Complaint against City and its Council Members California Government Code 910 and 910.

2 The issues are simple, the apparent cover up complex and spans a number of years.1 The City of Indio, the City Counsel, and their agents (hereinafter City or City of Indio) acting individually and as [the legislative body for the Indio CFD 2004-3] acts have and continue to financially damaged Brian Davies. I notice my claim as required in California Government Code 910 and 910.2. I believe outside Counsel should be obtained since the Citys Firm is implicated. My Mello Roos Tax is $4,000.00 per year for 30 years. My home value is $70,000.00 below fair market directly related to this tax. In the last 7-10 days the City has voted 5-0 to have

Improvement Area 2 pay only a fraction of what they should be responsible for in a settlement agreement. This total is about $8 million short of the amount I have calculated. This developer and purported owner, Terra Lago Indio LLC, should be responsible for in the backbone structures paid by Improvement Area 1. Despite presenting this issue in person to the City, and in numerous other communications, the City has chosen to secretly work a deal where Improvement Area 2 will be free from any Mello Roos Tax. I believe this act alone will allow Improvement Area 2 to sell homes $70,000.00 cheaper, further devaluing my property. I have no other recourse. A majority of my peers I believe would find this unacceptable. If fraud is found to have occurred or continues to be occurring, then I believe I have uncovered a very serious problem. In either scenario, I believe this needs forensic accounting by independent outside consultants. I believe the total amount due is over $8 million [more with interest] and I will support that statement with a review of the Indio CFD 2004-3 (CFD 2004-3) billings. I have been damaged not less than $120,000.00 and can support those figures. The City is allowing Area 2 to build without the same burden as Area 1 has carried. Area 1 was 98% completed when the Indio 2004-3 $26.3 million Bond was funded. In effect the City Of Indio, the legislative body for CFD 2004-3, and its agents have performed ineligible payments, improper administrative acts, and reimbursements, simply not allowed by the Mello Roos Act or
1

See presentation at: http://www.scribd.com/doc/167641743/City-of-Indio-Presentation-TerraLago-Hills-Development-Agreement

Government Code Section 53311 et seq. Such acts if proven at trial or by the Attorney General violates the tax status of the City. The City, as the legislative body for the 2004-3 District, has received money from a 2004-3 Mello Roos Bond (Indio CFD 2004-3),
2

and appears to have used it for ineligible facilities.

This creates severe problems including loss of the tax status of the bonds. Despite educating the City and volunteering to participate in discussions with Terra Lago Indio LLC (Area 2 or Improvement Area 2), the City entered into an agreement with this new owner to payback only a fraction of the value taken. The full filling information and supporting agreements for Indio CFD 2004-3 are linked below.
3

Such present acts are designed to allow Area 2 homes to be built under a development agreement, and not subject to the previously CFD 2004-3 tax, which by a previous vote of the landowners require those homes to fund up to $33 million in bonds which would benefit my property. 4 Only 530 homes are paying for this bond. The total amount to be paid over 30 years is outlined below. Nothing comes from my $4,000 payment. It only pays back what the City has spent. To ignore is a travesty. Here is the bond schedule for Indio CFD 2004-3. See Official Statement of the 2004-3 Bond offering, page 11. Debt Service Schedule
DEBT SERVICE SCHEDULE Year Ending (September 1) 2006 2007 2008 2009
2
5

Principal $-0385,000 415,000 445,000

Interest $ 1,234,030.63 1,283,962.50 1,271,065.00 1,256,167.50

Annual Debt Service $ 1,234,030.63 1,668,962.50 1,686,065.00 1,701,167.50

See Wildan Financial report for Indio CFD 2004-3 at: http://www.scribd.com/doc/162959583/Brian-CFD-2004-3-Exhibits 3 Link for all offering documents at: http://www.scribd.com/doc/152429034/CFD-2004-3-OPTfull-version-of-Mello-Roos-offering-city-of-Indio 4 Terra Lago West or Improvement Area 1 or simply Terra Lago. Consists of 635 home sites. See approval PMP: http://www.scribd.com/doc/163164488/Terra-Lago-WestPMP?secret_password=1kojvnxbygu2rxm2e9kk. See also Final Recorded Tract Maps 31601-1 at: http://www.scribd.com/doc/162985172/31601-1-Tract-Map-Original-Map-for-Terra-Lago 5 The following is the annual debt service schedule for the Bonds, assuming no redemptions other than mandatory sinking fund redemptions.

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

480,000 520,000 560,000 580,000 605,000 635,000 660,000 690,000 725,000 760,000 795,000 835,000 875,000 920,000 965,000 1,015,000 1,065,000 1,120,000 1,175,000 1,235,000 1,300,000 1,365,000 1,435,000 1,510,000 1,590,000 1,670,000

1,238,977.50 1,219,570.00 1,198,080.00 1,174,190.00 1,148,955.00 1,122,612.50 1,094,250.00 1,064,062.50 1,031,882.50 997,425.00 960,965.00 922,137.50 880,245.00 836,345.00 790,187.50 741,772.50 690,842.50 636,465.00 579,280.00 519,287.50 456,230.00 389,855.00 319,557.50 245,655.00 167,890.00 86,005.00

1,718,977.50 1,739,570.00 1,758,080.00 1,754,190.00 1,753,955.00 1,757,612.50 1,754,250.00 1,754,062.50 1,756,882.50 1,757,425.00 1,755,965.00 1,757,137.50 1,755,245.00 1,756,345.00 1,755,187.50 1,756,772.50 1,755,842.50 1,756,465.00 1,754,280.00 1,754,287.50 1,756,230.00 1,754,855.00 1,754,557.50 1,755,655.00 1,757,890.00 L756,005.00

Total $26,330,000 $25,557,950.63 $51,887,950.63 I believe it should be apparent that paying such a small amount of money cannot come close to

the $51.9 million in paybacks Area 1 is strangled with and what I feel is worse is that Area 2 has benefitted more than Area 1. My total cost over 30 years is $97,901.79. The house is devalued on top of that by $70,000.00. The payment is $360.00 per month. For nothing. A full discussion of all alleged improprieties are historically brought to date.6 The deceit if forensically found to be true, is significant. The new Area 2 builder Terra Lago Indio LLC recently approved agreement for a minimal amount of money, sets the table for the builder to avoid paying proper fees associated with the CFD 2004-3. They avoid $8 million in reimbursements to Improvement 1 homeowners as outlined in my application. To add to this damage 831 homes will be built and have no CFD 2004-3 tax which, will depreciate the value of

See overview presentation at: http://www.scribd.com/doc/167641743/City-of-IndioPresentation-Terra-Lago-Hills-Development-Agreement

my home further. Area 2 homes will be sold for less. No $33 million funding which would bring in area wide improvements which I deserve. I bring my complaint individually, and I alone request to be compensated an amount equal to my damages. If my allegation are proven as true I believe the full cost to the City could amount to $35 million. MULTIPLE TIMES I ASKED THE CITY FOR A FORENSIC ACCOUNTING AND AUDIT. NOTHING. I have previously asked this Council to call in an independent auditor to evaluate the Mello Roos offering and identify what monies were paid for Public Structures inside and outside of Area 1.
7

That any inequities be corrected to the benefit of Area 1 homeowners. Determine and explain

how any developer may change the Mello Roos District, so they do not have to pay? CFD 20043 tax on Area 1 is excessive and burdensome, Area 2 -the time share who received the benefits from Area 1 tax money should pay for benefits received. Despite notice on several occasion, which I keep written records, no such relief or answers were given. I have no other recourse for myself. HISTORIC REVIEW PRIOR TO THE COMMUNITY FACILITIES DISTRICT NO. 2004-3 (TERRA LAGO) MAJOR ISSUES THE CITY MUST ADDRESS 1. SEVERE PRE EXISITING WATER DEFICIENCIES ARE NOT ELEIGLE FOR A LANDOWNER VOTE CFD MELLO ROOS OFFERING. The history before the Mello Roos formation may be found in the City of Indio's public records. I have reviewed them, including the Indio Council Notes, various Development Agreements and Ordinances, Riverside Recorders office, and Indio Water District (IWA) Notes. The IWA notes on April 28, 2005 demonstrates that $8.1 million in water projects needed to be completed by spring 2006 and that '`no money" was available. On August 16, 2004 the Indio Water Notes state:

Communications available upon request.

[3.] SUNCAL, INDIAN LAKES AND TRENDWEST FOR OFF-SITE WATER IMPROVEMENTS (Off setting to Trendwest and others, not eligible) John CoreIla, Public Works Director/City Engineer, reported Staff is requesting authorization to enter into an agreement with SUNCAL, Indian Lakes, and Trendwest for off-site water improvements to credit IWA required off-site infrastructure against water impact fees. It was moved by Agency member Godfrey, seconded by Agency member Gilbert and unanimously carried to AUTHORIZE entering into an agreement with SUNCAL, Lakes. and Trendwest developments to credit IWA required off-site infrastructure against water impact fees. **** Documented Pre-existing Timeshare Water Deficiencies: The September 19, 2005 IWA notes states that there were water restrictions placed on the city. The Trendwest Resort and its present successors in interest (Timeshare) has difficulties with water pressures. In fact as the City knows there was far more than water problems. There were law suits ** have to build on. A third part of the study is water strategy in 2005, how to get between now and the end of the year. Some of them include fluoride wells to the north and variance requests. The Health Department does issue variances to existing wells. Commissioner Godfrey indicated the urgency of the Trendwest Project and the solution should be top priority_ Commissioner Wilson commented we can build on tanks, the bladder tanks, and look for a permanent solution where there might be other ways to improve. He asked if the bladder tanks, the facility, can be used as potable water? Mr. Holliman replied yes they can. That is what they are constructed for. Ken Weller, Acting Executive Director, commented Staff is requesting authorization under an emergency power, specifically related to the Trendwest project, to make the decision to not hold back the process of accomplishing this water solution. President Fesmire asked about the long term recommendations? Mr. Holliman replied beyond five yes, the ten million gallon tanks would afford storage to the north. In the interim while you are building the reservoirs it would allow you to take a look to see if there are hydraulic constraints. The short term one to five year window, you can treat the wells and you can upsize the lines. The water model will look at that and it will be incrementally changed to make those improvements. At the same time, Staff wants to be looking at the operational efficiency of the present system. Commissioner Godfrey stated this Board has already approved the construction of the reservoir tanks. Mr. Holliman replied that is correct, you have. Mr. Weller commented Staff will keep the Board updated on the progress.

Ken Weller, Acting Executive Director, commented Staff is requesting authorization under an emergency power, specifically related to the Trendwest project, to make the decision to not hold back the process of accomplishing this water solution. President Fesmire asked about the long term recommendations? Mr. Holliman replied beyond live years, the tan million gallon tanks would afford storage to the north. In the interim while you are building the reservoirs it would allow you to take a look to see if there are hydraulic constraints. The short term one to five year window, you can treat the wells and you can upsize the lines. The water model will look at that and it will be incrementally changed to make those improvements_ At the same lime, Staff wants to take looking at the operational efficiency of the present system. Commissioner Godfrey stated this Board has already approved the construction of the reservoir tanks. Mr. Holliman replied that is correct, you have. ** Note should be made of the City expense of over $1 million for this temporary solution made by Mr. Wilson. ** Also pre-existing to CFD 2004-3. THE CFD 2004-3 WAS BY LANDOWNER VOTE. 2. ELIGBLE FACILITIES ARE RESTICTED AND MAY NOT INCLUDE PRE-EXISTING DEFICIENT PUBLIC FACILITES. This was a CFD landowner vote that approved the Terra Lago 2004-3 District. Such a unilateral tax vote has restrictions: See Publish Brochure California Mello-Roos Community Facilities Districts by Orrick, Herrington & Sutcliffe LLP at page 7: Limitations on Landowner Vote Districts: The legislature placed restrictions on both the type and level of services, and on the level of facilities, that may be authorized by a landowner vote, and it is important to understand them. The restriction on type of services is set forth below with the larger description of the services the Act can provide. The restriction on level of services is that the CFD may only finance services "to the extent they are in addition to those provided within the area of the district before the district was created," and the "additional services may not supplant services already available within that territory when the district was created." The restriction on level of facilities is that a local agency may only conduct a landowner vote if it determines "that any facilities financed by the district are necessary to meet increased demands placed on local agencies as the result of development or rehabilitation occurring in the district."

