or concessions for the use of any part of the 2003 Project not incompatible with the maintenance and operation thereof, if the Consulting Engineer shall approve such lease, easement, franchise or concession in writing, and the net proceeds of any such lease, easement, franchise or concession (after the making of provision for payment from said proceeds of all costs incurred in financing, constructing, operating, maintaining or repairing such leases, easements, franchises or concessions) shall be deposited as received to the credit of the Revenue Fund. If there is a change in ownership of any portion of the Recreational Facilities constituting the 2003 Project, the District must give immediate written notice to the Owners of such change in ownership. It is hereby expressly understood and acknowledged that the District may transfer ownership of all or any portion of the 2003 Project to one or more governmental entities. Section Fidelity Bonds. Every officer, agent or employee of the District having custody or control of any of the Pledged Revenues or Bond proceeds shall be bonded by a responsible corporate surety in an amount not less than the greatest amount reasonably anticipated to be within the custody or control of such officer, agent or employee at one time. The premiums on such surety bonds shall be paid by the District as an expense of operation and maintenance of the applicable Project. If, in the opinion of the District Manager, a surety or fidelity bond containing reasonable terms, conditions, provisions and cost cannot be obtained as required hereunder, the District Manager, on behalf of the District, may obtain such surety or fidelity bond as the District determines to be in its best interests and otherwise consistent with the provisions of this Section For purposes of this Section, Bond proceeds that are held by the Trustee in one or more Fund or Account established under this Indenture shall not be deemed to be under the custody or control of an officer of the District. Section No Loss of Lien on Pledged Revenues. The District shall not do or omit to do, or suffer to be done or omit to be done, any matter or thing whatsoever whereby the lien of the Bonds on the Pledged Revenues, or any part thereof, or the priority thereof, would be lost or impaired; provided, however, that this Section shall not prohibit (i) the Trustee from transferring moneys to the Rebate Fund held by the Trustee under Section hereof, or (ii) the District from issuing bonds, C-38

150 as provided in Sections 2.10 and hereof, secured by and payable from special assessments and/or benefit special assessments having a lien on the District Lands on a parity and of equal dignity with the lien of the Special Assessments. Section Compliance with Other Contracts and Agreements. The District shall comply with and abide by all of the terms and conditions of any and all contracts and agreements which the District enters into in connection with the 2003 Project and the issuance of the Series 2003 Bonds including particularly the Tax Compliance Certificate. Section Issuance of Additional Obligations. The District shall not incur any obligations (other than Bonds issued under the provisions of Articles II and III hereof) nor voluntarily create or cause to be created any debt, lien, pledge, assignment, encumbrance or other charge, payable from the Pledged Revenues. Except as expressly provided otherwise in Section 2.10(b) hereof, the District may, in its sole discretion, incur other obligations secured by or payable from sources other than the Pledged Revenues, or special assessments or benefit special assessments as described in Section 2.10(b) hereof, without any limitation on the aggregate principal amount thereof. Section Extension of Time for Payment of Interest Prohibited. The District shall not directly or indirectly extend or assent to an extension of time for payment of any claim for interest on any of the Bonds and shall not directly or indirectly be a party to or approve any arrangement therefor by purchasing or funding or in any manner keeping alive any such claim for interest; no claim for interest which in any way, at or after maturity, shall have been transferred or pledged apart from the Bonds to which it relates or which shall in any manner have been kept alive after maturity by extension or by purchase thereof by or on behalf of the District, shall be entitled, in case of a default hereunder, to any benefit or security under the Indenture except after the prior payment in full of the principal of all Bonds and claims for interest appertaining thereto not so transferred, pledged, kept alive or extended. Section Further Assurances. The District shall not enter into any contract or take any action by which the rights of the Trustee or the Owners may be impaired and shall, from time to time, execute and deliver such further instruments and take such further action as may be required to carry out the purposes of this Indenture. Section Investments to Comply with Internal Revenue Code. The District covenants to the Owners that it will not make or direct the making of any investment or other use of the proceeds of the Series 2003 Bonds issued hereunder which would cause such Bonds to be private activity bonds as that term is defined in Section 141 of the Code, or arbitrage bonds as that term is defined in Section 148 (or any successor provision thereto) of the Code, and that it will comply with all the requirements of such Code sections and related regulations throughout the term of such Bonds. The District also covenants that it will not take or fail to take any action that would adversely affect the exclusion from gross income of interest on the Series 2003 Bonds. The District hereby further covenants and agrees to comply with the procedures and covenants contained in any arbitrage rebate agreement executed in connection with the issuance of the Series 2003 Bonds for so long as compliance is necessary in order to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. The District shall not direct the making of any investment inconsistent with the foregoing covenants. Section Compliance with Section 148(f) of the Code; Rebate Fund. For purposes of this Section 11.32, the following terms shall have the following meanings: Bond Year means the period from each May 2 to the succeeding May 1, inclusive. Gross Proceeds means Proceeds and Replacement Proceeds of an issue. Investment Proceeds means, with respect to the Series 2003 Bonds, any amounts actually or constructively received from investing Proceeds of that issue in Investment Property. Investment Property means investment property within the meaning of Sections 148(b)(2) and 148(b)(3) of the Code, including any security (within the meaning of Section 165(g)(2)(A) or (B) of the Code), any obligation, any annuity contract and any other investment-type property (including certain residential rental property for family units as described in Section 148(b)(2)(E) of the Code). Investment Property includes a Tax-Exempt Obligation that is a specified private activity bond as defined in Section 57(a)(5)(C) of the Code but does not include other Tax-Exempt Obligations. Issuance Date means the date of physical delivery of, and payment of the purchase price for, the Series 2003 Bonds. C-39

151 Nonpurpose Investments means with respect to the Series 2003 Bonds any Investment Property that is acquired with Gross Proceeds of such Bonds. Nonpurpose Investments does not include any investment that is not regarded as investment property or a nonpurpose investment for the particular purposes of Section 148 of the Code (such as certain investments in U.S. Treasury obligations in the State and Local Government Series and certain temporary investments), but does include any other investment that is a nonpurpose investment within the applicable meaning of Section 148 of the Code. Proceeds means, with respect to the Series 2003 Bonds, all Sale Proceeds, Investment Proceeds and Transferred Proceeds of the Series 2003 Bonds but do not include Replacement Proceeds of the Series 2003 Bonds. Qualified Guarantee means any guarantee of an obligation that constitutes a qualified guarantee within the meaning of Treasury Regulations 1.148?4(f). Rebate Amount means, with respect to the Series 2003 Bonds, as of each computation date, an amount determined in accordance with Section 148(f) of the Code equal to the sum of (1) plus (2) where: (1) is the excess of (a) the aggregate amount earned from the Issuance Date on all Nonpurpose Investments in which Gross Proceeds of the Series 2003 Bonds are invested (other than investments attributable to an excess described in this clause (i)), taking into account any gain or loss on the disposition of Nonpurpose Investments, over (b) the amount that would have been earned if the amount of the Gross Proceeds of the Series 2003 Bonds invested in such Nonpurpose Investments (other than investments attributable to an excess described in this clause (i)) had been invested at a rate equal to the Yield on the Series 2003 Bonds; and (2) is any income attributable to the excess described in clause (i), taking into account any gain or loss on the disposition of investments. The District Manager shall cause a determination of the sum of (1) plus (2) in accordance with Section 148(f) of the Code to be made annually within forty (40) days of the end of each Bond Year and shall advise the Trustee in writing within ten (10) days of the receipt of such determination of the amount to be deposited into the Rebate Fund pursuant to Section 6.03 hereof. Unless otherwise provided in the corresponding Supplemental Indenture, the Rebate Amount shall not include, with respect to the Series 2003 Bonds, any amount earned on amounts in the Debt Service Fund. Replacement Proceeds means amounts, with respect to the Series 2003 Bonds, (including any investment income but excluding any Proceeds of the Bonds) replaced by Proceeds of the Bonds under Section 148(a)(2) of the Code. Replacement Proceeds include amounts, other than Proceeds, held in a sinking fund, pledged fund or reserve or replacement fund for such Bonds. Yield has the meaning assigned to it for purposes of Section 148 of the Code, and means with respect to the Series 2003 Bonds, that discount rate (stated as an annual percentage) that, when used in computing the present worth of all applicable unconditionally payable payments of debt service and all payments for a Qualified Guarantee, applicable to the Bonds, if any, paid and to be paid with respect to an obligation, produces an amount equal to (a) the Issue Price with respect to the Bonds in the case of a Fixed Yield Issue or (b) the purchase price for yield purposes in the case of Investment Property, all subject to the applicable methods of computation provided for under Section 148 of the Code, including variations from the foregoing. The Yield on Investment Property in which Proceeds or Replacement Proceeds of the Series 2003 Bonds are invested is computed on a basis consistent with the computation of Yield on the Bonds, including the same compounding interval (of not more than one year selected by the District). The Trustee is hereby authorized and directed to establish a Rebate Fund into which the Trustee shall deposit amounts as provided herein. The Rebate Fund shall be held by the Trustee separate and apart from all other Funds and Accounts held under the Indenture and from all other moneys of the Trustee. Any provision hereof to the contrary notwithstanding, amounts credited to the Rebate Fund shall be free and clear of any lien hereunder. Within 40 days after the end of the fifth Bond Year after the date of initial issuance of the Series 2003 Bonds and every fifth Bond Year thereafter for the Series 2003 Bonds and within 40 days after the payment in full of all outstanding Bonds, the District shall calculate, or shall furnish information to and shall engage (at its expense) an independent firm C-40

152 designated by the District, to calculate, the Rebate Amount as of the end of that Bond Year or the date of such payment. The District shall notify the Trustee in writing of the amount and the Trustee shall notify the District in writing of the amount then on deposit in the Rebate Fund. If the amount then on deposit in the Rebate Fund is in excess of the Rebate Amount (computed by taking into account the future value of the amount or amounts, if any, previously paid to the United States pursuant to this Section 11.32), the Trustee shall forthwith transfer the excess amount to the Revenue Fund. If the amo unt then on deposit in the Rebate Fund is less than the Rebate Amount (computed by taking into account the future value of the amount or amounts, if any, previously paid to the United States pursuant to this Section 11.32), the District shall, within 10 days after the date of the aforesaid calculation, pay to the Trustee for deposit in the Rebate Fund an amount sufficient to cause the Rebate Fund to contain an amount equal to the Rebate Amount. The obligation of the District to make or cause to be made such computations and payments required by the Code shall remain in effect and be binding upon the District notwithstanding the release and discharge of this Indenture. Within 60 days after the end of the fifth Bond Year and every fifth Bond Year thereafter, the Trustee, acting at the direction of the District, shall pay to the United States in accordance with Section 148(f) of the Code from the moneys then on deposit in the Rebate Fund an amount equal to 90% (or such greater percentage not in excess of 100% as the District may direct the Trustee to pay) of the Rebate Amount earned from the date of the original delivery of the Bonds to the end of such fifth Bond Year (less the future value of the amount of Rebate Amount, if any, previously paid to the United States pursuant to this Section). Within 60 days after the payment in full of all outstanding Series 2003 Bonds, the Trustee, at the direction of the District, shall pay to the United States in accordance with Section 148(f) of the Code from the moneys then on deposit in the Rebate Fund an amount equal to 100% of the Rebate Amount earned from the date of the original delivery of the Bonds to the date of such payment (less the future value of the amount of Rebate Amount, if any, previously paid to the United States pursuant to this Section) and any moneys remaining in the Rebate Fund following such payment shall be transferred to the Revenue Fund. The Trustee shall keep and make available to the District such records concerning the investments of the Gross Proceeds of the Bonds held by the Trustee and the investments of earnings from those investments. The District shall obtain and keep such records of the computations made pursuant to this Section in accordance with and as are required under Section 148(f) of the Code. The Trustee shall be entitled to rely on the calculations made pursuant to this Section and shall not be responsible for any loss or damage resulting from any action taken or omitted to be taken in reliance upon those calculations, and shall have no duty to make such calculation, or any duty to pay the rebate analyst or any duty to pay any such amount except from funds provided by the District. Notwithstanding anything herein to the contrary, the District may calculate, or cause to have calculated, the amount of investment income to be rebated to the United States in accordance with Section 148(f) of the Code as to the Series 2003 Bonds under a different method and may make such rebate payments at different times; provided that the District and the Trustee shall have received an opinion of Bond Counsel that using such method of calculation and making payments at such times will not adversely affect the exclusion of interest on the Bonds from gross income for federal income tax purposes. Nothing in this subsection shall require payment into the Rebate Fund or payment to the United States of any greater amount or lesser amount than is required to be paid to the United States under Section 148(f) of the Code, including any applicable regulations, rulings, procedures or notices thereunder that may be relied upon for that purpose. Section Corporate Existence and Maintenance of Properties. For so long as any Bonds are Outstanding hereunder, unless otherwise provided by the Act, the District shall maintain its corporate existence as a local unit of special purpose government under the Act and shall provide for or otherwise require the 2003 Project and all parts thereof owned by the District to be (a) continuously operated, repaired, improved and maintained as shall be necessary to provide adequate service to the lands benefited thereby; and (b) in compliance with all valid and applicable laws, acts, rules, regulations, permits, orders, requirements and directions of any competent public authority. Section [Reserved.] [End Of Article XI] ARTICLE XII EVENTS OF DEFAULT AND REMEDIES Section Events of Default Defined. Each of the following shall be an Event of Default as to the Series 2003 Bonds under the Indenture: C-41

