Loading...
HomeMy WebLinkAboutCity Council - 2013-19 RESOLUTION NO. 2013-19 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH ACTING AS THE LEGISLATIVE BODY OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAN_ D COAST RESORT) AUTHORIZING THE ISSUANCE OF ITS 2013 SPECIAL TAX REFUNDING BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $14,000,000 AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council (the "City Council") of the City of Huntington Beach, California (hereinafter sometimes referred to as the "legislative body of the District"), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District") pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the "Act"), and the provisions of Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City(the "Municipal Code"); and Pursuant to proceedings taken and an election held on April 17, 2000, to authorize the issuance of bonds, the levy of special taxes and the establishment of an appropriations limit for the District, the District was authorized to issue bonds in one or more series, pursuant to the Act; and The District has previously issued its City of Huntington Beach Community'Facilities District No. 2000-1 (Grand Coast Resort) 2001 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$16,000,000 (the "Prior Bonds"), which were issued to finance certain infrastructure improvements within the District; and The City Council, acting as the legislative body of the District, now desires to refund the Prior Bonds through the issuance of bonds in an aggregate principal amount not to exceed $14,000,000 designated as the "City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds" (the "2013 Bonds"); and In order to effect the issuance of the 2013 Bonds, the City Council, acting as the legislative body of the District, desires to enter into a Bond Indenture, dated as of July 1, 2013 (the "Bond Indenture"), with U.S. Bank National Association, as Trustee, and an Escrow Agreement with U.S. Bank National Association, as Escrow Bank (the "Escrow Agreement") in substantially the forms presented herewith; and The legislative body of the District has determined in accordance with Government Code Section 53360.4 that a negotiated sale of the Bonds to Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter") in accordance with the terms of the Bond Purchase Agreement (defined below) approved as to form by this City Council herein will result in a lower overall cost to the District than a public sale; 13-3774/97074 1 I - Resolution No. 2013-19 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, ACTING AS THE LEGISLATIVE BODY OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1, DOES HEREBY RESOLVE, ORDER AND DETERMINE AS FOLLOWS: Section 1. Each of the above recitals is true and correct. Section 2. The issuance of the 2013 Bonds in a principal amount not to exceed $14,000,000 is hereby authorized pursuant to the Act with the exact principal amount to be determined by the officer signing the Bond Purchase Agreement in accordance with Section 7 below. The 2013 Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance with Section 7 hereof and otherwise shall be substantially in the form set forth in the Bond Indenture (herein the "Bond Indenture") on file with the City Clerk and made a part hereof. All other provisions of the 2013 Bonds shall be governed by the terms and conditions set forth in the Bond Indenture prepared by Bond Counsel for the District and executed by the Mayor, City Manager or Director of Finance, or their written designees, which Bond Indenture shall be substantially in the form presented to the City Council, with such additions thereto and changes therein as are recommended or approved by Bond Counsel for the District and the officers executing the same, with such approval to be conclusively evidenced by the execution and delivery of the Bond Indenture. Capitalized terms used in this Resolution which are not defined herein have the meaning ascribed to them in the form of the Bond Indenture. In satisfaction of the requirements contained in Section 53363.2 of the Act, the legislative body of the District hereby determines that: (1) it is anticipated that the purchase of the 2013 Bonds will occur on or about June 26, 2013, (2) the 2013 Bonds shall be dated their date of issuance, and be in the denominations, have the maturity dates (which do not exceed the latest maturity date of the Prior Bonds being refunded), and be payable at the place and be in the form specified in the Bond Indenture, (3)the aggregate principal amount of 2013 Bonds shall not exceed $14,000,000, (4)the 2013 Bonds shall not have a final maturity date later than September 1, 2032, (5)the issuance of the 2013 Bonds shall not result in a true interest cost for the 2013 Bonds in excess of 5.5%, (6)the Underwriter's discount for the 2013 Bonds shall not exceed 1.5% of the aggregate principal amount thereof, and (7)the designated cost of issuing the 2013 Bonds being used to refund the Prior Bonds, as defined by Section 53363.8 of the Act, shall include all of the costs specified in Section 53363.8(a), (b)(2) and (c). In satisfaction of the requirements contained in Section 53364.2 of the Act, the legislative body of the District hereby determines that any savings achieved through the issuance of the 2013 Bonds shall be used to finance further facilities authorized to be financed by the District with any amount in excess of the costs of the further facilities to be financed, as determined in the sole discretion of the Director of Finance, or her designees, being used to reduce special taxes of the District, and such reductions shall be made in accordance with the Act. Section 3. The 2013 Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor acting on behalf of the District, and attested with the manual or facsimile signature of the City Clerk. 2 13-3774/97074 Resolution No. 2013-19 Section 4. In accordance with the requirements of Section 53345.8(c) of the Act and the Municipal Code, the legislative body of the District hereby determines the Fiscal Year 2012-13 assessed value of the real property in the District subject to the special tax to pay debt service on the 2013 Bonds ($190,194,724) is at least three times the maximum principal amount of the 2013 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District ($14,000,000). Section 5. The proceeds of the 2013 Bonds and the Special Taxes may be invested in any of the Authorized Investments of the type described in the Bond Indenture. Section 6. The covenants set forth in the Bond Indenture to be executed in accordance with Section 2 above are hereby approved, shall be deemed to be covenants of the City Council in its capacity as the legislative body of the District and shall be complied with by the District and its officers. The Bond Indenture shall act as a bond indenture and constitute a contract between the District and the Owners of the 2013 Bonds. Section 7. U.S. Bank National Association is hereby appointed to act as Trustee, Registrar and Transfer Agent for the 2013 Bonds and as Escrow Bank under the Escrow Agreement. Willdan Financial Services ("Willdan") is hereby appointed to act as the Dissemination Agent under the Continuing Disclosure Agreement. The Mayor, City Manager, Assistant City Manager or the Director of Finance, or their written designees (collectively, the "Authorized Officers"), are hereby authorized to enter into an agreement with the Trustee and Willdan to provide such services to the District. The forms of the Continuing Disclosure Agreement, the Bond Purchase Agreement, the Escrow Agreement and the Official Statement presented at this meeting are hereby approved and each of the Authorized Officers is hereby authorized and directed to execute the Bond Purchase Agreement, the Continuing Disclosure Agreement, the Escrow Agreement and the Official Statement in substantially the form hereby approved, with such additions thereto and changes therein as are recommended or approved by Bond Counsel for the District and the officers executing the same, with such approval to be conclusively evidenced by the execution and delivery of such documents; provided, however, that the Bond Purchase Agreement shall be signed only if the interest rate on the 2013 Bonds is such that the principal and total interest cost to maturity on the 2013 Bonds is less than the principal and total interest cost to maturity on the Prior Bonds and the last maturity date of the 2013 Bonds is not later than the last maturity date of the Prior Bonds. The Underwriter is hereby authorized to distribute the Official Statement (in both preliminary and final forms) to prospective purchasers, and the Director of Finance, or her written designee, is hereby authorized to certify to the Underwriter prior to the distribution of the Official Statement in preliminary form that such Official Statement is deemed final by the District within the meaning of Rule 15c2-12 of the Securities and Exchange Commission. Section 8. The Authorized Officers are authorized to contract for all services necessary to effect the issuance of the 2013 Bonds. Such services shall include, but not be limited to, printing the 2013 Bonds, the Preliminary Official Statement and the final Official Statement, obtaining legal services, Trustee services and any other services deemed appropriate as set forth in a certificate of the Director of Finance, or her written designee. The Authorized Officers are authorized to pay for the cost of such services, together with other Costs of Issuance, with 2013 Bond proceeds deposited to the Costs of Issuance Fund established pursuant to the Bond Indenture. 3 13-3774/97074 Resolution No. 2013-19 Section 9. All actions heretofore taken by officers and agents of the District and the City of Huntington Beach with respect to the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the Authorized Officers and the other officers of the City of Huntington Beach and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposes of the Bonds as described in the Bond Indenture. Any document authorized herein to be signed by the Clerk of the legislative body of the District may be signed by a duly appointed deputy clerk. PASSED AND ADOPTED By the City Council of the City of Huntington Beach at a regular meeting thereof held on the 3rdday of June, 2013. 40 Alwal" Mayor REVIEWED AND APPROVED: APPROVED AS TO FORM: City Ma er 4itttorn �jV INITIATED AND APPROVED: ni - (�6' Director of Finance Exhibits to Include: Bond Indenture Escrow Agreement Preliminary Official Statement Bond Purchase Agreement 4 13-3774/97074 Resolution No. 2013-19 F I N A L B O N D D O C U M E N TS RECEIVED FROM BOND COUNSEL, STRADLING YOCCA CARLSON & RAUTHI CLOSING DULY 311 2013 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CLOSING MEMORANDUM Time and Place The pre-closing will take place at the offices of Stradling Yocca Carlson & Rauth, 660 Newport Center Drive, Suite 1600,Newport Beach, California 92660 at 1:30 p.m., on Tuesday, July 30,2013. Closing will take place at 8:30 a.m., on Wednesday, July 31,2013,via telephone. Parties Issuer Fred Wilson, City Manager Lori Ann Farrell, Director of Finance Kellee Fritzal,Deputy Director Sunny Han, Senior Administrative Analyst Issuer's Counsel Jennifer McGrath, Esq. City Attorney Bond Counsel Brian Forbath,Esq. Brad Neat,Esq. Carol L.Lew, Esq. Stradling Yocca Carlson&Rauth Underwriter Sara Oberlies Brown Tom Jacob Stifel,Nicolaus&Company, Incorporated Underwriter's Counsel Chris Lynch Jones Hal Financial Advisor Craig Hoshijima Usama Mahmud Public Financial Management,Incorporated Trustee and Escrow Agent June Borjo Martin Meza US Bank National Association Trustee's Counsel Dennis Wong,Esq. Dorsey&Whitney LLP DOCSOC/1633116v4/022273-0006 1 I Special Tax Consultant Beatrice Medina Candace Heiser Willdan Financial Services Verification Agent Mark Peroutka Joe Smith Grant Thornton LLP DOCSOC/1633116v4/022273-0006 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CLOSING INDEX RESOLUTIONS, ORDINANCES, MINUTES & DOCUMENTS RELATING TO FORMATION 1. Resolution No. 2000-35 Establishing Community Facilities District No. 2000-1 (Grand Coast Resort) and Establishing the Boundaries thereof, adopted April 17,2000. 2. Ordinance No. 3519 entitled "An Ordinance of the City of Huntington Beach Levying Special Taxes within the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)", adopted December 3, 2001. 3. Notice of Special Tax Lien recorded April 24,2000 4. Ground Lease, dated as of April 4,2001 5. Agreement between Community Facilities District and Agency re Forebearance of Remedies under Lease Agreement, dated as of December 1,2001. DOCUMENTS TO BE DELIVERED BY THE DISTRICT AND THE CITY 6. Resolution No. 2013-19 entitled "Resolution of the City Council of the City of Huntington Beach Acting as the Legislative Body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount not to $14,000,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith," adopted June 3,2013; Minutes. 7. Certificate of the City Clerk Bringing Forward Resolutions and Ordinances 8. Bond Indenture 9. Continuing Disclosure Agreement of the District 10. Escrow Agreement 11. CDIAC Report of Proposed Debt Issuance, Acknowledgment from CDIAC and Report of Final Sale 12. Certificate as to Finality of the Preliminary Official Statement 13. Incumbency and Signature Certificate of the City and District 1 DOC SOC/1633116v4/022273-0006 14. Certificate Re City Treasurer Designation 15. Issuer Closing Certificate 16. Closing Certificate of the City 17. Instructions to Trustee 18. Instructions to Trustee Re Administration Fund 19. Requisition No. 1 for Disbursement of Costs of Issuance 20. Irrevocable Instructions and Request to Fiscal Agent 21. Tax Certificate of the District and City, together with Certificate of the Underwriter; IRS Form 8038-G 22. Uniform Facsimile Signature Filings of the Mayor and City Clerk 23. Specimen Bond DOCUMENTS TO BE DELIVERED BY THE UNDERWRITER 24. Bond Purchase Agreement 25. Preliminary Official Statement 26. Official Statement 27. Underwriter's Receipt for the Bonds DOCUMENTS TO BE DELIVERED BY THE TRUSTEE AND THE ESCROW BANK 28. Officer's Certificate, together with Extracts from By-Laws and Official Signing Power Authorities Certificate 29. Closing Certificate of Trustee/Escrow Bank 30. Trustee's Receipt for Proceeds and Other Monies 31. Escrow Bank's Receipt for Proceeds DOCUMENTS TO BE DELIVERED BY PCH BEACH RESORT,LLC 32. Continuing Disclosure Agreement(Lessee) 33. l Ob-5 Certificate of Lessee 34. Closing Certificate of the Lessee 2 DOCSOC/1633116v4/022273-0006 OPINIONS 35. Opinion of Bond Counsel 36. Reliance Letter to Trustee 37. Supplemental Opinion 38. Defeasance Opinion 39. Opinion of Counsel to the City/District 40. Opinion of Counsel to the Underwriter 41. Opinion of Counsel to Trustee MISCELLANEOUS 42. Certificate of Tax Consultant 43. Certificate of Dissemination Agent 44. Certificates Regarding Continuing Disclosure(2) 45. Verification Report 46. Distribution List 3 DOCSOC/1633116v4/022273-0006 RESOLUTION NO. 2000-35 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH ESTABLISHING CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT)AND ESTABLISHING THE BOUNDARIES THEREOF WHEREAS,the City Council(the"City Council")of the City of Huntington Beach("City") has heretofore adopted on January 18,2000,Resolution No.2000-5,stating that a proposed community facilities district to be known as "City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort),County of Orange,State of California"(the"Community Facilities District"),is pro- posed to be established under the terms of Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City of Huntington Beach (the "Code") and Chapter 2.5 (commencing with § 53311)of Part 1 of Division 2 of Title 5 of the California Government Code, commonly known as the "Mello-Roos Community Facilities Act of 1982" (the "Act"), and fixing the time and place for a public hearing on the establishment of the Community Facilities District;and WHEREAS,notice was published and mailed to the owners of property in the Community Facilities District as required by law relative to the intention of the City Council to establish the Community Facilities District,the levy of the special taxes therein, the financing and refinancing of public facilities therein,and the incurring of a bonded indebtedness by the Community Facilities District,and of the time and place of said public hearing; and WHEREAS, the date for the public hearing on the establishment of the Community Facilities District was continued to April 17,2000,pursuant the City Council's finding that the complexity of the proposed Community Facilities District required additional time,which continuance is within six months of the originally proposed hearing date;and _WHEREAS, on April 17, 2000, at the time and place specified in said published and mailed notices,the City.Council opened and held a public hearing as required by law relative to the forma- tion ofthe Community Facilities District;the levy of the special taxes therein and the financing of facilities by the Community Facilities District;and WHEREAS, prior to said hearing there was filed with the City Council a report(the "Report") containing a description of the services being financed within and for the Community Facilities District, and an estimate of the cost of such financing, as required by Section 53321.5 of the California Government Code;and WHEREAS,at the public hearing all persons desiring to be heard on all matters pertaining to the establishment of the Community Facilities District,the levy of the special taxes and the financing of RVPUBIKAB1507625 the public facilities therein were heard,and a full and fair hearing was held;and WHEREAS,the City Council may therefore proceed to establishthe Community Facilities District; NOW,THEREFORE,IT IS HEREBY RESOLVED by the City Council of the City ofHuntington Beach,the following: Section 1. Findings. The City Council finds as follows: (i)all of the preceding recitals are correct,(ii) on April 17,2000,pursuant to notice thereof duly given as provided by law,the City Council conducted a public hearing with respect to the establishment of the Community Facilities District and the annual levying of specified special taxes on the taxable property within the Community Facilities District to pay for public facilities for the Community Facilities District which are described in Section 3 hereof,(iii) the boundary map of the Community Facilities District has beenrecorded pursuant to Sections 3111 and . 3113 of the Streets and Highways Code as Instrument No.20000038289 in Book 78 of Book of Maps of Assessment and Community Facilities Districts at page 49 of the Official Records of the County of Orange, (iv) all prior proceedings with respect to the establishment of the Community Facilities District prior to and during the hearing with respect to the establishment of the Community Facilities District conducted by the City Council on April 17,2000,were valid and in conformity with the requirements of Chapter 2.5 (commencing with§.53311)of Part 1 of Division 2 of Title 5 of the California Government Code,(v)no written protests were received at or prior to the time of said hearing against the establishment ofthe Community Facilities District or the levying of said special taxes by the Community Facilities District, and said special taxes have,therefore,not been limited by majority protest pursuant to Section 53324 of the California Government Code, (vi)the City Council is,therefore, authorized to adopt a resolution of formation pursuant to Section 53325.1 of the California Government Code for the establishment of City of Huntington Beach CommunityFacilities District No.2000-1 (Grand Coast Resort),County of Orange, State of California,and the Community Facilities District should be established. Section2.Establishment ofDistrict.City ofHuntingtonBeachCommunityFacilitiesDistrict No. 2000-1 (Grand Coast Resort), County of Orange, State of California,is hereby established. The boundaries.of the Community Facilities District are set forth in Exhibit"A" attached hereto and are also shown on the map endtled''Proposed Boundaries of City ofHuntington Beach Community Facilities District No.2000-1 (Grand Coast Resort),County of Orange,State of California"which is on file with the Clerk and said boundaries are hereby established. Section 3. Determinations. The City Council hereby finds that, pursuant to Sections 3.56.070(i)and 3.56.040 of the City's Special Tax Financing Improvement Code,in order to carry out the purposes.of such Code,and in order for the City and City of Huntington Beach Redevelopment Agency ("Agency'D to carry out their respective purposes, it is necessary and convenient to determine that the Agency is a public agency landowner subject to a special tax. -2- RVPUB\KAB\507625 Section 4. Procedures in Connection with Special Tax. The City hereby finds that pursuant to Section 3.56.070(i)ofthe City Special Tax Financing Improvement Code,the Agency,as fee title owner of land within the District,is considered a public agency landowner and,as such,is entitled to cast votes based on such possessory interest in land located within the District for the speciaFelection proceedings scheduled to take place in connection with the formation of the District,and is subject to the levy and collection of special taxes and potential foreclosure proceedings in connection therewith. Section 5. Types of Facilities:Incidental Expenses The types of public facilities proposed to be provided within and financed by the proposed Community Facilities District are: (a) Street improvements including costs of condemnation, removal, demolition, grading, paving, curbs and gutters, sidewalks, street lights and parkway and landscaping related thereto. (b) Storm drains, drainage storage ponds and drainage channels including landscaping, if applicable, (c) Sewers,sewer treatment facilities and sewer capacity acquisition. (d) Wetlands redemption,remediation and relocation. (e) Public park and recreation facilities, including beach access facilities and pedestrian bridge. (fl Water distribution facilities,including fire hydrants and reclaimed water and water storage facilities. (g) Street signalization and signage,including traffic fees. (h) Fire facilities including structures and capital equipment. (i) Beach maintenance facilities. (j) Acquisition of land, rights-of-way and easements necessary for any of the facilities specified in paragraphs(a)through(i)above. (k) The incidental expenses which will be incurred are:(i) the cost of engineering,planning and designing such facilities and the cost of environmental evaluations thereof, (ii)all costs' -3- RVPUB\KAB\507625 associated with the creation of the proposed community facilities district, issuance of the . bonds thereof,the determination of the amount of and collection oftaxes,the payment of taxes,and costs otherwise incurred in order to carry out the authorized purposes of the 1 community facilities district, and(iii) any other expenses incidental to the construction, acquisition,completion,and inspection of such facilities. Section 6. Special Taxes. Except where funds are otherwise available, special taxes sufficient to pay for all such facilities and to pay the principal of and interest on the bonds of the Community Facilities District and any territory to be annexed in the firture,and the annual administrative expenses of City and the Community Facilities District in determining,apportioning,levying and collecting such special taxes,and in paying the principal of and interest on such bonds,and the costs of registering,exchanging and transferring such bonds, secured by the recordation of a continuing lien against all taxable or nonexempt property in the Community Facilities District, and maintaining a reserve fund for such bonds, and paying any amounts that must be paid to the United States in order to preserve the tax-exempt status of such bonds shall be annually levied within the Community Facilities District and any territory to be annexed in the future. The rate and method of apportionment of said special taxes shall be asset forth in Exhibit'B" attached hereto and by this reference made a part hereof. The City Council finds that.the methodology for determining and apportioning annual amounts of special taxes,and maximum annual amounts of special taxes set forth in Exhibit'B"hereto are based upon the cost of making the public facilities available to each lot and parcel in the Community Facilities District. The special taxes will be apportioned to each lot or parcel on the foregoing basis pursuant to Section 53325.3 of the California Government Code and,therefore,such special taxes are not on or based upon the ownership of real property. Pursuant to Section 53.340 ofthe California Government Code,the special taxes shall be collected in the same manner as ordinary-ad valorem property taxes are collected and shall be subjectto the same penalties and the same procedure,sale,and lien priority in case of delinquency as is provided for ad valorem taxes. However,under no circumstances shall the special tax levied against any parcel subject . to,the levy of the special tax pursuant to the rate and method of apportionment be increased as a consequence of delinquency or default by the owner of any other parcel or parcels within the proposed Community Facilities District by more than ten(10)percent. Upon recordation of a notice of special tax lien pursuant to Section 3114.5 of the Streets and Highways Code,a continuing lien to secure each levy of the special tax shall attach to all non-exempt real property in the Community Facilities District and this lien shall continue in full force and effect until the special tax obligation is prepaid and permanently satisfied and the lien canceled in accordance with law or until collection of the special tax ceases. Section 7. Annexation of Territory. Other property within the boundaries of City may be annexed into the Community Facilities District upon the condition that parcels within that territory maybe -4- RVPUB\KAB\507625 i annexed only with the unanimous approval of the owner or owners of each parcel or parcels at the time that parcel or those parcels are annexed, Section 8. Exempt Property. Pursuant to Section 53340 of the California Government Code,properties of entities ofthe state,federal and local governments not subject to a leasehold interest or used for public rights of way or other public uses,shall be exempt from the levy of special taxes of the Community Facilities District. Section 9. Report. The Report is hereby approved and is made a part of the record of the public hearing regarding the formation of the Community Facilities District,and is ordered to be kept on file with the Clerk of the City as part of the transcript of these proceedings. Section 10. Repayment of Funds Advanced or Work-in-Kind. Pursuant to Section 53314.9 ofthe California Government Code,the City Council may accept advances of funds or work-in- kind from private persons or private entities and may provide,by resolution,for the use of those fluids or that work-in-kind,for any authorized purpose,including,but not.limited to,paying any costs incurred by City in creating the Community Facilities District and may enter into an agreement by resolution,with the person or entity advancing funds or work-in-kind to repay funds advanced,.or to reimburse the person or entity for the value or cost,whichever is less,of the work-in-kind,as deteirnined by the City Council. Section 11. Tender of Bonds. This City Council hereby reserves the right,on behalf of the Community Facilities District to accept tenders of bonds in full or partial payment of special taxes to be levied within the Community Facilities District pursuant to Section 3.56.320 of the Code. Section 12. Description of Voting Procedures. The voting procedures to be followed in conducting the consolidated special elections on(i)the proposition of the Community Facilities District incurring a bonded indebtedness in an amount nOt to exceed$16,000,000,(ii)the proposition with respect to the levy of special taxes onthe land within the Community Facilities District to pay the principal of and interest on the bonds thereof,and(iii)the proposition with respect to the establishment of an appropriations Emit for the Community Facilities District in the amount of$1,750,000,if the Community Facilities District is established and such consolidated special elections(the"consolidated special elections")are held,shall be as follows: (a) If at least 12 persons have been registered to vote within the territory of the Community Facilities District for each of the 90 days preceding the close of the public or protest hearing (the"protest hearing"),the vote in the consolidated special elections shall be by the registered voters ofthe Community Facilities District with each voter having one vote. In that event,the consolidated special elections-shall be conducted by the Clerk, and shall be held on a date selected by the City Council in conformance with the provisions of Section 53326 of the California Government Code and pursuant to the provisions ofthe California Elections Code governing elections of cities,insofar as they may be applicable, -5- RVPUBNKABN507625 I and pursuant to said Section 53326 the ballots for the consolidated special elections shall be distributed to the qualified electors of the Community Facilities District by mail with return postage prepaid or by personal service,and the consolidated special elections shall be conducted as a mail ballot election. (b) If 12 persons have not been registered to vote within the territory ofthe community facilities district for each of the 90 days preceding the close ofthe protest hearing,and pursuant to Section 53326 of the California Government Code,the vote is therefore to be by the Iandowners (as defined in Section 3.56.070 of the Municipal Code of the City of Huntington Beach) of the Community Facilities District,with each landowner of record at the close of the protest hearing having one vote for each acre or portion of an acre of land that he or she owns within the Community Facilities District,the consolidated special elections shall be conducted by the City Clerk pursuant to the Municipal Code of the City of Huntington Beach and Section 53326 of the California Government Code as follows: (1) The consolidated special elections shall be held on the earliest date, following the adoption by the City Council of the resolution of formation establishing the Community Facilities District pursuant to Section 53325.1 of the California Government Code,and a resolution pursuant to Section 53326 of said Code submitting the propositions with respect to (i)whether a bonded indebtedness shall be incurred for constructing and financing through the sale of bonds public facilities necessary for the formation of the Community Facilities District;(ii)the levy of special taxes to pay the principal of and interest on the bonds of the Community Facilities District and(iii)the establishing of an appropriations limit therefor