Thus the Legislature limited the use of landowner vote CFDs to mitigating the impacts of new development. If there are pre-existing needs for facilities or services within the local agency, Mello-Roos is not to be used as a tool to require new development to pay for them those needs must be addressed by the community as a whole. Nor is the landowner CFD to take on the financial burden of services the local agency is already providing. INDIO (CFD) 2004-3 HISTORY ATER GARY WILLIAMS PETITION IN MARCH 2005 REPRESENTING DEVELOPER INDIO LAND VENTURES LLC. **NOTE LB INDIO WAS THE BENEFICIARY OF THE HILLS DA*** The 2004-3 Terra Lago Mello Roos District 8 was formed after a petition to the City of Indio, [a general law city duly organized and validly existing under the Constitution and laws of the State of California], by then Developer Indio Land Ventures LLC (ILV), a Delaware limited liability corporation, represented by Gary Williams.
9

The Mello-Roos Community Facilities Act of

1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) allows for such a process. The Counsel representing the 2004-3 District was an Attorney Elizabeth L Martyn, Esq. out of the Kotkin & Associates, APLC office, who also represented the City of Indio.10 The City Council serves as the legislative body of the CFD 2004-3 District. See Official Statement for CFD 2004-3 Series 2005 Bond Offering page 24. The District consists of approximately 364.96 gross acres known as the Terra Lago comprising two Improvement Areas Improvement Area No. 1 consists of approximately 174.80 acres, approximately 135.75 acres. of which are slated for residential development and 39.05 acres of which are open space, and Improvement Area No. 2 which consists of approximately 190.16 acres, 173.76 acres of which are slated for residential development and 16.4 acres of which are open space. At build out, it is anticipated that Improvement Area No. 1 will
8

The Indio Community Facilities District (CFD) 2004-3, (Terra Lago) was formed in 2005, not 2004. The District includes Improvement Area 1 [635 homes], Improvement Area 2 [831 homes]. 9 Gary William developer representative and former City Attorney Elizabeth L. Martyn, ESQ. are now married. See Exhibit E at: http://www.scribd.com/doc/162959583/Brian-CFD-2004-3Exhibits 10 Now married to Petitioner Gary Williams.

contain 635 residential dwelling units and Improvement Area No. 2 will contain 849 residential dwelling units. See "THE DEVELOPMENT" for further information regarding the Terra Lago housing community. The bonds are being issued to finance the acquisition of public improvements serving properties within Improvement Area No. 1 only and not Improvement Area No. 2. 11 See "THE FINANCING PLAN" herein. It is unclear what facilities needed paid that directly benefited Area 1 as 98% of the development was completed at the time the CFD 2004-3 Funded. That is why forensic accounting is needed. A look at all development close to Terra Lago to see what was covered and was it fair and related to Area 1. THE PETITION, FORMATION, ELECTION, LIEN AND FORMATION
See full offering with formation documents at: http://www.scribd.com/doc/152429034/CFD-2004-3-OPTfull-version-of-Mello-Roos-offering-city-of-Indio.

On July 20, 2005, an elections was held within Improvement Area No.1 and Improvement Area 2 of the Terra Lago District relative to the authorization of [not to exceed] $30 million for both improvement Areas of the Terra Lago District. The Resolution of Formation was adopted by the City of Indio. See Exhibit A Resolution 9027 (Canvassing Results of Special Election). 12 The resolution recites the rate and method of apportionment (RMA) of the Special Tax, and the establishment of an appropriation limit. It was approved by 2/3 of the votes cast by qualified electors of both improvement Areas. The Council was authorized to incur indebtedness on behalf of the CFD 2004-3 for Improvement Area No 1 and Improvement Area No. 2 of the CFD, in the maximum amounts of $30 million for each Improvement Area.

11

Personal communications from Bond Counsel Don Hunt for the City stated that backbone structures were eligible facilities and that when Improvement Area 2 funded I would receive the benefits of their $33 million bond offering. 12 The resolution determined the elections were validly conducted. The council acted as the legislative body of the CFD, and was authorized to levy the Special Tax on behalf of the CFD as specified in Ordinance No 1441, (the Resolution of Formation) adopted by the Council on July 20, 2005. See Exhibit A: http://www.scribd.com/doc/162959583/Brian-CFD-2004-3-Exhibits

Further under this resolution the City is authorized to establish an appropriations limit for Improvement Area No.1 and Improvement Area No.2 of the CFD. The City Clerk was also directed and authorized to record notice of the special tax of the CFD by recording a Notice of Special Tax Lien of the CFD pursuant to Section 3117.5 of the California Streets and Highway Code. See Riverside County Instrument No. 2005-0603064 Notice of Special Tax Lien. See Exhibit G recorded Special Tax Lien for Improvement Area 1 and Improvement Area 2 of the Indio CFD 2004-3.13 The full procedure for the formation included 1) Petition, 2) Resolution No. 8956 (Resolution of Intention to establish a Community Facilities District (CFD)),14 3) Resolution No. 8957, (Resolution of intention of Incur bond indebtedness), 4) Resolution No. 9024 (Resolution approving Joint Community Facilities Agreements), 5) Resolution No. 9025 (Resolution of Formation) 15, 6) Resolution No. 9026 (Resolution Calling for a Special Election), 7) Resolution

13

http://www.scribd.com/doc/162959583/Brian-CFD-2004-3-Exhibits Exhibit E. Section 4.The facilities proposed to be financed by each improvement area of the CFD are public infrastructure facilities and other governmental facilities with an estimated useful life of five years or longer, which the CFD is authorized by law to construct, own or operate and that are necessary to meet increased demands placed upon the City as a result of development or rehabilitation occurring within the proposed CFD, including but not limited to streetscape, landscape, traffic controls, storm drain, water and sewer facilities, dry utilities, other City fees and facilities, other Valley Sanitary District fees and facilities, other Imperial Irrigation District fees and facilities, and related costs including designs, inspections, professional fees, connection fees and acquisition costs (the "Facilities"). Such Facilities need not be physically located within the CFD. 15 See Section 4 above is identical to the Formation Section 4. The document controls what facilities are eligible facilities. If the City or the District makes any acts or omissions in violation of the IRS code Section 103 of the IRS Code of 1986 it may cause loss of tax exemption. See Official Statement of CFD 2004-3 Series 2005 Bond Offerings page 44. Loss of Tax Exemption As discussed under the caption "CONCLUDING INFORMATION Tax Exemption," in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the District has covenanted in the
14

Fiscal Agent Agreement not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Bonds under Section 103 of the Internal Revenue Code of 1986, as amended. Interest on the Bonds could become includable in gross income for purposes of Federal income taxation retroactive to the date the Bonds were issued, as a result of acts or omissions of the City or the District in violation of the Code. Should such an event of taxability occur, the Bonds are not

No. 9027 (Resolution Canvassing Results of Special Election), 8) Notice of Special Tax Lien, 16 9) Ordinance No. 1442 (Ordinance Authorizing the Levy of Special Tax). On August 3, 2005 Resolution No 9037 (Approving Resolution Certified by City Clerk) to issue bonds for Improvement Area 1 for up to $30 million. The principal amount of $26,330,000 ("Bonds") was issued on September 15, 2005 for the purpose of financing certain development fees payable to the City and others, and to further pay the cost of public facilities [not private facilities or pre-existing facilities with deficiencies] required as a condition of development of the Terra Lago project. 17 BACKBONE STRUCTURES WERE PAID FROM AREA 1 BOND MONEY. PRIVATE FACILITIES REIMBURSED FROM THE CFD 2004-3

The Bonds were secured by Improvement Area 1 properties, and not by Improvement Area 2 properties. However, [eligible public facilities] backbone structures may be paid by either improvement Area. See: Official Statement page 26, Public Facilities. Public Facilities subject to early redemption and will remain outstanding to maturity or until redeemed under the optional redemption or mandatory sinking fund redemption provisions of the Fiscal Agent Agreement. The Opinion of Bond Counsel Fulbright & Jaworski L.L.P. concurs the bonds are tax exempt as long as there is compliance with Section 103 of the IRS Code of 1986. 16 Disclosure to Future Homebuyers Pursuant to Section 53328.3 of the Act, the District has recorded a Notice of Special Tax Lien in the Office of the Riverside County Recorder. The sellers of property within the District are required to give prospective buyers a Notice of Special Tax in accordance with Sections 53340.2 and 53341.5 of the Act. While title companies normally refer to the Notice of Special Tax Lien in title reports, there can be no guarantee that such reference will be made or the seller's notice given or, if made and given, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a home or commercial facility or the lending of money thereon. Failure to disclose the existence of the Special Taxes may affect the willingness and ability of future owners of land within Improvement Area No. 1 to pay the Special Taxes when due. 17 It is unclear why the year 2004 was used since it was initiated in 2005. It may be due to the failed annexation of Improvement Area 2 due to environmental approvals issues. Improvement Area 2, in fact was not annexed prior to the formations. Improvement Area 2 was later annexed in 2007 to the Hills Development Agreement. Improvement Area 2 was also annexed at that time even though it was completely developed and had paid all of the higher impact fees, not the excessively low fees associated with the Hills Development Agreement.

A description of the public facilities proposed to be financed for Improvement Area No. 1 is contained in the Funding and Acquisition Agreement by and between the City and the Master Developer (the "Funding and Acquisition Agreement"). These public facilities consist of in-tract public facilities that are within and required to develop Improvement Area No. 1 and backbone public facilities, both within and outside the District, required to serve the entire District or both Improvement Areas. The costs of many of the backbone public facilities are eligible to be financed by either of the Improvement Areas. In addition, pursuant to the Agreement of Formation of Mello-Roos Community Facilities District No. 2004-3 (the "Development Agreement"), the costs of many of the backbone public facilities are eligible to be financed with the proceeds of bonds including, without limitation, the Bonds. The Master Developer has identified two development phases within Terra Lago. Phase 1 currently includes Improvement Area No. 1 and Phase 2 includes Improvement Area No. 2. The Master Developer completed mass grading of Improvement Area No. 1 prior to the sale of the tracts contained therein to the Developers. With respect to the major backbone public infrastructure improvements required to serve Improvement Area No. 1, as of August 1, 2005, approximately 98% of such infrastructure improvement for Improvement Area No. 1, including sewer, water, storm drain, dry utilities and landscaping improvements, had been completed. The backbone public infrastructure improvements required to serve Improvement Area No. 2 are expected to be completed by December, 2006. As of July, 2005, the Master Developer had expended approximately $25 million for the mass grading and major backbone public infrastructure improvements for Improvement Area No. 1. Initial funding for the work completed by Master Developer has been provided by internal sources. To the extent available, costs of the public facilities with respect to Improvement Area No. 1 will be funded from proceeds of the Bonds. The City will not be obligated to pay for the public facilities except from amounts on deposit in the applicable Acquisition and Construction Fund once established with respect to each of the Improvement Areas. The City makes no warranty, express or implied, that the proceeds of the bonds deposited and held in the applicable Acquisition and Construction Fund, and any investment earnings thereon, will be sufficient to pay for the Improvements. THE WYNDHAM TIMESHARE (TIMESHARE) Included in the CFD 2004-3 by a parcel number and not by name.

Had pre-existing water issues. The City elected to do a Transient Occupancy Tax (TOT ). The TOT agreement has been amended several times due to late construction and other issues. It will be a major subject of full future discovery. 18 No Mention by name in any CFD 2004-3 document. It was necessary to do PARCEL AND TAX research to determine the Timeshare was included.

The Timeshare was always part of the planned Hills Development Agreement. See 1996 Hills DA page 3. Full Hills DA at: http://www.scribd.com/doc/167643079/DA-1998-Hillstrendwest-wyndham-resorts-LB-Indio-Terra-Lago-East-RB-Indio Whereas, City desires to enter into this Agreement with Owner and Developer in order to facilitate the development of certain property (the "Site"), the legal description of which is fully described in Exhibit "A" and shown on the site plan in The Hills Specific Plan (SP 96-8-7), a copy of which is shown on Exhibit "H", both attached hereto. Developer desires to develop on the Site two 18 hole golf courses with appurtenant facilities, a 400 room resort hotel (18 acres) and 500 unit residential development (45.5 acres), all in accordance with The Hills Specific Plan (the "Project"). The Timeshare entered into an easement agreement between, LB Hills, developer [and beneficiary of the Hills DA], the Timeshare, and the Golf Course for entry through Terra Lago Parkway. It was consummated on October 27, 2003. The Timeshare was approve July 30, 2003 by Ordinance ( ORD ) 1347, years before the CFD 2004-3 Petition and Funding. From City records : ORDINANCE 1347 OF THE CITY COUNCIL, OF THE CITY OF INDIO, CALIFORNIA, APPROVING THE FIRST AMENDMENT TO DEVELOPMENT AGREEMENT NO. 968-10 TO ALLOW A 455 UNIT VACATION CLUB LOCATION ON 27.3 ACRES OF VACANT LAND LOCATED ON THE EAST SIDE OF GOLF CENTER PARKWAY, NORTH OF LANDMARK GOLF PARKWAY; WESTERN PACIFIC RESORT DEVELOPMENT AND TRENDWEST RESORTS, INC. It was moved by Mayor Wilson, seconded by Mayor Pro-Tern Bethel and unanimously carried to APPROVE an amendment to Specific Plan No. 96 -87, RPD4, and ADOPT Ordinance No. 1348, by title only, as first reading, to read as follows:
18

http://www.scribd.com/doc/167648180/Whyndham-Tot-Tax-Agreement-With-City-of-Indio Second Amendment to the TOT agreement between the City of Indio and Trendwest Resorts.