153 or (a) if payment of any installment of interest on any Bond is not made when it becomes due and payable; (b) if payment of the principal or Redemption Price of any Bond is not made when it becomes due and payable at maturity or upon call or presentation for redemption or as a result of purchase required in connection with a mandatory tender; or (c) if the District, for any reason, is rendered incapable of fulfilling its obligations under this Indenture or under the Act as to the Bonds; or (d) if the District proposes or makes an assignment for the benefit of creditors or enters into a composition agreement with all or a material part of its creditors, or a trustee, receiver, executor, conservator, liquidator, sequestrator or other judicial representative, similar or dissimilar, is appointed for the District or any of its assets or revenues, or there is commenced any proceeding in liquidation, bankruptcy, reorganization, arrangement of debts, debtor rehabilitation, creditor adjustment or insolvency, local, state or federal, by or against the District and if such is not vacated, dis missed or stayed on appeal within ninety (90) days; or (e) if the District defaults in the due and punctual performance of any other covenant in this Indenture as to the Bonds and such default continues for sixty (60) days after written notice requiring the same to be remedied shall have been given to the District by the Trustee, which may give such notice in its discretion and shall give such notice at the written request of the Owners of not less than 51% in aggregate principal amount of the Outstanding Bonds; provided, however, that if such performance requires work to be done, actions to be taken, or conditions to be remedied, which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such sixty (60) day period, no Event of Default shall be deemed to have occurred or exist if, and so long as the District shall commence such performance within such sixty (60) day period and shall diligently and continuously prosecute the same to completion; or (f) written notice shall have been received by the Trustee from the Owners of 51% or more of the Series 2003 Bonds that an event of default has occurred under the Continuing Disclosure Agreement and the District or the Developer, as applicable, fails to remedy such default within ninety (90) days after receipt of written notice thereof from the Trustee; provided, however, that if curing such default requires work to be done, actions to be taken, or conditions to be remedied which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such ninety (90) day period, no Event of Default shall be deemed to have occurred or exist if, and so long as, the District or Developer, as applicable, shall commence such performance within such ninety (90) day period and shall diligently and continuously prosecute the same to completion. Section No Acceleration. No Bonds issued under this Indenture shall be subject to acceleration. Section Legal Proceedings by Trustee. If any Event of Default with respect to the Series 2003 Bonds has occurred and is continuing, the Trustee, in its discretion may, and upon the written request of the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds and receipt of indemnity to its satisfaction shall, in its own name: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Owners of the Bonds, including, without limitation, the right to require the District to carry out any agreements with, or for the benefit of, the Owners and to perform its or their duties under the Act; (b) bring suit upon the Bonds; (c) by action or suit in equity require the District to account as if it were the trustee of an express trust for the Owners of the Bonds; (d) by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of the Bonds; and C-42

154 (e) by other proceeding in law or equity, exercise all rights and remedies provided for by any other document or instrument securing the Bonds. Notwithstanding anything els e herein to the contrary, the Trustee may at its absolute discretion refuse to comply with any direction given to it by a majority of the Owners of the Series 2003 Bonds with respect to which an Event of Default exists, if the Trustee believes such direction may (i) adversely affect the Owners of those other Bonds with respect to which no similar Event of Default exists, or (ii) potentially result in the Trustee taking action either not in the best interests of the Owners of the Bonds with respect to which no similar Event of Default exists or which may adversely affect the Trustee. In the event the Trustee refuses to act pursuant to the preceding sentence, and notwithstanding anything else herein to the contrary, it shall have no liability to any Owners and further if it elects, the Trustee may resign as Trustee for the Owners of the Bonds who have given the direction not followed by the Trustee, which resignation shall be effective immediately upon such resignation and it shall be the obligation of the Owners of such Bonds to appoint a successor trustee to pursue remedial actions on their behalf. It shall be the obligation of the successor trustee for such Owners to distribute such money to them pursuant to the terms of the Indenture. Section Discontinuance of Proceedings by Trustee. If any proceeding taken by the Trustee on account of any Event of Default is discontinued or is determined adversely to the Trustee, the District, the Trustee, the Paying Agent and the Owners shall be restored to their former positions and rights hereunder as though no such proceeding had been taken. Section Owners May Direct Proceedings. Subject to the last paragraph of Section hereof and Section hereof, the Owners of a majority in aggregate principal amount of the Outstanding Bonds exists shall have the right to direct the method and place of conducting all remedial proceedings by the Trustee under the Indenture, provided that such directions shall not be otherwise than in accordance with law or the provisions of the Indenture. Section Limitations on Actions by Owners. No Owner shall have any right to pursue any remedy hereunder unless (a) the Trustee shall have been given written notice of an Event of Default, (b) the Owners of at least a majority in aggregate principal amount of the Outstanding Bonds shall have requested the Trustee, in writing, to exercise the powers hereinabove granted or to pursue such remedy in its or their name or names, (c) the Trustee shall have been offered indemnity satisfactory to it against costs, expenses and liabilities, and (d) the Trustee shall have failed to comply with such request within a reasonable time. Section Trustee May Enforce Rights Without Possession of Bonds. All rights under the Indenture and the Bonds may be enforced by the Trustee without the possession of any of the Bonds or the production thereof at the trial or other proceedings relative thereto, and any proceeding instituted by the Trustee shall be brought in its name for the ratable benefit of the Owners of the Bonds. Section Remedies Not Exclusive. Except as limited under Section of this Indenture, no remedy contained in the Indenture is intended to be exclusive of any other remedy or remedies, and each remedy is in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Section Delays and Omissions not to Impair Rights. No delay or omission in respect of exercising any right or power accruing upon any Event of Default shall impair such right or power or be a waiver of such Event of Default, and every remedy given by this Article XII may be exercised from time to time and as often as may be deemed expedient. Section Application of Moneys in Event of Default. Any moneys received by the Trustee or the Paying Agent, as the case may be, in connection with any proceedings brought under this Article XII with respect to the Series 2003 Bonds shall be applied in the following priority: (a) to the payment of the costs of the Trustee and Paying Agent incurred in connection with actions taken under this Article XII with respect to the Bonds, including counsel fees and any disbursements of the Trustee and the Paying Agent. (b) unless the principal of all the Bonds shall have become due and payable: FIRST: to payment of all installments of interest then due on the Bonds in the order of maturity of such installments of interest, and, if the amount available shall not be sufficient to pay in full any particular installment, then to the C-43

155 payment ratably, according to the amounts due on such installment, to the persons entitled thereto, without any preference or priority of one installment of interest over any other installment; and SECOND: to payment to the persons entitled thereto of the unpaid principal or Redemption Price of any of the Bonds which shall have become due in the order of their due dates, with interest on such Bonds from the respective dates upon which they become due and, if the amount available shall not be sufficient to pay in full the principal or Redemption Price coming due on such Bonds on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto without any preference or priority of one such Bond over another or of any installment of interest over another. (c) If the principal of all Bonds shall have become due and payable, to the payment of principal or Redemption Price (as the case may be) and interest then owing on the Bonds and in case such moneys shall be insufficient to pay the same in full, then to the payment of principal or Redemption Price and interest ratably, without preference or priority of one Bond over another or of any installment of interest over any other installment of interest. Any surplus remaining after the payments described above shall be paid to the District or to the Person lawfully entitled to receive the same or as a court of competent jurisdiction may direct. Section Trustee s Right to Receiver; Compliance with Act. The Trustee shall be entitled as of right to the appointment of a receiver for the benefit of the Series 2003 Bonds and the Trustee, the Owners and any receiver so appointed shall have such rights and powers and be subject to such limitations and restrictions as are contained in the Act and other applicable law of the State. Section Trustee and Owners Entitled to all Remedies Under Act. It is the purpose of this Article to provide such remedies to the Trustee and Owners as may be lawfully granted under the provisions of the Act and other applicable laws of the State; if any remedy herein granted shall be held unlawful, the Trustee and the Owners shall nevertheless be entitled to every other remedy provided by the Act and other applicable laws of the State. It is further intended that, insofar as lawfully possible, the provisions of this Article XII shall apply to and be binding upon any receiver appointed in accordance with Section hereof. [End Of Article XII] ARTICLE XIII THE TRUSTEE; THE PAYING AGENT AND REGISTRAR Section Acceptance of Trust. The Trustee accepts and agrees to execute the trusts hereby created, but only upon the additional terms set forth in this Article XIII, to all of which the parties hereto and the Owners agree. The Trustee shall act as Trustee for the Series 2003 Bonds. The Trustee shall, within ninety (90) days after the close of each Fiscal Year so long as any Bonds are Outstanding, file with the District a summary with respect to each Fund and Account of the deposits thereto and disbursements therefrom during such Fiscal Year and the amounts held therein at the end of such Fiscal Year, or at the option of the Trustee, such summary can be made on a monthly basis. Section No Responsibility for Recitals. The recitals, statements and representations in the Indenture or in the Bonds, save only the Trustee s Certificate, if any, upon the Bonds, have been made by the District and not by the Trustee and the Trustee shall be under no responsibility for the correctness thereof. Section Trustee May Act Through Agents; Answerable only for Willful Misconduct or Negligence. The Trustee may execute any powers hereunder and perform any duties required of it through attorneys, agents, officers or employees, and shall be entitled to advice of Counsel concerning all questions hereunder. The Trustee shall not be answerable for the exerc ise of any discretion or power under the Indenture nor for anything whatever in connection with the trust hereunder, except only its own negligence or willful misconduct or breach of its obligations hereunder. Section Compensation and Indemnity. The District shall pay the Trustee reasonable compensation for its services hereunder, and also all its reasonable expenses and disbursements, and shall indemnify the Trustee and hold the Trustee harmless against any liabilities which it may incur in the proper exercise and performance of its powers and duties C-44

156 hereunder, except with respect to its own willful misconduct, negligence or breach of its obligations hereunder. If the District defaults in respect of the foregoing obligations, the Trustee shall be entitled to a first lien upon all Pledged Revenues Funds, and shall be entitled to be paid from Pledged Revenues Funds before any other use of such funds. Section No Duty to Renew Insurance. The Trustee shall be under no duty to effect or to renew any insurance policy nor shall it incur any liability for the failure of the District to require or effect or renew insurance or to report or file claims of loss thereunder. Section Notice of Default; Right to Investigate. The Trustee shall give written notice by first-class mail to registered Owners of Series 2003 Bonds of all defaults with respect to such Bonds known to the Trustee, unless such defaults have been remedied (the term defaults for purposes of this Section and Section being defined to include the events specified as Events of Default in Article XII hereof, but not including any notice or periods of grace provided for therein); provided that, except in the case of a default in payment of principal or interest or Redemption Price, the Trustee may withhold such notice so long as it in good faith determines that such withholding is in the interest of the Owners. The Trustee shall not be deemed to have notice of any default other than a payment default under the Indenture unless notified in writing of such default by the Owners of at least 51% in aggregate principal amount of the Outstanding Bonds. The Trustee may, however, at any time require of the District full information as to the performance of any covenant hereunder, and if information satisfactory to it is not forthcoming, the Trustee may make or cause to be made, at the expense of the District, an investigation into the affairs of the District. Section Obligation to Act on Defaults. The Trustee shall be under no obligation to take any action in respect of any default or otherwise, except the obligation to give notice of default as required under this Indenture in the case of a default with respect to the payments of principal or interest or Redemption Price as the same shall become due and payable at redemption or upon maturity, unless (a) it is requested in writing to do so by the Owners of at least a majority in aggregate principal amount of the Outstanding Bonds which are or would be, upon the taking of such action, subject to remedial proceedings under Article XII of this Indenture and (b) it is also furnished with indemnity satisfactory to it. Section Reliance by Trustee. The Trustee may act on any requisition, resolution, notice, telegram, facsimile transmission, request, consent, waiver, certificate, statement, affidavit, voucher, bond, or other paper or document or telephone message (provided such message shall be preserved in writing by the Trustee) which it in good faith believes to be genuine and to have been passed, signed or given by the persons purporting to be authorized (which in the case of the District shall be a Responsible Officer) or to have been prepared and furnished pursuant to any of the provisions of the Indenture; the Trustee shall be under no duty to make any investigation as to any statement contained in any such instrument, but may accept the same as conclusive evidence of the accuracy of such statement. Section Trustee May Deal in Bonds. The Trustee may in good faith buy, sell, own, hold and deal in any of the Series 2003 Bonds. To the extent that the Trustee owns or holds any Series 2003 Bonds, the Trustee may join in any action which any Owners may be entitled to take with like effect as if the Trustee were not a party to the Indenture. The Trustee may also engage in or be interested in any financial or other transaction with the District; provided, however, that if the Trustee determines that any such relation is in conflict with its duties under the Indenture, it shall eliminate the conflict or resign as Trustee. Section Construction of Ambiguous Provisions. The Trustee may construe any ambiguous or inconsistent provisions of the Indenture, and except as otherwise provided in Article XV of this Indenture, any construction by the Trustee shall be binding upon the Owners. The Trustee shall give prompt notice to the District of any intention to make such construction. Section Resignation of Trustee. The Trustee may resign and be discharged of the trusts created by the Indenture by written resignation filed with the Secretary of the District not less than ninety (90) days before the date when such resignation is to take effect; provided, however, that (i) if any Outstanding Bonds are not registered Bonds, notice of such resignation is published at least once a week for three (3) consecutive calendar weeks in at least one Authorized Newspaper and at least once in The Bond Buyer, or its successor, if any, the first publication to appear not less than three (3) weeks prior to the date when the resignation is to take effect; and that (ii) if any Outstanding Bonds are registered Bonds, notice of such resignation shall be sent by first-class mail to each Owner as its name and address appears on the Register and to any Paying Agent, Registrar and Authenticating Agent, at least sixty (60) days before the resignation is to take effect. Such resignation shall take effect on the day specified in the Trustee s notice of resignation unless a successor Trustee is previously appointed, C-45