to the qualified electors ofthe Community Facilities District,upon which such elections can be held pursuantto said Section 53326 which may be selected by the City Council,or such earlier date as the owners of land within the Community Facilities District and the Clerk agree and concur is acceptable. (2) Pursuant to said Section 53326,the consolidated special elections may be held earlier than 90 days following the close of the protest hearing if the qualified electors of the Community Facilities District waive the time limits for conducting the elections set forth in said Section 53326 by unanimous written consent and the Clerk concurs in such earlier election date as shall be consented to by the qualified electors. (3) Pursuant to said Section 53326,ballots for the consolidated special elections shall be distributed to the qualified electors by the Clerk by mail with return postage prepaid,or by personal service. (4) Pursuant to applicable sections ofthe CaliforniaElections Code governing the conduct ofmail ballot elections of cities,and specifically Division 4(commencing with§4000 ofthe California Elections Code with respect to elections conducted by mail),the Clerk shall mail(or deliver)to each qualified elector an official ballot in a form specified by the City Council in the resolutions calling and consolidating the consolidated special elections,and shall also mail to all such qualified electors a ballot pamphlet and instructions to voter,including a sample ballot identical in form to the official -6- RVPUB\KAB\507625 I iQ ballot but identified as a sample ballot,an impartial analysis by Counsel to City pursuant to Section 9280, as amended, of said Code with respect to the ballot propositions contained in the official ballot, arguments and rebuttals, if any, pursuant to Sections 9281, as amended, to 9287, as amended, inclusive, and 9295, as amended, of said Code, a return identification envelope with prepaid postage thereon addressed to the Clerk for the return of voted official ballots, and a copy ofthe form of Resolution of Formation establishing the Community Facilities District,adopted by the City Council pursuant to Section 53325.1 of the California Government Code, and the exhibits thereto;provided,however,that such analysis and arguments may be waived with the unanimous consent of all the landowners,and in such event a finding regarding such waivers shall be made in the resolution adopted by the City Council calling the consolidated special elections. (5) The official ballot to be mailed(or delivered) by the Clerk to each landowner shall have printed or typed thereon the name of the landowner and the number of votes to be voted by the landowner and shall have appended to it a certification to be signed by the person voting the official ballot which shall certify that the person signing the certification is the person who voted the official ballot,and if the landowner is other than a natural person,that he or she is an officer of or other person affiliated with the landowner entitled to vote such official ballot,that he or she has been authorized to.vote such official ballot on behalf of the landowner,that in voting such official ballot it was his or her intent,as well as the intent of the landowner,to vote all votes to which the landowner is entitled based on its land ownership on the propositions set forth in the official ballot as marked thereon in the voting square opposite each suchproposition,and further.certifying as to the acreage of the landowner's land ownership within the Community Facilities District (6) The return identification envelope delivered by the Clerk to each landowner shall have printed or typed thereon the following: (i)the name of the landowner, (ii)the address of the land- owner,(iii)a declaration under penalty ofperjury stating that the voter is the landowner orthe autho- rized representative of the landowner entitled to vote the enclosed ballot and is the person whose name appears on the identification envelope, (iv)the printed name and signature of the voter,(v)the address of the voter,(vi)the date of signing and place_ of execution of said declaration,and(vii)a notice that the envelope contains an official ballot and is to be opened only by the Clerk. (7) The instruction to voter form to be mailed by the Clerk to the landowners shall inform them that the official ballots shall be returned to the Clerk properly voted as provided thereon and with the certification appended thereto properly completed and signed in the sealed return identification envelope with the certification thereon completed and signed and all other information to be inserted thereon properly inserted not later than 7:00 p.m. on the date of the election, or immediately after the Resolution Calling the Special Election is adopted (8) Upon receipt of the return identification envelopes which are returned prior to the voting deadline on the date of the elections,the Clerk shall canvass the votes cast in the consolidated special elections,and shall file a statement with the City Council as to the results of such canvass and -7- RVPUBUCAM507625 the election on each proposition set forth in the official ballot. The procedures setforth in this section for conducting the consolidated special elections,ifthey are held,may be modified as the City Council may determine to be necessary or desirable by a resolution subsequently adopted by the City Council. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 17th day of April,2000. Mayor ATTEST: APPROVED AS TO FORM: City Clerk City Attomey REVIEWED AND APPROVED: INITIATED AND APPROVED City A for Director of Economic Development -8- RVPUB\KAB\507625 I o-- ,3J-" EDIT A LEGAL DESCRIPTION CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT), COUNTY OF ORANGE, STATE OF CALIFORNIA City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort),County of Orange,State of California,includes the land situated in the State of California,County of Orange,City of Huntington Beach,described as follows: Lot 1 of Tract No. 15535,Recorded September 14, 1999 in Map Book 790, Pages 44-50,Records of Orange County,California. A-1 RMBIKAB1507625 EXHIBIT lB CITY OF HUNTINGTON]BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX A Special Tax applicable to each Assessor's Parcel of Taxable Property in the City of Huntington Beach CommunityFacilities District No.2000-1(Grand Coast Resort)(herein CFD No.2000-1)shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The leasehold interests in the real property in CFD No. 2000-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes,to the extent, and in the manner herein provided. A, DEFINITIONS The capitalized terms hereinafter set forth have the following meanings when used in this Rate and Method of Apportionment: Acre or Acreage means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map,the land area shown on the applicable final map,parcel map, or the other parcel map recorded with the County Recorder. If the Acreage of a particular Parcel is unclear after reference to available maps, the Administrator shall determine the appropriate Acreage fora Parcel. Act means Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City of Huntington Beach and, as applicable,the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311),Part 1,Division 2,of Title 5 of the Government Code of the State of California. Administrative Expenses means any or all ofthe following actual or reasonably estimated costs directly related to the administration of CFD No. 2000-1:the fees and expenses of any Fiscal Agent or trustee (including any fees and expenses of its counsel) employed in connection with any Bonds; any costs associated with the marketing or remarketing of the Bonds;the expenses of the Administrator and the City in carrying out their duties under any Indenture or resolution with respect to the Bonds,including,but not B-1 R VW fR\K A R\5A7A75 limited to,the levy and collection of the Special Tax,the fees and expenses of legal counsel,charges levied by the County or any division or office thereof in connection with the levy and collection of Special Taxes, audits, continuing disclosure or other amounts needed to pay arbitrage rebate to the federal government with respect to Bonds; costs associated with complying with continuing disclosure requirements; costs associated with responding to public inquiries regarding Special Tax levies and appeals;attorneys'fees and other costs associated with commencement or pursuit of foreclosure for delinquent Special Taxes;and all other costs and expenses of City,the Administrator,the County,and any Fiscal Agent, escrow agent or trustee related to the administration of CFD No.2000-1. Administrator means the Director of Economic Development or such other person or entity designated by the City Administrative Officer or the City Council to administer the Special Tax according to this Rate and Method of Apportionment of Special Tax. Assessor's Parcel or Parcelmeans a lot,parcel or airspace parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. Assessor's Parcel Map means an official map of the Assessor of the County designating Parcels by Assessor's Parcel number. Bonds mean any bonds or other debt(as defined in Section 53317(d)of the Act),whether in one or more series, issued by the City for CFD No. 2000-1 under the Act. City means the City of Huntington Beach. City Council means the City Council_ of the City of Huntington Beach,acting as the legislative body of CFD No. 2000-1. County means the County of Orange. Development Agreement means the Amended and Restated Disposition and Development Agreement betweenthe City and the developer,MayerFinancial,Ltd.and its subsidiaries,successors and assigns,and any subsequent amendments thereto. Exempt Land means(1)any real property within the boundaries of CFD No.2000-1 which generally serves the development subject to the Development Agreement and/or Ground Lease and is owned by a governmental agency for public right-of-way purposes including,but not limited to,streets,public walkway corridors,and slopes as determined in each Fiscal Year by the Administrator or(2)any Assessor's Parcel for which the Special Tax with respect to the leasehold interest has been paid in full. Fiscal Agent means the fiscal agent who is a party to the Indenture,if so approved. B-2 D\roi rol v A 0%4A7A'TG Fiscal Year means the period commencing on July 1 and ending on the following June 30,in any year in which the Bonds are outstanding. Ground Lease means the ground lease with respect to the land within CFD No. 2000-1 boundary covering a term exceeding the maturity date for the Bonds between the City and the tenant, Mayer Financial,Ltd. and its subsidiaries,successors and assigns, and any subsequent amendments thereto. Indenture means the indenture,fiscal agent agreement,resolution or other instrument approved pursuant to the Resolution of Issuance and pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time,and any instrument replacing or supplementing the same. Maximum Special Tax means,with respect to the leasehold interest in any Parcel of Taxable Property, the maximum Special Tax,determined in accordance with Section C,that can be levied in any Fiscal Year on the leasehold interest in such Parcel. Outstanding Bonds means all Bonds which are then outstanding under the Indenture. Reserve Fund means the fund of that name created under the Indenture. Resolution of Issuance means the resolution adopted by the City Council of the City,acting as the legislative body of CFD No.2000-1,authorizing the issuance of the Bonds in accordance with the Act. Special Tax means the special tax to be levied pursuant to the Act and this Rate and Method of Apportionment of Special Tax in each Fiscal Year on the leasehold interests in Taxable Property within CFD No. 2000-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No. 2000-1 necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Fund for all Outstanding Bonds;(iii)to pay Administrative Expenses,and(iv)to pay costs of any credit enhancement Cincluding fees and expenses related to any letter of credit)for the Bonds,and less a credit for available funds determined pursuant to the Indenture. Taxable Property means all ofthe Assessor's Parcels within the boundaries of CFD No.2000-1,which are not Exempt Land or exempt from the Special Tax pursuant to law. Trustee means the trustee who is a party to the Indenture,if so approved. B. IDENTIFYING TAXABLE PROPERTY B-3 avPrra�xen�smF�S a- Not less than fifteen business days prior to the beginning of each Fiscal Year,the Administrator shall . determine which Parcels in CFD No.2000-1 are Taxable Property.The leasehold interest in the Taxable Property shall be subject to Special Taxes in accordance with'the rate and method of apportionment described in Sections C and D below. C. MAX 14UM SPECIAL TAX The Maximum Special Tax for the leasehold interests in Taxable Property in CFD No.2000-1 shall be the greater of(1)$130,000 per Acre or(2)the amount determined pursuant to the following steps: Step 1: Determine the maximum annual debt service on all Outstanding Bonds; Step 2: Multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: Determine the Acreage of Taxable Property within the CFD No. 2000-1; Step 4: Divide the amount from Step 2 by the Acreage from Step 3 to determine the Maximum Special Tax per Acre of Taxable Property. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2000-2001,and for each Fiscal Year thereafter,the City Council shall levy the Special Tax proportionately on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax,as determined by reference to Section C,above,as needed to satisfy the Special Tax Requirement. E. LMTATIONS No Special Taxes shall be levied on the leasehold interest in any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on the leasehold interests in Taxable Property commencing withFiscal Year 2000-2001,and for each Fiscal Year thereafter,and until the date on which principal and interest on all Outstanding Bonds have been paid in full(or provision for their payment has been made). Upon determination by the Administrator that this requirement has been met,the Special Tax lien shall be removed from the leasehold interests in all Parcels in CFD No.2000-1. B-4 oroT ro\V D\SA9G'f c F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes,provided,however,that CFD No.2000-1 may directly bill the special tax,may collect special taxes at a different time or in a manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on the leasehold interest in delinquent Assessor's Parcels as permitted by the Act. G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No. 2000-1, a special three-member Review/Appeal Committee.The Review/Appeal Committee shall interpret this Rate and Method ofApportionment and make determinations relative to the annual administration of the Special Tax and any appeals,as herein specified. The owner of the leasehold interest in any Taxable Property within CFD No.2000-1 claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Review/Appeal Committee not later than one calendar year after having paid the Special Tax that is disputed. The Review/Appeal Committee shall promptly review the appeal, and if necessary,meet with the owner of the leasehold interest,consider written and oral evidence regarding the amount of the Special Tax, and resolve the appeal. If the Review/Appeal Committee's decision requires the Special Tax to be modified or changed in favor of the owner of the leasehold interest,a cash refund shall not be made(except for the last year of-the levy),but an adjustment shall be made to the next Special Tax levy.This procedure shall be exclusive and its exhaustion by any owner of a leasehold interest shall be a condition precedent to any legal action by such owner. H. PREPAYMENT OF SPECIAL TAX The following definitions apply solely to this Section H.: Outstanding Bonds means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. Previously Issued Bonds means all Bonds that have been issued by CFD No.2000-1 prior to the date of prepayment. 1. Prepayment in Full The Special Tax applicable to any leasehold interest in any Assessor's Parcel of Taxable Property may be B-5 RVPUB\KAB\507625 iQz-s, � aav �3 � prepaid. The Special Tax obligation applicable to the leasehold interest in such Assessor's Parcel in CFD No.2000-1 may be fully prepaid and the obligation ofthe leasehold interest in such Assessor's Parcel to pay.the Special Tax permanently satisfied as described herein. The owner of the leasehold interest intending to prepay the Special Tax obligation on one or a combination of Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. Following receipt of such notice,the Administrator shall notify the owner of the leasehold interest in such Assessor's Parcel or Parcels of the prepayment amount of such Assessor's Parcel(s). The Administrator may charge a reasonable fee for providing this figure. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Fiscal Agent pursuant to the Indenture. The Prepayment Amount(defined below) shall be calculated as summarized below(capitalized terms as defined below): . Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses i Less Reserve Fund Credit Less Capitalized Interest Credit Total: Equals Prepayment Amount As of the proposed date of prepayment,the Prepayment Amount(defined below) shall be calculated as follows: Paragraph No. 1. For Assessor's Parcels of Taxable Property intending to prepay,compute the Maximum Special Tax for such Assessor's Parcels. 2. Divide the Maximum Special Tax computed pursuant to Paragraph 1 by the total Maximum:Special Tax of all Assessor's Parcels of Taxable Property in CFD No.2000-1,excluding any Assessor's Parcels which have prepaid their Special Taxes in full,and 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section H to compute the amount of Outstanding Bonds to be retired and prepaid,and round the result up to the nearest multiple of$5,000(the Bond Redemption Amount). 4. Multiply the Bond Redemption Amount computed pursuant to Paragraph 3 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the Redemption Premium). B-6 RVPUBIK"NS07625 i aZU�v-3�� 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond . interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 6. Determine the Special Taxes levied on the Assessor's Parcel in the current and any previous Fiscal Year,which have not yet been paid. 7. Compute the amount the Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 8. Add the amounts computed pursuant to Paragraphs 5 and 6 and subtract the amount computed pursuant to Paragraph 7(the Defeasance Amount). 9. Determine the administrative fees and expenses of CFD No. 2000-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption(the Administrative Fees and Expenses). 10. Determine the reserve fund credit(theReserve Fund Credit)which shall equal the lesser of (a) the expected reduction in the reserve requirement-(as defined in the Indenture),if any,associated withthe redemption of Outstanding Bonds as a result of the prepayment,or(b)the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date,but in no event shall such amount be less than zero. 11. If any capitalized interest for the Outstanding Bonds will not have been expended at the time ofthe first interest and/or principal payment following the current Fiscal Year,a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to Paragraph 2 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the Capitalized Interest Credit). 12. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3,4, 8 and 9,less the amounts computed pursuant to Paragraphs 10 and 11 (the Prepayment Amount). 13, From the Prepayment Amount,the amounts computed pursuant to Paragraphs 3,4,8,10 and 11 shall be deposited into the appropriate fund as established under the Indenture and b e used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to Paragraph 9 shall be retained by the Administrator. As a result of the payment of the current Fiscal Year's.Special Tax levy as determined under Paragraph 6(above),the Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid,the City Council shall cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of B-7 RVPUBUCAM507625 Special Taxes and the release of the Special Tax lien on such Assessor's Parcel,and the obligation of such Assessor's Parcel to pry the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Taxes that may be levied on Taxable Property within CFD No. 2000-1 both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 14.Prepayment in Part The Maximum Special Tax on an Assessor's Parcel of Taxable Property may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1,except that a partial prepayment shall be calculated according to the following formula: PP=(PH xF)+G Where these terms are defined as follows: PP = the partial prepayment PH= the Prepayment Amount calculated according to Section H.1,minus the amounts determined in Paragraph No. 6 and 9 of Section H.1. F = the percent by which the owner of the leasehold interest in the Assessor's Parcel(s)is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No. 6 and 9 of Section H.1. The owner ofthe leasehold interest in an Assessor's Parcel who desires to partially prepay the Maximum Special Tax shall notify the Administrator of(i) such owner's intent to partially prepay the Maximum Special Tax,(ii)the percentage by which the Maximum Special Tax shall be prepaid,and(iii)the company or agency that will be acting as the escrow agent,if applicable. The Administrator shall provide the owner ofthe leasehold interest with a statement ofthe amount required for the partial prepayment ofthe Maximum Special Tax for an Assessor's Parcel following receipt of the request. With respect to any Assessor's Parcel that is partially prepaid, CFD No.2000-1 shall(i)distribute the funds remitted to it according to Paragraph 13 of Section H.1,and(ii)indicate in the records of CFD No. 2000-1 that there has been a partial prepayment of the Maximum Special Tax and that a portion of the Maximum Special Tax equal to the outstanding percentage(1.00—F)oftheremaining Maximum Special Tax shall continue to be authorized to be levied on such Assessor's Parcel pursuant to Section D. B-8 D IIVI M%V A W cfloLO C STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss. CITY OF HUNTINGTON BEACH ) I, Connie Brockway , City Clerk of the City of Huntington Beach, do hereby certify that the foregoing Resolutio cra s5 was duly adopted by the City Council at its regular meeting held on the 17th day of April,2000,and that it was so adopted by the following roll call vote: AYES: Julien, Sullivan, Harman, Garofalo, Green, Dettloff, Bauer NOES: None ABSENT: None ABSTAIN: None Res. No. 2000-35 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on the 17th day of April, 2000 by the following vote: AYES: Julien, Sullivan, Harman, Garofalo, Green, Dettloff, Bauer NOES: None ABSENT: None ABSTAIN: None City Clerk and ex-officio Jerk of the City Council of the City of The fon going kwhu ned is a oohed. Huntington Beach, California Copy of the odokw on so In thfs of m. Attest 20�, CONNIE BROCKWAY day alork MW ex-offido Cis* of the Council of the City of HurdWotan Beach, CWbfn a.. By Deputy 4 f ORDINANCE NO. 3519 AN ORDINANCE OF THE CITY OF HUNTINGTON BEACH LEVYING SPECIAL TAXES WITHIN THE.CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) WHEREAS, on January 18, 2000, this City Council adopted a resolution entitled "Resolution of Intention of the City Council of the City of Huntington Beach with Respect to Establishment of Proposed City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)" (the "Resolution of Intention") stating its intention to establish 'City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District")pursuant to Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City of Huntington Beach (the "Municipal Code") and Chapter 2.5 of Part 1 of Division 2 of Title 5, commencing with Section 53311, of the California Government Code (the "Act"), to finance certain facilities described in the Resolution of Intention(the"Facilities"); and Notice was published as required by the Municipal Code and the Act relative to the intention of this City Council to form the District and to provide for the Facilities; and The City Council held a noticed public hearing as required-by-the Municipal Code and the Act relative to the determination to proceed with the formation of the District and the rate and method of apportionment of the special tax to be levied within the District to finance'a portion of the costs of the Facilities; and At said hearing all persons desiring to be heard on all matters pertaining to the formation of the District and the levy of said special taxes were heard, substantial evidgnce was presented and considered by this City Council and a full and fair hearing was held; and Subsequent to said 4p#ring, this City Council adopted resolutions entitled "Resolution of the City Council of the .sty of Huntington Beach Establishing City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) County of Orange, State of California, and Establishing the Boundaries Thereof " (the "Resolution of Formation") and "Resolution of the City Council of the City of Huntington Beach Calling a Special!.Election and Submitting to the:Voters of City of Huntington Beach Community Facilities Distriet No. 2000-1 (Grand Coast Resort),a Proposition with Respect to the Annual Levy of Special Taxes Within the Community Facilities District to Pay:Principal of and Interest on Bonds Thereof, and.a Proposi- tion with Respect to the'Establishment of an Appropriations Limit for the Community Facilities District"which"resolutions established the District,authorized the levy of a special tax within the District, and called an election within the District on the proposition of incurring indebtedness, levying a special tax, and establishing an appropriations limit within the District, respectively; and An election was held within the District in which eligible landowner electors approved said propositions by more than the two-thirds vote required by the Act.' I SF-2001 Ord: Special Taxes FSD 2000-01 Ord. No. 3519 NOW, THEREFORE, the City Council of the City of Huntington Beach ordains as. follows: Section 1. By the passage of this Ordinance, this City Council hereby authorizes and levies special .taxes within the District,pursuant to the Municipal Code and California Government Code Sections 53328 and 53340, at the rates and.in accordance with the method of apportionment set forth in Exhibit A to the Resolution of Formation (the "Rate and Method of Apportionment"). The special taxes are hereby levied commencing in fiscal year 2001-02 and, in each fiscal year thereafter, until payment in full of any bonds of the City issued for the District (the "Bonds"), payment of all costs of the Facilities to be paid with such funds, and payment of all costs administering the District. Section 2. The Treasurer of the City or his/her designee is hereby authorized and directed each fiscal year to determine the specific special tax rate and amount to be levied for the next J ensuing fiscal year for each parcel of real property, including leasehold interests, within the { District, in the manner and as provided in the Rate and Method of Apportionment. Section 3. Properties or entities of the State, federal or local governments shall be exempt from any levy of the special taxes, except those properties subject to a leasehold interest, to the extent set forth in the Rate and Method of Apportionment. In no event shall the special taxes be levied on any parcel within the District in excess of the maximum tax specified in the Rate and Method of Apportionment. Section 4. All of the collections of the special tax shall be used as provided for in the Act, the Municipal Code, the Rate and Method of Apportionment, and in the Resolution of Formation including, but not limited to, the payment of principal and interest on the Bonds, the replenishment of the reserve fund for the Bonds, the payment of the costs of the Facilities, the payment of the costs of the City in administering the District and the costs of collecting and administering the special tax. Section 5. The special taxes shall be collected from time to time as necessary to meet the financial obligations of the District on the secured real property tax roll in the same manner as ordinary ad valorem taxes are collected. The City Treasurer or his/her designee, pursuant to the Rate & Method of Apportionment, is hereby authorized and directed to provide all necessary information to the auditor/tax collector of the County of Orange and to otherwise take all actions necessary in order to effect proper billing and collection of the special tax, so that the special tax shall be levied and collected in sufficient amounts and at the times necessary to satisfy the financial obligations of the District in each fiscal year until the Bonds are paid in full and provision has been made-for payment of all of the administrative costs of the District. Notwithstanding the foregoing and not withstanding the Rate & Method of Apportionment, the City Treasurer or his/her designee may collect one or more installments of the special taxes by means of direct billing by the. City of the property owners, or leasehold interest holders, within the District, it in the judgment of the Treasurer of the City or his/her . designee, such means of collection will reduce the administrative burden on the City or is otherwise appropriate under the circumstances. In such event, the special taxes shall become delinquent if not paid when due as set forth in any such respective billing to the property owners, or leasehold interest holders. 