ORDINANCE OF THE CITY COUNCIL, OF THE CITY OF INDIO, CALIFORNIA, APPROVING A SPECIFIC PLAN AMENDEMENT (SP 96-8-7) TO ALLOW A 455 UNIT VACATION CLUB LOCATION FOR PROPERTY LOCATED ON EAST SIDE OF GOLF CENTER PARKWAY, NORTH OF LANDMARK GOLF PARKWAY; WESTERN PACIFIC RESORT DEVELOPMENT AND TRENDWEST RESORTS, INC. It was moved by Mayor Pro-Tern Bethel, seconded by Councilmember Gilbert and unanimously carried to APPROVE an amendment to Project Master Plan No. 96-8-10 and ADOPT Ordinance No. 1349, by title only, as first reading, to read as follows: ORDINANCE OF THE CITY COUNCIL, OF THE CITY OF INDIO, CALIFORNIA, APPROVING AN AMENDMENT TO PROJECT MASTER PLAN (PMP 96-8-10) TO ALLOW A 455 UNIT VACATION CLUB LOCATION ON 27.3 ACRES OF VACANT LAND LOCATED ON THE EAST SIDE OF GOLF CENTER PARKWAY, NORTH OF LANDMARK GOLF PARKWAY; WESTERN PACIFIC RESORT DEVELOPMENT AND TRENDWEST RESORTS, INC. It was moved by Councilmember Fesmire, seconded by Mayor Pro-Tern Bethel and unanimously carried to APPROVE a Transient Occupancy Tax (TOT) agreement between the City of Indio and Trendwest Resorts, Western Pacific Resorts and World Mark. The City Council and staff discussion of the TOT and project in July 2003. See Council Notes on July 30, 2003: Mayor Wilson requested to know if this project is a vacation club resort and not a time share. Edward Kotkin replied that is correct. Mr. Kotkin stated the Environmental Assessment 96-8-370, Project Master Plan No. 96-8-10 and Development Agreement No. 96-8-10 still remain valid as the basis for the City Council action on this matter. Mr. Lopez replied that is correct. Councilmember Gilbert commented it looks like a great project and asked if the 455 rooms are permissive? Mr. Kotkin replied this would be confirming the language of the entitlements previously granted rather than a straight hotel. The impacts are less severe than that of a hotel as the owners will own a membership in a club. They will be obligated to pay Transient Occupancy Tax (TOT) until the end of time.

Councilmember Gilbert requested to know if this project will be subject to Quimby fees. Mr. Kotkin replied no it is not as this matter is fixed under the original development agreement. Councilmember Fesmire requested to know what amount this project is subsidized for. Mr. Kotkin replied it is not subsidized at all . Jerry Carter, Finance Director, stated the City would be receiving TOT from day one. The TOT this will bring in is tremendous over a twenty year period. Tom Ramirez, City Manager, commented it is all covered by the revenues of $15 million over the project in ten years. The money we are putting up front in sharing we will clearly exceed by at least six times. Councilmember Fesmire requested to know what the advantage is to the applicant. Mr. Ramirez replied they will make some infrastructure improvements. They will be recovering some of their costs up front. He stated a financial consultant was hired to make all of the projections. Based on his report he recommends moving forward with the agreement. She requested to know the "worse case" scenario. Mr. Ramirez replied the City would have infrastructure in place and the TOT would have been collected for the first two years. 19 They will pay close to $2 million up front in plan check fees alone.20 We have collected this up front on paper and have protected the City well. Bill Swank, Senior, hotel developer for over 45 years, commented on their experience in developing and building hotels. He introduced their A Team which included Scott Bevins of Trendwest, Donald Rich, Project Manager, Bill Swank Jr. Project Manager, and John Small, Site Development Manager/Engineer. Mr. Swank stated a timeshare club is not required to pay transient occupancy tax. He indicated they came in and volunteered to do so. This project will be built by Western Pacific Resorts and financed by Trendwest. At the end of the construction it will be transferred to Worldmark Resort free
19

This occurred prior to CFD 2004-3 by 2 years. All infrastructure needed for the Timeshare would be preexisting to any CFD 2004-3. Also the development is covered by the Hills DA whereby the City has the burden to supply or reimburse water. LB Hills, the Lehman Brothers entity, was party to the Hills DA at this time. 20 Actually the amount was $3.1, excluding hidden credits

and clear of debt. This project will start construction as soon as they can pull a grading permit. He stated based on 75% occupancy this project will generate the revenues that Mr. Ramirez indicated but it will also go far beyond that. The project will return somewhere between 19-20 million dollars over the next twenty years in revenues to the city. The project will not fail, it is free and clear. It is a very high quality project and it is unique to this valley. The design includes the lakes and the swimming pools. Donald Rich, Project Manager, commented they have an aggressive schedule. It includes 19 buildings and 455 units. They expect to start grading in September and they hope to complete the infrastructure of the streets by January, 2004. The initial planning includes building all the streets and all the perimeter landscaping and the proper dust control measures. The streets will have the first cross of asphalt in. The landscaping will be growing for one year before occupying any of the buildings. By 2006 all units will be completed. Scott Bevins, Trendwest, Project Manager, stated they are happy to be a part of this community. They have been received by the City of Indio with open arms and he thanked the City Council and Staff. Mayor Wilson declared the public hearing opened at 8:07 p.m. and requested comments from the public for or against this proposal. There being no comments Mayor Wilson closed the public hearing. Mr. Kotkin commented the initial environmental reviews for Landmark Golf Club are sufficient to cover this project. After discussion, it was moved by Councilmember Godfrey, seconded by Councilmember Fesmire and unanimously carried to APPROVE an amendment to Development Agreement No. 96-8-10 with The Hills Golf Club, LLC and ADOPT Ordinance No. 1347, by title only, as first reading, to read as follows: ORDINANCE OF THE CITY COUNCIL, OF THE CITY OF INDIO, CALIFORNIA, APPROVING THE FIRST AMENDMENT TO DEVELOPMENT AGREEMENT NO. 968-10 TO ALLOW A 455 UNIT VACATION CLUB LOCATION ON 27.3 ACRES OF VACANT LAND LOCATED ON THE EAST SIDE OF GOLF CENTER PARKWAY, NORTH OF LANDMARK GOLF PARKWAY; WESTERN PACIFIC RESORT DEVELOPMENT AND TRENDWEST RESORTS, INC. The entities involved in the Timeshare construction are listed in the Easement Agreement recorded on November 3, 2003 as Riverside Instrument No. 2003-870477. This document

was for an easement in the Hills properties. See page 3 for the parties to the Timeshare entities. Re: Terra Lago Parkway entry easement. (b) The Easement granted above in Section 3(a) shall be a nonexclusive easement in gross for the benefit of Trendwest, or if WorldMark, The Club, a California nonprofit mutual benefit corporation, acquires any or all of a substantial portion of Trendwest's Property and Trendwest transfers its rights hereunder, for the benefit of WorldMark, including also any successor(s) in interest to WorldMark pursuant to any corporate restructure or reorganization (collectively, "WorldMark "), and derivatively through Trendwest or WorldMark, their respective tenants, subtenants, invitees, occupants, gu ests, members, employees and agents, and, if a California nonprofit mutual benefit corporation is created to act as a homeowners association for the owners of a substantial number of the residential units on Trendwest' s Property, for the benefit of said corporation and its tenants, subtenants, invitees, occupants, guests, owners, employees and agents (All of these entities and their derivative users are collectively referred to herein as the "Permitted Users"). The Easement shall be used for the purpose(s) of allowing the Permitted Users to utilize the Golf Courses and other incidental uses in connection therewith which rights shall be subject to the reasonable rules and regulations promulgated by LB Hills. Notwithstanding any other term or provision of this Agreement, the Easement shall be personal to Trendwest and WorldMark, as applicable, and derivatively to the other Permitted Users in such manner during the term hereof as shall be determined by Trendwest and/or WorldMark, and shall expire and terminate immediately and with no further action on the part of LB Hills in the event (i) either Trendwest and/or WorldMark cease to own all or a significant portion of Trendwest's Property; or (ii) Trendwest or WorldMark significantly changes their respective business models from that currently in place. (By way of example only, a change to building and operating hotels would be considered a significant change in their business models.) In no event shall the Easement be deemed to be an appurtenant easement and it shall not run for the benefit of any successor or assign of Trendwest or World Mark, or to the successor owners of Trendwest's Property, other than with respect to the Permitted Users as expressly set forth herein. THERE ARE NO DOCUMENTS TO EXPLAIN HOW THE TIMESHARE BECAME PART OF THE CFD 2004-3 AS EXEMPT PROPERTY. Clearly one must search to find out that the Wyndham Timeshare (Timeshare) is included in the 2004-3 District. Although an option, it must be justified. It is unclear how if it was already

part of the Hills DA. A search of the Offering Documents notes that exempt properties are listed by name for the Golf Course, common areas, and only the Timeshare unnamed [and by a parcel number the needs un-coded]. See Official Statement Appendix A (Rate and Method of

Apportionment of Special Taxes) page 10, Section F Exemptions. The Council shall not levy Special Taxes on Public Property, Property Owner's Association Property or Golf Course Property within each Improvement Area or Riverside County Assessor Parcel Numbers 601-150-024 and 601-270-018 located within Improvement Area 2 of the CFD. Exempt Property status will be assigned by the Administrator in the chronological order in which property becomes Public Property, Property Owner's Association Property or Golf Course Property. The parcels number refers to the Timeshare, but not by name. Not once does any document list the timeshare by name. The Timeshare was under the Hills Development Agreement. The timeshare was built by Trendwest Resorts Inc. The 1998 Hills DA addresses water deficiencies. See: Hills 1998 DA page 11. Section 5.4 Water.

In order to develop the site as contemplated by provisions of this agreement, developer may be required to construct water improvements that will benefit not only the site but other properties within the area. If the City requires that water mains within the project boundary be enlarged to provide capacity greater than that required for The Hills, that will benefit other properties, the City will reimburse the Developer for the increased cost resulting from the City's requirements. The City will reimburse the Developer for all off site water main extensions either when adjacent properties develop and/or by receiving credits toward water fees. Additional off site reimbursement items shall include reservoirs, booster stations, domestic wells, etc. if these appurtenances are required by the City for this development mechanisms to fairly apportion the cost of required off-site improvements. At the time specific improvements are proposed, City and Developer shall enter into specific reimbursement agreements to accomplish such improvements. No draft reimbursement Agreements are included as part of this Agreement. The 1998 Hills DA addresses impact fees. See: Hills 1998 DA page 11. Section 23.1 Impact fees. All that is listed is $438.00 for fire and safety. The Timeshare was always part of the Hills DA. Construction began in July 2003. The impact fee for CFD 2004-1 was initially $360.00 increased 2% per year. Somehow in 2005, the Timeshare was added as annexed entity # 60 on 10.7.2005. Interesting enough Improvement Area 1 and part of Improvement Area 2 were

annexed on 07.21.2004, which is before Improvement Area 2 was approved. See Riverside County Instrument No. 2004-0604778 dated 08.04.2004. Notice of Special Tax. The Timeshare was not part of this 2004-1 tax initially, but added later. It is clear they were eligible. The CDF 2004-3 tax district includes 1) Terra Lago (Area 1) with 635 homes; The Wyndham Time Shares; 3) The Terra Lago Golf Course; and 4) The Rabobank development with its 831 homes [Area 2]. The idea behind funding the CFD 2004-3 district was to facilitate the infrastructure development for all of the CFD 2004-3 District. So, the money raised in the Area 1 bond offering was eligible to build infrastructure in the District. All others benefited with the money raised from our Area 1. Now the City approved another agreement which did not include request forensic accounting. No professional was used to calculate backbone structures. THE TIMESHARE ENTERED INTO AN AGREEMENT TO COVER PAYMENTS FOR DEFINED AREAS. ELIGIBLE. TIMESAHRE PAID IMPACT FEES OF $3.1 MILLION. THE COST SHARING AND NOTHING MORE. ************************************* 21
COST SHARING AGREEMENT This COST-SHARING AGREEMENT (this "Agreement") is entered into as of October 27, 2003, by and between LB HILLS GOLF LLC, a limited liability company ("Seller"), and TRENDWEST RESORTS, INC., an Oregon corporation ("Purchaser"), with reference to the following facts: RECITALS: A. Seller and Purchaser are parties to that certain Purchase and Sale Agreement (Indio Resort) dated as of June 6, 2003 (the "Purchase Agreement"), whereby Seller has agreed to sell to Purchaser and Purchaser has agreed to purchase from Seller, certain real property more particularly described in the Purchase Agreement (the "Property"). Capitalized terms used herein and not otherwise defined shall have the meaning given to such term in the Purchase Agreement. B. Seller and Purchaser have agreed, on the terms and conditions set forth herein, that Purchaser shall pay to or reimburse Seller for a portion of the costs Seller has or will incur to cause the completion of the Improvements (as hereinafter defined).

INCLUDED ARE FACILITIES PAID.

NOT CFD 2004-3

21

http://www.scribd.com/doc/167643065/Cost-Sharing-Agreement-With-LB-HILLS-and-TrendwestResorts-Oct-27-2003-0 Complete Cost share agreement with Timeshare and LB Hills.