157 in which event the resignation shall take effect immediately on the appointment of such successor; provided, however, that notwithstanding the foregoing, such resignation shall not take effect until a successor Trustee has been appointed. If a successor Trustee has not been appointed within ninety (90) days after the Trustee has given its notice of resignation, the Trustee may petition any court of competent jurisdiction for the appointment of a temporary successor Trustee to serve as Trustee until a successor Trustee has been duly appointed. Notice of such resignation shall also be given to any rating agency that shall then have in effect a rating on any of the Bonds. Section Removal of Trustee. The Trustee may be removed at any time by either (a) the District (by a written notice of such removal delivered to the Trustee), with or without cause, if no default exists under the Indenture or (b) an instrument or concurrent instruments in writing, executed by the Owners of at least fifty one percent (51%) in aggregate principal amount of the Bonds then Outstanding and filed with the District. A photographic copy of any instrument or instruments filed with the District under the provisions of this paragraph, duly certified by a Responsible Officer, shall be delivered promptly by the District to the Trustee and to any Paying Agent, Registrar and Authenticating Agent. The Trustee s rights under Section hereof shall survive any resignation by or removal of the Trustee hereunder. The Trustee may also be removed at any time for any breach of trust or for acting or proceeding in violation of, or for failing to act or proceed in accordance with, any provision of the Indenture with respect to the duties and obligations of the Trustee by any court of competent jurisdiction upon the application of the District or the Owners of not less than 25% in aggregate principal amount of the Bonds then Outstanding. Section Appointment of Successor Trustee. If the Trustee or any successor Trustee resigns or is removed or dissolved, or if its property or business is taken under the control of any state or federal court or administrative body, a vacancy shall forthwith exist in the office of the Trustee, and the District shall appoint a successor and (i) if any Outstanding Bonds are not registered bonds, shall publish notice of such appointment in an Authorized Newspaper, if any, and (ii) if any Outstanding Bonds are registered Bonds, shall mail notice of such appointment by first-class mail to each Owner as its name and address appear on the Register, and to the Paying Agent, Registrar, Authenticating Agent and any rating agency that shall then have in effect a rating on any of the Bonds. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Indenture prior to the date specified in the notice of resignation or removal as the date when such resignation or removal was to take effect, the Owners of a majority in aggregate principal amount of all Bonds then Outstanding may appoint a successor Trustee. Section Qualification of Successor. A successor Trustee shall be a national bank with trust powers or a bank or trust company with trust powers, having a combined net capital and surplus of at least $50,000,000. Section Instruments of Succession. Any successor Trustee shall execute, acknowledge and deliver to the District an instrument accepting such appointment hereunder and thereupon, such successor Trustee, without any further act, deed, or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of its predecessor in trust hereunder, with like effect as if originally named Trustee herein. The Trustee ceasing to act hereunder shall, after payment of all amounts due to it, pay over to the successor Trustee all moneys held by it hereunder and, upon request of the successor Trustee, the Trustee ceas ing to act and the District shall execute and deliver an instrument or instruments prepared by the District transferring to the successor Trustee all the estates, properties, rights, powers and trusts hereunder of the predecessor Trustee, except that the Trustee ceasing to act shall not be required to assign any right to payment it has under Section hereof. Section Merger of Trustee. Any corporation into which any Trustee hereunder may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which any Trustee hereunder shall be a party, shall be the successor Trustee under the Indenture, without the execution or filing of any paper or any further act on the part of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that any such successor corporation continuing to act as Trustee hereunder shall meet the requirements of Section hereof, and if such corporation does not meet the aforesaid requirements, a successor Trustee shall be appointed pursuant to this Article XIII. Section Extension of Rights and Duties of Trustee to Paying Agent and Registrar. The provisions of Sections 13.02, 13.03, 13.04, 13.08, and hereof are hereby made applicable to the Paying Agent and the Registrar, as appropriate, and any Person serving as Paying Agent and/or Registrar, hereby enters into and agrees to comply with the covenants and agreements of this Indenture applicable to the Paying Agent and Registrar, respectively. It is hereby expressly understood that the District may appoint one or more Persons as Paying Agent or Paying Agents for one or more Series of Bonds. C-46

158 Section Resignation of Paying Agent or Registrar. The Paying Agent or Registrar may resign and be discharged of the duties created by the Indenture by executing an instrument in writing resigning such duties and specifying the date when such resignation shall take effect, and filing the same with the District, the Trustee, and any rating agency that shall then have in effect a rating on any of the Bonds, not less than forty-five (45) days before the date specified in such instrument when such resignation shall take effect, and by giving written notice of such resignation not less than three (3) weeks prior to such resignation date to the Owners, mailed to their addresses as such appear in the Register. Such resignation shall take effect on the date specified in such instrument and notice, but only if a successor Paying Agent or Registrar shall have been appointed as hereinafter provided, in which event such resignation shall take effect immediately upon the appointment of such successor Paying Agent or Registrar. If the successor Paying Agent or Registrar shall not have been appointed within a period of ninety (90) days following the giving of notice, then the Paying Agent or Registrar shall be authorized to petition any court of competent jurisdiction to appoint a successor Paying Agent or Registrar as provided in Section hereof. Section Removal of Paying Agent or Registrar. The Paying Agent or Registrar may be removed at any time prior to any Event of Default by the District by filing with the Paying Agent or Registrar to be removed, and with the Trustee, an instrument or instruments in writing executed by the District appointing a successor, or an instrument or instruments in writing designating, and accompanied by an instrument or appointment by the District of, such successor. Such removal shall be effective thirty (30) days (or such longer period as may be set forth in such instrument) after delivery of the instrument; provided, however, that no such removal shall be effective until the successor Paying Agent or Registrar appointed hereunder shall execute, acknowledge and deliver to the District an instrument accepting such appointment hereunder. Section Appointment of Successor Paying Agent or Registrar. In case at any time the Paying Agent or Registrar shall be removed, or be dissolved, or if its property or affairs shall be taken under the control of any state or federal court or administrative body because of insolvency or bankruptcy, or for any other reason, then a vacancy shall forthwith and ipso facto exist in the office of the Paying Agent or Registrar, as the case may be, and a successor shall be appointed by the Dis trict; and in case at any time the Paying Agent or Registrar shall resign, then a successor shall be appointed by the District. After any such appointment, notice of such appointment shall be given by the District to the predecessor Paying Agent or Registrar, the successor Paying Agent or Registrar, the Trustee, any rating agency that shall then have in effect a rating on any of the Bonds, and all Owners. Any new Paying Agent or Registrar so appointed shall immediately, and without further act, supersede the predecessor Paying Agent or Registrar. Section Qualifications of Successor Paying Agent or Registrar. Every successor Paying Agent or Registrar (a) shall be a commercial bank or trust company (i) duly organized under the laws of the United States or any state or territory thereof, (i) authorized by law to perform all the duties imposed upon it by the Indenture and (iii) capable of meeting its obligations hereunder, and (b) shall have a combined net capital and surplus of at least $50,000,000. Section Judicial Appointment of Successor Paying Agent or Registrar. In case at any time the Paying Agent or Registrar shall resign and no appointment of a successor Paying Agent or Registrar shall be made pursuant to the foregoing provisions of this Indenture prior to the date specified in the notice of resignation as the date when such resignation is to take effect, the retiring Paying Agent or Registrar may forthwith apply to a court of competent jurisdiction for the appointment of a successor Paying Agent or Registrar. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Paying Agent or Registrar. Notice of such appointment shall be given by the Successor Registrar or Paying Agent to the District, the Trustee, any rating agency that shall then have in effect a rating on any of the Bonds, and all Owners. In the absence of such an appointment, the Trustee shall become the Registrar or Paying Agent, or and shall so notify the District, any rating agency that shall have issued a rating on the Bonds, and all Owners. Section Acceptance of Duties by Successor Paying Agent or Registrar. Any successor Paying Agent or Registrar appointed hereunder shall execute, acknowledge and deliver to the District an instrument accepting such appointment hereunder, and thereupon such successor Paying Agent or Registrar, without any further act, deed or conveyance, shall become duly vested with all the estates, property, rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named Paying Agent or Registrar herein. Upon request of such Paying Agent or Registrar, such predecessor Paying Agent or Registrar and the District shall execute and deliver an instrument transferring to such successor Paying Agent or Registrar all the estates, property, rights and powers hereunder of such predecessor Paying Agent or Registrar and such predecessor Paying Agent or Registrar shall pay over and deliver to the successor Paying Agent or Registrar all moneys and other assets at the time held by it hereunder. C-47

159 Section Successor by Merger or Consolidation. Any corporation into which any Paying Agent or Registrar hereunder may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which any Paying Agent or Registrar hereunder shall be a party, shall be the successor Paying Agent or Registrar under the Indenture without the execution or filing of any paper or any further act on the part of the parties thereto, anything in the Indenture to the contrary notwithstanding. [End Of Article XIII] ARTICLE XIV ACTS OF OWNERS; EVIDENCE OF OWNERSHIP OF BONDS Section Acts of Owners; Evidence of Ownership of Bonds. Any action to be taken by Owners may be evidenced by one or more concurrent written instruments of similar tenor signed or executed by such Owners in person or by an agent appointed in writing. The fact and date of the execution by any person of any such instrument may be provided by acknowledgment before a notary public or other officer empowered to take acknowledgments or by an affidavit of a witness to such execution. Any action by the Owner of any Bond shall bind all future Owners of the same Bond in respect of anything done or suffered by the District, Trustee, Paying Agent or Registrar in pursuance thereof. [End Of Article XIV] ARTICLE XV AMENDMENTS AND SUPPLEMENTS Section Amendments and Supplements without Owners Consent. This Indenture and any then existing indenture supplemental hereto may be amended or supplemented, from time to time, without the consent of the Owners, by a Supplemental Indenture authorized by a Certified Resolution of the District filed with the Trustee, for one or more of the following purposes: 3.01 or 3.03 hereof; (a) to set forth any or all of the matters in connection with the issuance of Bonds required by Sections the District; (b) to add additional covenants of the District or to surrender any right or power herein conferred upon (c) for any purpose not inconsistent with the terms of this Indenture or the Supplemental Indenture in question, as the case may be, or to cure any ambiguity or to cure, correct or supplement any defective provision (whether because of any inconsistency with any other provision hereof or otherwise) of this Indenture or the Supplemental Indenture in question, as the case may be, in such manner as shall not impair the security hereof or thereof or adversely affect the rights and remedies of the Owners; and (d) to provide for the execution of any and all contracts and other documents as may be required in order to effectuate the conveyance of all or any portion of the 2003 Project to the United States of America, the State or the City or any department, agency or branch thereof, or any other unit of government of the State or the City; provided, however, that the District shall have caused to be delivered to the Trustee an opinion of Bond Counsel stating that such conveyance shall not impair the security hereof or of the Supplemental Indenture relating to such portion of the 2003 Project or adversely affect the rights and remedies of the Owners or the exclusion from gross income for Federal income tax purposes of interest on the Bonds. Section Amendments with Owner Consent. This Indenture and any indenture supplemental hereto also may be amended from time to time as set forth below, except with respect to (a) the interest and principal payable upon any Bonds, (b) the dates of maturity or redemption provisions of any Bonds, (c) this Article XV and (d) the security provisions hereunder or under any indenture supplemental hereto, by a Supplemental Indenture approved by the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding affected by such amendments. Amendments with C-48