2 SF-2001 Ord: Special Taxes FSD 2000-01 Ord. NO. 3519 The special taxes shall have the same lien priority, and be subject to the same penalties and the same procedure and sale in cases of delinquency as provided for ad valorenz taxes. In addition, the provisions of Section 53356.1 of the Act shall apply to delinquent special tax payments. Section 6. If for any reason any portion of this ordinance is found to be invalid, or if the special tax is found inapplicable to any particular parcel within the District, by a Court of competent jurisdiction, the balance of this ordinance and the application of the special tax to the remaining parcels within the District shall not be affected. Section 7. This ordinance shall take effect thirty days after its adoption. PASSED AND ADOPTED at the regular meeting of the City Council of the City of Huntington Beach, State of California, on the 3rd day of December ,2001. Mayor ATTEST: APPROVED AS TO FORM: City Clerk r City Attorney REVIEWED AND APPROVED: INITIATED AND APPROVED: Ci dministrator Director of Economic Developmen 3 SF-2001 Ord: Special Taxes FSD 2000-01 Ord. No. 3519 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF.HUNTINGTON BEACH ) I CONNIE BROCKWAY the dulyelected qualified i, q City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven,that the foregoing ordinance was read to said City Council at a re ular meeting thereof held on the 19th day of November,2001, and was again read to said City Council at a regular meeting thereof held on the 3rd day of December,2001, and was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council. AYES: Garofalo,Dettloff,Bauer, Cook,Houchen, Green, Boardman NOES: None ABSENT: None ABSTAIN: None I,Connie Brockway CITY CLERK of the City of Huntington Beach and ex-offccio Clerk of the City Council,do hereby certify that a synopsis of this ordinance has been published in the Independent on ,2001 In accordance with the City Charter of said City City Clerk and ex-officio Clerk Connie Brockway,City Clerk of the City Council of the City Deputy City Clerk of Huntington Beach,California The iruftrnord Is to coo, COPY of MR MOW on fig.In ems. Attast 20 . CONNIE BROCKWAY gJord1nanc1ordbkpg2001.doo Beam, @, EXEMPT FROM FILING FEES PURSUANT TO GOVERNMENT Recording Requested by CODE SECTION 6I03 and When Recorded Return to: City Clerk Recorded in Official Records,County of Orange Gary Granville, Clerk-Recorder City of Huntington Beach �!IIIII8llilll1111!IIIIIiiIIIIII111iIIIIIIIIIIIIIIIiIiliNO FrE 2000 Main Street �! Huntington Beach, CA 92648 20000210584 03:56pm 04/24100 114 16 N33 13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 NOTICE OF SPECIAL TAX LIEN Pursuant to the requirements of Section 3114.5 of the Streets and Highways Code o n Section 53328.3 of the Government Code and Section 3.56,300 of the Municipal Code of the City n O ofHuntington Beach,the undersigned City Clerk ofthe City ofHuntington Beach,County of Orange, m ' a s State of California, hereby gives notice that a lien to secure payment of special taxes is hereby rn � o imposed by the City Council of the City of Huntington Beach,County of Orange,State of California. Q n 0 The special taxes secured by this lien are authorized to be levied for the purpose of paying principal w < of and interest on bonds, the proceeds of which are being used to finance the public facilities described in Exhibit "A" attached hereto. The special taxes are authorized to be levied within City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort), County of Orange, State of California(the"Community Facilities District"),the boundaries ofwhich are described in Exhibit"B" attached hereto,which has now been officially formed and the lien of the special taxes is a continuing lien which shall secure each annual levy ofthe special taxes and shall continue in force and effect until the special tax obligation is prepaid, permanently satisfied, and canceled in accordance with law or until the. special taxes cease to be levied and a notice of cessation of special tax is recorded in accordance with Section 5..3330.5 of the Government Code. RVP1UB'.KSC1562390 1 The rates, method of apportionment, and manner of collection of the authorized special taxes are as set forth in Exhibit "C" attached hereto. The conditions under which the obligation to pay the special taxes may be prepaid and permanently satisfied and the lien of the special taxes canceled are also set forth in Exhibit "C" hereto. Notice is further given that upon the recording of this notice in the office of the County Recorder, the obligation to pay the special tax levy shall become a lien upon all nonexempt real property within the Community Facilities District in accordance with Section 3115.5 of the Streets and Highways Code. The name(s) of the owner(s) and the assessor's tax parcel number(s) of the real property included within the Community Facilities District and not exempt from the special taxes are set forth in Exhibit "D" attached hereto. Reference is made to the boundary map (or the amended boundary map) of the Community Facilities District recorded on September 14, 1999,in Book 78 of Maps of Assessment and Community Facilities Districts, at Page 49, and as Instrument No.20000038289, in the office of the County Recorder for the County of Orange, State of California, which map is now the final boundary map of the Community Facilities District. RVPUDKSC1562390 -2- For further information concerning the current and estimated future tax liability of owners or purchasers of real property subject to this special tax lien, interested persons should contact the Office of the City Manager of the City of Huntington Beach, 2000 Main Street, Huntington Beach, California, telephone number(714)-536-5582. Dated: April,, 2000. I City Clerk of the City of IJuntin on Beach RVPUBIKSC\562390 -3 i i EXHIBIT "A" 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) DESCRIPTION OF PUBLIC FACILITIES The types of public facilities to be provided within and financed by the Community Facilities District are: i (a) Street improvements including costs of condemnation,removal, demolition, grading, paving, curbs and gutters, sidewalks, street lights and parkway and landscaping related thereto. (b) Storm drains, drainage storage ponds and drainage channels including landscaping, if applicable. (c) Sewers, sewer treatment facilities and sewer capacity acquisition. (d) Wetlands redemption, remediation and relocation. (e) Public park and recreation facilities, including beach access facilities and pedestrian bridge. (f) Water distribution facilities, including fire hydrants and reclaimed water and water storage facilities. (g) Street sigualization and signage, including traffic fees. (h) Fire facilities including structures and capital equipment. (i) Beach maintenance facilities. (j) Acquisition of land, rights-of-way and easements necessary for any of the facilities specified in paragraphs(a)through(i) above. (k) The incidental expenses which will be incurred are: (i) the cost of engineering, planning and designing such facilities and the cost of environmental evaluations thereof,(ii)all costs associated with the creation ofthe proposed community facilities district, issuance of the bonds thereof, the determination of the amount of and collection of taxes, the payment of taxes, and costs otherwise incurred in order to carry out the authorized purposes of the community facilities district, and (iii) any other expenses incidental to the construction,acquisition,completion, and inspection of such facilities. RVPU13\KSM562390 A-1 I EXHIBIT "B" CITY OF HUNTINGTON BEACH CONRAUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 1 LEGAL DESCRIPTION CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT), COUNTY OF ORANGE, STATE OF CALIFORNIA City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort), County of Orange, State of California, includes the land situated in the State of California, County of Orange, City of Huntington Beach, described as follows: Lot 1 of Tract No. 15535, Recorded September 14, 1999 in Map Book 790, Pages 44-50, Records of Orange County, California. RVPU MS0562390 B-1 EXHIBIT "C" CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) RATE AND METHOD OF APPORTIONMENT OF SPECIAL. TAX A Special Tax applicable to each Assessor's Parcel of Taxable Property in the City of Huntington Beach Community Facilities District No.2000-1(Grand Coast Resort)(herein CFD No.2000-1)shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The leasehold interests in the real property in CFD No. 2000-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes,to the extent, and in the manner herein provided. A. DEFINITIONS The capitalized terms hereinafter set forth have the following meanings when used in this Rate and Method of Apportionment: Acre or Acreage means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, or the other parcel map recorded with the County Recorder. .If the Acreage of a particular Parcel is unclear after reference to available maps, the Administrator shall determine the appropriate Acreage for a Parcel. Act means Chapter 3.56 (commencing with Section 3,56.010) of the Municipal Code of the City of Huntington Beach and,as applicable,the Mello-Roos Community Facilities Act of 1982,as amended, being Chapter 2.5(commencing with Section 53311),Part 1,Division2,ofTitle 5 ofthe Government Code of the State of California, Administrative Expenses means any or all of the following actual or reasonably estimated costs directly related to the administration of CFD No. 2000-1: the fees and expenses of any Fiscal Agent or trustee(including any fees and expenses of its counsel) employed in connection with any Bonds; any costs associated with the marketing or remarketing of the Bonds; the expenses of the Administrator and the City in carrying out their duties under any Indenture or resolution with respect to the Bonds, including, but not limited to, the levy and collection of the Special Tax, the fees and expenses of legal counsel,charges levied by the County or any division or office thereof in connection with the levy and collection of Special Taxes, audits, continuing disclosure or other amounts needed to pay arbitrage rebate to the federal government with respect to Bonds; costs associated with complying with continuing disclosure requirements; costs associated with responding to public inquiries regarding Special Tax levies and appeals; attorneys' fees and other costs associated with commencement or pursuit of foreclosure for delinquent Special Taxes; and all other costs and expenses of City, the Administrator, the County, and any Fiscal Agent, escrow agent or trustee related to the administration of CFD No. 2000-1. Administrator means-the Director of Economic Development or such other person or entity designated by the City Administrative Officer or the City Council to administer the Special Tax according to this Rate-and Method of Apportionment of Special Tax. RVPUHUCSC\562390 C-1 Assessor's Parcel or Parcel means a lot, parcel or airspace parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. Assessor's Parcel Map means an official map of the Assessor of the County designating Parcels by Assessor's Parcel number. Bonds mean any bonds or other debt(as defined in Section 53317(d)of the Act),whether in one or more series, issued by the City for CFD No.'2000-1 under the Act. City means the City of Huntington Beach. City.Council means the City Council of the City of Huntington Beach,acting as the legislative body of CFD No. 2000-1. County means the County of Orange. Development Agreement means the Amended and Restated Disposition and Development Agreement between the City and the developer,Mayer Financial,Ltd.and its subsidiaries,successors and assigns, and any subsequent amendments thereto. Exempt Land means(1)any real property within the boundaries of CFD No.2000-1 which generally serves the development subject to the Development Agreement and/or Ground Lease and is owned by a governmental agency for public right-of-way purposes including, but not limited to, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator or(2) any Assessor's Parcel for which the Special Tax with respect to the leasehold interest has been paid in full. Fiscal Agent means the fiscal agent who is a party to the Indenture, if so approved. Fiscal Year means the period commencing on July 1 and ending on the following June 30,in any year in which the Bonds are outstanding. Ground Lease means the ground lease with respect to the land within CFD No. 2000-1 boundary covering a term exceeding the maturity date for the Bonds between the City and the tenant, Mayer Financial,Ltd. and its subsidiaries,successors and assigns, and any subsequent amendments thereto. Indenture means the indenture, fiscal agent agreement, resolution or other instrument approved pursuant to the Resolution of Issuance and pursuant to which Bonds are issued,as modified,amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. Maximum Special Tax means, with respect to the leasehold interest in any Parcel of Taxable Property, the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on the leasehold interest in such Parcel. Outstanding Bonds means all Bonds which are then outstanding under the Indenture. Reserve Fund means the fund of that name created under the Indenture. Resolution of Issuance means the resolution adopted by the City Council of the City, acting as the legislative body of CFD No. 2000-1, authorizing the issuance of the Bonds in accordance with the Act. RVPUHIKS0562390 C-2 Special Tax means the special tax to be levied pursuant to the Act and this Rate and Method of Apportionment of Special Tax in each Fiscal Year on the leasehold interests in Taxable Property within CFD No. 2000-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No: 2000-1 necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year,(ii)to pay any amounts required to establish or replenish the Reserve Fund for all Outstanding Bonds, (iii)to pay Administrative Expenses, and(iv)to pay costs of any credit enhancement(including fees and expenses related to any letter of credit)for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No. 2000-1, which are not Exempt Land or exempt from the Special Tax pursuant to law_ Trustee means the trustee who is a party to the Indenture, if so approved. B. IDENTIFYING TAXABLE PROPERTY Not Iess than fifteen business days prior to the beginning of each Fiscal Year, the Administrator shall determine which Parcels in CFD No. 2000-1 are Taxable Property. The leasehold interest in the Taxable Property shall be subject to Special Taxes in accordance with the rate and method of apportionment described in Sections C and D below. C. MAXIMUM SPECIAL TAX The Maximum Special Tax for the leasehold interests in Taxable Property in CFD No. 2000-1 shall be the greater of(1)$130,000 per Acre or(2)the amount determined pursuantto thefollowing steps: Step 1: Determine the maximum annual debt service on all Outstanding Bonds; Step 2: Multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: Determine the Acreage of Taxable Property within the CFD No. 2000-1; Step 4: Divide the amount from Step 2 by the Acreage from Step 3 to determine the Maximum Special Tax per Acre of Taxable Property. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2000-2001,and for each Fiscal Year thereafter,the City Council shall levy the Special Tax proportionately on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax, as determined by reference to Section C, above, as needed to satisfy the Special Tax Requirement. RVPUB\KSC\562390 C-3 E. LIMITATIONS No Special Taxes shall be levied on the leasehold interest in any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on the leasehold interests in Taxable Property commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter, and until the date on which principal and interest on all Outstanding Bonds have been paid in full(or provision for their payment has been made). Upon determination by the Administrator that this requirement has been met, the Special Tax lien shall be removed from the leasehold interests in all Parcels in CFD No. 2000-1. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes,provided,however,that CFD No.2000-1 may directly bill the special tax,may collect special taxes at a different time or in a manner if necessary to meet its financial obligations,and may covenant to foreclose and may actually foreclose on the leasehold interest in delinquent Assessor's Parcels as permitted by the Act. G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No. 2000-1, a special three-member Review/Appeal Committee. The Review/Appeal Committee shall interpret this Rate and Method of Apportionment and make determinations relative to the annual administration of the Special Tax and any appeals, as herein specified. The owner of the leasehold interest in any Taxable Property within CFD No. 2000-1 claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Review/Appeal Committee not later than one calendar year after having paid the Special Tax that is disputed. The Review/Appeal Committee shall promptly review the appeal, and if necessary, meet with the owner of the leasehold interest,consider written and oral evidence regarding the amount of the Special Tax, and resolve the appeal. If the Review/Appeal Committee's decision requires the Special Tax to be modified or changed in favor of the owner of the leasehold interest, a cash refund shall not be made (except for the last year of the levy), but an adjustment shall be made to the next Special Tax levy. This procedure shall be exclusive and its exhaustion by any owner of a leasehold interest shall be a condition precedent to any legal action by such owner. H. PREPAYMENT OF SPECIAL TAX The following definitions apply solely to this Section H.: Outstanding Bonds means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. Previously Issued Bonds means all Bonds that have been issued by CFD No. 2000-1 prior to the date of prepayment. RVPUBM0562390 C-4 1. Prepayment in Full The Special Tax applicable to any leasehold interest in any Assessor's Parcel of Taxable Property may be prepaid. The Special Tax obligation applicable to the leasehold interest in such Assessor's Parcel in CFD No. 2000-1 may be fully prepaid and the obligation of the leasehold interest in such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner ofthe leasehold interest intending to prepay the Special Tax obligation on one or a combination of Assessor's Parcel(s)shall provide the Administrator with written notice ofintent to prepay.Following receipt of such notice, the Administrator shall notify the owner of the leasehold interest in such Assessor's Parcel or Parcels of the prepayment amount of such Assessor's Parcel(s). The Administrator may charge a reasonable fee for providing this figure. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Fiscal Agent pursuant to the Indenture. The Prepayment Amount(defined below)shall be calculated as summarized below(capitalized terms as defined below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Capitalized Interest Credit Total: Equals Prepayment Amount As ofthe proposed date of prepayment,the Prepayment Amount(defined below)shall be calculated as follows: Paragraph No. 1. For Assessor's Parcels of Taxable Property intending to prepay, compute the Maximum Special Tax for such Assessor's Parcels. 2. , Divide the Maximum Special Tax computed pursuant to Paragraph I by the total Maximum Special Tax of all Assessor's Parcels of Taxable Property in CFD No. 2000-1,excluding any Assessor's Parcels which have prepaid their Special Taxes in full, and 3_ Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section H to compute the amount of Outstanding Bonds to be retired and prepaid, and round the result up to the nearest multiple of$5,000(the Bond Redemption amount). 4. Multiply the Bond Redemption Amount computed pursuant to Paragraph 3 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed (the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 6. Determine the Special Taxes levied on the Assessor's Parcel in the current and any previous Fiscal Year,which have not yet been paid. 7. Compute the amount the Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. RVPUB\KSC\562390 C-5 S. Add the amounts computed pursuant to Paragraphs 5 and 6 and subtract the amount computed pursuant to Paragraph 7 (the Defeasance Amount). 9. Determine the administrative fees and expenses of CFD No. 2000-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds,and the costs of recording any notices to evidence the prepayment and the redemption(the Administrative Fees and Expenses). 10. Determine the reserve fund credit(the Reserve Fund Credit)which shall equal the lesser of: (a) the expected reduction in the reserve requirement (as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or(b) the amount derived by subtracting the new reserve requirement(as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date,but in no event shall such amount be less than zero. 11. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to Paragraph 2 by the expected balance in the capitalized interest fund after such first interest and/or principal payment (the Capitalized Interest Credit). 12-. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs'3, 4, 8 and 9, less the amounts computed pursuant to Paragraphs 10 and 11 (the Prepayment Amount). 13. From the Prepayment Amount,the amounts computed pursuant to Paragraphs 3,4, 8, 10 and 11 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to Paragraph 9 shall be retained by the Administrator. As a result of the payment of the current Fiscal Year's Special Tax levy as determined under Paragraph 6(above),the Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid,the City Council shall cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pry the Special Tax shall cease. Notwithstanding the foregoing,no Special Tax prepayment shall be allowed unless the amount ofthe Maximum Special Taxes that may be levied on Taxable Property within CFD No. 2000-1 both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 14. Prepayment in Part The Maximum Special'fax on an Assessor's Parcel of Taxable Property may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1,except that a partial prepayment shall be calculated according to the following formula: PP=(PH*xF)+G Where these terms are defined as follows: PP = the partial prepayment RVPUBIKS0562390 C-6 PH= the Prepayment Amount calculated according to Section H.1,minus the amounts determined in Paragraph No. 6 and 9 of Section H.1. F = the percent by which the owner ofthe leasehold interest in the Assessor's Parcel(s) is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No. 6 and 9 of Section H.1. The owner of the leasehold interest in an Assessor's Parcel who desires to partially prepay the Maximum Special Tax shall notify the Administrator of(i)such owner's intent to partially prepay the Maximum Special Tax, (ii)the percentage by which the Maximum Special Tax shall be prepaid, and (iii)the company or agency that will be acting as the escrow agent, if applicable. The Administrator shall provide the owner of the leasehold interest with a statement of the amount required.for the partial prepayment of the Maximum Special Tax for an Assessor's Parcel following receipt of the request. With respect to any Assessor's Parcel that is partially prepaid, CFD No. 2000-1 shall (i) distribute the funds remitted to it according to Paragraph 13 of Section H.1, and(ii)indicate in the records of CFD No. 2000-1 that there has been a partial prepayment of the Maximum Special Tax and that a portion ofthe Maximum Special Tax equal to the outstanding percentage(1.00—F)of the remaining Maximum Special Tax shall continue to be authorized to be levied on such Assessor's Parcel pursuant to Section D. RVPUB\KS0562390 C-7 EXHIBIT "D" CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-I (GRAND COAST RESORT) OWNERSHIP LIST TRACT& ASSESSOR'S PARCEL NOS. OWNER'S NAME Tract No. 15535 City of Huntington Beach Redevelopment Agency A.P.N. #'s: 024-250-73 024-250-76 RVPUMKSC%562396 D-1 GROUND LEASE By and Between REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, AGENCY, and PCH BEACH RESORT,LLC, a Califonva limited Iiability company LESSEE ent by: KANt, 8ALLMhH & tiEMKMAN ;e» trz5 UW41; u4/uotvi rage :eta TABLE OF CONTENTS 1. [§ 1001 SUBJECT OF GROUND LEASE ..... . .... ..... ... ... ... .... .. . .. 1 A. [§ 101] purpose of the Lease . .......... . ... . . .. . .... . . . .. 1 B. (§ 1021 The Redevelopment Plan ........ . . . ... . .. . .. . . . .. . I C. [§ 103] The Redevelopment Project Area . . .. . . . .. . . .. ... . . .2 D. [§ 104] The Site ................ ... .. . .... . ... ...... . . ..2 E. [§ 1051 Thu lmprovo monts ............. ... . .. ..... ... ... .3 F. [§ 106] Condition of the Site .. . ........ . .. . . . .... ...... ..3 G. [§ 106.1] Hazardous Substances .. ...... ........ . ... .. . ... .. .... ..4 IX. [§ 107] Parties to the Lease ....... . . . .. ...... .. . . . .7 . 1. [§ 106] Agency ........ ...... .... .... ... .... ....... ..7 2. [§ 109] Lessee.. .... ... ..... . . ....... . . ... . ... . .. . .. ..7 11. [§2001 LEASE OF THE SITF ...... ................ ... . . . ..... ._.. ... ... . . 8 A. [§201] Lease ... .. . ..... .... ... .......... .. . .. ... ... . .... . 9 B. [§202] Term of the Lease .. ............ . .... . .. .. . ... ... . .... 8 III. [§300] RENT ..... ........ ...... .... ... .. .... .... ..... .... .. .. .. ..... ..8 A. [§301] Definitions .... ......... ............ . .... . . .. . . ..... .. 8 S. [§302] Ground Rent ... .... .... ......... ..... .... . . .. .. .. ... . 10 C. [§303] Base Rent ... . . ... .. .. .......... ..... . . .. . . .. ...... ..10 D. [§304] Participation Rent. . ...... ............ . . ... . . . ....... .. 10 E. [§30S] Triple Netieme ......... ............. . ... . . .. .. .... .. 11 F. [§306] Non-Subordination of rent or Other Sums .. .... . . .. . . ...... 12 G. 307] Delinquency In Rental Payment;Collection of Rents . ... . .... 12 R. [§308] Right to Inspection and Audit of Records ...... . .. . ........ 12 IV. [§400] DEVELOPMENT OF THE SITE . ......... .. .. ... . .. . . . . .. ... . ... 13 A. [§401] Scope of Development,Plans,Drawings and Specifications ... 13 B. [§402] No Construction Before Notice ............. .... . .. .. . ..... 13 C. [§4031 Notice of Non-Responsibility ...... .. . ... . .. . ... .. . ..... 13 D. j§404] Mechanic's,Materialman's,Contractor's or Subcontractor's Litna .. ... .......... .. ... ... .. ... . . . . .... . .. . .... .. 13 E. (§405] Rights of Access ...... ........ .. .. . .... .. .. .. .. .... .. 14 ]t, (§406] Local,State and Federal Laws . ..... . ... .. ............ . 14 G. [§4071 Non-discrimination During Construction ... . .. . . .... ...... 15 H. [§4091 Archacolvgical Proviaions ........ . . . . . . . . ... . .... .... . . 15 V. [§ 500] USE OF THE SITE AND RAPROVEMENTS .... .. . .. . ..... .. .. . ... . . 15 A [§5011 Use of the Site and Improvements .. .. .. . . . ..... ...... ... . 15 H. [§502] Managernmi of the Site and Improvements . ... .. ........ . . 19 -i- • tlitt. Uy. "vi=j vmLLIttCn a or-nmrwmn eta U— waat, Vol volVl 7:[aF'M sJS:L[$$`{i`J-O� rifgb 4!`J C. [§503] [INTENTIONALLY OMITTED] ....... ... . . ... .. . .. ... .20 D. {§5041 Obligation to Refrain from Discrimination . .. . .. . . . . ...... .21 E. [§5051 Form of Nondiscrimination and Nonsegregation Clauses .. . .. .21 F. [§506) Quiet F.rljoyment .. . . .. . . ...... .:. ... ...... . . .. . .. .22 G. [§5071 payments to Agency ... . ... . ..... .... ......... . .......22 VI. [§ 600] TAXES,ASSMSjjLWfS AND OTHER CHARGES . . ...,. . .. . . . . . ... 23 A. [§6011 Utilities ............... . ........ .... .. ..... . ..... .23 B. [002] Impositions(Including Taxes and.Assessments) .. ... . . . .... .2.3 PsYment Generally _23 D. [§6041 Payment of Impositions in Installments.. .... .. ...... . . . .. .24 R. [§6051 Agency Right to Cure ....... ......... ... .. .... .. . . ....24 F. [§606] Tax Receipts.. . ... ..... .. . . .. .. . . . ..... . .. .. ... ...2d 0. [§6071 Limits of Tax Liability.. .. ... ..... ............. . .. ....25 H. [§6081 Contests ......... . ... . . . . . .....25 1. N 6091 Notice of•Possessory Interest;Payment of Taxes and Assessments on Value of Entire Property ........... . .. .....26 J. [§610] Other Liens..... .... ... . ... ..:.. .. . . ..... .. .26 v". [§7001 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS .....27 .A. [§701] Ownership During Term and at Termination....... ... .. .. 27 B. [§702] Removal of Fixtures and Furnishings at Termination . . .......27 C. [§703] Maintenance and Repair of Improvements .... .......27 D. [§704] Waste ......... ... .... . ........ . . ....... .28 E. 117051 Alteration of Improvements ..... ... ......... . ... . .......28 F. [§706] Damage to or Destruction of Hotel and Improvements . .. .... .29 1. [§707] Lessee to Give Notice .. . ........... ....... ........ ....23 2. [§7081 Restoration ........... . .. .. . ...... ...... . . .. . . .. ... .29 3. [§7091 Application of Insurance Proceeds ..... ...... . ... .... ....29 G. [§7101 Damage or Destruction During Final Years of terin .. .. ._ .. .30 H. [§711) Faithful Performance and Labor and Material(Payment) Bonds;Indemnification;Nonresponsibility Notices .. .... . .. .31 VI11. [§ 800] ASSIGNMENT,SUBLETTING,TRANSFER .. .. ....... ...... . . .......32 A. [§$01] Warranty Against Speculation . .. ... ..... .... . ... ..... ...32 B. [§$02) Frolu'bition Against Transfer . . ..... ..... . . ... .... .. . .32 C. 803] Investigation of proposed Transferee;Costs .... . ..... ..... . 35 D. [§804] Release of Construction Covenaats . . ... . .. .... .... .. ...... . 37 IX. [§900] MORTGAGES ... ... . .. ..... .. . .... . .. .. .... . ...... .. .. .. .... . .. .37 A. l§901) Leasehold Mortgages . .. .. . . ... ... ........ .. . . .. ... . 37 13. [§9021 Rights and Obligations of Leasehold Mortgagees . . . ........ .40 -ii- wt DY: KANk, 5ALLMCH & btr%r-MAN 414 040 uWal; U41VOlul a:earm;l gym; rcy� �15 C. (§903] Agency's Forbearance and Right to Cure Defaults on Leasehold Mortgages .. ...... ...... .... . .. .: .... . . ....42 D. [§9M Notice......... ...... . ........... ... . . ... ..... . .. ..142 E. [§905] Forbearance by Agency ......4........ . ....I .. ...... ...42 F. [§905.1) Conditions Precedent to Mortgagee Rights and Agency Forbearance .. ... ... . . ............ .. ..... .. ... . ..143 Q. [§906] Performance on Behalf of Lessee .... . . .. . . ... .. .. .. . . ...44 H. [§907] Nownerger . .... ... ... . . .. . ...... . . .. . ....... . .. . .. .44 11. [§100] SUBJECT OF GROUND LEASE . ...... ....... . ..... .. . 1 I; [§ 101] Purpose of the Lease ........ ...... :. . ... ....... . .. . 1 1. [§ 102] The Redevelopment Plat . .... ....... . . . .. ......... . . ... . 1 K. [§ 1031 . The Redevelopment Project Area ..... ... .. .. ....... . .... .2 L. [§ 104] The Site .................. ...... ... . . .. .... ....... . 12 M. [§ 105] The Improvements .......... .. .... ... . ...... .. .... .....3 N. [§ I06] Condition of the Site ..... ............. .. ... . .. .... .....3 O. [§ 106.11 Hazardous Substances .... .......... ... . ... ......... ....4 P. [§ 107] Parties to the Lease . .... ..... .............. . ... . .. . ... .17 1. [§ 108] Agency ........ ... ... .......... ...... ... . . .. ... . ... ..7 2. [§ 1091 Lessee..... . ....I. .... ....... .. .. .. . . .... .. ... . .....7 11. 200] LEASE OF THE SITE ... ............ .........• ... . ... . .. .. . . ...8 A. [§201] Lease ..... ... ..... .. ... ......... . ...... .... .. ... .. ..8 B. [§202] Term of the Lease .. .......... . ...... .. ....... . . .. .. . ..8 300] RENT .......... .. .... . . . . ..... ....... . . .. .. .. .... . .... ..8 A.. [§301] Definitions . ... ....... . . ... . ....... . . .... .. ... ...... . I B. [§ 302] Ground Rent .. . ... .......... ..... .. ... ..... .. ....... . 10 C. [§303] Base Rent . ........ ........ ..... .. .. . ..... ... ....... 10 D. [§304] Partioipation Rent. .. . .. ...... ...... ... . ..... .. ...... . . 10 E. [§305] Triple Net Lease ............ ........ .. ...... .. . ..... ..11 F. [§306] Non-Subordination of rent or Other Sums ... ... .. .. ...... .. 12 G. (§3071 Delinquency In Rental Payment;Collection of Rents .. . .. .. . .12 308] Right to Inspection and Audit of Records . . .. . .. . . . .. .. • . 12 1V. [§400] DEVELOPMENT OF THE SITE ..... . .... ....... .. .. .. ..... . .. .. . 