THEREFORE, in consideration of the foregoing and in reliance upon the mutual promises herein contained, the parties agree as follows: 1. Improvements. Exhibit "A" attached hereto and incorporated herein by this

reference sets forth the improvements (the "Improvements") to be performed by Seller upon the terms and conditions set forth herein, which Improvements shall be constructed in accordance with the requirements of that certain Development Agreement with the City of Indio dated as of December 16, 1996 (the "Development Agreement"), the requirements of the Governmental Authorities (hereinafter defined) and the Purchase Agreement. Seller has or will submit to the City of Indio (the "City") the plans and specifications detailing the Improvements prepared by Seller in accordance with the foregoing requirements (the "Plans and Specifications"). Seller shall select in its sole, but commercially reasonable discretion, qualified contractors and subcontractors to perfor m the Improvements. Subject to the qualification set forth in Section 6(f), Seller shall complete the Improvements on or before the later of (i) February 1, 2005 or (ii) fourteen (14) months after Purchaser commences its clearing and grading of the Property. Seller shall use commercially reasonable efforts to promptly commence and diligently prosecute to completion the Improvements from and after the later to occur of the Closing Date and the approval by the City of the Plans and Specifications and the Improvements. Seller makes no representations or warranties of any kind with respect to the construction of the Improvements other than to warrant and represent that (a) Seller shall use commercially reasonable efforts to cause the Improvements to be constructed in a good and workmanlike manner and (b) the Improvements will be constructed in accordance with the requirements of the Development Agreement, the Purchase Agreement and all requirements for the construction of the Improvements imposed by the City of Indio and any applicable governmental authorities ("Governmental Authorities"). 2. Cost Estimate. Purchaser acknowledges that it has reviewed and by execution and delivery of this Agreement approves construction of the Improvements listed in Exhibit A in accordance with all requirements for the construction of the Improvements imposed by the Governmental Authorities. Purchaser further acknowledges and agrees that Purchaser shall have no right to dispute in any manner the Improvements except as otherwise expressly set forth herein. Purchaser agrees and acknowledges that Exhibit "A" represents a good faith description by Seller and Purchaser of the presently anticipated scope of the Improvements, but that such scope of the Improvements may change due to factors beyond the control of Seller. Seller and Purchaser agree and acknowledge that: (i) if the costs incurred by Seller to cause the performance of the Improvements exceed the cost estimate upon which Purchaser's Share was based, Purchaser shall not be obligated for any portion of such difference; and (ii) if the cost estimate is greater than the costs incurred by Seller to cause the performance of the Improvements, Purchaser shall not be entitled to any refund or credit as a result therefrom. 3. Purchaser's Allocation of Costs for Improvements. Purchaser and Seller have agreed that Purchaser shall be responsible for and shall pay the sum of Seven Hundred Eighty Four Thousand and No/100 Dollars ($784,000.00) ("Purchaser's Share") of the cost of the Improvements. In addition to the Purchase Price to be delivered by Purchaser to Seller pursuant to the terms and conditions set forth in the Purchase Agreement, Purchaser shall deliver the Purchaser's Share to Escrow Agent which shall be released by Escrow Agent. Escrow Agent shall release one third (33 and 1/3%) of Purchaser's Share to Seller at Closing. Seller shall have no obligation to segregate Purchaser's Share in a separate account at any time after receipt of any portion of the Purchaser's Share. The second third (33 1/3%) of Purchaser's Share shall be disbursed to Seller upon its commencement of the construction of the Improvements. Seller shall simultaneously deliver notice to Purchaser and Escrow Agent when Seller commences construction of the Improvements

(the "Commencement Notice") and Purchaser shall have five (5) business days after the effective date of the Commencement Notice to confirm such commencement and to deliver notice to Escrow Agent authorizing release of those funds. Upon receipt of that notice Escrow Agent shall release the second third (33 1/3%) of Purchaser's Share to Seller five (5) business days after the effective date of the Commencement Notice. The final third (33 1/3%) of Purchaser's Share shall be disbursed to Seller upon Seller's completion of the construction of the Improvements. Seller shall simultaneously deliver notice to Purchaser and Escrow Agent when Seller completes construction of the Improvements (the "Completion Notice"). Purchaser shall have five (5) business days after the effective date of the Completion Notice to confirm such completion and to deliver notice to Escrow Agent authorizing release of those funds. Upon receipt of that notice, Escrow Agent shall promptly release the final third (33 1/3%) of Purchaser's Share to Seller five (5) business days after the effective date of the. Completion Notice. In the event that the Improvements are not completed on or before the later of (i) February 1, 2005 or (ii) fourteen (14) months after Purchaser commences its clearing and grading of the Property, Purchaser shall be entitled to complete the Improvements and to use the remaining third of Purchaser's Share still in escrow to fund such completion. 4. Refinements. Purchaser acknowledges that the Governmental Authorities may impose revisions to the Plans and. Specifications and/or the Improvements ("Project Refinements") in connection with the City's approval of the Plans and Specifications for the Improvements. Pur chaser agrees and acknowledges that Seller may make revisions to the Plans and Specifications and/or the Improvements without the consent of Purchaser from time to time in response to requirements of the Governmental Authorities so long as such changes do not adversely affect Purchaser's development; PROVIDED, HOWEVER, that Purchaser's Share shall not be increased as a result of any such change; and PROVIDED, FURTHER, that Seller shall provide Purchaser notice of any such revisions. 5. Cooperation. The Parties shall act in good faith and agree to use their best efforts to assist and cooperate with the other party in doing all things reasonably necessary to complete the Improvements contemplated by this Agreement; PROVIDED, HOWEVER, such cooperation shall not require either party to incur any additional significant expense or expend any significant time. In connection with Seller's processing of the Governmental Authorities' approval of the Plans and Specifications and Improvements, Seller shall provide Purchaser with copies of all material applications, documents, correspondence, agreements and maps submitted to the City and shall notify Purchaser of and permit Purchaser to attend any meetings and hearings with the City. Subject to the terms of this Agreement, Purchaser shall not directly or indirectly oppose, seek to restrict, interfere with or impose any conditions upon the development, construction or use of the Improvements. In the event Escrow Agent has instructions from Seller and Purchaser that are inconsistent, Escrow Agent has at its sole discretion the right to interplead the funds into an appropriate Washington Court of competent jurisdiction for determination as to outcome and disbursement of the funds so interpleaded. Further, Escrow Agent has the absolute right at its sole discretion the right to deduct its reasonable attorney fees and costs from the amount so interpleaded. 6. General Provisions. (a) reference. (b) Agreement. Time of Essence. Time is of the essence of each and every provision of this Recitals. The recitals are true and accurate and incorporated herein by this

(c) Notices. All notices required or permitted to be given under this Agreement shall be in writing and shall be given or made to the respective party(ies) at the address or facsimile number set forth below by (i) personal service; (ii) mailing by registered or certified mail, return receipt requested, postage prepaid; (iii) reputable courier that provides written evidence of delivery; or (iv) facsimile with the date and time imprinted during transmission. Notice by personal service, overnight delivery or facsimile shall be effective on receipt as evidenced by proof of transmission or delivery and notice by mail shall be effective three days after mailing. To LB Hills: LB Hills Golf LLC c/o Lehman Brothers 399 Park Avenue New York, New York 10022 and with a copy to: Attn: Mr. Robert G. Turner Gibson, Dunn & Crutcher LLP One 51 Floor San Montgomery Street, 31 Fax No: (646) 758-5417 Francisco, California 94104 Attn: Phone No: (212) 526-5811 Fred L. Pillon, Esq. and Deborah A. Cussen, Esq. Fax No: To Trendwest: Phone No: (415) 986-5309 (415) 393-8200

Trendwest Resorts, Inc. 9805 Willows Road Fax No: (425) 498-3059 Redmond, Washington 98052 Phone No: (425) 498-2500 Attn: Mr. Mark Lukens and Ms. Carmen. Cook First American Title Insurance 2101 Fourth Avenue, Suite 712 Seattle, WA 98121-2387 Attn: Dave Stuczynski Fax No: (206) 448-6348 Phone No: (206) 615-3160

To Escrow Agent:

Subject to clause (1) below, either Owner may (and shall if it acquires a Property from LB Hills or Trendwest) change its address for notices by at least three (3) days' advance written notice to the other Owner and upon recordation in the Official Records of the County of a notice of change of address ("Notice of Address Change"). (c) Assignments and Successors. This Agreement may only be assigned pursuant to Section 11(c) of the Purchase Agreement. Subject to the foregoing, this Agreement shall be binding on the parties and their respective heirs, successors and assigns.. (d) .

(h) Attorneys' Fees. In the event suit or action is instituted to interpret or enforce the terms of this Agreement, the prevailing party shall be entitled to recover from the other party such

sum as the court may adjudge reasonable as attorneys' fees in the preparation of its case at trial, on any appeal, on any petition for review or in any insolvency or bankruptcy proceeding, in addition to all other sums provided by law. In the event any judgment is obtained by the prevailing party, all such costs and attorneys' fees shall be included in the judgment. (i) Integration. This Agreement and Exhibit "A" attached hereto (which us hereby incorporated by reference), and all documents referenced in this Agreement constitute the entire agreement between the parties. There are no oral or other agreements. This Agreement may not be modified, amended, or otherwise changed except by a writing executed by the Party to be charged. Applicable Law. This Agreement shall be construed, applied and enforced in accordance with the laws of the State of California. (k) Subsequent Modifications. This Agreement and any of its terms may only

be changed, waived, discharged or terminated by a written instrument signed by the party against whom enforcement of the change, waiver, discharge or termination is sought. (I) Counterparts; Facsimile Signatures. This Agreement, along with any

amendments or addendum, may be executed simultaneously or in counterparts, each of which shall be deemed an original, and all of which together shall constitute but one and the same Agreement. Facsimile transmission of a signed copy of this Agreement or any amendment or addendum, and the retransmission of any signed facsimile transmission shall be the same as delivery of an original. (m) Saturday, Sunday, and Legal Holidays. If the time for performance of any the terms, conditions and provisions hereof shall fall on a Saturday, Sunday or legal holiday, then the time of such performance shall be extended to the next business day thereafter. (n) Invalidity of Provisions. If any provision of this Agreement is declared invalid or is unenforceable for any reason, such provision shall be deleted from such document and shall not invalidate any other provision contained in the document. (o) Confidentiality. All information delivered to Purchaser hereunder or otherwise obtained by Purchaser shall be kept confidential by Purchaser and shall not be disclosed to any third party except for disclosures necessary in connection with Purchaser's decision whether or not to purchase the Property, including disclosures to governmental agencies in connection with its timeshare registration. (p) Post-Closing Confidentiality. The terms of this transaction shall not be disclosed to third parties without the consent of both of Seller and Purchaser. There is to be no press release regarding the transaction unless it is approved by both Seller and Purchaser.

EXHIBIT A
SITE DEVELOPMENT COSTS PHASE II IMPROVEMENTS (Golf Center Dr.) (Per Conditions of Approval) ITEM QUANTITY UNIT PRICE COST Trend West Share

I.

Golf Center Parkway 4" AC over 14" CL II B. 8" Curb & gutter 6" Barrier curb 6" Sidewalk Signing and striping Median Landscaping Street Lights

62,040 SF 1320 LF 2,640 LF 1,320 LF 1 LS 17,160 SF 8 EA

$ 2.30 $ $ 12.00 $ $ 8.00 $ $ 9.00 $ $ 2,500.00 $ $ 2.50 $ $ 2,500.00 $ $ $ $ $ 20.00 $ 2,800.00 $ 900.00 $ 1,040.00 $ 15,000.00 $ $ $ $ $ $

142,692.00 15,840.00 21,120.00 11,880.00 2,500.00 42,900.00 20,000.00 256,932.00 125,000.00 305,532.00 79,200.00 25,200.00 900.00 3,120.00 15,000.00 123,420.00 260,000.00 180,000.00 440,000.00 100,000.00 100,000.00 40,000.00 40,000.00 75,000.00 40,000.00 50.6% $ 130,007.59 50.6% 28.4% $ $ 63,250.00 86,771.09

Traffic Signal Secondary Access (3,960') IV. Water Connection to 44th Avenue 3,960 LF 12" Dip 9 EA FHA 1 EA 12" TEE 12" GV 3 EA Connection at 44th 1 LS HD Conduit system Cabling Telephone Conduit system

28.4% $

35,051.28

V.

4,000 LF 4,000 LF

$ $

65.00 $ 45.00 $ $ 25.00 $ $ $ $ $ $

50.6% $ 222,640.00

VI.