160 respect to items (a), (b), (c) and (d) of this Section shall be effected only with the consent of Owners of all Outstanding Bonds. Section Trustee Authorized to Join in Amendments and Supplements; Reliance on Counsel. The Trustee is authorized to join in the execution and delivery of any Supplemental Indenture or amendment permitted by this Article XV and in so doing is entitled to request and may rely on a written opinion of Counsel that such Supplemental Indenture or amendment is so permitted and has been duly authorized by the District and that all things necessary to make it a valid and binding agreement have been done. [End Of Article XV] ARTICLE XVI DEFEASANCE Section Defeasance. When interest on, and principal or Redemption Price (as the case may be) of, the Series 2003 Bonds or portion thereof to be defeased (the Defeased Bonds ) have been paid, or there shall have been deposited with the Trustee or such other escrow agent designated in a Certified Resolution of the District (the Escrow Agent ) moneys sufficient, or Defeasance Securities, the principal of and interest on which, when due, together with any moneys, remaining uninvested, will provide sufficient moneys to fully pay (i) such Defeased Bonds and (ii) any other sums payable hereunder by the District, the right, title and interest of the Trustee with respect to such Defeased Bonds shall thereupon cease, the lien of the Indenture on the Pledged Revenues and the Funds and Accounts established under this Indenture with respect to such Bonds or portion thereof to be defeased shall be defeased and discharged, and the Trustee, on demand of the District, shall release the Indenture as to all Defeased Bonds and shall execute such documents to evidence such release as may be reasonably required by the District. Section Deposit of Funds for Payment of Bonds. If the District deposits with the Escrow Agent moneys sufficient, or Defeasance Securities, the principal of and interest on which, when due, together with any moneys remaining uninvested, will provide sufficient moneys to pay the principal or Redemption Price of any Bonds becoming due, either at maturity or by redemption or otherwise, together with all interest accruing thereon to the date of maturity or such prior redemption, and reimburses or causes to be reimbursed or pays or causes to be paid the other amounts required to be reimbursed or paid under Section hereof, interest on such Bonds shall cease to accrue on such date of maturity or prior redemption and all liability of the District with respect to such Bonds shall likewise cease, except as hereinafter provided; provided, however, that (a) if any Bonds are to be redeemed prior to the maturity thereof, notice of the redemption thereof shall have been duly given in accordance with the provisions of Section 8.02 hereof or irrevocable provision satisfactory to the Trustee shall have been duly made for the giving of such notice, and (b) in the event that any Bonds are not by their terms subject to redemption within the next succeeding sixty (60) days following a deposit of moneys with the Escrow Agent, in accordance with this Section, the District shall have given the Escrow Agent, in form satisfactory to the Escrow Agent, irrevocable instructions to mail to the Owners of such Bonds at their addresses as they appear on the Register, and to publish once in any Authorized Newspaper, a notice stating that a deposit in accordance with this Section has been made with the Escrow Agent and that the Bonds to which such notice relates are deemed to have been paid in accordance with this Section and stating such maturity or redemption date upon which moneys are to be available for the payment of the principal or Redemption Price (as the case may be) of, and interest on, said Bonds. Thereafter such Bonds shall be deemed not to be Outstanding hereunder and the Owners of such Bonds shall be restricted exclusively to the funds so deposited for any claim of whatsoever nature with respect to such Bonds, and the Escrow Agent shall hold such funds in trust for such Owners. Money so deposited with the Escrow Agent which remains unclaimed three (3) years after the date payment thereof becomes due shall, upon request of the District, if the District is not at the time to the knowledge of the Escrow Agent in default with respect to any covenant in the Indenture or the Bonds contained, be paid to the District; and the Owners of the Bonds for which the deposit was made shall thereafter be limited to a claim against the District; provided, however, that the Escrow Agent, before making payment to the District, may, at the expense of the District, cause a notice to be published in an Authorized Newspaper, stating that the money remaining unclaimed will be returned to the District after a specified date. Section Survival of Tax Covenants. Notwithstanding anything to the contrary contained herein, the provisions and covenants of Sections and hereof shall survive payment or defeasance of the Bonds. [End Of Article XVI] C-49

161 ARTICLE XVII MISCELLANEOUS PROVISIONS Section Limitations on Recourse. No personal recourse shall be had for any claim based on the Indenture or the Bonds against any member of the Board or any officer, employee or agent, past, present or future, of the District or of any successor body as such, either directly or through the District or any such successor body, under any constitutional provision, statute or rule of law or by the enforcement of any assessment or penalty or otherwise. The Bonds are payable solely from the Pledged Revenues and any other moneys held by the Trustee under this Indenture for such purpose. There shall be no other recourse under the Bonds, this Indenture or otherwise, against the District or any other property now or hereafter owned by it. Section Payment Dates. In any case where an Interest Payment Date or the maturity date of the Bonds or the date fixed for the redemption of any Bonds shall be other than a Business Day, then payment of interest, principal or Redemption Price need not be made on such date but may be made on the next succeeding Business Day, with the same force and effect as if made on the due date, and no interest on such payment shall accrue for the period after such due date if payment is made on such next succeeding Business Day. Section No Rights Conferred on Others. Nothing herein contained shall confer any right upon any Person other than the parties hereto and the Owners of the Bonds. Section Illegal Provisions Disregarded. If any term of the Indenture or the Bonds or the application thereof for any reason or circumstances shall to any extent be held invalid or unenforceable, the remaining provisions or the application of such terms or provisions to Persons and situations other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision hereof and thereof shall not be valid and enforced to the fullest extent permitted by law. Section Substitute Notice. If for any reason it shall be impossible to make duplication of any notice required hereby in a newspaper or newspapers, then such publication in lieu thereof as shall be made with the approval of the Trustee shall constitute a sufficient publication of such notice. Section Notices. Any notice, demand, direction, request or other instrument authorized or required by the Indenture to be given to or filed with the District or the Trustee shall be deemed to have been sufficiently given or filed for all purposes of the Indenture if and when personally delivered and receipted for, or sent by registered United States mail, return receipt requested, addressed as follows: (a) As to the District - Portofino Isles Community Development District c/o Severn Trent Services, Inc NW 11th Manor Coral Springs, FL Phone: (954) Fax: (954) Attention: District Manager with a copy thereof to District s Counsel, as follows: Lewis, Longman & Walker, P.A Palm Beach Lakes Blvd., Suite 1000 West Palm Beach, FL Phone: (561) Fax: (561) Attention: William G. Capko C-50

162 (b) As to the Trustee - Wachovia Bank, National Association Wachovia Financial Center 200 South Biscayne Boulevard 14th Floor Miami, Florida Phone: (305) Fax: (305) Attention: Corporate Trust Department Any of the foregoing may, by notice sent to each of the others, designate a different or additional address to which notices under the Indenture are to be sent. All documents received by the Trustee under the provisions of the Indenture and not required to be redelivered shall be retained in its possession, subject at all reasonable times to the inspection of the District, any Owner and the agents and representatives thereof as evidence in writing. Notices to Registered Owners shall be sufficient if given by First Class U. S. Mail, postage prepaid. Section Controlling Law. The Indenture shall be governed by and construed in accordance with the laws of the State of Florida. Section Successors and Assigns. All the covenants, promises and agreements in the Indenture contained by or on behalf of the District or by or on behalf of the Trustee shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not. Section Headings for Convenience Only. The table of contents and descriptive headings in the Indenture are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. Section Counterparts. This Indenture may be executed in any number of counterparts, each of which when so executed and delivered shall be an original; but such counterparts shall together constitute but one and the same instrument. Section Appendices and Exhibits. Any and all appendices or exhibits referred to in and attached to this Indenture are hereby incorporated herein and made a part hereof for all purposes. [End Of Article XVII] [Signature Pages and Exhibits Intentionally Omitted] C-51

163 APPENDIX D Form of Opinion of Bond Counsel

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165 APPENDIX D FORM OF OPINIONS OF BOND COUNSEL Upon delivery of the Series 2003A Bonds and the Series 2003B Bonds, Squire, Sanders & Dempsey L.L.P., Bond Counsel, proposes to render its final opinions with respect to the Series 2003A Bonds and the Series 2003B Bonds, respectively, in substantially the following forms: SERIES 2003A BONDS Board of Supervisors Portofino Isles Community Development District Port St. Lucie, Florida Wachovia Bank, National Association as Trustee Miami, Florida We have acted as Bond Counsel in connection with the issuance by the Portofino Isles Community Development District (the District ), of its $7,135,000 Special Assessment Bonds, Series 2003A (the Series 2003A Bonds ), dated March 1, 2003, initially issued and delivered on this date pursuant to the Constitution and laws of the State of Florida, particularly Chapter 190, Florida Statutes, as amended (the Act ), and other applicable provisions of law, and Resolution , adopted on October 14, 2002, as supplemented by Resolution , adopted on February 4, 2003, and Resolution , adopted on March 4, 2003 (collectively, the Resolution ), and a Trust Indenture, dated as of March 1, 2003 (the Indenture ) between the District and Wachovia Bank, National Association, as trustee (the Trustee ). The Series 2003A Bonds are being issued to (i) finance a portion of the cost of the planning, design, construction and acquisition of Utility System improvements and Road System improvements and other improvements as more particularly described in the Portofino Isles Engineer s Report of Capital Improvements, dated February 2003 (collectively, the Project ) within the District, (ii) fund the Series 2003A Debt Service Reserve Account, (iii) pay capitalized interest on the Series 2003A Bonds and (iv) pay the costs of issuance of the Series 2003A Bonds, all as more particularly described in the Indenture. We have examined the transcript of the proceedings (the Transcript ) of the District relating to its issuance of the Series 2003A Bonds and such other documents, as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the District furnished to us, without undertaking to verify such representations by independent investigation. As to certain matters of law regarding the creation and establishment of the District, the authorization and levy of the Series 2003A Special Assessments, and the proceedings relative thereto and to the authorization of the Series 2003A Bonds, we have relied upon the opinion of District Counsel. The documents in the Transcript include a certified copy of the Resolution and the Indenture. We have also examined the Series 2003A Bonds being delivered on original issuance. D-1

166 The Series 2003A Bonds and the interest thereon are special, limited obligations of the District, payable from and secured equally and ratably by a lien upon and pledge of (i) the Series 2003A Special Assessment Revenues, (ii) all moneys on deposit in the Series Subaccounts established for the benefit of the Series 2003A Bonds under the Indenture and (iii) a portion of moneys on deposit in the Construction Fund established under the Indenture (collectively, the Series 2003A Pledged Revenues ); provided, however, that the Pledged Revenues do not include (a) special assessments, fees or charges levied and collected by the District for operation and maintenance or other purposes or (b) any moneys in the Rebate Fund established under the Indenture. Based upon this examination, we are of the opinion that, under existing law: 1. The Indenture has been duly authorized by the Resolution and executed and delivered by the District and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and binding agreement of the District enforceable in accordance with its terms, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion. 2. The Series 2003A Bonds are authorized under the Indenture and the Resolution and have been duly executed and delivered by the District and authenticated by the Trustee and constitute valid and binding obligations of the District, enforceable in accordance with their terms, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion. 3. The Series 2003A Bonds are limited, special obligations of the District, the principal of, premium, if any, and interest on which, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion, are payable from and secured solely by a lien upon and pledge of the Series 2003A Pledged Revenues, as specified above. 4. The interest on the Series 2003A Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), and is not treated as an item of tax preference under Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations. The Series 2003A Bonds and the income thereon are exempt from taxation under the laws of the State of Florida, except estate taxes imposed by Chapter 198, Florida Statutes, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations, banks and savings associations. We express no opinion as to any other tax consequences regarding the Series 2003A Bonds. In giving the opinion in paragraph 4 above, we have assumed and relied upon compliance with the covenants of the District and the accuracy, which we have not independently verified, of the representations and certifications of the District in various documents, including the Resolution, the Indenture and the Tax Compliance Certificate contained in the Transcript. The accuracy of those representations and certifications and compliance by the District with those covenants may be necessary for the interest on the Series 2003A Bonds to be and to remain excluded from gross income for federal income tax purposes and for the other federal tax effects stated above. Failure to comply with certain of those covenants subsequent to the issuance of the Series 2003A Bonds could cause the interest thereon to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2003A Bonds. D-2

167 Under the Code portions of the interest on the Series 2003A Bonds earned by certain corporations (as defined for federal income tax purposes) may be subject to a corporate alternative minimum tax, and interest on the Series 2003A Bonds may be subject to a branch profits tax imposed on certain foreign corporations doing business in the United States and to a tax imposed on excess net passive income of certain S corporations. Purchasers of the Series 2003A Bonds should consult with their individual tax advisors regarding these and other tax consequences of ownership and transfer of the Series 2003A Bonds. In rendering the foregoing opinions we have assumed the accuracy and truthfulness of all public records and of all certifications, documents and other proceedings examined by us that have been executed or certified by public officials acting within the scope of their official capacities and have not verified the accuracy or truthfulness thereof. We have also assumed the genuineness of the signatures appearing upon such public records, certifications, documents and proceedings. Respectfully submitted, D-3