1 13 A. [§401] Scope of Development,Plans,Drawings and Specifications . . . 13 B. [§4021 No Construction Before Notice ........ . . ... .. ... ..... . . 13 C. [§403] Notice of Non-Responsibility ........ .. .. . .. ...... ... .. . . 13 b, j§404] Mechanic's,Materialmaa's,Comractor's or Subcontractor's Liens . ... ... .. . . 13 E. [t 405] Rights of Access . . .... .. .. . .. .. ....... ... . . . .. . .. ... . .14 p, [§406] Local,State and Federal Laws ... ...... . . .. . ... ... .. ..14 -iii� attt. uy. mmtvc, om6Lmen a oCnAwin 410 V4U UVat, VNt VOtVI D.G4rM,J �@a.7; rages DIV G. [§407] Non-discrimination During Construction . .. .. . . .... ... .... 15 H, {§4091 Archaeological Provisions ... .... . ......... . . . ... ... .... 15 V. j§5001 USE OF THE SITE AND IMPROVEMENTS .. . . .... ... . . . ... ....... . 15 A. {§5011 Use of the Site and Improvements .. . ... . .... . . ... .... ... . 15 B. [§5021 Management of the Site and Improvements . .. .. . ..... .. .. 19 C. [§503) [MENTIONALLY OMITTED) . . . ... ... . ... ... ... ... .20 D. [§5041 Obligation to Refrain from Discritnination .... .. .... . .. ....21 E. [§505] Form of Nondiscrimination and Nonacgrcgation Clauscs .. .. ..21 F. [§5061 Quiet Enjoyment .. . .... . ...:... . .... ... .. . .... ... .. ..22 G. [§507) Payments to Agency .. ._.....22 VI. [§6001 TAXES,ASSESSMENTS AND OTHER CHARGES ...... .. . .... ... ....23 A. [§6011 Utilities....... .... ... . ....... . .... .... .. . .... ... .. .23 B. [§602) Impositions(including Taxes and Assessments) . . .... ... .. ..23 C. [§6031 Payment Generally. . ... .... . ... .......... . .... ... . ..23 D. [§604) payment of Impositions in Installments........ . .... ... . . ..24 B. [§605] Agency Right to Cure ... . .. . 24 F. [§6061 Tax Receipts.. . . ... .. .. ._. ... . ... . . ... .... ... . . . . 24 0. [§607] Limits of Tax Liability. .. ... ...... ... .. .. . . . .. .. .. . .. .. 25 H. [§6081 Contests ...... .......... . . . ... . .. ... . ... 25 I. [§6091 Notice of Possessory Interest;Payment of Taxes and Assessments on Value of Entire Property .. ..... .... ... . . .. 26 I. [§610] Other Liens.. .. ... .. . .. . .... . ... ..... .. .. . . ...... . . ..26 VII. j§700] OWNERSHIP OF AND RESPONSIBILITY FOR.IMPROVEMENTS .. . . .27 A. [§7011 Ownership During Term and at Termination .. .. ... ....... ..27 B. U 7021 Removal of Fixtures and Furnishings at Termination .._... . ..27 C. [§703] - Maintenance and Repair ofIraprovements . . . .. . ., . ..27 D. [§704] Waste .... . .... .. 4. ....... . . . .. .. ... . ... .... ..... . ..28 E. [§705] Alteration of Improvements .... . . .. ..... ... . ..... .... . . .28 F. [§706] Damage to or Destruction of Motel and Improvements ........28 1. [§7071 Lessee to Give Notice .. ...... .. .. ..... . ... .... . .... ...28 2. [§708] Restoration .... .. .. . .. ...... .... .... . . . .. . .... ... . . ..29 3. j§709] Application of Insurance Proceeds .. ..... .. .... .. . ... . .. .29 G. [§710] Damage or Destruction During Final Years of term ... ... . . . .30 H. {§711] Faithful Performance and Labor and Material(Payment) Bonds;Indemnification;Nouresponsibility Notices ... .,. . . . . 31 VIII. [§800] ASSIGNMENT,SUBLETTING,TRANSFER .. .. .. . . .. . .. .. ..... ... .. 32 A. [$801] Warranty Against Speculation ...... .. . . .. . .. . ........ . ..32 B. [§802] Prohibition Against Transfer .. ... .. . . . . . .. . ... ..... . ..32 C. [§803] Investigation of proposed Transferee;Costs .. .. . .... .. .. . ..35 -iv- i 011t uy: nrage, VALLMen a ncnnmEuv era Den uaat; uwivalut a;twrna;l py,y; rage r/ts D. [§$04] Rulcasa of Construction Covcnants .. ... ...... .... .. . .....37 E. (§908] Agency Cooperation ... ............. .I.... .... ..... ...44 F. [§9091 Enforceability.... .. ........ .. .. . . ..... .. .. ... .... .45 G. [§9101 No Subordination of Agency's Interests . . ... .. . . .. ... .....45 H. (§911] Certificates to Lenders ....... ... .. ... . . . .. ...... .. .45 T. [§912] Obligations of Mortgagee Upon Acquisition of Leasehold Estate ..... .................... 5 X. [§ 10001 INDEMNIFICATION AND INSURANCE .... .... .. .. .. .... . ...46 A. [§ 1001] Indemnification ................ . ... . .... .. . . .. . ... ....46 B. [§ 1002] Required Insurance ......... . .. .. . .. .... .. . ... . .. . ....46 C. [§ 10031 Defrtutiolt of"Full Insurable Value'° . ... ...... .... . ... ....48 D, If 1004] General Insurance Provisions....... . .. . ..... .... .... ....49 11. [§ 1005] Failure,to Maintain Insurance ...... ... .... .. . . .. . .. .....49 F. [§ 1006] Disposition of Insurance Proceeds Resulting From Loss or Damage to Improvements ......... ... ....... ... ... .....49 XI. [§ 11001 EMINENT DOMAIN . . . ....... ......... .. . . ... .... .. ..... ...50 A. [§ 1101] Lessee to Give Notice ... .... ..... . .. .... .. .. .. .. ...... 50 B. 011021 TotalTaking.......... . .... .. ... .. . .... .... ..........50 C. If 1103] Partial Taking... .... .. . ........... . ...... .. .. . .. ... . .50 .D. [§ 1104] Application of Awards and Other Payments .. .. .. ...... . ...50 )(fl. DEFAULTS,REMEDIES AND TERMINATION. .. ..... .. . . . .. .. ... . . .......51 A [§ 1201] Defaults-General ....... ... ..... . . .. ,I. .. . . . . .. ... ... 51 B. [§ 1202] Legal Aotions ..... .. ... . ...... . . . . . .... .. .. .. ..... . ..52 1. (§ 120] I nstinition of Legal Actions . ...... . ... .... .. .... ...... . .52 _2, [§ 12041 Applicable Law . ..:... . . . ....... . .. ....... . .. ....... .52 3. [§ 12051 Acceptance of Service of Process .. . . . . .... .. . ... ...... .. 52 4. [§ 1206] Attorneys'Fees and Court Costs. .. .52 C. [§ 1207] Rights and Remedies are Cumulative ....... .. .. . ..... . ..52 D. [§ I208] Damages. . .. .. .... .. .. .. .. . .....53 E. [§ 12091 Specific Performance . ............ . . .... .. . . . . . ... .53 F. [§ 1210] Additional Remedies of Agency .... . .. ... ... .. .. . . .. ....53 G. [§ 1211] Remedies and Rights of Termination. . . .$4 H. [§ 12I2] No Cross Defaults ....... ....... . ......... .. .. . . ... . ..56 X11I. [§ 13001 GEMRAL PROVISIONS .... .. .. ... A. [§ 13013 Notices,Demands and Communications Between the Parties . .56 B. If 13021 Time of Essence ... ... . . .... . . ... ...... . .. .. . ..... ..56 C. [§ 1303] Conflict of Interests ... .. .. . . .. . .......56 D. [§ 1304.1 Nonliability of Agency Officials and Employees .. ... . ..... .57 131 [§ 1305] Inspection of Books and Records ... ........ . .. . . . .. ... . .57 -v- 4rli. Dy: MAM, DALLMC" A. otnhMAN Lid O!D U`Jdi j U41UD1Ut o:L4rm;jecraa {fa,3; ruge ply F. [§ 13061 No Parmership . ..... ..... .. .. ..... . .. . . . . . ..... . .. ..57 G. [§ 13071 Compliance with Law ... .... . ....... . . . . .. ...... . ..... 57 H. N 13081 Surrender of Property. .......... ..... .. . . .. .. ...... . .. ...57 I. [§ 1309] Severability ... ... . .. .. ..... .. .....5$ r. [§ 1310] Binding Effect ............ . ............ .. . ...... ..... 58 K. [§ 1311] Assignment or Sublease to City;Might of First Refusal .... .. .58 L. [§ 1312] Captions ... . .... ... ...... .... . .. .. ....... .. .. . 59 M. (§ 1313] No Recording of this Lease .... .. .... .. .. ........ ... . 59 N. [§ 13141 Enforced Dclay in Porformance for Causes Beyond Control of Patty ...... ... ........ .. . .... .... .. I. .... .... ... . 59 O. j§ 1315] Entire Agreement,Waivers and Amendments. .. .... ........59, P. [§ 1316] Off-set Statement,Attnnnnent end Subordination ... ... .... .60 Q. [§ 1317] Approvals .. ... ..... ........ .... .... . .. .. ... .. ...... .61 R. [§ 1318] Countatparts . .. ........ .. ... ...... ....... .. ... .. .. . 61 -vi- :nl Oy: twtvt, nxLtmGn a ncnAMHIr eta 0e0 uya); U41 UO/ul GI.GYrM1 Jr,/ .M2f.7� Ftlye� y/y LIST OF EXHISM DGMIT``A" MAY OF THE SITE EXHIBIT"B" LEGAL DESCRIPTION OF THE SITE EXEI IT 4iC" ARTICLE VIII OF THE THIRD AMENDED AND RESTATED LEASE -vii- GROUND LEASE This Ground Lease (this "Lease") is'made by and between the REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH ("Agency") and PCH BEACH RESORT,LLC,a California limited liability company("Lessee'). I. (§ 100] SUBJECT OF GROUND LEASE A. [§ 1011 Purpose of the Lease The'purpose of this Lease is to effectuate the Redevelopment PIan for the Huntington Beach Redevelopment Project by providing for the lease of the hereinafter defined Site from Agency to Lessee and the construction and operation on the Site by Lessee of a high-quality, first-class hotel (the "Hotel') with approximately five hundred nineteen (519) guest rooms, a conference center and related facilities. The lease of the Site and the development and operation of such hotel pursuant to this Lease, and the fulfillment generally of this Lease,are in the vital and best interests of the City of Huntington Beach and the health,safety,morals,and welfare of its residents, and in accord with the public purposes and provisions of applicable federal, state and local laws and requirements. B. [§ 102) The RedeveloQment Plan This Lease is made in accordance with and subject to(a)the Redevelopment. Plan for the Main-Pier Redevelopment Project,which was approved and adopted by Ordinance No.2578 of the City Council of the City of Huntington Beach(the"City'), amended by Ordinance No. 2634, and merged with certain other redevelopment projects in the City by the adoption of Ordinance No. 3343 on December 16, 1996 to form the Huntington Beach Redevelopment .Project(the"Merged Redevelopment Project'); (b)the Amended and Restated Disposition and Development Agreement entered into by and between Agency and Mayer Financial, L.P. ("Mayer') on September 14, 1998, as amended by the-First Implementation.Agreement to Amended and Restated Disposition and Development Agreement (the '-First Implementation Agreement") that was entered into on or about May 15, 2000, the Second Implementation Agreement to Amended and Restated Disposition and Development Agreement (the "Second Implementation Agreement') that was entered into on or about February 5, 2001, and any additional amendments thereto (collectively, the "Agreement'); and (c)the Assignment and Assumption Agreement and Consent to Assignment(the"Assignment')dated .2001, by and between Mayer and Lessee whereby Mayer assigned and Lessee assumed all of Mayees rights and obligations set forth in the Agreement that relate to the leasing and development of the Site(referred to therein as "Parcel X). From and after the issuance by the Agency of a Release of Construction Covenants for the development of the Site under the . Agreement,there shall no longer be any operative requirements of the Agreement applicable to' Lessee or the Site which have not been set forth or referred to in this Lease. Any amendments hereafter to the Redevelopment Plan (as so approved and amended) which change the uses or development permitted on the Site as provided in this Lease, or otherwise change the restrictions or controls that apply to the Site,or affect or impair any of the rights or obligations,of Lessee or the holder or beneficiary of any Mortgage obtained in accordance'with Section 901 of this Lease(the "Mortgagee'), shall not apply to Lessee or the Site without the prior written consent of Lessee and the Mortgagee,which consent Lessee and the Mortgagee may withhold in its or their sole and absolute discretion. No other amendments to the Redevelopment Plan shalt require the consent of Lessee or the Mortgagee. Mayer also entered into an Amended and Restated.Development Agreement with the City dated September 21, 1998(the"Development Agreement"). Pursuant to the Assignment,Mayer assigned to Lessee and Lessee assumed all of Mayer's rights and obligations set forth in the Development Agreement that relate to the Ieasing and development of the Site (referred to therein as"Parcel RD. The Development Agreement,as assigned to Lessee,among other things, provides for.the development of the Site by Lessee in conformity with the City's General Plan and applicable Specific Plans, and provides for certain limitations and noticed procedures relating to uses and activities on certain beach property therein defined owned by the City in the vicinity of the Site. The development of the Site in accordance with the Development Agreement conforms to the Redevelopment Plan. Nothing in this Lease shall modify or limit the rights of either the City or Lessee under the provisions of the Development Agreement, C. R 1031 The Redevelopment Project Area The Huntington Beach Redevelopment Project area is located in the City of Huntington Beach,California(the"City"), The exact boundaries of such Project Area are specifically and legally described in the Redevelopment Plan for the Merged Redevelopment Project. D. [§ 104] The Site The "Site" is that certain real property within the Huntington Beach Redevelopment Project Area illustrated and designated as such on the"Map of the Site"(which is attached hereto and incorporated herein as Exhibit A) and having the legal description set forth in the "Description of the Site" (which is attached hereto and incorporated herein as Exhibit B). The Site shall include all appurtenant rights and easements which are reasonably necessary to the proper enjoyment ofAhe tenancy created by this Lease,provided,however,that Agency reserves to itself,its successors and assigns,together with the right to grant and transfer all or a portion of the same,the following: (a) Any and all oil, oil rights,petroleum,minerals,mineral rights,natural gas rights, and other hydrocarbon substances by whatsoever name known, geothermal resources,and all products derived from any of the foregoing,that may be within or under the land,together with the perpetual right.of drilling,mining,exploring,prospecting and operating therefor and storing in and removing the same from the Site or any other land, including the right to whipstock or directionally drill and mine from lands other than those leased hereby,oil or gas wells,tunnels and shafts into,through or across the subsurface of the Site,and to bottom such whipstocked or. " directionally drilled well's, tunnels and shafts under and beneath or beyond the exterior limits thereof, and to redrill, retunnel, equip, maintain, repair, deepen and operate any such wells or mines;without,however, the right to enter,drill,mine, store, explore or operate on or through the surface or the upper 500 feet of the subsurface of the Site,and -2- •(b) Any and all water, water rights or interests therein, no matter how acquired by Agency,together with the right and power to explore,drill,redrill,remove and store the same from the Site or to'divert or otherwise utilize such water, water rights or interests on any other property owned or leased by Agency, whether such water rights shall be riparian, overlying, appropriative,percolating,littoral,prescriptive,adjudicated,statutory or contractual;but without, however, any right to enter upon the surface of the Site in the exercise of such rights and, provided further,that the exercise of any such rights by Agency shall not result in any damage or injury to the improvements constructed on the Site by Lessee,including without limitation any subsidence of all or any part of such improvements. E. [§ 105] The Improvements The term "Improvements"as used in this Lease means any and all improvements tb the Site,whether previously existing or constructed on the Site by Lessee pursuant to this Lease,and including any and all amendments, modifications, additions, substitutions and replacements thereof. F. [§ 106] Condition of the Site (a) All portions of the Site, and any improvements thereon, which are leased to Lessee by Agency shall be leased in an"as is"condition,with no warranty,express or implied, by the Agency as to the condition of the soil,its geology,or the presence of known or unknown faults or the presence of any Hazardous Substances, and it shall be the.sole responsibility of Lessee,at Lessee's expense, to investigate and determine the soil conditions of the Site and the suitability of the Site for the development to be constructed by Lessee. If the soil conditions of the Site,or any part thereof, are not in all respects entirely suitable for the use or uses to which the Site will be put,then it is the sole responsibility and obligation of Lessee to take such action as may be necessary to place the Site and the soil conditions thereof in all respects'in a condition entirely suitable for the development of the Site as-described in the Agreement, which may include demolition, clearing, or moving buildings, structures, or other improvements, and removal of Hazardous Substances, as defined in Section 106.1 below,provided, however, that nothing in this Lease shall limit or modify in any way the Agency's obligations to perform certain work and/or make certain payments for work to be performed by Lessee or others in accordance with the Agreement and the Amended and Restated Mobilehome Acquisition and Relocation Agreement(the"Driftwood Agreement's referred to therein. (b) Lessee acknowledges that Agency has heretofore provided Lessee, without charge, copies of the following reports, studies, surveys, and other data and information on the physical condition of the properties being conveyed under the Agreement: June 5, 1990,letter from Donald W.Kiser to Doug Snyder,with attachments; April 1, 1987,certification from Kenneth K.Hekimian to Don Kiser,with exhibits; February 25, 1987,letter from Hekimian to Kiser, February 9, 1987,Report from Hekimian to County of Orange,with exhibits; January 30, 1987,letter from County to Kiser, January 26, 1987,letter from Hekimian to Kiser,with attachments; November 17, 1986,letter from Kiser to Regional Water Quality Control Board; -3- i i I October 3, 1986,letter from Hekimian to Kiser with exhibits; September 12, 1986,letter from County to Kiser with exhibits; July 2, 1987,letter from Kiser to Orange County Health Care Agency;and June 30, 1986,test results from Tait&Associates to Kiser,with attachments. I (c) Lessee hereby releases Agency and City and their respective officers,employees and consultants from any and all claims, liabilities, losses, damages, judgments, costs or expenses arising from or connected to any and all matters or states of fact affecting the Site concerning or related to the physical condition of the Site, subject to the performance of work and payment of funds by the Agency referred to in Section 106(a)above. (§ 106.1] Hazardous Substance (a) "Hazardous Substance," as used in this Lease means any substance, material or waste which is or becomes regulated by the United States government,the State of California,or any local or other governmental authority,including,without limitation,any material,substance or waste which is (i)defined as a "hazardous waste,' "acutely hazardous waste," 'restricted hazardous waste,"or"extremely hazardous waste"under Sections 25115,25117 or 25122.7,or listed pursuant to Section 25140, of the California Health and Safety Code; (ii)defined as a "hazardous substance" under Section 25316 of the California Health and Safety Code; (iii)defined as a "hazardous material," "hazardous substance," or "hazardous waste" under Section 25501 of the California Health and Safety Code;(iv)defined as a"hazardous substance" under Section 25281 of the California Health and Safety Code; (v)petroleum; (vi)asbestos; (vii)a polychlorinated biphenyl; (viii)listed under Article 9 or defined as "hazardous" or 'extremely hazardous' pursuant to Article 11 of Title 22 of the California Code of Regulations, Chapter 20; (ix)designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act (33 U.S.C. Section 1317); (x)defined as a "hazardous waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act(42 U.S.C.Section 6903);(xi)defined as a "hazardous substance"pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act(42 U.S.C.Section 9601); or(xii)any other substance,whether in the form of a solid, liquid, gas or any other form whatsoever, which by any governmental requirements either requires special handling in its use, transportation, generation, collection, storage, treatment or disposal, or is defined as"hazardous"or is harmful to the environment or capable of posing a risk of injury to public health and safety. (b) For good and valuable consideration pursuant to the Lease,Lessee covenants each and all of the following: (1) Lessee shall remove all Hazardous Substances from the Site in the manner prescribed by law. (2) The Site shall be free and clear of any Hazardous Substances to the extent,. required by applicable law. (3) The development, construction and uses of the Site pennitted under this Lease do not require the presence of any Hazardous Substance on the Site, except for those customarily used in the ordinary course ofbusiness for such development,construction and use. -4- Nothing herein shall relieve or release the Agency from its-duty to perform any of its obligations set forth in Section 106 of this Lease and in the Agreement and the Driftwood Agreement. (c) If at any time during the-term of this Lease, any Hazardous Substance is present on, in or under the Site(including,without limitation,the soil and groundwater)in violation of applicable law, Lessee shall at no expense to Agency, at the earliest practicable date, remove such Hazardous Substances from the Site (including without limitation any Hazardous Substances in the soil or groundwater) and any surrounding areas to which such Hazardous Substances may have migrated in accordance with and to the extent required by any and all applicable legal requirements. The parties intend to require Lessee to remove all Hazardous Substances from the Site and surrounding areas to which such Hazardous Substances may have migrated to the extent required by applicable law, if such Hazardous Substances are present at levels of concentration which require removal under applicable law. K at any time during the term of this Lease,Agency has reasonable cause to believe one or more Hazardous Substances may be present on, in or under the Site in violation of applicable law,Agency may by written notice inform Lessee of the basis for.Agency's concern and require Lessee to cause the Site to be tested for such Hazardous Substance(s) at Lessee's sole expense in accordance with a testing plan and schedule first approved in writing by Agency. Lessee shall exercise reasonable diligence to submit a testing plan to Agency within'30 days after the date of the Agency's notice, endeavor to obtain Agency's approval of the testing plan as soon as practicable thereafter,and cause the testing to begin within 30 days Agency's approval of the testing plan. (d)• Lessee shall not bring or allow to be brought onto the Site or use or store on the Site any Hazardous Substances without the prior express written consent of the Agency, except for those Hazardous Substances (including without limitation fuel stored in motor vehicles) ;.customarily used in the ordinary course of business in the use and operation of the Site and the Improvements. (e) The following covenants pertain to Lessee's occupancy and use of the Site and Improvements except for those Hazardous Substances customarily used in the ordinary course of business- 1. No underground storage tanks for Hazardous Substances shall be installed without the prior written approval of the Agency's Executive Director. 2. Agency, or its officers,employees,contractors or agents shall at all times have the right to go upon and inspect the Site and Improvements and the operations conducted thereon to assure compliance with the requirements herein stated. The Agency shall provide reasonable prior notice to Lessee of such entry, and shall seek to minimize interference with Lessee's use of the Site and Improvements as much as is reasonably feasible. Such entry shall be in compliance with all applicable safety rules and regulations. This inspection may include. taking samples for testing of substances and materials present and/or testing soils on the Site and Improvements. Agency shall indemnify;defend,and hold harmless Lessee from and against any claims, liabilities, losses, and damage caused by Agency during any such inspections, and shall be responsible for the prompt repair and/or restoration of any such damage caused by Agency during any such inspection. . ! 3. Lessee shall be responsible for posting on the'Site and improvements any signs required by Section 25249.6 of the California Health and Safety Code and regulations promulgated pursuant thereto. Lessee shall also complete and file any business response plans or inventories required by Chapter 6.95.of the California Health and Safety Code and regulations promulgated pursuant thereto. Lessee shall concurrently file a copy of any such business response plan or inventory with Agency. 4. Lessee shall immediately notify Agency in writing of the release of any Hazardous Substance on the Site and improvements in violation of applicable law. 5. Lessee shall to the extent required by applicable law immediately remove any Hazardous Substances Iocated on the Site and Improvements and shall dispose of such Hazardous Substances in a safe and legal manner. Lessee shall immediately disclose to Agency its disposal of any.Hazardous Substance Iocated on the Site and improvements and upon Agency's written request shall provide written documentation of its safe and legal disposal. (f) Lessee shall be responsible for and bear the entire cost of removal and disposal of { - Hazardous Substances, except for any portion thereof that may be the responsibility of the 1 Agency under express provisions of this Lease or the Agreement. Agency may also pass through to Lessee any and all clean-up costs incurred by the Agency as a result of Lessee's activities on the Site and Improvements or the presence of any Hazardous Substariee(s) on, in or tinder the Site and Improvements. Notwithstanding the foregoing,the Lessee shall not be responsible for any clean-up and decontamination on or off the Site and Improvements necessitated by the presence of such Hazardous Substances. Upon termination of this Lease,Lessee is required,in accordance with all applicable laws, to remove from the Site and Improvements any equipment or improvement to the property that is contaminated by Hazardous Substances. 1 (g) By this Lease, Lessee provides to the Agency, effective upon the date of this Lease, an indemnification of the Agency and the City and their respective members, officers, employees,agents,contractors and consultants relating to the environmental condition of the Site and the presence of Hazardous Substances thereon. Therefore, Lessee hereby agrees to 1 indemnify, defend and hold harmless Agency and City and their respective merizbers, officers, agents, employees, contractors and consultants, from any claims, actions, suits, legal and j administrative proceedings, liability, injury, deficiency, damages, fines, penalties, punitive j damages,costs and expenses(including,without limitation,the cost of any cleanup,remediation, j removal, mitigation, monitoring or testing of Hazardous Substances, and reasonable attorneys' fees) resulting from, arising out of, or based upon (i)the presence, release, use, generation, discharge; storage or disposal of any Hazardous Substances on, under, in or about, or the transportation of any Hazardous Substances to or from,the Site;or(ii)the violation,or alleged violation,of any statute,ordinance,order,rule,regulation,permit,judgment or license relating to the use, generation, release; discharge, storage, disposal or transportation or Hazardous Substances on,under,in or about,to or from,the Site. • I (h) From the date of this Lease,Lessee hereby waives, releases and discharges the Agency, the City and their respective members, officers, employees, agents, contractors and consultants,from any and all present and future claims,demands,suits, legal and administrative proceedings, and from all liability for damages, losses, costs, liabilities, fees and expenses (including, without limitation, attorneys' fees)arising out of or in any way connected with the Agency's or Lessee's use, maintenance, ownership or operation of the Site, any'Hazardous Substances on the Site,or the existence of Hazardous-Substances contamination in any state on the Site,however the Hazardous Substances came to be placed there, except that arising out of the intentional misconduct of the Agency or its employees, officers or agents. Lessee acknowledges that it is aware of and familiar with the provisions of Section 1542 of the California Civil Code which provides as follows- ."A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release,which if known by him must have materially affected his settlement with the debtor." As such relates to Section 106 and this Section 106.1, Lessee hereby waives and relinquishes all rights and benefits which they may have under Section 1542 of the California Civil Code. G. [§ 107] Parties to the Lease I. [§108] Aggne Agency is the Redevelopment Agency of the City of Huntington Beach, a public body, corporate and politic, exercising governmental functions and powers and organized and existing under Chapter 2 of the Community Redevelopment Law of the State of California. The principal office of Agency is located at 2000 Main Street, Huntington Beach, California 92648. "Agency" as used in this Lease, includes the Redevelopment Agency of the City of Huntington Beach,and any assignee of or successor to its rights,powers and responsibilities. 2. [§109] Lessee Lessee is PCH BEACH RESORT, LLC, a California limited liability company,whose managing member is GRAND RESORT,LLC,a California limited liability company. The principal office of Lessee is located at 660 Newport Center Drive, Suite 1050, Newport Beach,California 92660. Wherever the term "Lessee" is used herein, such term shall also include any pennitted- nominee or assignee of PCH BEACH RESORT,LLC,'a California limited liability company,,as herein provided.- -7- II. [§200) LEASE OF THE SITE A. [§201) Lease For and in consideration of the rents, conditions, covenants and agreements set forth herein,Agency hereby leases and demises the Site to Lessee and Lessee does hereby take and lease the Site from Agency. B. [§202] Term of the Lease. (a) The term of this Lease shall be ninety-nine(99)years,commencing on the date of" the execution and delivery of this Lease(the"Effective Date of Lease) and terminating on the ninety-ninth (99th) anniversary of the Effective Date of Lease, unless sooner terminated as provided for herein. (b) .