4,000 LF

50.6% $

50,600.00

VII. Television Conduit

4,000 LF

10.00

50.6% 33.3% 33.3% $

$ 20,240.00 $ 24,975.00 13,320.00

VIII. Engineering IV. X. Construction Staking Geotechnical 10% Contingent General Conditions Liability Insurance SUBTOTAL: OH & P

$ 7,500.00 $ 1,513,384.00 10.0% $ 151,338.40 $ 1,664,722.40 $ 83,236.12 $ 16,647.22 $ 1,764,605.74 88,230.29 5.0% $ $ 1,852,836.03

33.3% $ 2,497.50 $ 649,352.46 $ 64,935.25 $ 714,287.71 33.3% $ 27,717.63 33.3% $ 5,543.53 $ 747,548.86 16 37,377.44 $ 784,926.30

THE TIMESHARE LAWSUIT FOR DAMAGES Keith G. Wileman, Esq. Lord, Bissell & Brook, LLP 300 S. Grand Avenue, Suite 800 Los Angeles, CA 90071

Re:

World Mark Claim for Damages

Dear Keith: Your letter of February 20, 2007 has been referred to us for response by LB Hills Golf, LLC. Without acknowledging or responding to the validity of any portion of the purported claims outlined or waiving or releasing any rights or potential claims or remedies our client may have, we were somewhat surprised at the tone and approach of your letter, especially given that there are potential claims on both sides of this matter. Moreover, our client's representative and agent was led to believe by your client that the parties would make a reasonable, good faith attempt to resolve any disputes related to the delivery of the utilities between their respective business representatives , without resort in the first instance to outlandish demands and threats of litigation. We are optimistic that this is still your client's intention and that your letter was primarily intended to serve as a vehicle to foster reasonable settlement discussions of these issues. In that regard, we would agree that such discussions would be a good idea before embarking down what will undoubtedly be a very uncertain, expensive and possibly surprising path. We would like to suggest that the parties agree to meet in the context of settlement discussions where both sides can freely discuss and attempt to resolve ail issues as soon as possible. ******************************************************************** NEW WATER IMPACT FEES JUST IN TIME FOR CFD 2004-3. THE CITY CHARGED IMPROVEMENT AREA 1 FOR 635 WATER IMPACT FEES AND FOR 831 WATER IMPACT FEES FOR IMPROVEMENT AREA 2. Further the City developed new impact fees, a few months prior to the September 2005 funding of CFD 2004-3. See ORD 1423 Residential Impact fees within the North Development Area were instituted at $3,025.25. **Note that the billing No. 1 of CFD 2004-3 includes these fees for Improvement Area 1 and Improvement Area 2.** This calculates to be near $2.4 million paid out of the Area 1 Bonds for Area 2 Impact Fees. This equates to about $3.8 million paid to date by Improvement Area 1 homeowners for Area 2. The CFD 2004-3 Official Statement page 5 is listed in part below: The following table sets forth a description of the improvements

to be constructed in Improvement Area No. 1, along with the estimated costs as sociated with each item.

CITY OF INDIO CFD 2004-3 [IMPROVEMENT AREA NO. I] IMPROVEMENTS/FEES FUNDED FROM SPECIAL TAX BONDS AREA 1 PAID FOR WATER CAPITAL IMPROVEMENT FEES FOR AREA 2 Quant Unit City Fees Storm Drainage Fees Fire Station Mitigation Fee Sheriff/Police Fee Park Fee Bridge/Major Street Impact Fees TUMF Water Meter Fee Water Capital Improvement Fees Park Capital Impact Fee Other Fees School Fees Sewer Connection Capacity Fees Sewer Service Fees 450 Acres 635 EA 635 EA 635 EA 635 EA 635 EA 635 EA 1484 EA 635 EA New Unit Price 500 85 400 700 794 156 3,025.25 1,988 $ Phase 1 Project Total 225,000.00 1,000,000.00 53,975.00 254,000.00 444,500.00 504,190.00 99,060.00 4,489,471.00 1,262,380.00 $8,332,576.00 $5,588,000.00* 1,974,850.00 80,645.00 $7,643,495.00 $ 355,268.00 68,576.00 591,956.00 1,508,875.00 133,800.00 610,411.00 1,186,300.00 814,222.00 1,862,900.00 150,000.00 35,000.00 141,897.00 263,471.00 503,437.00 $8,226,113.00 (1,705,011.63) $6,521,101.37 $22,497,172.37

635 EA 635 EA 635 EA

8,800 3,110 127

Capital Costs Reimbursable to Developer Site Preparation Grading Surface Improvements Landscaping Storm Drainage Traffic Control Water Sewer Engineering Soils Engineering Blueprints Repairs for Inspection Dry Utilities Contingency Shortfall to be Reimbursed to Suncal from Phase 2 Net Available for Suncal Reimbursement Phase 1 Bond Proceeds

* $3,000,000 available to be paid when released from Escrow Fund.

22

THE CFD 2004-3 DISTRICT FORMATION REQUIRES STRICT COMPLIANCE. The Government Code for Mello Roos Tax initiation is very clear. See California Government Code 53311 et seq. The 1982 Mello-Roos Community Facilities Act (Government Code Sections 53311 et seq.) enables cities, counties, special districts, and school districts to establish community facilities districts (CFDs) and to levy special taxes to fund a wide variety of facilities and services. The proceeds of a Mello-Roos tax can be used for direct funding and, in the case of capital facilities, to pay off bonds. Mello-Roos financing has similarities to special taxes and special assessments and, in some situations, it has advantages over both. The procedure for establishing a Mello-Roos district is not simple. The following is a general example of how it is done. Proceedings may be started: (1) by the local legislative body acting on its own initiative; (2) at the request of at least two members of the body; or, (3) when the body receives a petition signed by either 10% of the registered voters residing within the proposed district or by the owners of 10% of the land within the proposed district. Within 90 days of the initiation of proceedings, the legislative body must adopt a resolution of intention which: (1) describes the boundaries of the proposed district; (2) states the name of the proposed CFD; (3) describes the types of facilities and services to be provided or purchased within the district and any incidental expenses; (4) states that a special tax, secured by recordation of a continuing lien on nonexempt property, will be levied annually. It must also specify the rate, method of apportionment, and manner of collection of the special tax in a way which will allow each landowner to estimate their tax liability; (5) fixes a time and place for a public hearing on the district formation; (6) describes any adjustment in property taxation necessary to pay prior indebtedness; and (7) describes the proposed voting procedure. However, it requires the Legislative Body, here the City, and its council members to act in a fiduciary manner. Each person and entity collectively must follow the Government Code.
23

A BRIEF HISTORY OF IMPROVEMENT AREA 2 MUST BE DONE AT THIS POINT. I will insert the review done by the Department of the Interior for Area 2 (Terra Lago East). 24 Area 1 is (Terra Lago West) I have all environmental studies and approval submissions upon request.
22

Billings for CFD 2004-3 till 2012: http://www.scribd.com/doc/193566064/2004-3-AllBillings-of-Cfd 23 As with all special taxes, Mello-Roos taxes are subject to reduction or repeal by initiative. Proposition 218 does not specify whether the qualifying signatures for an initiative must be gathered jurisdiction-wide and the question put to jurisdiction-wide vote, or whether the initiative is limited to that portion of the jurisdiction within the boundaries of the CFD. 24 http://www.scribd.com/doc/167646825/Terra-Lago-East-CFD-2004-3-Mello-Roos-Indio Project Master Plan Terra Lago East. Failed Amendment. Environmental Studies at:

LETTER - DEPARTMENT OF THE INTERIOR RE: IMPROVEMENT AREA 2 ISSUES. Department of the Interior Report for Area 2 United States Department of the Interior FISH AND WILDLIFE SERVICE Ecological Services Carlsbad Fish and Wildlife Office 6010 Hidden Valley Road Carlsbad, California 92009

In Reply Refer To: FWS-ERIV-4301.1 Dec 10 2004 Ms. Susan E. Williams Community Development Services Building and Safety Director 100 Civic Center Mall Indio, California 92201 Subject: Notice of Intent to Adopt a Mitigated Negative Declaration and Draft Environmental Assessment for the Proposed Terra Lago East Project, City of Indio, Riverside County (EA No. 04-11-404) Dear Ms. Williams: This letter responds to your request for agency comment on the above referenced Notice of Intent (NOI) and draft Environmental Assessment (EA) for the proposed Terra Lago East project, dated November 4, 2004. The U.S. Fish and Wildlife Service (Service) has reviewed the subject notice and accompanying draft EA, and we offer the following recommendations to assist you in planning for the conservation of sensitive wildlife species and plant communities within the project area. In particular, the Service has concerns regarding impacts to the federally endangered Coachella Valley milk-vetch (Astragalus lentiginosus var. coachellae; hereinafter milk-vetch) and its habitat. This species is known to occur just east of the proposed project boundary and suitable habitat occurs on portions of the project site. We are concerned that impacts have recently occurred to the milk-vetch adjacent to the project site that were to be avoided under the former SunCal project. Furthermore, we are concerned with the lack of effective mitigation measures proposed in the Mitigated Negative Declaration for project impacts on the Palm Springs ground squirrel (Spermophilus tereticaudus chlorus; hereinafter ground squirrel) and the honey mesquite (Prosopis glandulosa) hummock plant community found onsite. Additionally, the Biological Resources section of the draft EA does not address Environmental Evaluation letter f: Conflict with the provisions of an adopted Habitat Conservation Plan, Natural Community Conservation Plan, or other approved local, regional, or http://www.scribd.com/doc/167647222/Terra-Lago-East-Draft-Vol-I-EA and http://www.scribd.com/doc/167645412/Terra-Lago-East-Draft-Vol-II-Ea-Terra-LagoEnvironmental-Studies?secret_password=2e5tcwr73h19ncrsxin9 also:

state habitat conservation plan? This section should be completed and circulated for public review. According to the EA, the proposed Terra Lago East project is a consolidation of the previously approved Hills (November 1996) and Indian Lakes (May 2000) projects, and is designed to be consistent with the SunCal Indio Project Master Plan that was approved December 2003. The proposed Terra Lago East project is geographically located within a subset of these previously approved projects. A biological assessment (BA) was prepared for the proposed SunCal project by James Cornett, dated June 28, 2003, which enveloped the project footprint for the proposed Terra Lago East project. A review and update of the 2003 BA was prepared for the Terra Lago East project by AMEC Earth and Environmental, Inc., dated September 20, 2004. We appreciate the opportunity to comment on the NOI and draft EA and our concerns are addressed in detail below. Coachella Valley Milk-vetch According to the 2003 BA (page 13) for the SunCal project, milk-vetch was detected in eastern portions of the site adjacent to Dillon Road, and habitat was found to be suitable for this species on portions of the project site. The conditions of approval (condition number 4) and Mitigation Monitoring and Reporting Program (BS-2) for the SunCal project required the project proponent to confer with the Service regarding acceptable mitigation for the milk-vetch and to provide proof to the City of Indio of consultations held with the U.S. Fish and Wildlife Service regarding any mitigation measure requirements for loss of potential milk-vetch habitat. However, a letter submitted to our office by the law office of Hewitt & ONeil, dated March 12, 2004, stated that no mitigation is offered as no impacts to the milk-vetch will occur as a result of SunCals project. Nonetheless, according to the 2004 BA (page 2), site visits conducted by John Green and Dave Kajtaniak in September 2004 found that extensive blading had recently occurred in the eastern portion of the project site. Though the 2004 BA does not clarify if the occupied milkvetch habitat was disturbed by the blading, the area has been cleared to Dillon Road, which undoubtedly adversely impacted the milk-vetch population on-site. Because the proposed Terra Lago East project is proposed to be consistent with the approved SunCal project, the Citys mitigation measures for milk-vetch have not been complied with, and this outstanding responsibility still needs to be satisfied. Please see our recommendations below. The eastern boundary of the proposed Terra Lago East project has been moved to the west, apparently to avoid the previously identified milk-vetch occurrences, however, the 2004 updated BA (page 1) states that, Habitat is similar on the adjacent Terra Lago East site, so by natural seed dispersal, there is at least a chance that it could now occur there as well. Focused surveys during the blooming season of this plant would be required to confirm this possibility. If the grading that occurred earlier this year redistributed and leveled sandy soils without transporting this material off-site, milk-vetch seeds would remain on-site and the seed bank should remain viable, assuming that some of the bank remains within sprouting depth of the soil surface.