168 SERIES 2003B BONDS Board of Supervisors Portofino Isles Community Development District Port St. Lucie, Florida Wachovia Bank, National Association, as Trustee Miami, Florida We have acted as Bond Counsel in connection with the issuance by the Portofino Isles Community Development District (the District ), of its $520,000 Special Assessment Bonds, Series 2003B (the Series 2003B Bonds ), dated March 1, 2003, initially issued and delivered on this date pursuant to the Constitution and laws of the State of Florida, particularly Chapter 190, Florida Statutes, as amended (the Act ), and other applicable provisions of law, and Resolution , adopted on October 14, 2002, as supplemented by Resolution , adopted on February 4, 2003, and Resolution , adopted on March 4, 2003 (collectively, the Resolution ), and a Trust Indenture, dated as of March 1, 2003 (the Indenture ), between the District and Wachovia Bank, National Association, as trustee (the Trustee ). The Series 2003B Bonds are being issued to (i) finance a portion of the cost of the planning, design, construction and acquisition of Utility System improvements and Road System improvements and such other improvements as more particularly described in the Portofino Isles Engineer s Report of Capital Improvements, dated February 2003 (collectively, the Project ) within the District, (ii) fund the Series 2003B Debt Service Reserve Account, (iii) pay capitalized interest on the Series 2003B Bonds and (iv) pay the costs of issuance of the Series 2003B Bonds, all as more particularly described in the Indenture. We have examined the transcript of the proceedings (the Transcript ) of the District relating to its issuance of the Series 2003B Bonds and such other documents, as we have deemed necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the District furnished to us, without undertaking to verify such representations by independent investigation. As to certain matters of law regarding the creation and establishment of the District, the authorization and levy of the Series 2003B Special Assessments, and the proceedings relative thereto and to the authorization of the Series 2003B Bonds, we have relied upon the opinion of District Counsel. The documents in the Transcript include a certified copy of the Resolution and the Indenture. We have also examined the Series 2003B Bonds being delivered on original issuance. The Series 2003B Bonds and the interest thereon are special, limited obligations of the District, payable from and secured equally and ratably by a lien upon and pledge of (i) the Series 2003B Special Assessment Revenues, (ii) all moneys on deposit in the Series Subaccounts established for the benefit of the Series 2003B Bonds under the Indenture and (iii) a portion of moneys on deposit in the Construction Fund established under the Indenture (collectively, the Series 2003B Pledged Revenues ); provided, however, that the Pledged Revenues do not include (a) special assessments, fees or charges levied and collected by the District for operation and maintenance or other purposes or (b) any moneys in the Rebate Fund established under the Indenture. D-4

169 Based upon this examination, we are of the opinion that, under existing law: 1. The Indenture has been duly authorized by the Resolution and executed and delivered by the District and, assuming due authorization, execution and delivery by the Trustee, constitutes a valid and binding agreement of the District enforceable in accordance with its terms, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion. 2. The Series 2003B Bonds are authorized under the Indenture and the Resolution and have been duly executed and delivered by the District and authenticated by the Trustee and constitute valid and binding obligations of the District, enforceable in accordance with their terms, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion. 3. The Series 2003B Bonds are limited, special obligations of the District, the principal of, premium, if any, and interest on which, subject to bankruptcy laws and other laws affecting creditors rights and to the exercise of judicial discretion, are payable from and secured solely by a lien upon and pledge of the Series 2003B Pledged Revenues, as specified above. 4. The interest on the Series 2003B Bonds is excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the Code ), and is not treated as an item of tax preference under Section 57 of the Code for purposes of the alternative minimum tax imposed on individuals and corporations. The Series 2003B Bonds and the income thereon are exempt from taxation under the laws of the State of Florida, except estate taxes imposed by Chapter 198, Florida Statutes, and net income and franchise taxes imposed by Chapter 220, Florida Statutes, on interest, income or profits on debt obligations owned by corporations, banks and savings associations. We express no opinion as to any other tax consequences regarding the Series 2003B Bonds. In giving the opinion in paragraph 4 above, we have assumed and relied upon compliance with the covenants of the District and the accuracy, which we have not independently verified, of the representations and certifications of the District in various documents, including the Resolution, the Indenture and the Tax Compliance Certificate contained in the Transcript. The accuracy of those representations and certifications and compliance by the District with those covenants may be necessary for the interest on the Series 2003B Bonds to be and to remain excluded from gross income for federal income tax purposes and for the other federal tax effects stated above. Failure to comply with certain of those covenants subsequent to the issuance of the Series 2003B Bonds could cause the interest thereon to be included in gross income for federal income tax purposes retroactively to the date of issuance of the Series 2003B Bonds. Under the Code portions of the interest on the Series 2003B Bonds earned by certain corporations (as defined for federal income tax purposes) may be subject to a corporate alternative minimum tax, and interest on the Series 2003B Bonds may be subject to a branch profits tax imposed on certain foreign corporations doing business in the United States and to a tax imposed on excess net passive income of certain S corporations. Purchasers of the Series 2003B Bonds should consult with their individual tax advisors regarding these and other tax consequences of ownership and transfer of the Series 2003B Bonds. D-5

170 In rendering the foregoing opinions we have assumed the accuracy and truthfulness of all public records and of all certifications, documents and other proceedings examined by us that have been executed or certified by public officials acting within the scope of their official capacities and have not verified the accuracy or truthfulness thereof. We have also assumed the genuineness of the signatures appearing upon such public records, certifications, documents and proceedings. Respectfully submitted, D-6

171 APPENDIX E Form of Continuing Disclosure Agreements

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173 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (the Disclosure Agreement ) is executed by and between Portofino Isles Community Development District (the Issuer ) and Prime Homes at Portofino Isles, Ltd. (together with its successors and assigns, the Developer ), in connection with the issuance of the Issuer s $7,135,000 * Special Assessment Bonds, Series 2003A and $520,000* Special Assessment Bonds, Series 2003B (the Bonds ). The Bonds are being issued pursuant to a Trust Indenture dated as of March 1, 2003 (the Indenture ), between the Issuer and Wachovia Bank, National Association (the Trustee ). Capitalized terms not defined herein shall have the meanings ascribed thereto in the Indenture. The Issuer and the Developer agree as follows: SECTION 1. PURPOSE OF DISCLOSURE AGREEMENT. This Disclosure Agreement is being executed and delivered in order to comply with the requirements of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the Rule ), and is for the benefit of the Holders and beneficial owners of the Bonds. SECTION 2. APPOINTMENT OF DISSEMINATION AGENT. The Issuer and the Developer hereby appoint the District Manager as the dissemination agent (the Dissemination Agent ) hereunder. The District Manager hereby accepts its appointment as Dissemination Agent and all of the obligations and responsibilities related thereto as described herein. The Issuer may, upon the giving of ten (10) days written notice to the Developer, appoint another Person to serve as Dissemination Agent hereunder. Any such Person appointed by the Issuer as Dissemination Agent hereunder shall acknowledge its duties set forth herein by a written acceptance delivered to the Issuer and the Developer. SECTION 3. PROVISION OF DEVELOPER INFORMATION. So long as the Developer is the owner of at least 25% of the Project Lands (as defined herein) or the Developer is actively engaged in the development of the Project Lands, the Developer shall provide the following information to the Dissemination Agent annually (except that the information required by paragraph (C) below shall be provided quarterly, as set forth below) on the dates as set forth below and the Dissemination Agent shall, within 15 days of its receipt thereof, provide such information to all of the nationally recognized municipal securities information repositories described in Section 8 hereof (the NRMSIRs ), and to any state information depository that is established within the State of Florida (the SID ): (A) if the Developer is required to file its audited financial statements with the Securities and Exchange Commission (the SEC ), the Developer shall provide its audited financial statements for the most recent fiscal year for which audited financial statements have been completed, within ten (10) Business Days after filing the same with the SEC; * Preliminary, subject to change. E-1

174 (B) updates of the financial information and operating data, to the extent such information relates to the Portofino Isles Development (the Development ) or the Developer, included or incorporated by reference under the captions THE DEVELOPMENT or THE DEVELOPER in the Limited Offering Memorandum dated March 2003, relating to the Bonds (the Limited Offering Memorandum ); any such information that is required to be updated as a result of its incorporation by reference shall be provided within ten (10) Business Days after filing the same with the SEC or such other entity with which the information is required to be filed; any other information shall be provided by no later than April 1 of each year commencing April, 2004; and (C) additional information relating to the Developer or the Development shall be provided on a quarterly basis, commencing July 1, 2003, and on each October 1, January 1 and April 1 thereafter while the Bonds are Outstanding: 1. For all Project Lands: a. Single Family lots - Estimation of total number of lots expected to be included within the District upon full build-out - Number of lots sold (closed) to persons or entities in the business of building or developing homes (hereinafter referred to as Builders ) - Number of lots under contract (sold but not closed) to Builders - Number of lots sold (closed) to persons or entities that are not Builders (hereinafter referred to as Non-Builders ) - Number of lots under contract (sold but not closed) to Non-Builders - Number of homes (whether or not occupied) for which certificates of completion or certificates of occupancy have been issued (hereinafter referred to as Completed Homes ) - Number of Completed Homes owned by Non-Builders - Number of Completed Homes for sale by Builders (based upon survey of Builders active within the District) - Number of Completed Homes for sale by Non-Builders (as disclosed by MLS listing or survey of District conducted on or after May 1 of each year) - The estimated date of full build-out of all single family lots on Developer-owned lands within the Project Lands b. Multi-Family Units - Estimation of total number of units expected to be included within the District upon full build-out - Number of acres sold (closed) to Builders (together with accompanying densities) - Number of acres under contract (sold but not closed) to Builders - Number of units sold (closed) to Non-Builders E-2

175 - Number of units for which certificates of completion or certificates of occupancy have been issued (hereinafter referred to as Completed Units ) which are occupied; provided that as to multifamily rental units, the Developer s obligation shall be to survey the building management company and forward the information provided by the management company to the Dissemination Agent - Number of Completed Units for sale by Builders (based upon survey of builders active within District) - Number of Completed Units for sale by Non-Builders (as disclosed by MLS listing or survey of District conducted on or after May 1 of each year) - The estimated date of full build-out of all multifamily units on Developer-owned lands within the Project Lands c. Commercial Space - Estimation of total numbers of acres of commercial (that is, non residential) land expected to be included within the District upon full build-out - Acreage of commercial land sold (closed) by the Developer - Acreage of commercial land under contract (sold but not closed) for sale by the Developer - The estimated date of full build-out of all commercial space on Developer-owned lands within the Project Lands 2. Materially adverse changes or determinations in permits/approvals for the Development or the District which necessitate changes in the Developer s land use plan. For purposes of this Disclosure Agreement, the term Project Lands means the lands within the District that are benefitted by the Project and subject to the lien of the Special Assessments. SECTION 4. PROVISION OF ISSUER S ANNUAL INFORMATION. The Issuer shall provide the following information to the Dissemination Agent on or before the dates specified below and the Dissemination Agent shall, within 15 days of its receipt thereof, provide such information to all of the NRMSIRS and to the SID: (A) audited financial statements of the Issuer for the most recent fiscal year for which audited financial statements have been completed, prepared in accordance with Generally Accepted Governmental Accounting Principles, as modified by applicable State of Florida requirements and the governmental accounting standards promulgated by the Government Accounting Standards Board, by no later than April 15 of each year, commencing April 15, 2004; and (B) additional financial information and operating data relating to the Issuer and the District, as follows: E-3

176 1. by no later than May 1 of each year, commencing May 1, 2004, balances as of April 1 of such year in all Funds and Accounts established for the Bonds under the Indenture. 2. by no later than May 1 of each year, commencing May 1, 2004, assessed value of Project Lands as of January 1 of such year; provided, however, that the Issuer may rely upon the records of the County Property Appraiser for such information. 3. by no later than May 1 of each year, commencing May 1, 2004, the amount of Special Assessments certified by the District to the Tax Collector for the immediately preceding calendar year. 4. by no later than May 1 of each year, commencing May 1, 2004, the amount of Special Assessment Revenues collected in respect of Special Assessments levied for the immediately preceding calendar year. 5. by no later than May 1 of each year, commencing May 1, 2004, the amount of delinquent Special Assessments (i.e., number of single-family units/multi-family units/commercial acres/utility acres/golf acres/church acres and dollar amount) in respect of Special Assessments levied for the immediately preceding calendar year. 6. by no later than May 1 of each year, commencing May 1, 2004, the dollar amount of tax certificates sold in respect of Special Assessments levied during the immediately preceding calendar year. 7. debt service schedule for the remaining term of the Bonds. 8. percentage of infrastructure improvements that have been completed with proceeds of the Bonds. 9. Materially adverse changes or determinations in permits/approvals relating to the Project. 10. by no later than May 1 of each year, commencing May 1, 2004, for the most recent fiscal year, a certificate of a Responsible Officer setting forth (i) a description in reasonable detail of the insurance then in effect pursuant to the requirements of Section of the Indenture and that the District has complied in all respects with such requirements, (ii) whether during such year any material part of the Project has been damaged or destroyed and, if so, the amount of insurance proceeds covering such loss or damage and specifying the District s reasonable and necessary replacement costs, and (iii) whether or not to the knowledge of the signor, the District is in default with respect to any of the covenants, agreements or conditions on its part contained in the Indenture, and if so, the nature of such default. 11. by no later than October 1 of each year, commencing October 1, 2003, for the current fiscal year, the final annual budget adopted by the District. E-4