•. At the expiration or earlier teiriiinatioa of this Lease, Lessee shall execute, acknowledge and deliver to Agency,within thirty(30)days after written demand by Agency,a valid and recordable quitclaim deed covering the Site and the improvements,free and clear of all liens and encumbrances. Ill. [§3001 RENT A. [§301] Definitions For the purposes of this Lease, the following terms shall have the following respective meanings: (1) "Operating Commencement Date" means the earlier to occur of(a)t2�e date on which'the Hotel opens for business; or (b)the date on which a Certificate of Occupancy for the Hotel is first available in accordance with the normal procedures of the city. (2) "Operating Year"as used herein means(a)the First Operating Year,and (b)each calendar'year which follows the end of the First Operating Year and which ends prior to the Last Partial Operating Yew, and(c)the Last Partial Operating Year, (3) "First Operating Year"as used herein means the period that begins on the Operating Commencement Date and ends on either (1)the first December 31 which follows the Operating Commencement Date, in the event the Operating Commencement Date occurs during the period commencing on January 1 and ending on August 31 of the calendar year in which the Operating Commencement Date occurs; or (ii)the second- December 31 which follows the Operating Commencement Date, in the' event the Operating Commencement Date occurs during the period commencing on September 1 and ending on December 31 of the calendar year in which the Operating Commencement Date occurs. -S- (4) "Second Operating Year" as used herein means the calendar year whieh follows the end of the First Operating Year. (5) "Third Operating Year" as used herein means the calendar year which follows the end of the Second Operating Year. (6) "Last Partial Operating Year"as used herein means the period of less than twelve(12)months that begins on an anniversary of the convnencement of the Second Operating Year and ends on the last day of the term of this Lease. (7) "Gross Room Revenue"as used herein means all revenue of any kind or nature, determined on an accrual basis,paid to Lessee or Lessee's agents for the rental of the Hotel guest rooms and suites (but excluding meeting and banquet rooms and similar areas in the Hotel) rented, licensed or otherwise provided whether on cash basis or credit by Lessee to third parties, excluding refunds and uncollectible accounts (bad debts), including,without limitation, (a) all room rental payments, room deposits forfeited, room cancellation fees;and (b) proceeds of business interruption and similar insurance payable as a result of loss of room revenues;and (e) fees for use of any facilities which are customarily included by comparable first quality hotels in the guest room rental rate, excluding,however,food,beverage,mini-bar,health club,parking, telephone, and rentals for equipment not customarily provided guests of first class resort hotels. (8) "Adjusted Room Revenue"as used herein means the amount by which(a) Gross Room Revenue for each Operating Year exceeds (b) a threshold revenue base which shall 'initially be twenty-five million dollars ($25,000,000) for each Operating Year and shall be increased on the first day of each Operating Year which begins after the Third Operating Ydar in proportion to the escalation,if any,of the Consumer Price Index during the immediately preceding calendar year; provided, however, that such increase in the threshold revenue base shall not in any single year exceed five percent(5%)of the preceding year's threshold revenue base and shall not in any five-year period exceed twenty percent(20%) of the revenue threshold base at the commencement of the five-year period. (9) "Consumer Price Index"as used herein means the Consumer Price Index- All Urban Consumers, [Los Angeles-Long Beach-Anaheim],published by the Bureau of Labor Statistics or,if such index ceases to be published,the most closely analogous substitute index. -9- ,1 i B. [§3021 Gmund Rent "Ground Rent," as used herein,shall mean rent paid by Lessee to Agency for the Site. Ground Rent consists of Base Rent (as described in Section 303) and Participation Rent (as described in Section 304). C. [§3031 Base Rent (1) For the First Operating Year,Lessee shall pay to Agency as Base Rent the amount of twenty-five thousand dollars ($25,000) multiplied by a fraction, the numerator of which is the number of days in the First Operating Year and the denominator of which is three j hundred sixty-five(365). . • I (2) For the Second Operating Year,Lessee shall pay to Agency as Base Rent j the amount of seventy-five thousand dollars($75,000). (3) For the'Third Operating Year, Lessee shall pay to Agency as Base Rent the amount of one hundred fifty thousand dollars($150,000). (4) For each Operating Year beginning with the. Fourth Operating Year, Lessee shall pay to Agency as Base Rent the amount of one hundred fifty thousand dollars ($150,000) as increased on the first day of each such Operating Year(i.e., each Operating Year after the Third Operating Year) in proportion to the escalation, if any, of the Consumer Price Index between.the fifteenth(15th)month and the third(3rd)month prior to the first day of such Operating Year,provided,however,that such escalation shall not in any single year exceed five percent(5%)of the preceding Operating Year's Base Rent and shall not over any period of five consecutive Operating Year's exceed twenty percent (201%) of the Base Rent at the commencement of such five Operating Year period; and provided, further, that for the Last Partial Operating Year, such amount shall be multiplied by a fraction:,the numerator of which is the number of days in the Last Partial Operating Year and the denominator of which is three hundred sixty-five(365). (5) The Base Rent specified in paragraphs (a) through (d) above shall be payable by Lessee to Agency in installments on the first(1st)day of each calendar month of each Operating Year. The amount of each such monthly payment shall be one-twelfth(1/12)of the. Base Rent for the then current Operating Year, except as provided hereafter with respect to the Last Partial Operating Year. Each monthly payment of Base Rent iri the Last Partial Operating Year shall be the Base Rent for the Last Partial Operating Year multiplied by a fraction, the numerator of which is one and the denominator of which is the number of first days of calendar months in the Last Partial Operating Year. D. j§304) Participation Rent (1) For each Operating Year beginning with the fast day of the 'Third Operating Year, Lessee shall pay to Agency as Participation Rent an amount equal to three percent(3%) of Adjusted Room Revenue, which shall be payable as specified in paragraph (c) below. -la . (2) Within one hundred twenty(120) days after the close of each Operating Year(except-the First Operating Year and the Second Operating Year),Lessee shall submit to Agency, for Agency's review and written approval, a statement (the "Certified Annual Statement")containing an.itemiration and a reasonable explanation of the composition of Gross Room Revenue and Adjusted Room Revenue for the applicable Operating Year,together with a certificate of-an independent certified public accountant reasonably acceptable to Agency(the "Accountant'). The Accountant's certificate shall be addressed to Agency, and shall state that the Accountant is familiar with the definition of each of the terms defined in Section 301 of this Lease and attest to the accuracy of Gross Room Revenue and Adjusted Room Revenue. At Lessee's election,the Accountant may be any of the following national accounting firms: j i i) Arthur Andersen&Co.;LLP; ii) Deloitte&Touche,LLP; iii) Ernst&Young,LLP;' iv) Coopers and Lybrand,LLP; v) KMPG Peat Marwick,LLP; vi) Price Waterhouse,LLP; vii) Any national accounting firm having at the time of delivery of the Certified Annual Statement reputation and stature in the accounting community comparable to the foregoing firms as of the Effective Date of Lease,if first approved by Agency. (3) No later than concurrently with Lessee's submission to Agency of the Certified Annual Statement,and in any event within one hundred twenty(120)days after the end of the applicable Operating Year,Lessee shall pay to Agency the amount of Participation Rent as j determined on the basis of such Certified Annual Statement. If Participation Rent is not paid JI within thirty (30) days after the Certified Annual Statement is submitted to Agency or one hundred twenty (120) days after the termination of the applicable Operating Year, whichever first occurs,the amount of Participation Rent shall bear interest at the annual rate ofthree percent (3%)over the prime rate of the largest bank operating in the State of California until paid. E. [§305] Triple Net Lease This is an absolute net lease and Agency shall not be required to provide any services or do any act or thing with respect to the Site and Improvements or the appurtenances thereto, except as may be specifically and expressly provided herein and in the Agreement and the Driftwood Agreement, and Lessee shall make all payments required by this Lease,including but not limited to the payment of rent to Agency, without any claim on the part of Lessee for diminution,set-off or abatement,and nothing shall suspend,abate or reduce any rent to be paid hereunder, except as otherwise specifically provided in this Lease; provided, however, that Lessee,shall have the right to withhold the payment of rent in an amount equal to payments which the Agency fails to make to Lessee in breach of the Agreernent.f m Available Site- Generated Property Tax Increment and Available Site-Generated Transient Occupancy Tax(as.' defined in the Agreement). Lessee agrees that in the event of any such set-off,the Agency shall receive a credit equal to(i)the dollar arriount of such set-off against amounts otherwise required to be paid by Agency under the Agreement of Available Site-Generated Property Tax Increment and Available Site-Generated Transient Occupancy Tax less (ii) the interest accrual on the amount of the set-off'from the date payment was due from Agency to Lessee pursuant-to the i ' -11- Agreement to the date the set-off occurs hereunder at a rate equal to the "Developer's Cost of Funds,"as defined in paragraph(k)of-Attachment No.8 to the Agreement. F. [§306] Non-Subordination of Rent or Other Sunts Lessee hereby covenants and agrees that rent and all other sums of whatever kind and nature payable to Agency-from Lessee under the provisions of this Lease shall be paid from Gross Revenue and, to the extent consistent with applicable law, all other expenses shall be subordinate to the payments to Agency as required under this Lease. It is expressly understood _ and agreed that there shall be no subordination or encumbrance of any kind under this Lease or otherwise of(i)the Agency's fee title ownership of the Site; (ii)the Agency's interest in this Lease;and(iii)the Agency's right to receive Ground Rent under this Lease. G. [§307]. Delinquency in Rental Payment;Collection of Rents The failure of Lessee to pay Ground Rent by the due date shall constitute a default. In the event Lessee fails to pay the applicable rents on or before the due date, in addition to any other remedy provided by this Lease,Lessee shall pay Agency the delinquent rent and interest on the total delinquent rent at the rate of three percent(3%)over the prime rate of the largest bank operating in the State of California on the due date, from the date of each delinquency. Said interest shall accrue from the due date of the rent to the date the rent is received by Agency. It is the intent of this provision that Agency shall be compensated by such additional sums for loss resulting from rental delinquency including costs to Agency for servicing the delinquent account. Agency, at its option,-may waive any such delinquency compensation required herein, upon written application of Lessee. H. (§3081 Right to Inspection and Audit of Records Lessee shall keep full and accurate books and accounts,records,cash receipts,and other pertinent data showing its financial operations. Such books of account,records, cash receipts, and other pertinent data shall be kept for a period of five(5)years after the end of the Lease Year to which such items pertain. Agency shall be entitled during such five (5) years to inspect, examine and to copy at Agency's expense Lessee's books of account,records,cash receipts,and other pertinent data as necessary or appropriate for the purpose of this Lease. Lessee shall cooperate fully with Agency in making the inspection. Hooks and records shall remain confidential and not public except as necessary to protect Agency's interests under this Lease. Agency shall also be entitled at Agency's expense,once during each calendar year and once after expiration or termination of this Lease,to an independent audit of Lessee's books of account,records, cash receipts,and other pertinent data, by a certified public accountant to be designated by Agency,as necessary or appropriate to the purposes and provisions of this Lease. .Any such audit shall be conducted after reasonable prior written notice by Agency to Lessee and*- during Lessee's usual business hours. if the audit shows that there is a deficiency in the payment of Ground Rent,the deficiency and interest thereon at the rate specified in Section 305 of this Lease shall become immediately due and payable to Agency. If such deficiency exceeds the amount of the greater of Five Thousand Dollars($5,000.00), or two percent(2%) of the actual Ground Rent due in any Lease Year in which there is a deficiency, Lessee shall reimburse. -12- Agency for the cost of Agency's audit, if Agency has not audited Lessee hereunder with respect to a particular Lease Year within the permitted five year period, or has not advised Lessee in writing of any exceptions based on said audit within said five year period,then Agency shall be deemed to have waived its right to redetemrine Ground Rent for such Lease Year. IV. [§400J DEVELOPMENT OF THE SITE A. [§401] Scope of Development.Plans Drawings and SRecification� Lessee shall construct the improvements upon the Site in accordance with the Agreement,including without limitation the Scope of Development appended to the Agreement as Attachment No. 4, the Development Agreement, add plans, drawings and specifications approycd by City, and within the time and in accordance with the other terms, covenants•and conditions of the Agreement, the Development Agreement and the plans, drawings and specifications approved by City pursuant thereto, at the times provided in the Schedule of Performance(appended to the Agreement as Attachment No.3 and incorporated herein by this reference), B. [§402] No Construction Before Notice From and after issuance of the Release of Construction Covenants by the Agency pursuant to the Agreement, no work of any kind shall be commenced on'the Site and no building or other materials shall be delivered to the Site for construction of any improvements,nor shall any other building or land development work be commenced on or building materials be delivered to the Site at any time during the term of the Lease, which work and/or materials exceed in the aggregate Two Hundred and Fifty Thousand Dollars ($250,000), until at least ten (10) days following notice by Lessee to Agency of the intended commencement of such work or the delivery of such materials. C. [§403] Notice of Non-Responsibility Agency shall,at any and all times during the term of this Lease,have the tight to post and maintain on the Site and to record as required by law any notice or notices of non-responsibility provided for by the mechanics' lien laws of the State of California. The.work for which said ten (10)days written notice is required shall include,in addition to actual construction work,any site preparation work,installation of utilities, street construction or improvement, or any grading or filling of the Site. D. [§404] Mechanic's,Materialman's,Contractor's or Subcontractor's Lien Subject to Lessee's right to contest as hereinafter provided,at all times during the term of the Lease,Lessee shall keep the Site,including all buildings and improvements now or hereafter . located on the Site, free and clear of all liens and claims of liens for labor,services,materials; supplies, or equipment performed on or furnished to the Site. Lessee shall promptly(i)pay and discharge,or cause the Site to be released from,any such lien or claim of lien,or(ii)contest such lien and furnish Agency such bond as may be required by law to free the Site from the effect of such lien and to secure Agency against payment of such lien and against arty and all loss or damage whatsoever in any way arising from Lessee's-failure to pay or discharge such lien, In -13- the event Lessee provides a bond in lieu of paying or discharging a lien as set forth herein,and Agericy is unable despite reasonably diligent effort to obtain an endorsement to any existing title policy in favor of Agency insuring Agency's interest in the Site free and clear of any such liens that have not been paid or discharged, Lessee shall, at Lessee's sole cost and expense,.within thirty (30) days of Agency's written request therefor, provide the Agency with such endorsement. Should Lessee fail to pay and discharge,or cause the Site to be released from,any such lien or claim of lien or to provide a bond as permitted hereunder within thirty(30) days after service on Lessee by Agency of a written request to do so,Agency may pay,adjust,compromise and discharge any such lien or claim of lien on such terms and in such manner as Agency may reasonably deem appropriate. In such event,Lessee shall,on or before the first day of the next calendar month following any such paymerit by Agency,reimburse Agency for the full amount so paid by Agency, including any actual and reasonable attorneys' fees-or other costs expended by Agency, together with interest thereon at the annual rate of interest equal to three percent (3%)over the prime rate of the largest bank operating in the State of California as of the close of business on the date of payment by the Agency, or the highest lawful rate, whichever is less, from the date ofpayment by Agency to the date of Lessee's reimbursement of Agency. On substantial completion of any work of improvement during the term of the Lease, Lessee shall record or cause to be recorded in the Official Records of Orange County a notice of completion. Lessee hereby appoints Agency as Lessee's attorney-in-fact to record the notice of completion, which appointment shall only become effective on ten (10) days' notice upon Lessee's failure:to record such a notice of completion after the work of improvement has been substantially completed;provided,that Agency'shall not be obligated to record such a notice of completion and the failure of Agency to record said notice shall not excuse the failure of Lessee to discharge its obligation to record said notice of completion. E. (§405) Rights ofAccess Representatives of Agency and City shall have the reasonable right of access to the Site without charges or fees, at normal construction hours during the period of construction for the purposes of this Lease,including,but not limited to,the inspection of the work being performed in constructing the improvements. Such representatives of Agency or City shall be those who are so identifred'in writing by the Executive Director of Agency. The Agency shall provide reasonable prior notice to Lessee of such entry, and shall seek to minimize interference with Lessee's use of the Site and Improvements as much as is reasonably feasible. Such entry shall be in compliance with all applicable safety rules and regulations. Agency shall indemnify,defend, and hold harmless Lessee from and against any claim, liability, losses and damages caused by Agency during any such inspections, and shalt be responsible for the prompt repair and/or restoration of any such damage caused by Agency during any such inspection. F. (§406] Local,State and Federal Laws Lessee shall carry out the construction of the improvements on the Site in conformity with, all applicable laws, including all applicable federal and state labor standards and requirements. -14- G. j§407] Aron-discrimination During<Construction Lessee for itself and its successors and assigns agrees that in the construction of the improvements on the Site provided for in this Lease,Lessee will not discriminate against any employee or applicant for employment because of sex,-marital status,race,color,creed,religion, national origin,or ancestry. H. (§409] . Archaeological Provisions Agency shall comply with any procedures or reviews relating to archaeological resources and take any remedial action which may be required by applicable state and federal laws with respect to development of the Site as contemplated by this Lease. In connection therewith, Agency shall perform, at its expense, any necessary studies, tests or surveys which may be j required to comply with such procedures•or reviews, or-to undertake any required remedial action for such clearances or certifications. Lessee shall comply with all reasonable requests from Agency,including but not limited to requests for access to the Site,to facilitate Agency's compliance with such procedures or reviews and obtainment of such clearances or certifications. V. (§500) USE OF THE SITE AND R"ROVEU ENTS A. [§501] Use of the Site and Improvements Lessee covenants and agrees for itself, its successors, its assigns and every successor in interest to the Site and Improvements or any portion thereof, that during construction and thereafter through the remainder of the term of this Lease, Lessee, such successors and such :assignees shall; I. Construct or cause to be constructed all first class resort hotel and conference center improvements described in the Scope of Development in accordance therewith and subject to the limitations thereof, including without limitation the standards of quality set forth in the Scope of Development(Attachment No.4 of the Agreement),with an overall standard of quality consistent with a first class resort hotel equal to or better than a resort rated four-diamonds by the Automobile Association of America (AAA), such as the Hotel del Coronado in San Diego, California, or the Biltmore Hotel in Santa Barbara, California. It is recognized that not all services and facilities available in one first-class resort hotel will necessarily be provided by all first-class resort hotels,but that the composite of service and facilities provided by each firtt- class resort hotel comparable to the hotels referred to above will cause the same to be deemed to constitute a first-class resort hotel. Uses normally incidental to a hotel use, including without limitation a restaurant, cocktail lounge, cleaning and-laundry service, banquet and catering j facilities, meeting rooms, gift shop, spa, resort retail, magazine stand, barber or beauty shop, travel agency, airline ticket office, automobile rental operation, and recreational facilities, shall also be permitted. 2. Devote the Site, or cause the Site to be devoted solely to use in accordance with this Lease,the standards of quality set forth in Section 501.1 of this Lease,and plans and permits approved by the City,as the same may be amended frorn time to time. { • I I i i • 1 1 - l 3. Subject to Sections 706.710, 1100-1104, and 1314 of this Lease, operate in. substantially complete fashion or cause the hotel and all other improvements to be constructed on. the Site to be operated in substantially complete fashion and continuously open for business to the general pubic in accordance with the standards set forth in this Lease;provided however that 1 the requirements of this sub-paragraph for continuous operation shall not apply temporarily for the period required for bona fide hotel wide major remodeling. i 4. Operate,or cause to be operated,the conference center in substantial accordance with conference center operating requirements first reasonably approved by the Agency's Executive Director,which shall provide for priority use of the conference center at Lessee's cost j for five(5)days per year(other than prime vacation and holiday periods)non-cumulatively by the City for its own purposes,or by a community,charitable or other not-for-profit group,subject to an advance reservation of not more than thirty(30)days prior to each such use,provided that •Lessee shall not be required to cancel a reservation already accepted from any third party. 5. (a) Maintain,repair and operate the Site and all improvements constructed or to be constructed thereon(including landscaping,lighting and signage),or cause the Site and all such improvements to be maintained, in a first quality condition, free of debris, waste and graffiti, and in compliance with the terns of the Redevelopment Plan, the City of Huntington Beach Municipal Code,and the following: (1) All improvements on the Site shall be maintained in good condition in accordance with the custom and practice generally applicable to comparable first quality hotels in Orange County, and in conformance and compliance with all plans, drawings and related documents-approved by the Agency pursuant to this Lease,all conditions of approval of land use entitlements adopted by the City or the Planning Commission,including painting and cleaning of all exterior surfaces of all private improvements and public improvements to the ctubline. (2) Landscape maintenance shall include, without limitation, wateringrrrigation; fertilization; mowing; edging; trimming of grass; tree and shrub pruning, trimming and shaping of trees and shrubs to maintain a natural and healthy appearance, road visibility, and irrigation coverage; replacement, as needed, of all plant materials; control of weeds in all planters, shrubs, lawns, ground covers, or other planted areas; and staking for support of trees. (3) Clean-up maintenance shall include,without limitation,maintenance of all sidewalks, paths and other paved areas in a clean and weed-free condition;maintenance of all such areas clear of dirt,mud,trash,debris or other matter which is unsafe or unsightly;removal of all trash,litter and other debris from improvements and landscaping;clearance and cleaning of all areas maintained prior to the end of each day on which maintenance operations are performed to ensure that all cuttings, weeds, leaves and other•debris are properly disposed of-by maintenance workers. (b) If the Agency gives written notice to Lessee that the maintenance or condition of the Site or any portion thereof or any improvements thereon does not comply with this Lease and such notice describes the deficiencies,Lessee shall correct,remedy or cure the deficiency within thirty (30) days following the submission.of such notice, unless the notice states that the -16- } deficiency is an urgent matter relating to public health and safety in which-case Lessee shall cure the deficiency with all due diligence and shall complete the cure at the earliest possible time but in no even more than forty-eight(48)hours following the submission of the notice. In the event Lessee fails to maintain the Site or any portion thereof or any improvements thereon in accordance with this Lease and'fails to cure any deficiencies within the applicable period described above,the Agency shall have,in addition to any other rights and remedies hereunder, the right to maintain the Site and the improvements thereon,or portion thereof;or to contract for the correction of any deficiencies,and Lessee shall be responsible for payment of all such costs actually and reasonably incurred by the Agency. 6. (a) Pay when due all real estate taxes and assessments assessed and levied on the Site or any portion thereof or any improvements thereon or any interest therein; provided however that nothing herein shall limit or affect any right Lessee may have under applicable law to contest the validity or amount of any property tax assessment so long as Lessee(1)is not in default in payment of any Annual Property Tax Guarantee to the Agency required by this paragraph, and (ii)refrains from appealing, challenging or contesting in any manner any assessment of the Site and Improvements equal to or less than the Minimum Assessed Valuation, and (iii) complies with the requirements-set forth in Section 501.6(b) of this Lease; and, in addition thereto,pay to the Agency on September I of each year for each prior fiscal year of the Agency, commencing on the first September I to occur after the issuance of the Release of Construction Covenants for the Site by the Agency pursuant to the Agreement(but excluding any period of time prior to such issuance of the Release of Construction Covenants),the Annual Property Tax Guarantee, if any, due for each such prior fiscal year. For purposes of this Agreement, "Annual Property Tax Guarantee"for each Agency fiscal year(July I -June 30)in Which said guarantee remains in effect hereunder shall mean an amount equal'to (iythe Net Property Tax Increment Revenues that would have been allocated to and received by the Agency in said fiscal year with respect to the Site and Improvements if the Site and Improvements had been assessed at the Minimum Assessed Valuation for said year, less (ii)the amount of Net Property Tax Increment Revenues actually allocated and paid to the Agency in said fiscal year with respect to the Site and Improvements. The`Net Property Tax Increment Revenues shall include one hundred percent (100%) of the property tax increment revenues payable to the Agency pursuant to Section 33670(b) of the California Health and Safety Code(as said statute may be amended from time to time), including without limitation the twenty percent (Zfl%)of said revenues that Agency is required to set aside for affordable housing purposes in the Redevelopment Project Area as a whole pursuant to California Health and Safety Code Section 33334.2,less the portion of said tax increment revenues equal to the sum of(i)the percentage of. such revenues in the Main-Pier portion of the Merged Redevelopment Project Area that the Agency is required to pay to other affected taxing entities pursuant to tax sharing/pass-through agreements entered into prior to the date of this Agreement,(ii)the percentage of such revenues in the Merged Redevelopment Project Area as a whole which the Agency may be required to pay to any and all governmental entities pursuant to any provision of law,including for example,and without limiting the generality of the foregoing, any statutory pass-through payments which are required to be made to affected taxing entities pursuant to California Health and Safety Code Sections 33607.5 and 33607.7, California health and Safety Code Section 33681 et seq., as applicable,and(iii)the percentage of such revenues in the Merged Redevelopment Project Area as a whole which the Agency is required to pay to the County of Orange or which the County is entitled to retain as an admirdstrative fee. "Minimum Assessed Valuation" shall mean an -17- amount calculated for each fiscal year equal to one hundred million dollars(S100,000,000)plus a compound annual escalation of such dollar amount from and after the 2000-2001 fiscal year to and including the 2032-33 fiscal year of two percent(2%)per annum;provided,however, that the Minimum Assessed Valuation shall not be so escalated when and to the extent the assessed valuation of the Site increases at less than two percent(20/9)per annum, remains the same, or decreases by reason of an action initiated by the County and not by an assessment appeal, challenge or contest of Lessee. The obligations of Lessee under this paragraph 501.6 shall terminate at such time as Agency is no longer legally entitled to receive such ad valorem property tax increment revenues from the Site and Improvements pursuant to applicable provisions of law. (b) The following requirements shall apply to any appeal,objection or contest to any tax or assessment permitted to be made by Lessee under this Lease: the contest, opposition, or objection must be filed before the tax, assessment, or other charge at which it is directed becomes delinquent and written notice of the contest,opposition,or objection must be given to Agency before the date the tax or assessment, or other charge becomes delinquent. No such contest, opposition, or objection shall be continued or maintained after the date the tax, assessment,or other charge at which it is directed becomes delinquent unless Lessee has met one of the following conditions: (i) Paid such tax, assessment, or other charge under protest prior to its becoming delinquent;or (H) Obtained and maintained a stay of all proceedings for enforcement and collection of the tax,assessment,or other charge by posting such bond or other matter required by law for such a stay;or (iii) Delivered to Agency a good and sufficient undertaking in a form reasonably acceptable to Agency's Executive Director,in an amount equal to one hundred twenty-five percent(125%)of the amount in.controversy (inclusive of fines,interests,penalties,costs,and other expenses that may have accrued or been imposed thereon) and issued by a surety company authorized to issue undertakings in California,conditioned on the payment by Lessee of the tax, assessment, or charge together with any fines, interest, penalties, costs, and .expenses that may have with or been imposed thereon within thirty (30) days after final deterr iation of Lessee's contest,opposition,or objection to such tax,assessment,or other charge. . Agency shall not be required to join in any proceedings or contest brought by Lessee unless the provisions of any law requires that the proceeding or contest be brought by or in the name of Agency or any owner of the Site. In that case,Agency shall join in the proceeding or contest or permit it to be brought in Agency's name but such action shall be without cost or other liability to Agency and Lessee agrees to pay to Agency all costs incurred by Agency in..' connection therewith. 