Mitigation measures to offset impacts to milk-vetch should be included as permit conditions for the proposed Terra Lago East project. We recommend that the City require the project proponent to restore and protect, with a permanent conservation easement, the entire milk-vetch habitat that was to be avoided, per the letter from the law office of Hewitt & ONeil. This area includes those lands along Dillon Road that the current project was reconfigured to avoid. Additionally, focused surveys for this species should be conducted on the remainder of the site during the appropriate blooming season and survey reports, including survey methodology, date of surveys, survey results, and surveyor qualifications should be submitted to the Service and the City for review prior to permitting the proposed project. This information is required to adequately evaluate the current status of this species on the project site, and determine the significance of potential impacts and appropriate mitigation measures. Palm Springs Ground Squirrel and Mesquite Hummocks The 2003 BA for the SunCal project reports more than 50 observations of the ground squirrel onsite and states that this species can be expected over most of the area surveyed, which includes the proposed Terra Lago East project site. The 2004 updated BA concludes that, despite clearing of many mesquite hummocks (discussed below), ground squirrels are still likely to be present onsite. This species is a candidate for Federal listing (candidate species are those for which the Service has on file sufficient information indicating that listing as threatened or endangered is warranted by the species has not yet been proposed for listing), and is considered a species of special concern by the California Department of Fish and Game (CDFG), because it is a narrow endemic species that largely occurs in the Coachella Valley within sandy habitats, and is most abundant in mesquite hummock habitat. In addition, the ground squirrel is proposed for conservation in the draft Coachella Valley Multiple Species Habitat Conservation Plan (draft CVMSHCP) to avoid the need for future listing, and provide adequate conservation so that if the species were to be listed in the future, additional funding or habitat would not be needed in the plan area. Though the draft CVMSHCP provides a habitat model for the ground squirrel that suggests relatively widespread distribution in the Valley, the Service has conducted a 2-year study of the ground squirrel and found that it is largely restricted to stands of mesquite, including substantially higher population densities than in other habitat types, and currently appears absent from much of the modeled suitable habitat. Given the substantial reliance of the regional ground squirrel population on mesquite habitat, the future survival of the ground squirrel appears dependent on the conservation of that habitat type. Historically, the amount of mesquite hummocks in the Valley has been dramatically reduced by agricultural and urban development, to the extent that only about 945 acres of such habitat currently remain. Most of this habitat (about 570 acres, as calculated in the draft CVMSHCP) occurs in isolated patches that were excluded from the proposed CVMSHCP reserve design because of disjunct distribution, small size, and lack of connectivity with larger blocks of habitat. Therefore, only about 375 acres of mesquite hummocks may be protected in the future if the draft CVMSHCP is approved. However, most of the habitat that is proposed for conservation under the draft CVMSHCP is

threatened by groundwater over-draught, and substantial death and degradation of the remaining mesquite habitat currently is evident. As such, the future survival of the ground squirrel in Valley appears to be at high risk, which adds to the significance of conserving those remaining stands of mesquite that still support the ground squirrel. The CDFG considers this community to be a rare vegetation element in California and of significant importance regionally due to high ecological value and increasing rarity/threat. Please see Enclosure 1 for additional information on the regional importance of mesquite hummocks and threats to this vegetation community type. The 2003 BA for the SunCal project identified mesquite hummocks (some as high as fifteen feet) within the northeastern and southwestern portions of the proposed Terra Lago East project site, and the 2004 updated BA reports extensive, extant hummocks within the existing golf course, particularly in the eastern portion of the course, north of the canal, and west of Wasteway Number Three that were not identified in the 2003 BA. According to the 2004 BA (page 2), site visits conducted in September 2004 confirmed that all of the mesquite hummocks in the northeastern project area and some hummocks in the southwestern area had been bladed. Observations by Service biologists in April 2004 found that all of the mesquite hummocks onsite were undisturbed. Therefore, blading occurred between April and September 2004. Based on available information, the bladed area between the eastern boundary of the proposed Terra Lago East project and Dillon Road is no longer part of any proposed project for unexplained reasons. That the former SunCal project boundary was moved farther west in the current Terra Lago East proposal, suggests that an attempt was made to avoid the area previously documented to support the milk vetch. However, why this area would have been bladed before the City and developer completed its coordination with the Service, pursuant to the Cit ys mitigation requirement for the milk-vetch, is perplexing. The 2004 BA reports that extant mesquite roots that were bladed this summer are currently resprouting. This regeneration indicates that despite the significant degradation caused by the grading, the mesquite stands remain alive and likely will naturally reestablish if left undisturbed, to again provide suitable habitat for the ground squirrel. The two BAs and the draft EA do not quantify the acreage of mesquite hummocks that occurred on the property at the time of the 2003 assessment for the SunCal project, the amount of mesquite hummocks that have subsequently been bladed, nor the amount of mesquite hummocks still extant on the proposed Terra Lago East project site. Given the proposed elimination of an unquantified amount of mesquite for housing within the existing golf course matrix, and the documented presence of ground squirrels in the existing golf course/mesquite hummock complex, a thorough assessment of the extent of mesquite and ground squirrel habitat is needed to assess the adverse effects of the project proposal. The Service has performed a preliminary assessment based on available aerial photography to help determine a threshold of significance for these potential impacts. Though a more careful assessment is needed, we have initially estimated that at least 50 acres of contiguous mesquite hummocks occurred in the eastern area of the project site, and this entire area was bladed, as reported in the 2004 updated BA and

confirmed per personal communication with John Green of AMEC on December 10, 2004. We did not estimate the acreage of mesquite hummocks that were reported bladed in the southwestern portion of the proposed site. Additionally, we preliminarily estimate that at least an additional 20 acres of mesquite hummocks are extant within the rest of the project site. Based on the potential significance for adverse effects that this threshold assessment has identified, a more rigorous and accurate analysis is needed to quantify adverse effects so that effective mitigation measures can be formulated. Given our threshold analysis above, the mesquite hummocks on the project site represent one of the largest remaining contiguous blocks of such habitat in the Coachella Valley. These mesquite hummocks are contiguous with, and part of, the regional habitat linkage that supports and connects the ground squirrel population along Dillon Road with those on the Coachella Valley Preserve. This linkage is identified in the draft 2004 CVMSHCP as part of the East Indio Hills Conservation Area. Based upon review of our records, it appears that the City did not require mitigation for impacts to the ground squirrel and mesquite hummocks, perhaps based on findings in the 2003 BA (page 17), where Cornett suggested that due to the limited size of onsite mesquite hummocks, their isolation from other such habitats, and off-road vehicle impacts, payment of the $600 per acre Coachella Valley fringe-toed lizard Habitat Conservation Plan (CVFTLHCP) fee is adequate mitigation for loss of this community type on-site. The Service does not agree with this assessment. As described above, the extensive acreage of mesquite hummocks that remain extant and those that were bladed are contiguous with, and part of, an important regional habitat complex that supports and connects the ground squirrel population in this area with the populations to the west in the Coachella Valley Preserve. The CVFTLHCP mitigation fee was designed solely for that species and planning program, which did not address the conservation needs of other species, such as the ground squirrel and milkvetch. To suppose that mitigation for the fringe-toed lizard also offsets significant adverse effects to other species with different habitat requirements suggests an inappropriate double counting of mitigation credits. Therefore, payment of the CVFTLHCP fee does not offset the significant impacts to the ground squirrel from the proposed project. Summary The proposed Terra Lago East project is associated with several previously authorized projects (Hills, Indian Lakes, and SunCal), however, it appears that adequate mitigation for impacts to Palm Springs ground squirrel and mesquite hummocks was not provided in the permits associated with these related projects. Furthermore, the permit condition to avoid impacts to Coachella Valley milk-vetch associated with the SunCal project apparently has been violated. Any impacts that have occurred, or potentially could occur, to sensitive species and habitats should be addressed through the permit requirements for the Terra Lago East project.

Because of the regional biological significance of the project site for the ground squirrel that cannot be mitigated through off-site replacement/fee payment, we recommend that the project (1) be reconfigured to avoid and connect the extant (ungraded) mesquite hummocks throughout the project site, and (2) protect the graded mesquite hummock habitat along Dillon Road that has been avoided in the current project proposal. As discussed above, the bladed mesquite hummocks are resprouting, which we anticipate will reestablish former hummocks over time, to again provide habitat for the ground squirrel and milk-vetch. Given the unaddressed impacts and mitigation responsibilities discussed above, (3) intensive restoration and management also should be required to accelerate natural regeneration and recolonization processes, and (4) all mesquite hummocks that were bladed (both within the proposed project site and east of the project site) should be monitored for recovery. As previously discussed, on-site restoration and preservation is required to achieve conservation of the regionally significant ground squirrel population found on-site; however, any mesquite hummocks that do not recover despite adequate recovery efforts should be mitigated off-site through habitat replacement at a 3:1 ratio, and (5) the on-site and off-site mesquite hummock habitat should be permanently protected through a conservation easement or donation to a public agency. Additionally, (6) all impacts to the Coachella Valley milk-vetch habitat that were to be avoided, per the letter from the law office of Hewitt & ONeil, should be offset through restoration and protection of the graded area along Dillon Road, as discussed in #2 above. If the City does not require mitigation adequate to offset significant effects to Palm Springs ground squirrel and Coachella Valley milk-vetch in the Mitigated Negative Declaration, additional environmental analysis and documentation, and coordination with the Service would be needed to address the unmitigated significant effects of the proposed project. Please contact Sandra Marquez of my staff at 760/431-9440 if you have any questions or comments concerning this letter. Sincerely, //s//Sorensen, for Therese ORourke Assistant Field Supervisor

AREA 2 APPROVAL WAS DONE IN JULY 2007 BY WAY OF THE HILLS DA, WHICH HAD NO NEW STUDIES AND INCLUDED ALREADY DEVELOPED AREA 1. How Area 2 was SUPPOSED TO BE approved. Approval was contingent on the approval of the second amendment to the Hills PMP 96-8-10. The amendment failed. City ORD 1408 had a first reading, to approve the Project Master Plan 98-8-10 (Amendment No. 2). ORDINANCE NO. 1408

ORDINANCE OF THE CITY COUNCIL OF THE CITY OF INDIO, CALIFORNIA, APPROVING PROJECT MASTER PLAN 98-8-10 (AMENDMENT NO. 2) TO MODIFY THE APPROVED LAND USE REGULATIONS, DEVELOPMENT STANDARDS AND DESIGN GUIDELINES IN ORDER TO DEVELOP THE "TERRA LAGO EAST" PLANNED COMMUNITY WITH UP TO 851 RESIDENCES, A MODIFICATION TO THE EXISTING GOLF COURSE, A WATER TREATMENT FACILITY, PEDESTRIAN PATHWAYS, AND A POTENTIAL RECREATION CENTER; SUNCAL/INDIO LAND, LLC. WHEREAS, on October 18, 2004, the SunCAL/Indio Land, LLC, the "Applicant," filed with the Community Development Services/Building and Safety Department, an application for an amendment to Project Master Plan (PMP 96-9-10) to modify land use regulations, development standards and design guidelines to allow a new residential community consisting of 851 single-family residences, a modification to an existing golf course, a water treatment facility, pedestrian pathways, and a potential recreation center on 563.34 acres of partially of developed property including the Landmark Golf Club and vacant land previously entitled as the Indian Lakes Project Master Plan and The Hills Project Master Plan within the RPD-4 (Country Estates/Residential Planned Development) Overlay Zone, located north of Avenue 44 and east of Golf Center Parkway; and WHEREAS, a Mitigated Negative Declaration and Mitigation Monitoring Program have been adopted, pursuant to the environmental review guidelines of the California Environmental Quality Act, and environmental impacts were examined as part of Environmental Assessment 04-11-414, which includes an Environmental Checklist Form and several technical studies including a "Traffic Analysis," "Biological Impact Assessment," "Cultural Resources Assessment," "Noise Study," and "Air Quality Study;" and WHEREAS, after due notice as required by law, on February 16, 2005, the City Council conducted a public hearing, reviewed the staff report, considered testimony both for and against the project, considered the recommendation of the Planning Commission that the City Council approve the amendment to the Project Master Plan, and concluded its proceedings NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF INDIO, CALIFORNIA, HEREBY ORDAINS, AS FOLLOWS: Section 1. The City Council hereby certifies as to the adequacy of the information in the Mitigated Negative Declaration and the Mitigation Monitoring and Reporting Program as contained in Environmental Assessment 04-11-414 as part of the Council's review of the Terra Lago East project. Section 2. To approve Project Master Plan 96-8-10 (Amendment No. 2) based on the following findings: 1) The proposal is consistent with the Indio General Plan 2020 which intends for Residential Planned Development overlay designations to have master planned

residential communities with a combination of lot sizes including low and medium density product types, and a maximum density of 3.5 dwelling units per acre. The character of the RPD-4 planning area encourages a transition from urban and suburban uses to open space, to be accomplished by specific planning tools that provide for a variety of residential and recreational activities. The proposed development will provide a variety of residential product types in a clustered arrangement for varying residential densities, maintaining an overall density of 1.51 dwelling units per acre for the project. The Project Master Plan amendment provides for recreational opportunities in the context of the Landmark Golf Club, as encouraged by the General Plan. The proposed amendments to the adopted Project Master Plan do not materially change the development intensity that was originally envisioned for the project. 2) The proposed modification to the Project Master Plan will not affect the Indio Code of Ordinances, which seeks to have consistency between zoning classification and the general plan land use designation. The proposed modifications will not significantly change the approved land uses and the development regulations will be in keeping with the originally approved Indian Lakes and The Hills planned communities. The Project Master Plan amendment is subject to ordinance approval by the City Council and would create the proper zoning designations and regulations for each residential village within the planned community. 3) The proposed Terra Lago East project may be developed as a non-gated community with private streets, subject to review and approval by the City Engineer and Fire Department. The applicant shall revise all PMP exhibits and text, as needed, to allow for that street option. Section 3. To approve the Project Master Project 96-8-10 (Amendment No. 2) subject to the following conditions. 1. The applicant shall submit ten copies of the Project Master Plan 96-8-10 (Amendment No. 2) in its amended form, and in compliance with all conditions of approval contained herein, to the Community Development Services/Building and Safety Department prior to the issuance of any building permits. 2. The property owner or successor in interest shall annex into the existing Community Facilities District (No. 2004-1) for public facilities and/or public services. 3. The developer shall coordinate with the Fire Department and the Community Development Services/Building and Safety Director concerning the development of a temporary fire station on the designated lot in Phase I. Section 4. That the above recitations are true and correct and constitute the findings of the City Council regarding the Project Master Plan Amendment and this project. Section 5. That the proposed amendments to Project Master Plan 96-8-10 are on file in the office of the City Clerk and are available for review by the public

newspaper of general circulation, printed, published, and circulated within the City of Indio and the same shall be in full force and effect 30 days after its adoption. PASSED, APPROVED, AND ADOPTED this 2nd day of March, 2005, by the following vote: AYES: Gilbert, Godfrey, Ramos Watson, Wilson, Fesmire This amendment failed. It is believe and documented that Monies from Improvement Area 1 were used to upgrade water, sewer, roads, dry conduits, and other unknown expenses. HOW DID THE CITY PURPORT TO CORRECT THE FAILED AREA 2 SECOND AMENDMENT TO THE HILLS DA? See Riverside County Instrument No. 2008-006985 recorded 01.07.2008 Assignment and Assumption of Development Agreement and Consent. ** Note the City uses LB Indio LLC, Suncal, and Indio Land Ventures interchangeably. These entities are not the same. Lehman Brothers used LB as part of their land LLC portfolios. Indio Land Ventures is a separate LLC.