177 (C) the Issuer shall provide directly to the Owner of more than 51% of the Bonds then Outstanding, a copy of the books and records relating to the collection of Special Assessments on the District Lands required to be maintained by the Issuer pursuant to Section of the Indenture. Such books and records shall be provided to said Owner on an annual basis by no later than July 1 of each year. SECTION 5. DEVELOPER S OBLIGATION TO REPORT SIGNIFICANT EVENTS. So long as the Developer is the owner of at least 25% of the Project Lands or the Developer is actively engaged in the development of the Project Lands, the Developer shall provide to the Dissemination Agent, on a timely basis, notice of any release, substitution, or sale of all or substantially all of the Project Lands not in the ordinary course of business (provided that the parties acknowledge and agree that the Developer is in the business of selling the lands within the District, and, accordingly, sales of less than 100 acres of land in the aggregate to the same person in any bond year will be presumed to be in the ordinary course of business). The Dissemination Agent shall promptly provide notice of the foregoing event to the NRMSIRs, or the Municipal Securities Rulemaking Board (the MSRB ), and to the SID. The Developer shall provide notice of the occurrence of any other events to the Dissemination Agent, if such other events materially adversely affect the Developer s ability to develop the District Lands, including, without limitation, any material adverse change or determination in any permit required for such development. In the event the Developer provides such other notice to the Dissemination Agent, the Dissemination Agent shall promptly provide such notice to the NRMSIRs or the MSRB and to the SID as provided above. SECTION 6. ISSUER S OBLIGATION TO REPORT SIGNIFICANT EVENTS. The Issuer shall provide to the Dissemination Agent, on a timely basis, notice of any of the following events and the Dissemination Agent shall promptly provide such notice to the NRMSIRs or the MSRB and to the SID: (A) (B) in (A) above); (C) principal and interest payment delinquencies on the Bonds; the occurrence of any Event of Default under the Indenture (other than as described unscheduled draws on the debt service reserve fund reflecting financial difficulties; (D) unscheduled draws on credit enhancement reflecting financial difficulties; * (E) substitution of credit or liquidity providers, or their failure to perform; * (F) (G) adverse tax opinions or events affecting the tax-exempt status of the Bonds; modifications to rights of Bondholders; * There will not be any credit enhancement or liquidity facility in effect with respect to the Bonds. E-5

178 (H) (I) calls on the Bonds (other than mandatory sinking fund or extraordinary redemption); defeasance of the Bonds; (J) release, substitution, or sale of property directly securing repayment of the Bonds to the extent described in Section 5 hereof; (K) rating changes; ** (L) notice of any failure on the part of the Issuer to meet the requirements of Section 4 hereof. The Issuer shall provide notice of the occurrence of any other events, in addition to those listed in this Section 6, if any such other events are material with respect to the Bonds. SECTION 7. ADDITIONAL DUTIES OF DISSEMINATION AGENT. (A) Upon providing any of the information required in Sections 3 and 4 hereof to the NRMSIRs, the MSRB or the SID, as the case may be, the Dissemination Agent shall promptly provide the Developer and the Issuer with written notice setting forth a brief description of the information provided, the date such information was provided and to whom such information was provided. (B) If the Dissemination Agent has not received the applicable annual information described in Sections 3 and 4 hereof from the Developer and the Issuer, respectively, on or prior to the 15th day before such information is required to be provided pursuant to said Sections 3 and 4, the Dissemination Agent shall notify the Developer or the Issuer, as applicable, and inquire as to when such information is expected to be provided to the Dissemination Agent. (C) Each year the Dissemination Agent shall determine, prior to the date upon which it is required to provide the annual information to the NRMSIRs and the SID pursuant to Sections 3 and 4 hereof, the name and address of each NRMSIR and SID. SECTION 8. NRMSIRs. As of the date of this Disclosure Agreement, the NRMSIRs to which the Dissemination Agent shall provide the information described in Sections 3, 4, 5 and 6 above, to the extent required, shall be the following organizations, or their successors and assigns: ** The Bonds are not rated. E-6

179 (A) (B) Bloomberg Financial Markets Muncipal Repository 100 Business Park Drive Skillman, New Jersey Phone: (609) Fax: (609) DPC Data Inc. One Executive Drive Ft. Lee, New Jersey Phone: (201) Fax: (201) (C) (D) Interactive Data Attn: Repository 100 Williams Street New York, New York Phone: (212) Fax: (212) Standard & Poor s J.J. Kenny Repository 55 Water Street 45 th Floor New York, New York Phone: (212) Fax: (212) nrmsir_repository@sandp.com (E) Any NRMSIRs that are established subsequent to the date of this Disclosure Agreement and approved by the Securities and Exchange Commission. SECTION 9. EVENT OF DEFAULT; REMEDY FOR BREACH. This Disclosure Agreement shall be solely for the benefit of the Holders and beneficial owners from time to time of the Bonds. It shall be an event of default under this Disclosure Agreement if the Developer fails in the due and punctual performance of its obligations under Sections 3 and 5 hereof or the Issuer fails in the due and punctual performance of its obligations under Sections 4 and 6 hereof and any such default continues for ninety (90) days after written notice requiring the same to be remedied shall have been given to the Issuer and/or the Developer, as the case may be, by the Trustee, which may give such notice in its discretion and shall give such notice at the written request of the Holders of not less than 51% in aggregate principal amount of the Outstanding Bonds. If such performance requires work to be done, actions to be taken or conditions to be remedied which by their nature cannot reasonably be done, taken or remedied, as the case may be, within such ninety (90) day E-7

180 period, no event of default shall be deemed to have occurred or exist if the Issuer and/or the Developer, as the case may be, shall commence such performance within such ninety (90) day period and shall diligently and continuously prosecute the same to completion. Upon the occurrence of an event of default hereunder, the Trustee may exercise any rights under law and, if requested to do so by the holders of at least 51% in aggregate principal amount of the Bonds then Outstanding, subject to the same conditions, limitations and procedures that would apply under Section of the Indenture, the Trustee shall exercise any such right. Any Holder or beneficial owner of Bonds may exercise any such right in the same manner and subject to the same conditions and limitations that would apply under Section of the Indenture. Holders and beneficial owners of Bonds shall not be entitled to institute or maintain any such proceedings individually that assert a breach of this Disclosure Agreement that is based on the alleged inadequacy of any pertinent filing that has been made without first providing the Issuer or the Developer, as appropriate, written notice of such alleged inadequacy and opportunity to remedy the same in accordance with the cure period specified in the first paragraph of this Section 9. SECTION 10. INCORPORATION BY REFERENCE. Any or all of the information required herein to be disclosed may be incorporated by reference to documents, including official statements or debt issues of the Developer (or related public entities), or the Issuer, which have been submitted to each of the NRMSIRs, the MSRB, the SEC or the SID. If the document incorporated by reference is a final official statement, it must be available from the MSRB. Such party shall clearly identify each document incorporated by reference. SECTION 11. DISCHARGE; SUCCESSOR DISSEMINATION AGENTS. The Developer and the Issuer may discharge the Dissemination Agent at any time and for any reason upon 10 days prior written notice, with or without appointing a successor dissemination agent. Any successor Dissemination Agent shall acknowledge its duties set forth herein by a written acceptance delivered to the Issuer and the Developer. If at any time during which this Disclosure Agreement is in effect there is no acting Dissemination Agent, the Developer and the Issuer shall provide the required information described herein directly to the NRMSIRs, the MSRB and the SID in the manner and at the times in which it presently is required to provide such information to the Dissemination Agent. SECTION 12. TERMINATION. The obligations of the parties under this Disclosure Agreement shall terminate upon (A) the defeasance, prior redemption or payment in full of all of the Bonds, (B) the termination of the continuing disclosure requirements of the Rule by legislative, judicial or administrative action, (C) in the case of the Dissemination Agent, upon receipt of notice of discharge as provided in Section 11 hereof, or (D) in the case of the Developer, when the Developer no longer is (i) the owner of at least 25% of the Project Lands and (ii) actively engaged in the development of the Project Lands. SECTION 13. AMENDMENTS. Notwithstanding any other provision of this Disclosure Agreement, the Issuer and the Developer may amend this Disclosure Agreement, and may waive any provision, if such amendment or waiver is supported by an opinion of counsel familiar with federal securities laws, to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule, if such amendment or waiver had been effective on the E-8

181 date hereof but taking into account any subsequent amendment or official interpretation of the Rule; provided, however, that no amendment to this Disclosure Agreement may be made without the prior written consent of the Owners of at least 51% of the Bonds then Outstanding. SECTION 14. ADDITIONAL INFORMATION. Nothing in this Disclosure Agreement shall be deemed to prevent any party hereto from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in its annual information described herein or notice of occurrence of a significant event described herein, in addition to that which is required by this Disclosure Agreement. If any party chooses to include any information in its annual information or notice of occurrence of a significant event in addition to that which is specifically required by this Disclosure Agreement, such party shall have no obligation under this Disclosure Agreement to update such information or include it in its future annual information or notice of occurrence of a significant event. SECTION 15. OBLIGATED PERSONS. If any person, other than the Issuer or the Developer becomes an Obligated Person (as defined in the Rule) relating to the Bonds, the Issuer and the Developer shall use their best efforts to require such Obligated Person to comply with all provisions of the Rule applicable to such Obligated Person. SECTION 16. NOTICES. Any notices required to be given under this Disclosure Agreement shall be given to the following addresses and telephone numbers (and such notices shall also be given to the Trustee at the address for notices to the Trustee set forth in the Indenture): (a) As to the Issuer: Portofino Isles Community Development District N.W. 11th Manor Coral Springs, Florida Attention: District Manager with a copy thereof to Issuer s Counsel as follows: Lewis, Longman & Walker, P.A Palm Beach Lakes Boulevard Suite 1000 West Palm Beach, Florida (b) As to the Developer: Prime Homes at Portofino Isles, Ltd St. Andrews Boulevard, #510 Boca Raton, FL E-9

182 (c) As to the Dissemination Agent: the initial Dissemination Agent hereunder is the Issuer. SECTION 17. INDEMNIFICATION OF DISSEMINATION AGENT. The Developer and the Issuer each further agrees to indemnify and save the Dissemination Agent harmless, to the extent allowed by law, against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder, and which are not due to its negligence or misconduct. SECTION 18. SOURCES OF PAYMENTS; EXTENT OF COVENANTS; NO PERSONAL LIABILITY. The Issuer shall be required to use only Maintenance Assessment Revenues (as defined below) to pay any costs and expenses to be incurred in the performance of this Disclosure Agreement by it or the Dissemination Agent, and the performance of its obligations hereunder shall be subject to the availability of Maintenance Assessment Revenues for that purpose. This Disclosure Agreement does not and shall not constitute a general obligation of the Issuer. All covenants, stipulations, obligations and agreements of the Issuer contained in this Disclosure Agreement are and shall be deemed to be covenants, stipulations, obligations and agreements of the Issuer to the full extent authorized by law and the Florida Constitution. No covenant, stipulation, obligation or agreement of the Issuer contained in this Agreement shall be deemed to be a covenant, stipulation, obligation or agreement of any present or future officer, agent or employee of the Issuer in other than that person s official capacity. For purposes of this Section 18, Maintenance Assessment Revenues means the proceeds of special assessments levied and collected by the Issuer under Section of the Act for maintenance purposes or maintenance special assessments levied and collected by the Issuer under Section (3) of the Act. SECTION 19. ASSIGNMENT. The Issuer and the Developer each may assign their respective obligations under this Disclosure Agreement only in connection with the assignment of its respective obligations under and in accordance with the provisions of any contractual commitment or other arrangement to support payment of all or any part of the Bonds; provided, that neither the Issuer nor the Developer shall assign its obligations under this Disclosure Agreement so long as it remains an obligated person under the Rule with respect to the Bonds and except to the assignee of its obligations under any such contractual commitment or other arrangement to support payment of the Bonds. The Issuer and the Developer each may assign its respective obligations under any such contractual commitment or other arrangement, without remaining primarily liable for the performance of those obligations, only if the assignee of the Issuer or the Developer, as the case may be, assumes the assignor s obligations under this Disclosure Agreement. Any assignment by the Issuer or the Developer of its obligations under this Disclosure Agreement shall not be effective unless and until the assignee shall have expressly assumed in writing, for the benefit of the Holders and beneficial owners from time to time of the Bonds, the obligations of the Issuer or the Developer, as the case may be, under this Disclosure Agreement or enters into a new agreement for purposes of the Rule that is substantially similar to the undertaking of the Issuer or the Developer, as the case may be, under this Disclosure Agreement. If the Developer sells, assigns or otherwise transfers, directly or indirectly, all or substantially all of its interests with respect to the Project Lands or the Development, other than in the ordinary course of its business, the Developer shall E-10