7. Not discriminate upon the basis of race, color, creed, religion, sex,age,marital status,national origin,or ancestry in the sale,lease,sublease,transfer,use,occupancy,tenure or enjoyment of the Site,or any improvements erected or to be erected thereon,or any part thereof -18- B. j§5023 Management of the Site and Improvements Prior to the date of this Lease, Lessee has entered into a hotel management agreement which has been approved in writing by the Agency for consistency with the Agreement and this Lease, it being understood and agreed that Lessee may redact from such agreement when submitted to Agency for approval any confidential business information not relevant to the purposes of this Lease (the "Original Management Agreement"). Prior to the expiration or termination of the Original Management Agreement (and any successor hotel management agreement(s).throughout the tern of this Lease), Lessee shall obtain the Agency's written approval of a new hotel management agreement which shall become effective concurrently with the expiration or sooner termination of the hotel management agreement which it replaces. Each such hotel management agreement shall be with a manager determined by the Agency to have not less than eight (8) years of experience'in the successful operation of first quality hotels comparable to the hotel to be constructed on the Site. Approvals required of the Agency under this Section 502 shall follow and be limited by the following procedures: Within thirty (30) days after receipt of Lessee's request for approval, Agency shall respond in writing by stating what ftnther information, if any, Agency reasonably requires in order to determine whether or not to approve the agreement. Lessee shall promptly furnish to Agency such further information as may be reasonably requested. Lessee's request for approval shall be deemed complete thirty(30)days after Agency's receipt thereof,if no timely response requesting further information is delivered to Lessee, or, if such a timely response requesting further information is received, on the date that Lessee delivers such additional information to Agency, provided that Lessee's additional information is responsive to Agency's request. Agency shall approve or disapprove the matter within forty-five(45)days after Lessee's request for such approval is accepted as complete or is deemed complete. Approval will not be unreasonably withheld if Lessee demonstrates that the proposed management agreement will provide capable,competent and experienced operation of resort hotels similar in quality,size and type as required to be maintained on the Site and Improvements pursuant to this Lease. If Agency shall disapprove a hotel operator,Agency shall do so by written notice to Lessee stating the reasons for such disapproval. Waterfront Resorts, inc,.a California corporation,is hereby pre-approved by Agency as an operator of the resort hotel on the Site and Improvements,so long as there is no material change in the ability of the same to provide capable, competent and experienced quality operation of the Site and Improvements from that•evident upon the execution of this Lease. At all times during the term of this Lease,the Site and Improvements shall be managed or caused to be managed by Lessee in a prudent and business-like manner as necessary to maintain- the Site and Improvements in a fast-class condition. Lessee shall assume responsibility, subject to the provisions of this Lease, for the operation and maintenance (including repair, restoration and reconstruction) of all of the improvements constructed on the Site and the costs thereof,and Agency and the City shall have' no liability for costs of such operation and maintenance by Lessee or for any claims arising from the operation and maintenance (including repair, restoration and reconstruction) of such improvements. Without limiting the generality of the foregoing,Lessee, in the maintenance of the improvements,shall observe the following standards: -19- I. Maintain the surface of all automobile and pedestrian areas level, smooth and evenly covered with the type of surfacing materials originally installed thereon or such substitute thereof as shall be in all respects equal thereto or better in quality,appearance and durability. 2. Remove all papers,debris,filth and refuse,and sweep,wash down and/or clean all hard surface,including brick,metal,concrete,glass,wood and other permanent poles,walls or structural members as required. 3. Maintain such appropriate entrance,exit and directional signs,markers and lights as shall be reasonably required and in accordance with the practices prevailing in the operation of similar developments. 4. Clean lighting fixtures and relamp and/or reballast as needed. 5... _ Repaint striping,markers,directional signs,ctc.,as necessary to maintain in first- class condition. 6. Maintain landscaping as necessary to keep it in a first-class,thriving condition. 7. Maintain signs, including relamping and/or reballasting and/or repairing as required. S. Provide security personnel and security measures to the extent reasonably necessary. Lessee shall seek the advice of the police department in planning appropriate security measures. 9. Maintain and keep in good condition and repair all benches, shelters,planters, Trull coverings, banners, kiosks and other furniture, trash containers, sculptures, play areas, platforms and stages. 10. Maintain and keep in a sanitary condition public restrooms and other common use facilities. 11. Clean,repair and maintain all common utility systems to the extent that the same are not cleaned,repaired and maintained by public utilities. 12. Maintain all fountains and associated structures, drinking fountains, pumps and associated plumbing. 13. Maintain all lights,light fixtures and associated wiring systems. 14. Maintain public right-of-way items between the property and the street,including sidewalks,curbs,gutters,driveways,signs and poles,curb painting and markings. 15. Maintain all surface and storm lateral drainage systems. 16. Maintain all sanitary sewer lateral connections. -20- C. [§503] [INTENTIONALLY OMITTED] D- [§5041 Obli ation to Refrain from Discrimination There shall be no discrimination against or segregation of any person, or group of persons,on account of sex,marital status,race,color,deed,religion, national origin or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the Site and Improvements,and Lessee itself or any person claiming under or through it shall not establish or permit any such practice or practices of discrimination, or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of the Site and Improvements. E. [§505] , Form of Nondiscrimination and Nonsegregation Clauses Lessee shall refrain from restricting the rental,sale or lease of the Site and Improvements, or any portion thereof,on the basis of sex,marital status,race,color,creed,religion,ancestry or national origin of any person. All such deeds, leases or contracts pertaining to the foregoing matters shall contain or be subject to substantially the following nondiscrimination or nonsegregation clauses: I. In deeds: "The grantee herein covenants by and for itself its heirs, executors, idministrators and assigns, and all persons claiming under or through it,that there shall be no discrimination against.or segregation of, any person or group of persons on account of sex, marital status, race, color, creed, religion, national origin or ancestry in the sale, lease, sublease,transfer,use,occupancy,tenure or enjoyment of the land herein conveyed, nor shall the grantee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the land herein conveyed. The foregoing covenants sball'run with the land." .2. In leases: "The lessee covenants by and for itself, its heirs, executors, administrators and assigns, and all persons claiming under or through it, and this lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons m account of sex, marital status, race, color; creed, religion, national origin or ancestry, in the leasing, subleasing, transferring, use, or enjoyment of the land herein leased nor shall the lessee itself, or any person claiming under or through it, establish or permit any such practice or practices of.discrimination or segregation with reference to the selection',location,number,use or occupancy,of tenants, lessees,sublessees,subtenants or vendees in the land herein leased." -21- I 3. In contracts. "There shall be no discrimination against or segregation of, any person or group of persons on account of sex, marital status, race,. color, creed, religion, national origin, or ancestry in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall the transferee itself or any person claiming under or through it, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy, of tenants, lessees, sublessees, subtenants, or vendees in the land'$ F. [§5061 Quiet Enjoyment The parties hereto mutually covenant and agree that Lessee by keeping and performing the covenants herein contained, shall at all times during the term of this Lease, peaceably and quietly have,hold and enjoy the Site and Improvements. G. [§507] Payments to Agency In consideration of the agreement to restrict development on certain property as set forth in Articie VIII of that certain Third Amended and Restated Lease between the Agency(as lessor) and Robert L.Mayer,as Trustee of the Robert L.Mayer Trust of 1982 dated June 22, 1982(as lessee), dated as of April 28, 1989, as amended on or about November 16, 1992 by a First Amendment to Third Amended and Restated Lease (collectively, the "Third Amended and Restated Lease),Lessee shall pay to Agency the amounts set forth below for the benefit of the City: 1. For each Lease Year from 2001 through 2013, inclusive, or earlier termination of this Lease,the sum of Eight Thousand Three Hundred Thirty-Three Dollars and Thirty-Four Cents ($8,333.34)per Lease Year,payable in advance on the first day of each such year. 2. For each Lease Year from 2014' to 2099, inclusive, or the earlier termination of this Lease, the sum of Eight Thousand Three Hundred Thirty-Three Dollars and Thirty-Four Cents($8,333.34)per Lease Year adjusted upward as of January 1, 2014,and each January tat thereafter as provided herein ("Adjustment Dates"), with such sum payable in advance on the first day, of each such year. The annual adjustment shall be calculated upon the basis of the United States Department of Labor, Bureau of Labor Statistics Consumer Price Index of Urban Wage Earners and Clerical Workers, Los Angeles —Long Beach—Anaheim Average, All Items (1967=I00) (the "Index'J. The Index published and in effect ninety(90) days prior to the Effective Date of Lease shall be considered the'Base Year Index". At each Adjustment Date, the consideration due shall be adjusted to equal the product obtained by multiplying(i)$8,33334 and(ii)a fraction,the numerator of which is the Index published and in_.' effect ninety(90)days preceding the Adjustment Date,and the denominator of which is the Hale Year Index. In no event shall the consideration payable on any Adjustment Date be less than the consideration required to be paid during the year immediately preceding such Adjustment Date notwithstanding the fact that the Index may,as of some Adjustment Date,be less than the Index of the previous Adjustment Date or the Base Year Index. When the amount of the adjusted -22- i consideration is determined,and at least thirty(30)days prior to the date payment for the next year is due,Agency shall give Lessee written notice of the amount of the adjusted consideration indicating how the new figure was computed. If at any Adjustment Date the Index shall not exist in the same format as recited herein, Agency and Lessee shall agree to substitute any official index published-by the Bureau of Labor Statistics,or successor or similar governmental agency, as may then be in existence and which is most nearly equivalent to the Index. Should Agency and Lessee be unable to mutually agree as to any such substitute index prior to the date such agreement is required in order to properly and timely comply with this Section,determination of the proper substitute index shall be by arbitration conducted in accordance with the then- prevailuig commercial arbitration rules of the American Arbitration Association or its successor. The terms and provisions of Article VIE of the-Third Amended and Restated Lease("Article VIW), as attached hereto as Exhibit T_' are hereby incorporated by reference, except that the payment provisions of this Section 507 shall replace and supersede Section 8.3 of Article VM in its entirety. Article VM shall survive any termination of the Third Amended and Restated Lease. VI. [§600] TAXES,ASSESSMENTS AND OTHER CHARGES A. [§6011 Utilities Lessee agrees to pay or cause to be paid,as and when they become due and payable,all charges for water, gas, light, heat, telephone, electricity and other utility and communication services rendered or used on or about the Site and Improvements at all times during the term of this Lease. B. [§602] Imuositions(Including Taxes and Assessments) C: [§603] Payment Generally Subject to the provisions of Section 501.6 of this Lease,Lessee agrees to pay or cause to be paid, as and when they become due and payable,and before any fine,penalty,interest or cost may be added thereto, or become due or be imposed by operation of law for the nonpayment thereof, all taxes, assessments, franchises, excises, license and permit fees, and other governmental levies and charges, general and special, ordinary and extraordinary, unforeseen and foreseen,of any kind and nature whatsoever which at any time during the term of this Lease may be assessed,levied,confirmed,imposed upon,or grow or become due and payable out of or . in respect of, or become a lien on: (1)the Site and Improvements or any part thereof or any appurtenance thereto; (2)the rent and income received by Lessee from subtenants, guests or others for the use or occupation of the Site and the Improvements thereon;or(3)this transaction or any document.to which Lessee is a party, creating or transferring an interest or estate in the Site and Improvements. All such taxes, franchises, excises, license and permit fees, and other ' governmental levies and charges shall hereinafter be referred to as"Impositions",and any of the same shall hereinafter be referred to as an "Imposition". Any Imposition relating to a Ascal period of the taxing authority, a part of which period is included within the term of this Lease and a part of which is included in a period of time after the expiration of'the term of this Lease, shall (whether or not such Imposition shall be assessed, levied, confirmed, imposed.upon, -23- i become a lien upon the Site and Improvements,or shall become payable,during the term of this Lease)be adjusted between Agency and Lessee as of the expiration of the term of this Lease,so that Lessee shall pay that portion of such Imposition which that part of such fiscal period included in the period of time before the expiration of the tern of this Lease bears to such fiscal period, and Agency shall pay the remainder thereof;Lessee shall not be entitled to receive any apportionment,if Lessee shall be in default in the performance of any of Lessee's covenants and agreements as provided in this Lease. The failure of Lessee to pay an Imposition that cannot under any circumstances give rise to a lien against the Site and Improvements shall not be a breach of the first paragraph of this Section 603. Lessee hereby agrees to defend,indemnify and hold harmless Agency and City and their respective officers, employees and consultants from and against all claims, liability,loss, damage, costs,or expenses(including reasonable attorneys fees and court costs)arising from or —as a result of Lessee's failure to pay any Imposition to.the extent that such Imposition relates to a fiscal period included within the terra of this Lease.. . —_-... Nothing in this Section 603 shall alter, modify or limit in any way the rights and obligations of Lessee to contest property tax assessments as set forth and as limited in Section 501.6 of this Lease. D. [§604) PaMent oflmpositions in installments If,by law,any Imposition may at the option of the payer be paid in installments(whether or not interest shall accrue on the unpaid balance of such Imposition),Lessee may exercise the option to pay the same(and any accrued interest on the unpaid balance of such Imposition) in installments and,in such event,shall pay such installments as may become due during the term of this Lease as the same respectively become due and before any fine,penalty,further interest or cost may be added thereto;provided,however,that the amount of all installments of any such Imposition which will be the responsibility of Lessee pursuant to Section 603 herein above,and which are to become due and payable after the expiration of the term of this Lease, shall be deposited with Agency for such payment on the date which shall be one(1)year immediately prior to the date of such,expiration. E. [§605] Agency Right to Cure If Lessee, in violation of the provisions of this Lease, shall fail to pay and to discharge any Imposition,Agency may(but shall not be obligated to)pay or discharge it,and the amount paid by Agency and.the amount of all costs,expenses,interest and penalties connected therewith, including attorney fees,together with interest at the rate of three percent(3°/a)over the prime rate of the largest baiik operating in the State of California on the date payment is made by Agency, shall be deemed to be and shall be payable by Lessee as additional rent and shall be reimbursed to Agency by Lessee on demand,provided that Lessee and the holder of any Mortgage obtained in accordance with Section 901 of this Lease that has registered its name and address in writirig with Agency shall have failed to pay such Imposition within ten(10)business days after written notice from Agency to Lessee and such holder of Agency's intention to pay. -24- I I F. [§606] Re i Lessee shall furnish to Agency,within forty-five (45)days after the date when any real propeity takes, assessments or any other Imposition which could have any effect on Agency's title would become delinquent, official receipts of the appropriate taxing authority or other evidence,satisfactory to Agency evidencing payment thereof. G. [§607J Limits of Ta3 Liability The provisions of this Lease shall not be deemed to require Lessee to pay municipal, county, state or federal income or gross receipts or excess profits taxes assessed against Agency, or municipal,county,state or federal capital levy,estate,succession,inheritance,gift,or transfer taxes of Agency,or corporation franchise taxes imposed upon any corporate owner of the fee of the Site;except,however,that Lessee shall pay O.taxes assessed by any governmental authority by virtue of any operation by Lessee conducted on or out of the Site and improvements. It is agreed that in the event the State of California or any taxing authority thereunder changes or modifies the system of taxing real estate so as to tax the rental income from real estate in lieu of or in substitution(in whole or in part)for the real estate taxes and-so as to impose a liability upon Agency for the amount of such tax,then Lessee shall be liable under this Lease for the payment of the taxes so imposed during the term of this Lease,or any renewal thereof,to the same extent as though the alternative tax was a tax upon the value of the Site and Improvements. In order to determine the amount of such alternative tax for which Lessee shall be liable, the Site and Improvements shall be considered as if it was the only asset of Agency, and the rent paid hereunder shall be considered as if it were the only income ofAgency. H. [§608] Contests (a) Except as expressly permitted under Section 501.6 herein above, Lessee shall refrain from appealing,challenging or contesting in any manner the validity or amount ofany tax assessment,encumbrance or lien on the Site;provided, however,that such prohibition shall not apply to an appeal, challenge or contesting of the erroneous initial assessment for property tax purposes of the Site in the fiscal year of the completion ofthe improvements to be constructed pursuant to this Lease,and further provided that in the absence of transfer-of ownership or new construction Lessee shall not be prohibited from appealing, challenging or contesting any increases in assessment of the Site for property tax purposes over and above the current 2%per annum permitted amount. (b) Lessee agrees that any such permitted proceedings shall be begun without undue delay after any contested item is imposed and shall Ve prosecuted to final adjudication with reasonable dispatch. Lessee shall give Agency prompt notice in writing of any such contest at least ten (10)days before any delinquency occurs. Lessee may only exercise its right to contest an Imposition hereunder if the subject legal proceedings shall operate to prevent the collection of the Imposition so' contested; or the sale of the Site and Improvements, or any part thereof, to satisfy the same, and only if Lessee shall, prior to the date such Imposition is due and payable, have given such reasonable security as may be required by Agency from time to time in order to insure the payment of such Imposition to prevent any sale, foreclosure or forfeiture of the Site and Improvements or any part thereof,by reason of such nonpayment. In the event of any such -25- contest and the final determination thereof adversely to Lessee, Lessee shall,before any fine, interest, penalty or cost may be added thereto for nonpayment thereof,pay fully and discharge the amounts involved in or affected by such contest,together with any penalties,fines,interest, costs and expenses that may have accrued thereon or that may result from any such contest by Lessee and, after such payment and discharge by Lessee,Agency will promptly return to Lessee such security as Agency shall have received in connection with such contest. (c) Agency shall cooperate reasonably in any such contest permitted by this Section 608, and shall execute any documents or pleadings reasonably required for such purpose. Any such proceedings to contest the validity or amount of Imposition or to recover back any . Imposition paid by Lessee shall be prosecuted by Lessee at Lessee's sole cost and expense;and Lessee shall indemnify and save harmless Agency against any and all loss, cost or expense of any kind,including,but not limited to, reasonable attorneys' fees and expenses,which may be -imposed upon-or incurred by Agency in connection therewith. I. [§609] Notice of Possessory Interest:Payment of Taxes and Assessments on Value of Entire Property In accordance with California Revenue and Taxation-Code Section 107.6(a), Agency states that by entering into this Lease, a possessory interest subject to property taxes shall be created. Lessee or other party in whom the possessory interest is vested shall be subject to the payment of property taxes levied on such interest. Lessee acknowledges and agrees that the Site and/or the Improvements thereon,and any possessory interest therein,shall at all times after the commencement of this Lease,be subject to ad valorem taxes levied, assessed or imposed on such property, and that Lessee shall pay taxes upon the assessed value of the entire property, and not merely upon the assessed value of its leasehold interest;provided that if permitted by law,Lessee shall be required to pay ad valorem taxes only upon the assessed value of its Ieasehold interest. If for any reason the taxes levied on such property in any year during the tern of this Lease are less than the taxes which would have been levied if the entire property had been assessed and taxed in the same manner as privately owned property, Lessee shall pay such difference to Agency within thirty (30) days after"the taxes for such year become payable and in no event later than the delinquency date of such taxes established by law. J. [§610] Other Liens Lessee shall not, directly or indirectly, create or permit to be created or to rerhain, and will promptly discharge,at its expense,any mortgage, lien, encumbrance or charge on or pledge of the Site or the Improvements, or fixtures and furnishings, or any part thereof, or Lessee's interest therein, or the rent, additional rent or other stuns payable by Lessee under this Lease, other than(i)such Mortgages as are permitted pursuant to Section 901,and(H)as necessary in connection with the financing of furniture,fixtures and equipment for the Improvements. Lesseb- shall notify Agency promptly of any lien or encumbrance which has been created on or attached to the Site and Improvements,or to Lessee's leasehold estate therein,whether by act of Lessee or otherwise. The existence of any mechanic's, laborer's, materialmen's, supplier's or vendor's lien, or any right in respect thereof, shall not constitute a violation of this Section if payment is -26- not yet due upon the contract or for the goods or services in respect of which any such lien has arisen, or if such lien has been discharged by the posting of bonds or other lien-release security as is provided for such discharge by law. VII. [§7001 OWNERSHIP OF AND RESPONSIBILITY FOR IMPROVEMENTS A. 07011 Ownership During Tenn and at Termination All Improvements on the Site constructed or installed by Lessee as permitted or required by this Lease, shall,during the term of this Lease,be and remain the property of Lessee. All Improvements Iocated on the Site,whether existing thereon at the commencement of the term of this Lease, or constructed or installed thereon by Lessee as permitted or required by this Lease, shall, at the expiration or sooner termination of the term of this Lease, be and remain the propertyof Agency. Subject to Lessee's rights and obligations set forth in this Lease relating to alterations and additions, Lessee shall have no right at any time to waste,destroy,demolish or remove any of the Improvements. Lessee's rights and powers with respect to the Improvements are subject to the terms and limitations of this Lease. Agency and Lessee covenant for themselves and all persons claiming under or through them that the Improvements are 'real property. B. [§702] ' Removal of Fixtures and Furnishings at Termination At the expiration or sooner termination of tho term of this Lease, Agency may, at Agency's election, demand the removal from the Site and Improvements, at Lessee's sole cost and expense,of all fixtures and furnishings,or of certain fixtures and/or fiuishings,as specified In the notice provided for below. A demand to take effect at the normal expiration of the term shall be effected by notice given not.less than sixty(60)days prior to the expiration date. A demand to take effect on any other termination of the Lease shall be effectuated by notice given in or concurrently with notice of such termination or within ten(10)days after such termination. At the expiration or sooner tenmination of the terns of this Lease,Lessee may,at Lessee's sole cost and expense, remove from the Site and Improvements any and all fixtures and furnishings. Any fixtures and/or furnishings not removed by Lessee within thirty(30)days of the termination of the Lease shall be deemed to be abandoned by Lessee and shall, without compensation to Lessee, then become Agency's property, free and clear of all claims to or against them by Lessee or any third person, subject to security interests therein to the extent permitted by this Lease. Lessee shall defend, indemnify and hold harmless Agency against all liability and loss arising from any such claims or from Agency's exercise of the rights conferred by this Section 702. C. [§703] Maintenance and d Repair of Improvements Lessee agrees to assume full responsibility for the operation and maintenance of the Site and the Improvements and all fixtures and fumishings thereon or therein, and all sidewalks and to the extent required by the Development Agreement, landscaping within the public right of way adjacent to the Site,throughout the tern hereof without expense to Agency uriless otherwise -27- I' I I - I 1 specified herein,and to perform all repairs and replacements necessary to maintain and preserve said Site and the Improvements and fixtures and furnishings and sidewalks and landscaping in a, decent,safe and sanitary condition in a manner satisfactory to Agency and in compliance with all applicable laws. Lessee agrees that Agency shall not be required to perform any maintenance, repairs,or services or to assume any expense not specifically assumed herein in connection with the Site and the Improvements,fixtures and furnishings;and sidewalks and landscaping. The condition of the improvements required to be maintained hereunder upon completion of the work of maintenance or repair shall be equal in value,quality and use to the condition of such Improvements before the event giving rise to the work. D. [§704] Waste Lessee shall,not commit or suffer to m be comitted any waste or impairment of the Site or the Improvements,or any part thereof. Lessee agrees to keep the Site and the Improvements clean and clear of refuse and obstructions,and to lawfully dispose of all garbage,trash and rubbish. { E. [§7051 Alteration of Improvements Lessee shall not make or permit to be made any alteration of,addition to or change in the ..Improvements, other than(a)routine maintenance,repairs,interior decoration and minor interior alterations or (b)alterations, additions or changes not open to public view which cost in the aggregate less than an a mount equal to Two Hundred and Fifty Thousand Dollars (S250,000) . escalated from the date of this Lease in accordance with the applicable Consumer Price Index, nor demolish all or any part of the Improvements,without the prior written consent of Agency's Executive Director. In requesting such consent, Lessee shall submit to Agency detailed plans and specifications of the proposed work and an explanation of the need and reasons thereof. Notwithstanding the prohibition in this Section 705, Lessee may make such changes, repairs,alterations, improvements,renewals or replacements to the Improvements as are required by reason of any law,ordinance,regulation or order of a competent government authority. F. [§70b] Damage to or Destruction of Hotel and Improvements 1. [§'707] Lessee to Give Notice In case of any damage to or destruction of the hotel or the Improvements, or any part thereof, in excess of an amount equal to Two Hundred and Fifty Thousand Dollars($250,000) escalated from the date of this Lease in accordance with the applicable Consumer Price Index, Lessee shall within ten(10)days after Lessee becomes aware of such damage or destruction give . written notice thereof to Agency generally describing the nature and extent of such damage or' destruction. -28- - 2. [§708] Restoration (a) Lessee shall be responsible for the restoration of the Hotel or other improvements in accordance with the damage and destruction clauses of this Lease. (b) In case of any damage to or destruction of the Hotel or other Improvements, or any part thereof, Lessee shall commence the restoration, replacement or rebuilding of the Improvements with such alterations and additions as may be approved by the Agency (such restoration, replacement, rebuilding alterations and additions, together with any temporary repairs and property protection pending completion of the work being herein called "Restoration')within thirty(30)days of such damage or destruction,plus any additional period reasonably required to obtain any Net Insurance Proceeds to be used to pay all or a portion of the cost of such Restoration,and shall complete such Restoration within a reasonable period of time thereafter. - - -- -- - (c) As used herein; the term "Net Insurance Proceeds" means the grass insurance proceeds paid by an insurer to Lessee for lass or damage to the Improvements on the Site and Improvements, less any and all costs and expenses (including, but not limited to reasonable attorneys' fees) incurred to recover said proceeds. Lessee agrees to promptly cotrunence and prosecute to completion the settlement of insurance proceeds with respect to any event of damage or destruction of the Improvements on the Site. (d) Lessee agrees that,notwithstanding any other provision of this Lease, upon any event of damage or destruction to the Improvements, Lessee shall at its sole cost'and expense (whether or not Lessee terminates or intends to terminate this Lease pursuant to Section 710 below)immediately take or cause to be taken such actions and under and complete such work as is necessary to assure the safe condition of the damaged Improvements pending the ultimate disposition of the Improvements. In any instance where Lessee may elect to terminate this Lease -rather than restore the improvements pursuant to Section 710 below,if Lessee does not terminate this Lease,Lessee shall restore the Improvements. 