ASSIGNMENT AND ASSUMPTION OF DEVELOPMENT AGREEMENT AND CONSENT 25 This Assignment and Assumption of Development Agreement and Consent is entered into this 20 th day of June, 2007 by and between LB HILLS GOLF, LLC, a Delaware limited liability company ("Assignor") and INDIO LAND VENTURES, L.L.C., a Delaware limited liability company ("Assignee") and consented to by the CITY OF INDIO, a California municipal corporation ("City"), RECITALS
A. WHEREAS, City and LANDMARK GOLF COMPANY, an Arizona corporation ("Landmark') entered into a certain "DEVELOPMENT AGREEMENT" dated December 18, 1996, effective January 15, 1997, and recorded on September 18, 1998 as Instrument No. 399082 in the Official Records of Riverside County, California (the "Agreement"). Unless otherwise specified herein, capitalized terms used herein shall have the meanings ascribed to them in the Agreement; and B. WHEREAS, Landmark assigned all of its rights, obligations and entitlements under the Agreement to THE HILLS GOLF CLUB, LLC, a California limited liability company ("HGC") pursuant to an Assignment dated September 1, 1998 and recorded September 18, 1998 as Instrument No. 399083 in the Official Records of Riverside County, California (the "1998 Assignment"); and

25

Note is made that the 2004-3 CFD funded September 2005.

C. WHEREAS, HGC assigned all of its rights, obligations and entitlements under the Agreement and the 1998 Assignment to Assignor, with City consent, pursuant to an "ASSIGNMENT AND ASSUMPTION OF DEVELOPMENT AGREEMENT AND CONSENT" dated April 26, 2002 and recorded on April 26, 2002 as Instrument No. 2002 221299 in the Official Records of Riverside County, California (the "2002 Assignment"); and D. WHEREAS, Assignor and City entered into a certain "FIRST AMENDMENT TO DEVELOPMENT AGREEMENT" dated July 30, 2003, effective October 28, 2003 and recorded on November 19, 2003 as Instrument No. 2003-911978 in the Official Records of Riverside County, California (the "First Amendment").

E. WHEREAS, Assignor desires to assign Assignor's rights and obligations under the Development Agreement and the First Amendment to Assignee, and Assignee desires to accept said rights and obligations; and F. WHEREAS, Assignor and Assignee, pursuant to the terms of that certain "SECOND AMENDMENT TO DEVELOPMENT AGREEMENT" prepared, executed and recorded concurrently herewith (the "Second Amendment"), desire to annex to the Site subject to the Agreement and the First Amendment certain real property adjacent to said Site, identified as Assessor's Parcel Numbers 601270-037 through 041, 601-270-055 through 058, 601-310001, 601-310-018 & 019, 601-810-013, 601-390-032 and more particularly described on Exhibit "A" attached hereto and incorporated herein by this reference ('Additional Property"), and thereby subject such Additional Property to the Agreement, the First Amendment and the Second Amendment .26

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1, The parties hereto agree that the Recitals above are true and correct and intend to be bound by same; the Parties further agree to the incorporation by reference herein of said Recitals, together with all definitions provided and the exhibit referenced therein.
2. In conformance with the terms and conditions of the Agreement, the First Amendment and the Second Amendment, Assignor hereby assigns, transfers and conveys to Assignee, all of Assignor's right, title and interest in and to, and all obligations under the Agreement, the First Amendment and the Second Amendment pertaining to the Site and the Additional Property, and Assignee hereby expressly and unconditionally accepts and assumes all such rights and responsibilities. In accepting this assignment, Assignee agrees that it shall be bound by each and every term of the Agreement, the First Amendment and the Second Amendment. 3. In accepting this assignment as to the Site and the Additional Property, Assignee hereby warrants and represents that it has the ability to complete the project described in the Agreement, the First Amendment and the Second Amendment.

26

Back to Parcel number to describe Improvement Area 1 and Improvement Area 2. The failed 2nd amendment is not referenced. The second amendment will be listed below in its entirety.

4. This assignment by Assignor and assumption by Assignee shall become effective upon full execution of this Assignment and Assumption of Development Agreement and Consent by all parties, with the consent thereto by the City.

Signed

x0x0x0x0 CITY CONSENT TO ASSIGNMENT AND ASSUMPTION

The City of Indio hereby acknowledges that, pursuant to paragraph 9.2 of that certain "DEVELOPMENT AGREEMENT" dated December 18, 1996, effective January 15, 1997, and recorded on September 18, 1998 as Instrument No. 399082 in the Official Records of Riverside County, California (the "Agreement"), as amended by that certain "FIRST AMENDMENT TO DEVELOPMENT AGREEMENT" dated July 30, 2003, effective October 28, 2003 and recorded on November 19, 2003 as Instrument No. 2003-911978 in the Official Records of Riverside County, California (the "First Amendment") and that certain "SECOND AMENDMENT TO DEVELOPMENT AGREEMENT" prepared, executed and recorded concurrently herewith (the "Second Amendment"), LB HILLS GOLF, LLC, a Delaware limited liability company ("Assignor") has the right to assign its right, title and interest in and to, and all obligations under the Agreement, the First Amendment and the Second Amendment (in the aggregate, the "Amended Agreement'), subject to the City's consent, provided Assignor's proposed Assignee agrees to be bound by the terms of the Amended Agreement, and has the financial capability to complete the project specified in the Agreement. By its signature below, the City hereby consents to the foregoing Assignment and Assumption Agreement whereby Assignor has assigned its right, title and interest in and to, and all obligations under the terms of the Amended Agreement to Assignee. City of Indio, a California municipal corporation By Ben Godfrey Mayor 12.05.2007 The attached legal description is Improvement Area 1 and Improvement Area 2.

Exhibit A LEGAL DESCRIPTION DEVELOPMENT AGREEMENT LEGAL TERRA LAGO PROJECT

ALL OF TRACT MAP NO. 31601-1 AS SHOWN ON MAP ON FILE IN BOOK 363 OF MAPS, PAGES 17 THROUGH 31, INCLUSIVE; ALL OF TRACT MAP NO. 31601-2 AS SHOWN ON MAP ON FILE IN BOOK 387 OF MAPS, PAGES 29 THROUGH 33, INCLUSIVE; ALL OF TRACT MAP NO. 31601-3 AS SHOWN ON MAP ON FILE IN BOOK 391 OF MAPS, PAGES 39 THROUGH 43, INCLUSIVE; ALL OF TRACT MAP N 31601-4 AS SHOWN ON MAP ON FILE IN BOOK 39) OF MAPS, PAGES 35 THROUG 38, INCLUSIVE; ALL OF TRACT MAP NO. 31601-5 AS SHOWN ON MAP ON FILE IN BOOK 391 OF MAPS, PAGES 44 THROUGH 48, INCLUSIVE; ALL OF TRACT MAP N 3160] AS SHOWN ON MAP ON FILE IN BOOK 394 OF MAPS, PAGES 15 THROUGH INCLUSIVE; ALL OF TRACT MAP NO. 31631 AS SHOWN ON MAP ON FILE IN BOC 363 OF MAPS, PAGES 31 THROUGH 37, INCLUSIVE; ALL OF AMENDED TRACT M NO. 32341-1 AS SHOWN ON MAP ON FILE IN BOOK 414 OF MAPS, PAGES 86 THROUGH 95, INCLUSIVE; AND ALL OF TRACT MAP NO. 32462-1 AS SHOWN

ON MAP ON FILE IN BOOK 409, PAGES 78 THROUGH 84, INCLUSIVE, ALL. RECORDS RIVERSIDE COUNTY, STATE OF CALIFORNIA.

The apparent Second Amendment to Development Agreement is listed as Riverside County Instrument No. 2008-0056279 recorded on 02.05.2008. See also: ORDINANCE NO. 1503 ORDINANCE OF THE CITY COUNCIL OF THE CITY OF INDIO CALIFORNIA APPROVING SECOND AMENDMENT TO DEVELOPMENT AGREEMENT 96-8-10 PAUL AMES AND LANDMARK GOLF COMPANY WHEREAS Paul Ames and Landmark Golf Company as the Developer and the City of Indio entered into Development Agreement 96810on or about December 18, 1996 (the DA) and the County recorded the DA on September 18 1998 and WHEREAS after prior assignments of Developers interest in the DA and the Execution and recordation of a first amendment to the DA Indio Land Ventures LC Delaware Limited Liability Company and SunCal Companies Inc., a Delaware Corporation related entities operating under the same management and control in the aggregate SunCal acquired extensive real property subject to the DA as amended once together at roughly the same time with certain adjacent real property the Original Site and secured various land use entitlements related to SunCals proposed Development of the Original Site the Entitlements and; WHEREAS on approximately March 15 2007 SunCal Companies Inc Developer initiated an application with the City of Indio for approval of a Second Amendment to Development Agreement 96-8-10 the Amendment to annex property generally located east of Golf Center Parkway north of Avenue 44 south of the Coachella Valley Water District Flood Control Dike and west of Dillon Road the Additional Land to the geographical area subject to the DA as amended once and; WHEREAS approval of this proposed Second Amendment to the DA adds approximately four hundred and twenty eight 428 acres of land identified on Exhibit A attached hereto and incorporated by reference herein to the area subject to the DA as previously amended and; WHEREAS Developer concurrently with the Amendment has secured City approval of the assignment of all Developers right title and interest in and to all Obligations under the DA as amended previously and by this proposed Second Amendment the Amended DA to SunCal and SunCal s assumption of all Developer rights and responsibilities under the Amended DA and; WHEREAS the Council has previously made findings based upon analysis that the environmental impacts associated with the Citys approval of the DA and the Entitlements in Environmental Assessment 96-8-10 and Environmental Assessment 04-11-404 the Findings and;

WHEREAS on May 18 2005 the Council approved that certain AGREEMENT for FORMATION OF MELLO RODS COMMUNITY FACILITIES DISTRICT No. 2004 3 by and between City and SunCal the CFD Agreement executed August 1 2005 and maintained as a public record by the City Clerk and; WHEREAS the CFD (i) Agreement provided funding for SunCal s Design construction and installation of public improvements serving the Terra Lago project developed per the Entitlements (the Project) (ii) called for SunCals dedication of land to the City for the construction of a fire station and a reservoir and (iii) contained provisions limiting SunCals payment of development impact fees as to the Project and; WHEREAS The City seeks to ratify the Citys approval of the aspect of the CFD Agreement that limited development impact fees in conformance with all applicable authorities and; WHEREAS staff has determined (i) that neither Developers proposal to annex the land identified in Exhibit A to the area of Amended DA coverage nor the Citys proposed ratification of the aspect of the CFD Agreement addressing development impact fees modifies existing land use designations or development regulations for the Original Site or the Additional Land (ii) that approval of the proposed Second Amendment to the DA will cause no impact upon the environment beyond that analyzed at the time of the approval of the DA and the Entitlements and (iii) that pursuant to the California Environmental Quality Act more specifically California Administrative Code Title 14 Section 15168(c) 2 the Council Findings were correct and no new environmental analysis or documentation as to the proposed Second Amendment is necessary and; WHEREAS on March 28, 2007 the Planning Commission of the City of Indio conducted a duly advertised public hearing reviewed a staff report considered testimony both for and against the proposed Second Amendment to the DA and subsequently concluded its proceedings on April 11, 2007 and recommended approval of the Second Amendment to the Council and; WHEREAS on May 16, 2007 commenced and through June 6 2007 kept open a duly advertised public hearing reviewed staff reports considered testimony both for and against the proposed Second Amendment and; WHEREAS on June 20 2007 the City Council concluded the proceedings as to this public hearing following the recommendation of the Planning Commission and approving the Second Amendment to the DA. NOW THEREFORE THE CITY COUNCIL OF THE CITY OF INDIO CALIFORNIA HEREBY FINDS AS FOLLOWS; 1. The above recitals are true and correct and hereby incorporated by reference inclusive of all definitions and exhibits referenced.