183 make it a condition to such sale, assignment or transfer that the buyer, assignee or transferee expressly assume in writing, for the benefit of the Holders and beneficial owners from time to time of the Bonds, all of the Developer s obligations hereunder or enters into a new agreement for purposes of the Rule that is substantially similar to the Developer s undertaking under this Disclosure Agreement. SECTION 20. BENEFICIARIES. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Developer, the Trustee and the Holders and beneficial owners from time to time of the Bonds, and any official, employee or agent thereof acting for and on its behalf, and shall not create any rights in any other person or entity. SECTION 21. SEVERABILITY. In case any section or provision of this Disclosure Agreement, or any covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into, or taken thereunder or any application thereof, is for any reason held to be illegal or invalid, such illegality or invalidity shall not affect the remainder thereof or any other section or provision thereof or any other covenant, stipulation, obligation, agreement, act or action, or part thereof made, assumed, entered into, or taken thereunder (except to the extent that such remainder or section or provision or other covenant, stipulation, obligation, agreement, act or action, or part thereof is wholly dependent for its operation on the provision determined to be invalid), which shall be construed and enforced as if such illegal or invalid portion were not contained therein, nor shall such illegality or invalidity of any application thereof affect any legal and valid application thereof, and each such section, provision, covenant, stipulation, obligation, agreement, act or action, or part thereof shall be deemed to be effective, operative, made, entered into or taken in the manner and to the full extent permitted by law. SECTION 22. AGREEMENT CONSTITUTES SUPPLEMENTAL AUTHORITY. The provisions of this Disclosure Agreement are supplemental and in addition to the provisions of the Indenture with respect to reports, filings and notifications provided for therein. The provisions of this Disclosure Agreement are intended to promote disclosures, and notwithstanding anything herein to the contrary, the Trustee may make disclosures as it deems necessary or appropriate under the Indenture, including in instances where it is otherwise directed not to do so by the Issuer, the Developer, the Dissemination Agent or other person. SECTION 23. COUNTERPARTS. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 24. GOVERNING LAW. This Disclosure Agreement shall be deemed to be an agreement made under the laws of the State of Florida and for all purposes shall be governed by and construed in accordance with the laws of the State of Florida. E-11

184 IN WITNESS WHEREOF, the parties hereto have each caused this Disclosure Agreement to be executed by their duly authorized officers and appointed officials and their seals to be hereunder affixed and attested as of the day of, (SEAL) PORTOFINO ISLES COMMUNITY DEVELOPMENT DISTRICT ATTEST: By: Chairman, Board of Supervisors By: Secretary PRIME HOMES AT PORTOFINO ISLES, LTD. By: (SEAL) ATTEST: By: Authorized Officer I:\Client Documents\Portofino Isles CDD\ \Misc\CONTINUING DISCLOSURE AGREE CDD v2.doc E-12

185 APPENDIX F General Information Pertaining to the City of Port St. Lucie and St. Lucie County, Florida

186 [This page intentionally left blank]

187 APPENDIX F GENERAL INFORMATION PERTAINING TO THE CITY OF PORT ST. LUCIE AND ST. LUCIE COUNTY, FLORIDA THE FOLLOWING INFORMATION CONCERNING THE CITY OF PORT ST. LUCIE, FLORIDA AND ST. LUCIE COUNTY, FLORIDA, IS INCLUDED ONLY FOR THE PURPOSE OF PROVIDING GENERAL BACKGROUND INFORMATION. THE BONDS ARE PAYABLE SOLELY FROM THE SOURCES DESCRIBED IN THE OFFICIAL STATEMENT TO WHICH THIS INFORMATION IS APPENDED, AND ARE NOT GENERAL OBLIGATIONS OF THE CITY, THE COUNTY, THE STATE OF FLORIDA, OR ANY POLITICAL SUBDIVISION THEREOF, AND NEITHER THE CITY, THE STATE, NOR ANY POLITICAL SUBDIVISION THEREOF IS REQUIRED TO LEVY ANY TAX FOR PAYMENT OF THE BONDS. LOCATION The City of Port St. Lucie (the City ) is a residential community in the southern part of St. Lucie County, Florida (the County ), and was incorporated in The City encompasses approximately 80 square miles of the 588 square miles of the County and is located in southeastern Florida. The City is located one hundred miles north of the City of Miami, 50 miles north of the City of West Palm Beach and about 65 miles south of the City of Melbourne. The City is served by three major north-south Florida highways: Interstate 95, the Florida Turnpike, and U.S. Highway 1. Below is a table which shows the relative number of square miles of each incorporated municipality within the County and of the unincorporated area of the County: Land Area Square Miles City of Port St. Lucie 80 City of Ft. Pierce 19 St. Lucie Village 1 Unincorporated Area 488 St. Lucie County total 588 Source: Planning and Zoning Department, City of Port St. Lucie. GOVERNMENT The City operates under a Mayor/Council/Manager form of government. The Council, comprised of the Mayor and four Council members, is the primary governing body of the City. The City Manager is the chief administrative officer responsible to the Council. City elections are held every two years or upon the vacancy of a Council seat. F-1

188 POPULATION Currently more than 44% of the County s population resides within the City, less than one-fifth resides within the City of Ft. Pierce and the balance of the County s population resides in the unincorporated area of the County. The City s population increased from 50 in 1960, the year before the City s incorporation, to 88,769 in The City is part of the Fort Pierce/Port St. Lucie/Stuart Standard Metropolitan Statistical Area (SMSA), which has a population in excess of 316,000. The following table sets forth the population trends in the City, the County and the State from the years 1960 through 1990 and the City s, the County s and the State s population for the years 1995 through 2000 and The City s estimated population as of June 30, 2002 was 97,037. Year City of Port St. Lucie City of Port St. Lucie and St. Lucie County, Florida Population Trends Average Annual Percentage Increase St. Lucie County Average Annual Percentage Increase State of Florida Average Annual Percentage Increase , ,951, , ,789, , , ,746, , , ,937, , , ,149, , , ,411, , , ,712, , , ,982, , , ,322, , , ,982, n/a n/a 237,700 (1) ,927,851 (1) Sources: United States Census Bureau for 1960, 1970, 1980, 1990 and 2000; Executive Office of the Governor/Office of Planning and Budgeting Revenue and Economic Analysis for the City of Port St. Lucie, University of Florida, Bureau of Economic and Business Research for St. Lucie County and State of Florida, (1) Estimated figures; State of Florida, Office of Economic and Demographic Research, Florida Demographic Forecasting Conference. BUDGET PROCESS The City follows the procedures set forth in Chapters 166 and 200 of the Florida Statutes in establishing its budgetary data. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing on October 1. The operating budget includes proposed expenditures and means of financing them. Public hearings are then conducted to obtain taxpayer comments on the operating budget. F-2

189 The budget is legally enacted through the passage of an ordinance by City Council on or before the fifteenth day of September of the year currently ending. The level of budgetary control is the department. The City Manager is authorized to transfer budgeted amounts within departments of any fund. Revisions that alter the budget totals of any department require approval of the City Council. Unencumbered appropriations lapse at year end. The reported budgetary data represent the final approved budget after amendments adopted by the City Council. Budgets for general and special revenue funds are adopted on a basis consistent with generally accepted accounting principles, except that encumbrances are presented as expenditures. Formal budget integration is not employed for proprietary, capital project or trust funds because effective budgetary control is achieved by alternate measures. Budgeted amounts are as originally adopted, or as amended by the City Council. [Remainder of page intentionally left blank] F-3

190 Fiscal Year Revenue Fiscal Year SOURCES OF REVENUES OF THE CITY Set forth below are the sources of revenue for the last ten fiscal years: Taxes Licenses & Permits GENERAL REVENUES BY SOURCE LAST TEN FISCAL YEARS CITY OF PORT ST. LUCIE, FLORIDA Fines & Forfeitures Inter- Govern- Mental Charges for Services Interest on Investments Miscellaneous Human Services 1991 $ 9,174,223 $1,413,395 $319,784 $ 4,383,857 $ 389,464 $ 881,344 $ 289,000 $23,619 $16,874, ,227,083 1,481, ,609 4,950, , ,250 1,257,169 26,701 19,081, ,266,413 1,689, ,489 5,905, , , ,515 28,997 19,561, ,546,561 1,844, ,159 6,034, , ,239 1,147,115 33,229 20,910, ,716,972 1,782, ,943 7,483,476 2,254, ,655 3,479,489 35,772 26,637, ,186,451 1,825, ,810 7,199,437 2,248, ,463 1,589,661 32,227 26,563, ,552,253 1,883, ,205 7,786,919 9,170,247 1,708,825 1,291,532 32,613 34,853, ,449,590 2,036, ,724 8,410,348 7,065,539 2,372,237 1,919,788 30,257 35,857, ,694,748 2,215, ,199 10,781,975 15,364,065 4,860,842 1,432,240 36,192 48,856, ,747,220 2,523, ,064 12,471,257 9,553,753 4,499,178 1,221,827 58,175 46,664, ,887,582 2,795, ,800 12,759,935 11,032,749 4,092,086 2,692,239 65,975 52,001,695 Source: City of Port St. Lucie Finance Department Expenditures General Government Set forth below are the City s expenditures by function for the last ten fiscal years: GENERAL GOVERNMENTAL EXPENDITURES BY FUNCTION LAST TEN FISCAL YEARS CITY OF PORT ST. LUCIE, FLORIDA Public Safety Physical Environment Transportation Economic Environment Human Services Culture & Recreation Capital Outlay Debt Service Total Total(1) 1991 $3,150,951 $ 6,834,722 $ 97,645 $3,622,913 $ 24,029 $233,294 $1,415,678 $5,064,186 $1,003,368 $21,446, ,738,815 7,601, ,512 5,742,792 35, ,294 1,605,191 1,321,515 1,064,775 20,495, ,613,363 7,868, ,161 6,952, , ,227 1,989,935 1,099,518 1,943,905 23,097, ,279,538 8,875, ,591 6,818, , ,281 2,200,115 2,856,655 1,956,623 25,784, ,205,515 9,915, ,997 4,474, , ,501 2,256,795 2,218,625 5,441,872 27,905, ,375,016 10,699, ,822 4,554, , ,416 2,299,368 5,053,568 4,412,322 30,815, ,716,524 10,969, ,706 4,765,434 1,135, ,185 2,537,624 21,795,536 5,459,442 50,481, ,820,612 11,954, ,206 3,705, , ,699 2,953,590 13,421,710 4,550,685 41,796, ,969,224 12,846, ,328 4,402, , ,393 3,236,954 24,668,210 9,801,736 60,400, ,924,072 15,411,667 1,276,678 6,182,839 1,473, ,966 3,566,294 27,139,521 15,761,759 74,546, ,615,785 16,377, ,083 11,523,669 1,692, ,873 3,782,968 18,967,271 15,339,556 72,810,804 Source: City of Port St. Lucie Finance Department (1) General governmental expenditures may be paid from sources other than General Fund revenues. Accordingly, the total amount of general governmental expenditures in a given fiscal year may exceed the total General Fund revenues for that fiscal year. F-4

191 DEBT The following tables show the details of the City s direct and overlapping bonded debt for general obligation bonds as of September 30, COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT GENERAL AND LIMITED OBLIGATION BONDS City of Port St. Lucie, Florida Dollar Amount Per Capita Jurisdiction Bonded Debt Outstanding Percent Applicable to Port St. Lucie Applicable to Port St. Lucie Applicable to Port St. Lucie St. Lucie County $17,465,000 (1) 35.13% $ 6,135,456 $ 66 St. Lucie County District School Board 44,340, % 15,576, City of Port St. Lucie % TOTAL $61,805,000 $21,712,098 $234 (1) Includes Limited Ad Valorem Tax Bonds in the amount of $12,355,000. Note: The above information on Bonded Debt does not include Self-Supporting and Non-Self Supporting Revenue Bonds, Certificates and Notes. Source: St. Lucie County and St. Lucie County School Board Financial Records. COMMERCE AND INDUSTRY The City has a stable, diversified service sector base, and is a center for tourism, recreation and residences. Major economic activities of the City and surrounding areas include construction, transportation, tourism, wholesale and retail trade, truck farming, citrus, cattle and major league sports. The New York Mets baseball team operates a team spring training complex within the City limits. The City was planned for single-family residences, schools, churches, community centers, recreational parks, and shopping centers, but until recently did not provide for multi-family housing. The Ballantrae Golf and Yacht Club project, which is between 80-90% completely constructed, is a 402-acre planned unit development which includes the completed Jack Nicklaus Signature Golf Course and plans for single family and multi-family homes, a church, day care center and marina. There are two Professional Golfers Association of America (PGA) courses, one is PGA Village, a 36-hole public golf course adjacent to the City with a state-of-the-art golf school, the PGA Learning Center and the other is in an 18-hole private golf course, the PGA St. Lucie West Country Club located in the Village of St. Lucie West. St. Lucie West is a master planned community of approximately 4,600 acres consisting of single and multi-family housing in addition to commercial and industrial development. Approximately 50% of the project has been developed with the balance under construction or in various stages of planning. F-5

192 Land adjacent to the North Fork of the St. Lucie River is utilized by Club Med Resorts. The City has the following facilities available: a large motel, vacation villas, a marina, three golf courses and restaurants. Major Employers St. Lucie County, Florida Number of Employer Employees St. Lucie County Schools 3,700 St. Lucie County 1,561 State Government 1,375 Lawnwood Regional Medical Center 1,300 Indian River Community College 1,080 Publix (estimated) 995 QVC 970 Florida Power & Light 962 Wal Mart 850 Liberty Medical Supply 750 Winn Dixie 742 St. Lucie Medical Center 700 City of Port St. Lucie 700 Aegis Communications Group 550 Sheriff s Department 535 Federal Government 534 Convergys Corporation 458 Club Med/Village Hotels of Sandpiper 420 BellSouth 400 New Horizons of the T.C. 354 Riverside National Bank 350 City of Fort Pierce 346 Tropicana Products 310 Packers of Indian River 275 Harbor Federal Bank 270 Harbor Branch Oceanographic Inst. 250 Pursuit Fishing Boats 250 Fort Pierce Utilities Authority 247 Albertson s 206 Source: St. Lucie County, 2000 Major Employers Port St. Lucie, Florida Number of Employer Employees QVC Port St. Lucie 970 St. Lucie Medical Center 700 City of Port St. Lucie 700 Aegis Communications Group 550 Club Med/Village Hotels of Port Sandpiper 420 Source: St. Lucie County, 2000 F-6