3. [§709] Application of Insurance Proceeds Insurance proceeds carved under Article X which are received on account of any damage to or destruction of the Site or the Improvements thereon, or any portion thereof,(Tess the costs, fees and expenses incurred in the collection thereof,.including without limitation attorney's fees and expenses)and if Lessee shall not make the election permitted in Section 710 below,shall be - applied as follows: (1) Within a reasonable time and in any event within 180 days after the damage to or destruction of the Hotel or other Improvements,Lessee shall furnish,or cause to be furnished to Agency and-any Mortgagee evidence satisfactory to Agency and the Mortgagee(a) - of the total cost of Restoration of the damaged or destroyed Improvements pursuant to Section 708 and.(b)that the total amount of money available will,when added to the insurance proceeds received and available to pay for the Restoration pursuant to the terms of this Section 709,be sufficient to pay the cost of such Restoration. _29_ (2) Net insurance proceeds received on account of any damage 'to or destruction of the Improvements, or any part thereof, shall be paid to Lessee or as Lessee may direct(except that,during the term of any Mortgage,such net insurance proceeds shall be paid to the Mortgagee which holds the highest priority Mortgage,if required by such Mortgagee)from time to time as Restoration progresses, solely to pay (or reimburse Lessee for) the cost of, Restoration. Upon receipt by Agency and any Mortgagee of evidence that Restoration has been completed and the cost thereof paid in full or has been adequately provided for,and that there are no mechanic's or similar liens for labor or materials supplied in connection therewith which have not been adequately provided for,the balance,if any,of such proceeds shall be paid to Lessee. (3) Any insurance proceeds held by the recipient on any termination of this Lease and not required to be paid to Agency pursuant to the provisions of this Lease shall be paid first to the expenses of clearing the Site of any rubble,and next to the Mortgagee as its interests may appear,and next to Lessee. G. [§710] Damage or Destruction During Final Years of Term Notwithstanding Sections 708 and 709 to the contrary,in the event of major damage or destruction to the Improvements on the Site during the last ten years of the term of this Lease, Agency shall not unreasonably withhold its approval if Lessee requests that this Lease be terminated on thirty(30)days' notice, provided Lessee first complies with all of the following conditions: 1. Lessee shall give Agency notice of the damage or destruction within ten (10)days after the event causing such damage and destruction. 2. Lessee shall give Agency notice requesting that this Lease be terminated as a result of such damage or destruction within forty-five(45)days after settlement of insurance proceeds, but in any event within one hundred eighty(180)days after the event causing such damage or destruction. 3. Lessee shall pay to Agency all applicable rents to the date of such termination. 4. Lessee shall clear and remove all debris from the Site,restore the Site to a safe and neat condition,deliver possession of the Site to Agency,and shall quitclaim all right,title and interest in the Site to Agency. 5. Lessee shall transfer to Agency all insurance proceeds resulting from the casualty to be retained by Agency without limitation as to use. Major damage or destruction to the Improvements as used in this Section means such damage or destruction that the cost of restoration will exceed fifty percent (50%)of the cost to- replace the Improvements on the Site in their entirety. • -30- 7111 Faithful Performance and Labor and Material (Pavment) Bonds. Indemnification:NonresponsibilityNolices (a) Lessee agrees to hold harmless Agency and City, and to indemnify Agency and City against all claims,liabilities,costs and expenses,for labor arid materials in connection with all construction,repairs or alterations on the Site and Improvements and the Improvements,and the cost of defending against such claims,including reasonable attorney's fees. (b) - Lessee agrees to procure, or cause the procurement of, contractor's bonds ' covering labor, materials and faithful performance for construction on the Site and Improvements and the Improvements in accordance with the following requirements: 1. As to the initial construction of the Improvements required by the Agreement and this Lease,such bonds shall be in an amount equal to one hundred percent (100%) of the total sum of the construction prices to be paid to each sub-contractor whose sub-contract has a contract price in excess of$100,000, and shall be accompanied by the corporate guarantee of the general contractor in an amount 'equal to one hundred percent (I COOK)of the sum of the construction price in the contract entered into by Lessee and its general contractor. 2.- As to subsequent work involving repair or alteration of the Improvements in an aggregate amount exceeding $250,000 plus escalations to such amount after the date of this Lease in accordance with the applicable Consumer Price Index, such bonds shall be in the amount equal to one hundred percent (100%).of the construction price in the contract entered into by Lessee and its general contractor. Subsequent work in an aggregate amount of$250,000(plus escalations to such amount after the date of this Lease in accordance with the applicable Consumer Price Index)or less shall not be subject to bonding requirements. Said bonds and the construction contract must first be approved in writing as to content and form by Agency. Lessee shall,prior to commencement of construction,deliver tb Agency a certificate or certificates from the bonding company or compaiues issuing the aforesaid bonds, naming Agency and City as additional insureds under said bonds. (c) The provisions of paragraphs (a) and (b) of this Section shall be applicable to construction, repairs or alterations to the Site and Improvements and the Improvements at all -times during the Lease Term. I (d) Agency shall have the right to post and maintain on the Site and the Improvements any notices of non-responsibility provided for under applicable law. I I -31- i a VIII. [§800} ASSIGNMENT,SUBLETTING,TRANSFER A. [§801) Warrant Against Speculation (a) Lessee hereby represents and warrants that this Lease, the construction of the buildings, and its other undertakings pursuant hereto, are, and will be used for the purpose of redevelopment of the Site and not for speculation in land holding. Lessee further recognizes that: 1. The importance of the redevelopment of the Site to the general welfare of the community;and 2. The substantial financing and other public aids that have been made available by law and by the Agency for the purpose of making such redevelopment possible;and 3. The fact that a change in ownership or control of Lessee or of a part thereof,or any other act or transaction involving or resulting in a change in ownership or with respect to the identity of the parties in control of Lessee or the degrees thereof, is for practical purposes a transfer or disposition of the Site and Improvements;and 4. The Site is not to be acquired or used for speculation, but only for development by Lessee in accordance with this Lease. (b) The qualifications and Identity of Lessee, and its principals, are of particular concern to the community and Agency. Lessee further recognizes that it is because of such qualifications and identity that Agency is entering into this Lease with Lessee. B. [§802] Prohibition Against Transfer (a) Lessee shall comply with Section 316 of the Agreement until the recordation of a Release of Construction Covenants pursuant-to Section 804 of this Lease. Upon the recordation of a Release of Construction Covenants,the provisions of Section 316 of the Agreement shall no longer apply to Lessee or this Lease and.the provisions of Sections 800 to 803,inclusive, shall become effective. (b) Lessee shall not, except as permitted by this Lease, make any .Transfer, hereinafter defined,to any person or entity(a"Transferee!),without the prior written consent of the Agency and any permitted Mortgagee. Any purported Transfer not permitted by this Article VIII or Article IX shall be ipso facto null and Void,and no voluntary or involuntary successor to any interest of Lessee under such a Transfer shall acquire any rights pursuant to this Lease. These restrictions shall be binding on any successors,heirs or permitted Transferee of Lessee. "Transfer,"as used herein,shall mean any assignment or attempt to assign this Lease or any tight herein, any total or partial transfer, sale, assignment, lease, sublease, license, franchise, gift, hypothecation, mortgage, pledge, encumbrance or the like, excluding, however, each of the following: (a)the foreclosure of a permitted Mortgage or the acceptance of a deed in lieu of foreclosure by a permitted Mortgagee; (b)the subsequent Transfer by a permitted Mortgagee of . . j -32- I I i an interest acquired pursuant to(a);(c)the acquisition at a foreclosure sale in connection with a permitted Mortgage by any third party, and (d)the execution of a hotel franchise and/or management agreement first approved in writing by Agency pursuant to Sections 502 or 503 of this Lease. Persons or entities who are permitted Transferees under the immediately preceding sub-paragraphs (a) through (c),.inclusive, shall enjoy the rights of a'Transferee only on the condition that,except for approved hotel franchisers and approved hotel management companies, they accept and agree in writing approved by the Agency to be bound by all of the provisions of this Lease,including but not limited to all obligations of Lessee hereunder. (c) This prohibition shall not be deemed to prevent (i)the granting of easements or permits for the development of the Site as reasonably approved by Agency, (ii)the renting or subleasing or licensing of space for occupancy consistent with the customary uses and practices of a hotel'and related facilities,(III)granting any security interests expressly permitted under this Lease in accordance with the provisions of this Lease,or(iv)the assignment of this Lease tb any affiliate of Lessee or joint venture,provided Lessee submits evidence satisfactory to Agency that the principals who own and control Lessee will maintain•a majority controlling interest after consummation of such transaction and will have the ability to maintain a majority controlling interest throughout the term of this Lease. (d) Lessee may Transfer the whole or any part of the Site and Improvements after recordation of a Release of Construction Covenants pursuant to Section 804 with the prior written consent bf the Agency subject to the rights of any Mortgagee under Article IX of this Lease,which consent shall not be unreasonably withheld in the event that all conditions of this Section 802 are met, and provided that Lessee is not in default hereunder. Lessee shall only Transfer the Site and Improvements and Lessee's rights therein as a whole and is not permitted to subdivide the Site and Improvements and its rights for the duration of the Lease without the prior written approval of the Agency. (e) Such approval shall be given by Agency if- (1) At the time of such assignment,this Lease shall be in fall force and effect and either no default then exists or no default will exist upon consummation,of the Transfer; (2) Agency determines in its sole discretion that the following Transfer requirements are met: (i)such assignment is made to a responsible third party who will undertake Lessee's responsibilities under this Lease to use and develop the Site in accordance with this Lease; (ii)if the assignment occurs prior to the Issuance of a Release of Construction Covenants pursuant to Section .804 of the Lease that such third party shall demonstrate qualifications and experience with respect to the type of development proposed herein and in the Agreement to assure the development and operation of the Improvements equal to or greater than the quaiif cations and experience of Lessee;and(III)such third party shall demonstrate sufficient financial resources or commitments to assure operation (and, if the assignment occurs prior to.. the issuance of a Release of Construction Covenants pursuant to Section 804 of the Lease, development)of the Site in accordance with this Lease; -33- (3) The Transferee shall have executed an express assumption, in form and substance first approved in writing by Agency,of the obligations and liabilities of Lessee under, this Lease arising on and after the effective date of the Transfer, (4) The Transferee shall have a Net Worth equal to-at least Fifty Million Dollars($50,000,000),subject to increase on the fifth(5th)anniversary of the Effective Date of Lease and every five(5)years thereafter in accordance with the escalation of the Consumer Price Index during each such five(5)year period,or,for any Transfer proposed after the issuance by Agency of a Release of Construction Covenants for the Site, such other evidence as may-be reasonably satisfactory to Agency documenting the financial wherewithal of the-Transferee to ,successfully operate the Improvements and the Site;and. (5) The Transferee shall have experience in the operation and management of a hotel of the type and character located on the Site and improvements, or shall agree and covenant- as an additional obligation under this Lease to at all times cause the Hotel to be operated and managed by a person, first approved in writing by Agency's Executive Director, who has substantial experience in managing and operating a hotel of similar type and character, (f) No voluntary or involuntary successor in interest of Lessee shall acquire any rights or powers under this Lease except as expressly permitted under this Lease. This Lease may not be assigned,nor may a transfer of interest take place without the express,prior written consent of Agency and, to the extent required by the applicable loan documents,the holder of any Mortgage obtained in accordance with Section 901 of this Lease. (g) During the existence of this Lease,Lessee shall promptly notify Agency of any and all changes whatsoever is the identity of the parties in control of Lessee,or a change in the degree thereof,of which it or any of its officers have been notified or otherwise have knowledge or information. (h) In the absence of specific express written provision to the contrary by Agency,a Transfer of the Site and Improvements,or portion thereof,or approval thereof by Agency,shall be deemed to relieve the Lessee or any other party from any obligations under this Lease arising on or after the effective date of the Transfer, provided, however, that a Mortgagee sball be deemed to be released from and after the date of a Transfer from such Mortgagee. (i) Lessee shall only Transfer the Site and Improvements and Lessee's rights therein as a whole and is not permitted to subdivide the Site and Improvements and its rights for the duration of the Lease without the prior written approval of Agency. (j) No provision hereof authorizing encumbrance of Lessee's interest herein shall be construed to authorize encumbrance of Agency's fee title to the Site or Agency's interest under . this Lease, and Lessee shall not by any act or deed cloud Agency's fee title or Agency's interest- under this Lease. Notwithstanding any other provision of this Lease to the contrary, Agency approval of a Transfer of this Lease or of any interest herein shall not be required in connection with any of the following; -34- (i} Any Transfer to any entity or entities in which either Lessee or Robert L. Mayer and Stephen K. Bone retain a minimum of fifty-one percent (510/*) of the ownership or beneficial interest and retain management control. (ii) Transfers resulting from the death or mental or physical incapacity of an individual. (iii) Transfers or assignments in trust for the benefits of spouse, children,grandchildren,or other family members. (iv) The conveyance or dedication of any portion of Lessee's interest in the Site to the City or other appropriate governmental agency,or the granting of easements or permits in accordance with the Lease where required to facilitate the development or operation of the Site or the development or operation of any of the other portions of the"Site"as defined in the Agreement. (v) The leasing of any part or parts of a building or structure:for occupancy, or entering into of any concession agreements, licenses, or other contracts in the normal course bf owning and operating the Improvements on the Site, provided that all applicable requirements of this Lease have been met. (vi) A Transfer of stock in a publicly held corporation or the transfer of the beneficial interest in any publicly held partnership or real estate investment rust. C. [§803] Investigation of Pro-posed Transferee,Costs (a) In the event that Lessee requests Agency's written consent to a proposed Transfer pursuant to Article VIH or Article-IX of this Lease,Lessee agrees to provide Agency with such information, including financial statements as Agency may reasonably require in order to evaluate the solvency, financial responsibility and relevant business acumen and experience of any proposed Transferee. Such information shall include,without limitation,a balance sheet of the proposed Transferee as of a date within ninety(90)days of the request for Agency's consent and statements of income or profit and loss of the proposed subtenant or assignee for the two- year period preceding the request for Agency's consent, if the same be available(or such other' similar information as shall be available at the time the request for approval of the Transfer is made), and a written statement in reasonable detail as to the business. and experience of the proposed Transferee during the five(5)years•preceding the request for Agency's consent. . . Within thirty (30) days after the receipt of Lessee's written notice requesting Agency approval of an Transfer,Agency shall respond in writing by stating what fiuther information,if any, Agency reasonably requires.in order to determine whether or not to approve the.requested Transfer. Upon receipt Of Such a timely response,Lessee shall promptly furnish to Agency such - further information as may be reasonably requested. Lessee's request for approval of a Transfer and delivery of necessary information for financing purposes shall be deemed complete twenty (20) days after Agency's receipt thereof and Lessee's request for approval of a Transfer and delivery of necessary information for all other types of Transfer shall be deemed complete thirty(30)days after Agency's receipt thereof • -35- if Agency does not deny approval or if no timely response requesting further information regarding the proposed assignee is delivered to Lessee,or,if such a timely response requesting further information is received,on the date which is fifteen(15)days after the date that Lessee delivers such additional information to Agency. None of the foregoing shall restrict Agency's rights to deny approval of any Transfer not found acceptable by Agency pursuant to this Lease. Any Transfer requiring Agency's consent shall only be effective upon Agency's written consent to such Transfer. Agency shall approve or disapprove any requested Transfer for financing purposes requiring Agency approval within thirty(30)days after Lessee's request therefor is accepted as complete or is deemed complete, and Agency shall approve or disapprove any other type of requested Transfer requiring Agency approval within forty-five(45) days after Lessee's request therefor is accepted as complete or is deemed complete. Any disapproval shall be in writing an shall ipecify thb reasons for the-disapproval and,-if applicable, the conditions required to be satisfied by Lessee in order to obtain approval. If Lessee's initial notice requesting approval of ' an Transfer for financing purposes (but not any other type of Transfer) states that the Transfer will be deemed approved unless rejected within the time required in this Lease,Agency's failure to timely disapprove the Transfer shall be conclusively deemed to constitute an approval. (b) If Agency consents to any Transfer pursuant to Article VM or Article IX,such consent shall not be effective unless and until Lessee gives Agency notice of the Transfer and a copy of any documents effecting and/or evidencing such Transfer,and unless and until any such 'Transferee(other than a sublessee)assumes all of the obligations and liabilities of Lessee under this Lease. (c) Bankruptcy. It is acknowledged and•agreed that this Lease is a lease of real property within the meaning of Subsection 365(b)(3)of the Bankruptcy Code, 11,U.S.C.To the extent not prohibited by provisions of the Bankruptcy Code, I i U.S.C. Section 101 et seq., including Section 365(f)(1) thereof, Lessee on behalf of itself; creditors, administrators and assigns waives the applicability of Sections 541 (c)and 365(e)of the Bankruptcy Code of 1978 unless the proposed assignee of the Trustee for the estate of the bankrupt meets Agency's standards for consent. Agency has entered into this Lease with Lessee in order tb obtain for the Benefit of the Site the unique types.of facilities, usinesses,services and goods which Lessee can bring to the Site; the foregoing prohibition on Transfer or subletting is expressly agreed to by Lessee in consideration of such fact. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deem to have assumed all of the obligations arising under.this Lease on and after the date of such Transfcr. Any such assignee shall upon demand execute and deliver to Agency an instrument confirming such assumption. (d) Agency's Fee: Lessee agrees to reimburse Agency for Agency's reasonable costs and attorneys' fees incurred in connection with the processing and documentation of any..' requested Transfer, subletting, transfer, change of ownership or hypothecation of this Lease 6r Lessee's interest in and at the Site, or any party thereof, which required Agency's approval hereunder,in an amount not to exceed Two Thousand Five Hundred Dollars($2,500.00)for each such Transfer(which amount shall be adjusted each year by the Consumer Price Index). -36- (e) hLQ Waiver. The acceptance by Agency of any payment due hereunder from any other person shall not be deemed to be-a waiver by Agency of any provision of this Lease or to be a consent to any,Transfer or subletting. Consent by Agency to one or more Transfers of this Lease or to one or more sublets of the Site shall not operate as a waiver or estoppel to the future enforcement by Agency of its rights pursuant to the provisions of this Lease. D. [§8041 Release of Construction Covenants (a) Within thirty(30)days after completion of all construction and development to be completed by Lessee upon the Site under the Agreement and this Lease, Agency shall furnish Lessee with a Release of Construction Covenants,in such form as to permit it to be recorded in the Office of the County Recorder of Orange County, upon written request therefor by Lessee. Agency shall not unreasonably withhold such Release of Construction Covenants. Such Release of Construction Covenants shall constitute evidence of satisfactory completion of the construction-required -under the Agreement,.this.Lease,_.and. the .Release_of-Construction Covenants shall so state. (b) If Agency refuses or fails to furnish a Release of Construction Covenants for the Site after written request.from Lessee, Agency shall, within; thirty (30) calendar days of the written request,provide Lessee with a'written statement of the reasons Agency refused.or failed to furnish the Release of Construction Covenants for the Site. The statement shall also contain Agency's opinion of the action Lessee must take to obtain a'Release of Construction Covenants for the Site,but it need not contain technical information-or instructions. If the reason for such refusal,is confined to the immediate availability of specific items of landscaping or other minor items or the failure to complete "punch list" items, Agency shall issue the Release of Construbtion Covenants upon the posting of a bond or other security instrument in form and content acceptable to Agency and in an amount representing the fair value of the work not yet completed,which bond or other security instrument shall secure Lessee's obligation to complete all outstanding items of construction and development within sixty (60) days following the issuance of the Release of Construction Covenants, (c) Such Release of Construction' Covenants shall not constitute evidence of compliance with or satisfaction of any obligation of Lessee to any holder of a mortgage,or any insurer of a mortgage securing money loaned to finance the improvements on the Site or any part ' thereof- Such Release of Construction Covenants is not notice of completion as referred to in Section 3093 of the California Civil Code. IX. [§9001 MORTGAGES A [§.901) Leasehold Mortgages (a) From time to time during the tern of this Lease, Lessee shall have the right to mortgage, pledge, deed in trust, assign rents, issues and profits (for purposes of security if required by any lender), enter into capitalized leases or other financing mechanisms in connection with the acquisition of furniture, fixtures and equipment for the Hotel,or otherwise encumber the interest of Lessee cinder this Lease,in whole or in part,and any interests or rights appurtenant to this Lease,and to assign or pledge the same as security for any debt(the holder of -37- . I 1 11 any such mortgage,pledge or other encumbrance,and the beneficiary'of any such deed of trust being hereafter referred to as "Mortgagee" and the mortgage,-pledge, deed of trust or other instrument hereafter referred to as"Mortgage"),upon and subject to'each and all of the following terms and conditions. 1. Lessee shall not make or enter into an agreement to make any Mortgage without the prior written approval of Agency. Upon Lessee's request for approval of a proposed Mortgage and Lessee's submission to Agency of such information concerning the proposed Mortgage as Agency may reasonably request,Agency shall not unreasonably delay its approval or disapproval of the proposed Mortgage and,in any event, shall approve or disapprove the . proposed Mortgage within thirty (30) days. The Agency's Executive Director shall be authorized to approve minor changes to this Lease as reasonably requested by a proposed Mortgagee. 2. The Mortgage shall cover no interest in any real property other than Lessee's in in the Site,the Hotel and other Improvements or sorne portion thereof,and the leasehold estate of Lessee under this Lease. The Mortgage shall state on its face that it does not encumber in any way Agency's fee interest in the Site and Agency's interest under this Lease. 