2. The Second Amendment to Development Agreement 96-8-10 and the Project consistent with the underlying DA and approved through the Entitlements are consistent with the goals and policies of the Indio General Plan 2020 encouraging high quality residential projects inclusive of a variety of housing types significant amenities community parks and open space. 3. The Second Amendment to Development Agreement 96810and the Project consistent with the underlying DA and approved through the Entitlements are consistent with the densities and uses for the Project site specified in the Indio General Plan 2120 and Specific Plan 9687. 4. The Second Amendment to Development Agreement 96-8-10 and the Project consistent with the underlying DA and approved through the Entitlements are consistent with the Zoning Ordinance of the City of Indio per Specific Plan 96-8-7 compatible with the present and future logical growth of the Project area as envisioned in the Indio General Plan 2020 and designed to protect and promote the public health safety and welfare 5. The City Council hereby finds that neither the annexation of properties to the area. A coverage caused by the Second Amendment to Development Agreement 96-8-10 nor the ratification of the City Council approval of CFD Agreement limits upon Project development impact fees payable by SunCal provided by the Second Amendment will modify existing land use designations or development regulations for the Original Site or the Additional Land that there will be no impact upon the environment beyond that analyzed by the City Council at the time of Citys approval of the DA and the Entitlements and addressed in the Findings and that pursuant to the California Environmental Quality Act more specifically California Administrative Code Title 14 Section 15168 (c)2 that past Council Findings were correct and that no new environmental analysis or document as to the Amendment is necessary NOW THEREFORE THE CITY COUNCIL OF THE CITY OF INDIO CALIFORNIA DOES HEREBY ORDAIN AS FOLLOWS Section 1. That the above recitals and findings are true and correct are incorporated herein by this reference inclusive of all definitions and exhibits provided and constitute the findings of the Council in this case Section 2. That the Second Amendment to Development Agreement 96-8-10 is hereby approved. Section 3. That a fully executed copy of the Second Amendment to Development Agreement 968-10 between the City of Indio and SunCal as to SunCals rights and responsibilities under the Amended DA shall be and remain on file in the Office of the City Clerk as a public record and shall be recorded at the Office of the Recorder for Riverside County. Section 4. That the City Clerk shall certify to the passage and adoption of this ordinance and shall cause a summary of same to be published once in the Desert Sun a newspaper of general circulation printed published and circulated within the City of Indio and the same shall be in full force and effect thirty 30 days after its adoption SECOND READING INTRODUCED AS FIRST READING this 20th day of June 2007 by the following vote:

AYES Fesmire Gilbert Wilson Godfrey NOES None BEN GODFREY MAYOR ATTEST CYNTHIA HERNANDEZ CMC CITY CLERK THE CFD 2004-3 BOND OFFERING REQUIRES STRICT COMPLIANCE. 1. (To get title one must have a recorded title on the land title records for Streets.) 2. (Streets are also listed on Original Tract Maps as Private) 3. (Streets also need to be maintained by the entity who owns the Streets) Fiscal Agent Agreement See Exhibit B at: http://www.scribd.com/doc/162959583/Brian-CFD-2004-3-Exhibits Application of the proceeds of the Bonds is governed by a Fiscal Agent Agreement dated as of September 1, 2005 ("Fiscal Agent Agreement") between the District and its Fiscal Agent. See Exhibit B Fiscal Agent Agreement. The City concurrently entered into the Funding Agreement with the Developer, Suncal or Indio Land Ventures.27 The agreement also addresses the use of Bond proceeds deposited in the Acquisition Fund established under the Fiscal Agent Agreement. Any application of Bond proceeds must be considered in light of the District's obligations under the Fiscal Agent Agreement related to the Bonds, state law related to the use of proceeds of the District Bonds, and the City's obligations under the Funding Agreement. Strict compliance is necessary. IRS implications may be or should be the most feared. This would be retroactive and now 8-10 years. Fiscal Agent Agreement Requirements Under the Fiscal Agent Agreement, an original deposit of $19,497,000 was made to the Acquisition Fund. Aside from the payment for the costs of issuance of Bonds, monies in the Acquisition Fund are to be applied exclusively to pay "Project Costs". "Project Costs" are defined as "those public facilities and/or capital fees described in the Resolution of Formation" as defined in City Resolution 9025. See Resolution 9025 Resolution of Formation.

27

The funding, construction and acquisition agreement between Indio Land Ventures LLC and City of Indio. See Exhibit D at: http://www.scribd.com/doc/162959583/Brian-CFD-2004-3-Exhibits

The Resolution of Formation, in turn, authorizes the District to pay the cost of "Facilities" which are defined generally as public infrastructure facilities and other governmental facilities which the District is authorized to construct or finance and that are necessary to meet increased demands generated by the Terra Lago project. (Supporting documentation may define these facilities in more detail), The District requisitions monies from the Acquisition Fund directly, pursuant to a simple requisition. Thus, taken alone, the Fiscal Agent Agreement authorizes the District to expend Bond Proceeds on any eligible Project Costs; however, the public facilities must be eligible under the proceedings related to the formation of the District and, furthermore, this right is constrained by the Funding Agreement. Further the transfers must include clear title to the transferred

properties. This must be well documented. Any deviation may cause a default in the tax exempt status of the given facility with interest, or the given facilities. The Defeasing of the Special Escrow of $3 million Special Escrow Bond

Due to the fact that the appraisals on the Terra Lago Project Area at 2-3 years was not higher than the initial $81 million appraisal, the developer was not eligible to use these funds. The $3 million 3036 bond was repurchased and has resulted in the District Bond Debt Service payment being reduced about $220,000 per year for the total life of the bond. RB Terra Lago, the undeveloped property owner, benefited the full $220,000 per year for the last 2 years, and pays no tax. So any reduction there has benefited the current owner RB Terra Lago. Ten [10] years. Yes undeveloped for 10 years is long enough. It is apparent that the time is needed to ensure that fair payments be made and that this Rabobank Area 1 entity pay its fair share or simply develop the property and sell the homes. So any reduction there has benefited the current owner RB

Terra Lago. Ten [10] years. Yes undeveloped for 10 years is long enough. It is apparent that the time is needed to ensure that fair payments be made and that this Rabobank Area 1 entity pay its fair share or simply develop the property and sell the homes. Funding, Construction, and Acquisition Agreement The City makes certain promises to the Developer in the Funding Agreement. See the Funding, Construction, and Acquisition Agreement. Full CFD 2004-3 offering at:

http://www.scribd.com/doc/152429034/CFD-2004-3-OPT-full-version-of-Mello-Roos-offeringcity-of-Indio First, the Funding Agreement provides that monies deposited in the Acquisition Fund ("Improvement Fund") shall be deposited and disbursed in accordance with the Fiscal Agent Agreement and the Funding Agreement. The City agrees in Section 4.2 of the Funding Agreement to purchase from the Developer the Public Facilities constructed by the Developer. Article IV sets forth the requirements for a payment request, including a requirement that the facilities be publicly owned. Article III of the Funding Agreement provides that the Developer will cause plans to be prepared for "Public Facilities" to be sold to the District but arguably does not require the Developer to construct any Public Facilities except those which it chooses to construct. See Sections 3.2 and 3.3.Section 3.6 allows the Developer and the City to mutually elect to cause any of the Public Facilities to be constructed by the City. Section 8.1 of the Funding Agreement provides that the agreement may be terminated by mutual written consent and monies in the Acquisition Fund may be used to pay for Public Facilities outside of the agreement. The attached Exhibit A lists the Eligible Public Facilities. Just because a facility is listed as eligible does not make it so. It must be an eligible public facility that the City will take title to. Otherwise Disney Land maybe listed as eligible, but it is not. It is customary to make a list of eligible facilities attached to the construction agreement. Here in CFD 2004-3 under the Resolution and Intention and the Community Facilities District Report, the Community Facilities District is authorizing to finance the following Facilities: Street Facilities. "Street Facilities" consist of certain road and appurtenant drainage facilities required as a condition for the development of the property in the Community Facilities District, which will be owned by the City, and may include street improvements to Terra Lago Parkway, Lago Vista Boulevard, Lago Brezza Drive, Golf Center Parkway, Avenue 44 and Avenue 43. Water Facilities. "Water Facilities" consist of certain water facilities required as a condition of development of the property in the Community Facilities District, which will be owned by Indio

Water Authority, and may include water improvements in Terra Lago Parkway, Lago Vista Boulevard, Lago Brezza Drive, Golf Center Parkway, and Avenue 44. Sewer Facilities. "Sewer Facilities" consist of certain sewer facilities required as a condition of development of the property in the Community Facilities District. The City may make amendments to the RMA without violating bond covenants or the law, but such changes would require a public process and an election. The Area 1 homeowners are the registered voters. The undeveloped property owners would not be able to influence the outcome of such vote of the homeowners. However, RB Terra Lago or Area 1 Rabobank may sue and contest such a change, be owned by Valley Sanitary District, and may include sewer improvements in Terra Lago Parkway, Lago Vista Boulevard, Lago Brezza Drive, Avenue 44 and Avenue 43. Flood Control Facilities. "Flood Control Facilities" consist of certain flood control and storm water drainage facilities required as a condition for the development of the property in the Community Facilities District, which will be owned by the Coachella Valley Water District and may include storm drain improvements to Terra Lago Parkway, Lago Vista Boulevard, Lago Brezza Drive, Golf Center Parkway. Estimated Facilities Costs. The Bonds are anticipated to provide the following amounts for the acquisition and construction of the Public Facilities: Street Facilities Water Facilities Sewer Facilities $1,382,530.00 $ 1,694,946.00 $ 1,322,867.00

Flood Control Facilities $ 642,448.00 Related Site improve Total: $8,226,110.00

The Funding Agreement defines "Public Facilities" to mean one or more of the Public Facilities described in Exhibit A which are "eligible to be financed out of the Improvement Fund." As noted above, the Fiscal Agent Agreement authorizes monies in the Acquisition Fund

to be expended only for costs of the Public Facilities described in the Resolution of Formation, which clearly refers to publicly owned facilities. This is consistent with the requirements of the law relative to formation of community facilities districts. Moreover, the Developer is clearly obliged to deliver to the City "Acceptable Title" to any public facilities in connection with its receipt of payment for that public facility. See for example Section 5.1. Anything may be included, but that does not make it a public eligible facility. THE CFD 2004-3 BILLING INFORMATION 28 The First Check was written to the City of Indio City of Indio City of Indio City of Indio City of India City of Indio City of Indio City of Indio Storm Fees` Fire Station Mitigation Fee Sheriff/Police Fee Park Fee Bridge/Major Street Impact Fee TIJIY117 Water Capital Improvement Fee 57,595.00 1,000,000.00 54,060.00 254,400.00 445,200.00 504,984.00 4,489,471.00

INCLUDES THE HOMES FROM AREA 2!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! City of Indio Park Capital Impact Fee Total 1,264,365.00 $8,100,078.00

The check for $8.1 million . Well it appears that Indio Water Authority, a new spinoff from the City of Indio at the time picked up the check. See Indio Water Authority Notes September 2005. See who received the money. Jim Smith Indio Water Authority receives a $8 million check. Mello Roos funded $8.1 million within 5 days of the statement. I have drawn a map of the district and color coded it. Private Street are marked, notations are made of the CFD 2004-3 District. See CFD 2004-3 District Map Color marked. http://www.scribd.com/doc/193568284/Cfd2004-3-District-Map-Color-Marked-10132013

28

Color map of properties under the CFD 2004-3 District. Based on land title the map demonstrates private and public streets and territories. Includes what was eligible. See: http://www.scribd.com/doc/193568284/Cfd-2004-3-District-Map-Color-Marked-10132013

Reminder is made that Timeshare paid over $3 million in impact fees, and signed an agreement with LB Indio for all other infrastructure costs. The agreement states that they will not be responsible for any additional monies. See: http://www.scribd.com/doc/167643065/Cost-Sharing-Agreement-With-LBHILLS-and-Trendwest-Resorts-Oct-27-2003-0. 1. If one looks at the color map and understands the documents to this point it is hard to see how Area 1 could be forced to pay anything. Like Area 2 states we can do it without a bond. The real question is how a bond could be forced on innocent future residents. 2. Now for convenience simplified payments made from CFD 2004-3. See attached CFD 2004-3 Billings. http://www.scribd.com/doc/193566064/2004-3-All-Billings-of-Cfd 3. The records do not conform to the required documentation outlined in the CFD 2004-3 offering and supportive documents. 4. The fire station benefits area 2 and the District. 5. Water impact fees for Area 2, benefit Area 2 or the City depends on your point of view. 6. Billing on Req. No. 4 done a year after Area 1 was finish is suspect. First it was a year. Second the City does not hold title to these public facilities. Third they on private areas.

7. Billing on Req. No. 5 done a year after Area 1 includes Dry Utilities. It appears as though this is not Area 1. Dry goods were being put into Area 2 at that time. 8. Billing on Req. No 7. Simply states Area 2. Done 10/04/2007. **Note is made of inappropriate sign off. No sign off by Rex Sharp Valley Sanitary District. [Rex Sharp personally communicated the issues to me.] 9. Billing on Req. No 8. July 16, 2008. A mere 3 years after Area 1 completed. **Note is made NOT VERIFIABLE BY FINANCE. Phase 2 Final Street Improvements. Lists Area 2 Tract Maps 32341.

I believe I understand the facts. I am willing to work for resolution. However I strongly feel that the City contact an outside special forensic accounting group and reimburse me appropriately.

Brian Davies, individually