193 Calendar Year Estimated Effective Buying Income and Retail Sales St. Lucie County, Florida EBI ($000) Retail Sales ($000) ,269,149 1,330, ,384,743 1,396, ,510,004 1,423, ,656,541 1,491, ,772,649 2,012,264* Calendar Year Median Household EBI Average Household EBI Per Capita EBI ,619 33,817 12, ,449 35,070 13, ,137 35,960 13, ,836 37,154 14, ,838 38,086 14,678 *Sales Estimates for the period 1/1/2000 through 12/31/2000, retail sales is now defined as retail sales plus food service and drinking establishment sales, due to a change in the federal government s new system for classifying businesses into industries. This change has precipitated an update to the Retail Sales categories. Source: Sales and Marketing Management, August 1996, 1997, 1998, 1999 and 2000 The following table estimates the percentage of households within each EBI Group for the City, the County, the State and the United States for Effective Buying Power Group City Port St. Lucie St. Lucie County State of Florida United States $0-19, % 29.9% 41.8% 25.8% 20,000-34, ,000-49, ,000 - Over Source: Sales and Marketing Management, August 2000 F-7

194 Personal Income St. Lucie County, Florida ( ) Year Total (millions) % Increase Per Capita , , , , , , , ,993 Source: U.S. Commerce Department, Bureau of Economic Analysis, Regional Accounts Data. May, 2002 The unemployment rate for the County is generally higher than the unemployment rate for the State due, in part, to the greater dependence on agricultural and construction employment within the County and seasonal variations related to such employment. The City s unemployment rate is generally lower than the unemployment rate for the County due, in part, to the fact that the City does not heavily rely on the agricultural sector for employment. Labor Force St. Lucie County, Florida Year Labor Force Employment Unemployment Number Unemployment Rate ,009 62,484 9, % ,696 63,161 10, ,767 64,623 9, ,459 66,186 9, ,963 66,981 7, ,968 68,179 7, ,472 70,488 6, ,642 72,609 6, ,116 73,441 6, State of Florida Year Labor Force Employment Unemployment Number Unemployment Rate ,661,000 6,192, , % ,811,000 6,363, , ,851,000 6,475, , ,956,000 6,603, , ,119,000 6,780, , ,228,000 6,918, , ,361,000 7,077, , ,490,000 7,221, , ,674,000 7,309, , Source: Florida Research & Economic Database, F-8

195 Construction and Property Value Last Ten Years City of Port St. Lucie, Florida Construction Residential Commercial Year Number of Units Value Number of Units Value ,305 $ 84,168, $26,538, ,169 91,194, ,545, , ,211, ,593, , ,462, ,395, ,202 95,668, ,459, , ,749, ,442, ,037 90,305, ,166, , ,069, ,593, , ,892, ,981, , ,557, ,177, , ,377, ,294,415 Source: City of Port St. Lucie Building Department. Figures are for calendar year January 1 - December 31 Bank Deposits Last Ten Fiscal Years City of Port Lucie, Florida (in thousands) Year Banks Savings & Loans 1991 $177,149 $ 96, ,392 95, ,214 90, ,497 98, , , , , , , , , , , , , , ,262 Source: Florida Bankers Association Banking and Thrift Institutions Market Share Report Year figures are as of September 30. F-9

196 PROPERTY TAXES Property values in the City are determined by the County Property Appraiser. Millage on property located in the City is set by the City Council, and the first $25,000 of appraised value on homestead property is deducted prior to tax computation. The tax collections since 1990 are summarized below. Tax Roll Year Total Assessed Value for Tax Purposes (000 s) Property Taxes and Collections Property Taxes Levied Current Tax Collection (1) % of Levy Collected 1990 $1,916,903 $7,030,897 $6,462, % (2) ,118,704 7,829,051 7,572, ,176,063 7,630,623 7,356, ,220,916 7,786,076 7,520, ,297,248 8,053,164 7,705, ,362,560 9,078,845 8,701, ,426,088 9,355,993 8,993, ,562,660 10,108,563 9,682, ,576,153 10,156,645 9,697, ,713,778 10,726,478 10,162, ,826,176 11,166,932 10,681, (1) Current Tax Collections presented herein are through the recapitulation date of June 30. (2) General Development Corporation, at one time the City s largest landowner and taxpayer, filed bankruptcy (Chapter 11) on April 6, Their new name is Atlantic Gulf Communities. Tax roll year is January 1 to December 31. Municipality s Fiscal Year is October 1 to September 30. Source: St. Lucie County Tax Collector Records Tax Roll Year ASSESSED VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS CITY OF PORT ST. LUCIE, FLORIDA Real Property Personal Assessed Centrally Assessed Assessed Value for Operations Property 1992 $2,620,814,620 $123,971,410 $134,195 $2,176,063, ,699,010, ,569, ,150 2,220,915, ,792,459, ,521, ,752 2,297,247, ,887,552, ,449, ,660 2,362,559, ,972,424, ,497, ,670 2,426,088, ,116,099, ,687, ,079 2,562,659, ,168,782, ,397, ,621 2,576,153, ,305,358, ,332, ,960 2,713,778, ,482,522, ,134, ,949 2,826,177, (1) 3,581,861, ,017, ,123 3,043,495,099 Source: St. Lucie County Property Appraiser Note: Tax Roll Year is January 1 to December 31. City s Fiscal Year is October 1 to September 30. (1) Preliminary tax roll. F-10

197 The ten largest taxpayers and the type of business each such entity is engaged in is summarized below. SCHEDULE OF TEN LARGEST TAXPAYERS 2001 TAX ROLL CITY OF PORT ST. LUCIE, FLORIDA Taxpayer Type of Business Valuation (1) Percentage 1. Florida Power & Light Corporation Utility $ 44,805, % 2. BellSouth Telecommunications Communications 33,389, St. Lucie West Development Corp. Land Development 31,505, HCA Health Services of Florida, Inc. Hospital Facility 27,401, Sandpiper Resort Property Inc. Resort Hotel 24,199, Levitt Homes, Inc. Land Development 13,789, Outdoor Resorts at SLW, Inc. Resort Camping 12,973, Regency Centers, Inc. Shopping Center 12,365, Martin Memorial Health Care Services 11,463, LSL Associates LP LTD Shopping Center 10,623, Total Taxable Assessed Value of 10 Largest Taxpayers $ 222,516, Total Taxable Assessed Value of Other Taxpayers 2,822,429, Total Taxable Assessed Value of All Taxpayers $3,044,946, % (1) Includes both Real and Personal Property Tax roll year is January 1 to December 31 Source: St. Lucie County Property Appraiser St. Lucie County Tax Collector City of Port St. Lucie GIS Department EDUCATIONAL FACILITIES The County has 20 public elementary schools, 7 middle schools, 4 public high schools, including one magnet school, which combines a middle school and a high school. In addition, the County has three special need schools: Woodlands Academy which services the needs of high school and middle school students with disciplinary problems, Anglewood Center which assists high school and middle school students with small children complete their education and Dale Cassens School for the physically and emotionally handicapped students at all grade levels. There are also ten private schools supplementing the public system. Higher education in the area is offered by Barry University located in Port St. Lucie with its emphasis on upper class coursework for the working adult who is obtaining their Bachelors degree. The state university system is represented by Florida Atlantic University ( FAU ), and offers selected post-graduate courses and degrees in elementary and early childhood education. FAU has acquired a 50-acre campus in St. Lucie West. Indian River Community College ( IRCC ) is a two-year community college located in Ft. Pierce with locations in surrounding counties. Its broad selection of programs lead to associate degrees. IRCC operates a 40-acre campus in St. Lucie West. In August 2000, FAU opened a joint-use 1000 square foot facility with IRCC allowing them to increase course offerings at both the community college and university levels. F-11

198 AGRICULTURE The County is the largest citrus producing county in the State. The County s 588 square miles occupy 1% of the land area in Florida. Eighty-two percent (82%) of the County s land is used in farm-related activities. In 1998, an estimated.88% of wage and salary employees were agricultural workers as compared to.70% statewide. The most recent information provided by the U.S. Department of Commerce, 1997 Census of Agriculture, states that as of 1997 there were 500 counted farms in the County, encompassing approximately 227,414 acres with an average land and building value of $1.2 million. The market value of all agricultural products (i.e., crops and livestock) produced in the County amounted to $260.5 million in cash receipts, representing 4% of the State s total farm cash receipts. TOURISM AND RECREATION A combination of favorable climate and available recreational activities including public beaches, tennis courts, golf courses and theaters has made tourism an important industry in St. Lucie County. Within the County, there are 9 licensed hotels and 30 licensed motels with approximately 2,530 total units. The County also has over 363 licensed dining establishments with an estimated seating capacity in excess of 27,000. The County has one inlet, located at its northeast corner and is connected to the federally-maintained Intracoastal Waterway. City residents have easy access to the ocean by way of the North Fork of the St. Lucie River through its protected, tree-lined waterway meandering through the City. Besides boating and fishing, the City maintains 210 acres of developed parks and has over 680 acres in undeveloped or passive status. Developed parks have facilities for organized athletic programs. TRANSPORTATION FACILITIES Highways: Within its 80 square miles of area, the City provides approximately 821 miles of paved roads. The transportation network makes up approximately 6,000 acres which is 12% of the City s land area. The City has excellent access to three major north-south Florida highways. Both Interstate I-95 and the Florida Turnpike have interchanges in the City. U.S. Route 1 is the primary local highway with most of the area s commercial development along this corridor. The City has easy access to two principle east-west highways. State Road 76 connects Stuart to southwest Florida and State Road 70 provides connections to other Florida West Coast areas. Bus and Taxi Service: Greyhound Bus Lines has a terminal located in Fort Pierce near the I- 95 and the Florida Turnpike interchanges, offering daily scheduled service for nationwide thru-line and charter service. The City has three taxi services and seven motor services to Palm Beach International Airport. Rail Transportation: Freight service to the Port St. Lucie region is provided by the Florida East Coast Railroad which operates from Jacksonville to Miami. Passenger railway service is located in nearby West Palm Beach. Water Port: The Port of Fort Pierce, ten miles north of the City, is a deep water port accommodating ships of up to six hundred feet. Cargo traffic consists primarily of citrus, vegetables F-12

199 and fertilizer. There is 64,000 square feet of refrigerated storage and an additional 8,000 square feet of dry storage in dock warehouses which are owned and operated by Indian River Terminal Company, a subsidiary of Bernard Egan & Company. Airports: The St. Lucie County International Airport is located in nearby Fort Pierce and presently has two runways. In addition, the facility provides fuel, repair, hanger and U.S. customs and immigration services. Palm Beach International Airport (less than 50 miles away from the City) is the closest major commercial traffic port, servicing most U.S. airlines. POLICE AND FIRE PROTECTION The City s Police Department consists of approximately 147 authorized full-time sworn officers and 56 full-time civilian personnel, for a total of 203 employees. The Department s budget for fiscal is $14.2 million, as compared to $14.1 million for It is estimated that the Department handled 166,959 calls for service (which includes primary and backup calls) in 2000 and of those calls 2,422 involved serious crimes (i.e. homicide, rape, robbery, aggravated assault, burglary, theft, auto theft). In 1999, the Department handled 131,769 total calls for service, as compared with 118,578 for Of these calls, 2,350 in 1999 and 2,545 in 1998 involved serious crimes. There were three reported homicides in 2000, three reported homicide in 1999 and one in There are a number of programs offered to residents: a close patrol plan of homes belonging to seasonal residents, an infant car seat loan program, an active neighborhood crime watch program, Police Athletic League, the new Neighborhood Mini-Stations, Domestic Violence Security Program, Reverse 911 System and Operation Identification Lending Engravers. As part of the local justice system, there are programs (such as teen court) available for youth offenders, D.A.R.E. (Drug Abuse Resistance Education) School Resource Officers, and a Juvenile Counselor. Fire protection is provided by St. Lucie Fire District (the Fire District ), an independent tax supported special district. The Fire District employs 325 persons. The Fire District maintains 15 fire stations and 88 vehicles, including 21 ambulances, 17 engines, 5 elevated platforms, 1 hazardous materials vehicle, 2 special operations trucks and 11 wild-fire specialty vehicles. EMPLOYEE RELATIONS The City currently employs 711 individuals on a full time basis, as authorized by the City Council. Under the Constitution of the State, employees have the right to join together for the purposes of collective bargaining. To date, the members of the Coastal Florida Police Benevolent Association have selected various bargaining representatives. Strikes by municipal employees, under any conditions, are prohibited by the Florida Constitution. The City maintains a Civil Service Appeals Board. Employees may be removed for cause. F-13

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201 APPENDIX G Accredited Investor Definition

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