3. Prior to the issuance of the Release of Construction Covenants,Mortgages may be made only for the purposes of financing necessary and appropriate to pay Project Costs. "Project Costs"as used herein means the following actual costs and expenses of the development work to be performed by or on behalf of Lessee for or in connection with the development of the Hotel and other Improvements required under this Lease, to the extent that such costs and expenses are incurred and paid for by Lessee and/or a Mortgagee in connection with the initial -construction: a. Land development work. b. Construction of the Improvements and installation of the required fixtures,furniture,machinery and equipment. C. Building pemuts and entitlement fees not paid for or'reimbursed by Agency. d. Premiums for fire,public liability and property damage insurance during construction and on bonds securing work against liens for labor and materials. e. Real estate taxes and assessments upon the Site and Improvements j or the Improvements during the period of construction. j f. Interest on construction loans prior to the opening of the Hotel. g. Fees for architects,engineers,accountants and attorneys, j b.' Purchasing fees paid to third parties not affiliated with Lessee in j connection with the purchase of furniture,fixtures and equipment. I -38- I i i i. Development fees paid to government agencies. j- Charges-and premiums for searching and insuring title. k. Out-of-pocket costs incurred by Lessee iit connection with construction financing, including, without limitation, commitment fees, mortgage broker fees, standby fees and fees of alike nature,printing and duplicating expenses, documentary transfer tax stamps,mortgage taxes,recording charges. 1. Customary and reasonable pre-opening expenses for the Hotel. m. Costs of required studies,reports and inspections. n. Fee for management and construction services.comparable to the amount included in project pro forma previously provided Agency by Lessee, o. Expenditures by Lessee required to satisfy any other obligation of Lessee under the Agreement. 4. The amount of any loan secured by a Mortgage prior to the issuance of a Release of Construction Covenants shall not exceed Project Costs. 5. Lessee may refinance the property after the issuance of a Release of Construction Covenants by Agency, provided that Lessee submits evidence satisfactory to the Agency demonstrating that the loan as refinanced is fully subordinate to the Agency's fee title and all of the Agency's rights under this Lease and obtains the prior written consent of Agency to the refinancing, which consent shall be granted provided that the Mortgage is given to a responsible bona fide institutional lender. 6. Any Mortgage is to be given only to a responsible bona fide institutional lender. For the purposes hereof the term"institutional lender"shall mean any bank,savings and loan association, thrift and loan association,savings bank,pension fund,insurance company,real estate investment gust or any other comparable or similar.entity authorized to make loans in the State of California. 7. All rights acquired by said Mortgagee under said Mortgage shall be subject to each and all of the covenants,conditions and restrictions set forth in this Lease,and to all rights of Ageircy thereunder,none of which covenants,conditions'and restrictions is or shall be waived by Agency by reason of the giving of such Mortgage,except as expressly provided in this Section 900. Notwithstanding any foreclosure of any such Mortgage,Lessee shall remain liable for the payment of the accrued but unpaid rent reserved in this Lease while Lessee remains in possession of the Site and Improvements. 8. Promptly upon the recording of a Mortgage, Lessee shall, at its own expense, cause to be recorded in the Official Records of Orange County a written request executed and acknowledged by Agency for a copy of all notices of default and all notices of sale under the Mortgage as provided by applicable law. Inclusion of a request for notice having the -39- effect described above in the body of the recorded Mortgage shall constitute compliance with this provision, (b) If Lessee encumbers its leasehold estate by way of a Mortgage in accordance with this Section 900,and if such Mortgagee has registered its name and address in writing with the Agency,then this Lease shall not be terminated or canceled on account of any default by Lessee in the performance of the terms, covenants or conditions hereof until Agency shall have complied with the provisions of Sections 902 through 905 as to the Mortgagee's rights to cure and to obtain a new lease. B. (§9021 Rights and Obligations of Leasehold Mortgagees If Lessee,or Lessee's successors or assigns,shall mortgage the leasehold interest herein demised, then, as long as any such Mortgage shall remain unsatisfied of record, the following provisions shall apply: 1. If the holder of any Mortgage on the leasehold interest herein demised shall register with Agency its name and address in writing, no notice of default by Agency to Lessee shall be deemed to have been duly given unless and until a copy thereof has been mailed to the Mortgagee by registered or certified mail at the address registered with Agency. 2. In the event Lessee shall be in default hereunder, the Mortgagee shall, at .any time prior to the termination of this Lease(which termination can occur only after notice to Mortgagee and-an opportunity to cure in accordance with this Article M and without payment of any penalty, have the right, but not the obligation, to pay all of the rents due hereunder, to effect any insurance, to pay any taxes and assessments(subject to Agency's right to cure under Section 605 of this Lease),.to make any repairs.and improvements,to do any other act or thing .,required or permitted of Lessee hereunder, and to do any other thing which may be necessary and proper to be done in the performance and observation of the agreements, ,covenants and conditions hereof to prevent termination of this Lease. All payments so made and all things so 'done and performed by such Mortgagee shall be accepted by Agency and shall be effective to, prevent a termination of this Lease as the same would have been if made,done and performed by Lessee instead of such Mortgagee. Lessee hereby constitutes and appoints the Mortgagee as Lessee's agent and attorney in fact with full power coupled with an interest,in Lessee's name; place and stead,and at Lessee's cost and expense,to enter upon the Site and Improvements and the Improvements, and perform all acts required to be performed herein. No Mortgagee shall have the right to take or perform any action hereunder,under its leasehold Mortgage or otherwise which might result in any detriment to the rights of a prior leasehold Mortgagee with respect to the same lease or leasehold Site. 3. While any such Mortgage remains unsatisfied of record, and an event or events shall occur which shall entitle Agency to terminate this Lease,Agency shall forbear from terminating this Lease if and to the extent that such forbearance is required under Section 905 of this Lease. 4. If the holder of a Mortgage obtained in accordance with Section 901 of this Lease acquires the leasehold estate created hereunder or otherwise acquires possession of the 40- Site and Improvements pursuant to available legal remedies,Agency will Iook to such holder to perform the obligations of Lessee only from and after the date of foreclosure or possession and will not hold such holder responsible for the past actions or inactions of the prior Lessee. Notwithstanding the foregoing,(A)on and after the date of such foreclosure or possession,such holder shall be required to perform and abide by each and all of the obligations of Lessee under this Lease and(B)on and'after the date of such foreclosure or possession,Agency shall have the right to enforce each and all of the provisions of this Lease against such holder. 5. The foreclosure of a Mortgage obtained in accordance with Section 901 of this Lease,or any sale thereunder;whether by judicial proceedings or by virtue of any power of sale contained in such Mortgage, or any conveyance of the leasehold estate created hereby from Lessee to the holder of any such Mortgage through,or in lieu of,foreclosure or other appropriate proceedings in the nature thereof shall not require the consent or approval of Agency or constitute a default under this Lease, and upon such foreclosure, sale or conveyance Agency shall recognize the Mortgagee, or any other foreclosure sale.purchaser, as the new Lessee hereunder. In the event that such Mortgagee becomes the Lessee hereunder, or in the event that the leasehold estate created hereunder is purchased by any other party at a foreclosure sale or by any other lawful means, such Mortgagee, or such other foreclosure sale purchaser, shall be responsible for the performance of the obligations of Lessee under this Lease only for the period of time that the Mortgagee or such other foreclosure sale purchaser remains Lessee hereunder,- and such Mortgagee or foreclosure sale purchaser shall thereafter have the right to assign this Lease without need to obtain the approval of Agency. Notwithstanding anything to the contrary herein: (A)as a precondition to any.Mortgagee, foreclosure sale purchaser or other person obtaining the rights of Lessee hereunder,such person shall first be required to expressly assume each and all of the obligations of Lessee under this Lease pursuant to a written document in form and substance.satisfactory to Agency;(B)such new Lessee shall have no right to construct any Improvements on the Site unless and until such new Lessee has submitted evidence satisfactory to Agency that such new Lessee has the financial capability and overall competence to perform the obligations of Lessee hereunder,provided that this clause(B)shall not require submission of such evidence if such new Lessee is the holder of a Mortgage obtained in accordance with Section 901 of this Lease but shall require submission of such evidence if such new Lessee is the successor of such a holder, and(C)Agency shall have the right of prior written approval over any prospective operator or manager(including.but not limited to such new Lessee)of the Hotel uses on the Site and Improvements in accordance with Section 502 of this Lease. 5. In the event that the holder of any Mortgage obtained in accordance with Section 901 of this Lease remedies or causes to be remedied, within the times specified in Section 905 of this Lease, all monetary defaults of Lessee and all nonmonetary defaults of Lessee which by their nature are capable of being remedied by such Mortgagee,such Mortgagee shall have the right within thirty(30) days after all such defaults are remedied to request that Agency promptly execute and deliver to such Mortgagee, a new lease of the Site(naming such Mortgagee as Lessee) for the remainder of the term of this Lease with the same agreements,,, covenants and conditions (except for any requirements which have been fulfilled prior to execution of the Lease)as are contained•herein and with priority equal to that hereo4 along with a Quitclaim Deed first approved in writing by the Agency as to form and substance;provided, however,that if more than one Mortgagee requests such a new lease,the Mortgagee holding the most senior Mortgage shall prevail; and provided,further,that Agency shall not be required to -41- execute such new lease earlier than concurrently with the execution of such new lease by such Mortgagee. Agency shall prepare such-new lease at the expense of such Mortgagee,and all costs incurred by Agency in preparing such new lease (including attorneys' fees) shall be paid to Agency by such Mortgagee prior to the execution by Agency of such new lease. The execution of a new lease by Agency pursuant to this paragraph 6 shall automatically and immediately terminate this Lease. Although not necessary to effect the termination of this Lease,the former Lessee shall, upon Agency's execution of such new lease, execute any documents and perform any acts which may be reasonably necessary to evidence the termination of this Lease. Upon Agency's execution and delivery of such new lease,Agency, at the expense of the new Lessee, shall take such action as shall be necessary to remove the former Lessee from the Site and Improvements. Notwithstanding any provision herein, Agency shall not be required to forbear from terminating this Lease except to the extent required by Section 905 hereof and Agency shall not be required to execute a new lease after the termination of this.Lease in accordance with the provisions hereof. '` — 7. Anything herein contained to the contrary notwithstanding,the provisions of this Section 902 shall inure only to the benefit of the holders of Mortgages and,with respect to paragraph 5.only,other persons that acquire the leasehold interest created hereunder pursuant to a foreclosure,sale or conveyance of the type described in paragraph 5. C. [§903] Agency's Forbearance and Right to Cure Defaults on Leasehold D. [§904] Notice In the event that Lessee's interest under this Lease is subject to any Mortgage,Agency will simultaneously give to Mortgagee at such address ss is specified by the Mortgagee in accordance with Section 902 hereof, a copy of each notice of default from Agency to Lessee hereunder at the time of giving such notice or communication to Lessee. Agency will not exercise any right, power or remedy with respect to any default hereunder, and no notice to Lessee of any such default and no termination of this Lease in connection therewith shall be effective,unless Agency has given•to Mortgagee written notice or a copy of its notice to Lessee of such default or any such termination,as the case may be. E. [§905] _Forbezranceby Apten_cy During the continuance of any Mortgage obtained in accordance with Section 901 of this Lease and until such time as the lien of such Mortgage has been extinguished: (A) Agency shall not agree to any mutual termination nor accept any surrender of this Lease, nor shall Agency consent to any amendment or modification of this Lease, without the prior written consent of the Mortgagee. (B) Notwithstanding any default by Lessee in the performance or observance of any agreement, covenant or condition of this Lease on the part of Lessee to be perfarined or observed,Agency shall have no right to terminate this Lease unless an event of default shall have occurred and be continuing, Agency shall have given such Mortgagee written notice of such -42- i I i event of default, and such Mortgagee shall have failed to remedy such default, or caused such default to be deemed remedied,within the times specified in(i)and(ii)below. (i) Should any event of default under this Lease occur, any Mortgagee shall have ninety(90)days after receipt of written notice from Agency setting forth the nature of such event of default,and,if the default is such that possession of the Site is reasonably necessary to remedy the default,a reasonable time after-the expiration of such ninety(90)day period,within which to remedy such default;provided,however that Agency shall not be required to forbear beyond such-initial ninety'(90) day period unless(a)the Mortgagee shall have fully cured any default in the payment of any monetary obligations ofLessee under this Lease within such ninety (90) day period and shall continue to pay currently such monetary obligations as and when the same are due, and (b) such Mortgagee shall have acquired Lessee's leasehold estate created hereby or commenced foreclosure or other appropriate proceedings in the nature thereof within such ninety (90) day period, or prior thereto, and shall be-diligently prosecuting any such proceeding. Agency agrees that all payments so made and all things so done and performed by such Mortgagee shall.be accepted by Agency and shall be effective to prevent a termination of this Lease as the same would have been if made,done and performed by Lessee instead of such Mortgagee. (ii)- Any event of default under this Lease which in the nature thereof cannot be remedied by a Mortgagee shall be deemed to be remedied if the Mortgagee does all of the following: (a) within ninety (90) days after receiving written notice from Agency setting forth the nature of an event of default, or prior thereto, the Mortgagee shall have acquired Lessee's leasehold estate created hereby or shall have commenced foreclosure or other appropriate proceedings, (b) Mortgagee shall diligently prosecute any such proceedings to completion, (c) within the ninety(90)day period referred to in(a)above,Mortgagee shall have fully cured any default in the payment of all monetary obligations of Lessee hereunder and any non-monetary obligations which do not require possession of the Site and Improvements, and(d)after gaining possession of the Site,Mortgagee shall perform and abide by each and all of the obligations•of i Lessee under this Lease as and when the same are due;provided,however,that Mortgagee shall not be required to cure any default which occurs prior to the date on which Mortgagee obtains possession of the Site and which by its nature cannot be cured by such Mortgagee. (C) In the event that Mortgagee is prohibited by any process or injunction issued by any court of competent Jurisdiction or byreason of any action by any court having jurisdiction of any.bankruptcy or insolvency proceeding involving Lessee from commencing or prosecuting .foreclosure or other appropriate proceedings in the nature thereof, the times specified in paragraph (B) of this Section 905 for commencing and prosecuting such foreclosure or other proceedings shall be extended for the period of such prohibition. Notwithstanding anything to j the contrary herein,Agency shall in no event be required to forbear hereunder unless Mortgagee shall within ninety (90) days after the giving of notice by Agency pay all moneys due and in respect of which there exists a monetary event of default. [§905.1] Conditions Precedent to Mortgggee_Rights and Agency Forbearance Agency shall not be required to comply with Sections 902 through'905 of this Lease with respect to any Mortgage,unless and until a true copy of the original thereof bearing the date and -43- 0 book and page of recordation thereof,and a certified copy of the original note secured by such Mortgage has been delivered to Agency together with written notice of the address of the Mortgagee-to which notices may be sent;and in the event of an assignment of such Mortgage, such assignment shall not be binding upon Agency unless and until a certified copy thereof bearing the date and book and page of recordation together with written notice of the address of the assignee thereof to which notices may be sent,have been delivered to Agency. F. [§906] Performance on Behalf of Lessee In the event that Lessee shall fail to make any payment or perform any act required hereunder to be made or performed by Lessee, then Agency or Mortgagee may, but shall be under no obligation to, after such notice to Lessee, if any, as may be reasonable under the circumstances, make such payment or perform such act with the same effect as if made or performed by Lessee. Nothing herein shall limit the right of Mortgagee-to take action or make a payment if permitted under its Mortgage. Entry by Agency or Mortgagee upon the Site and Improvements for such purpose shall not waive or release Lessee from any obligation or default hereunder(except in the case of any obligation or default which shall have been fully performed or cured by Mortgagee). Lessee shall reimburse Agency(with interest at the Interest Rate) or Mortgagee (with interest as provided in the Mortgage) for all sums so paid by Agency or Mortgagee and all costs and expenses incurred by Agency and Mortgagee in connection with the performance of any such act. G. (§907) Nonmerg There shall be no merger of this Lease,or of the leasehold estate created thereby,with the fee estate in and to the Lease Site and Improvements by reason of the fact that this Lease,or the leasehold estate created thereby, or any interest in either thereof, may be held directly or indirectly by or for the account of any person who shall own the fee estate in and to the Lease Site and Improvements, or any portion thereof,and no such merger shall occur unless and until all persons at the time having any interest in this Lease or the leasehold estate, including the' leasehold mortgagee and the holder of any mortgage upon the fee estate in and to,the Lease Site and Improvements shall join in a written instrument effecting such merger. H. [§908] A enoy Cooperation. Agency covenants and agrees that it will act and cooperate with Lessee in connection with Lessee's right to grant leasehold mortgages as herein above provided. At the request of Lessee or any proposed or existing leasehold mortgagee,Agency shall within a reasonable time execute and deliver (i)any documents or instruments reasonably requested to evidence, acknowledge and/or perfect the rights of leasehold mortgagees as herein provided; and•(ii)an estoppel certificate certifying the status of this Lease and Lessee's interest herein and such matters as are reasonably requested by Lessee or such leasehold mortgagees. Such estoppel certificate shall include,but not be limited to,certification if true by Agency that(a)this Lease is unmodified and in full force and effect(or,if modified,state the nature of such modification and certify that this Lease, as so modified,is in full force and effect),(b)all rents currently due under the Lease have been paid,(c)there are not,to Agency's knowledge,any uncured defaults on the part of Lessee under the Lease or facts, acts or omissions which with the giving of notice or 44- I i i i passing of time, or both, would constitute a default. Any such estoppel certificate may be conclusively relied upon by any leasehold mortgagee or assignee of Lessee's interest in this Least. I. [§909] Enforceability The rights granted herein to a leasehold mortgagee shall be enforceable only by such leasehold mortgagee. In the event any action or proceeding is brought to enforce or interpret the provisions hereof or to seek damages or performance or declare the rights of the parties hereto or such leasehold mortgagee,the prevailing party including such leasehold mortgagee,if prevailing, shall be entitled to attorneys'fees,costs and expenses. J. [§910} No Subordination of Ageocv's lnterests .Agency's interest in the Site under this-Lease is a vested landlord's reversionary interest and not just a contractual obligation of Lessee. Notwithstanding anything which is or appears to, be to the contrary in this Lease,Lessee shall not encumber Agency's interest under this Lease or Agency's fee interest in the Site by any mortgage, deed of trust, lien, security instrument or financing conveyance of any kind whatsoever. K. [§911] Certificates to Lenders Lessee and Agency, as the case may be, shall execute, acknowledge and deliver to any lender,promptly upon request, its certificate certifying (a)that this Lease is unmodified and in full force and effect (or, if there have.been modifications, that this Lease is in full force and effect, as modified, and stating the modifications), (b)the dates, if any, to which all rent due hereunder has been paid, (c)whether there are then existing any charges, offsets, or defenses against the enforcement by Agency of any agreement,covenant or condition hereof on the part of Lessee to be performed and observed(and,if so,specifying the same),and(d)whether there are then existing any defaults by Lessee in the performance or observance by Lessee of any agreement, covenant or condition hereof on the part of Lessee to be performed or observed and whether any notice has been given to Lessee of any default which has not'been cured(and, if so, specifying the same). Any such certificate may be relied upon by a prospective purchaser, mortgagee,trustee or beneficiary under a deed of trust which encumbers this Lease. L. [§912) (�bliigations of Mortgagee Upon Acquisition of Leasehold Estate If the holder of a Mortgage obtained in accordance with Section 901 of this Lease acquires the leasehold estate created hereunder or otherwise acquires possession of the Site and Improvements pursuant to available legal remedies,Agency will look to such holder to perform the obligations of Lessee hereunder only from and after the date of foreclosure or possession and will not hold such holder responsible for the past actions or inactions of the prior Lessee. . Notwithstanding the foregoing,(A)on and after the date of such foreclosure or possession,such° holder shall be required to perform and abide by each and all of the obligations of Lessee under this Lease and(B)on and after the date of such foreclosure or possession,Agency shall have the right to enforce each and all of the provisions of this Lease against such holder. Nothing herein is intended or shall be construed to limit or restrict Agency's rights and remedies against any prior Lessee, provided that Agency's pursuit of such remedies shall not affect the-rights of the -45- holder of any Mortgage obtained in accordance with Section 901 of this Lease to the use, enjoyment or operation of the Site and Improvements. . X. [§ 1000) INDEMNIFICATION AND INSURANCE A. [§ 1001) Indemni cation Throughout the term of this Lease,Lessee agrees to and shall defend,indemnify and hold harmless Agency, the City and their officers, employees, agents, contractors and consultants from and against all claims, liability, loss, damage, costs or expenses (including reasonable attorneys' fees and court costs) arising from or as a result of the death of any person or any accident, injury, loss,or damage whatsoever caused to any person or to the property of any person which shall occur on or adjacent to the Site and which shall be directly or indirectly caused by or based on the Agency's ownership of or interest in the Site or any portion thereof or any improvements thereon or the condition of the Site or any portion thereof or any improvements thereon or Lessee's rehabilitation,development,construction,use or operation of the Site or any portion thereof or any improvements thereon or any of Lessee's activities under this Lease, whether such actions or inactions thereof be by Lessee or anyone directly or indirectly employed or contracted with by Lessee and whether such damage or injury shall accrue or be discovered before or after the termination of this Lease. Lessee shall not be responsible for(and such indemnity shall not apply to)property damage or bodily injury caused by entry onto the Site and Improvements by Agency pursuant to various provisions of this Lease, and/or to the extent caused by the wilful misconduct or active negligence of the Agency or its designated employees or agents. 13. [§ 1002] R-equired Insurance During the term of this Lease,Lessee at its sole cost and expense shall: I. Keep or cause to be kept a policy or policies of insurance against loss or damage to the Improvements on the Site, resulting from fire, earthquake (to the extent commercially available at commercially reasonable rates), windstorm, hail, lightning, vandalism, malicious mischief, riot and civil commotion,and such other perils ordinarily included in extended coverage fire insurance policies. Such insurance shall be maintained in an-amount not less than one hundred percent(100%)of the full insurable value of the Improvements as defined herein in Section 1003 (such value to include amounts spent for construction of the improvements, architectural and engineering fees,and inspection and supervision). 2. Maintain or cause to be maintained use and occupancy or business interruption or rental income insurance against the perils of fire, windstorm, hail, lightning, vandalism and malicious mischie& riot and' civil commotion, and such other perils ordinarily included in extended coverage fire insurance policies, in an amount equal to not less than two times the sum of the highest Participation Rent paid to Agency in any year under this Lease and twelve (12) months fixed operating expenses of -46- Lessee, except to the extent such insurance is not commercially available at conunercially reasonable rates due to reasons other than thi wrongful acts or omissions or dangerous or hazardous activities of Lessee. 3. Maintain or cause to be maintained public liability insurance, to protect against loss from liability imposed by law for damages on account of personal injury, including death therefrom, suffered or alleged to be suffered by any person or persons whomsoever, resulting directly or indirectly from any aot or activities of Lessee or under Lessee's control or direction,and also to protect against loss from liability imposed by law for damages to any property of any person caused directly or indirectly by or from the acts or activities in connection with the Site and Improvements of Lessee or its invitees and sublessees, or any person acting for Lessee,or under its control or direction. Any such property damage and personal injury insurance maintained by Lessee at any time during the term of this Lease shall name Agency, City, and their respective officers, ¢mployees and consultants, as additional insureds and shall also provide for and protect Agency and City against incurring any legal cost in defending claims for alleged loss. Such personal injury and- property damage insurance shall be maintained in full force and effect during the entire term ofthis Lease in an amount not less than Ten Million Dollars($10,000,000) combined single limit as of the Effective Date of Lease,which minimum amount of coverage shall escalate on the fifth anniversary of the Effective Date of Lease and once every five years thereafter in proportion to the escalation,if any,during such period in the Consumer Price Index. Lessee agrees that provisions of this paragraph 3. as to inaintenance of insurance shall not be construed as limiting in any way the extent to which Lessee may be held responsible for the payment of damages to persons or property resulting from Lessee's activities, or activities of its invitees and sublessees or the activities of any other person or persons for which Lessee is otherwise responsible. 4. Maintain or cause to be maintained worker's compensation insurance issued by a responsible carrier authorized under the laws of-the State of California to insure employers against liability for compensation undei the Worker's Compensation Insurance and Safety Act now in force in California, or any act hereafter enacted as an amendment or supplement thereto or in lieu thereof. Such worker's compensation insurance shall cover all persons employed by Lessee in connection with the Site and Improvements, and shall cover full liability for compensation under any such act aforesaid,based upon death or bodily injury claims made by, for or an behalf of any person incurring or suffering injury or death in connection with the Site and Improvements, or the operation thereof by Lessee. S. In the event that the holder of a Mortgage obtained in accordance with Section-901 of this Lease which has registered its name and address with -47- Agency acquires the leasehold interest created by this Lease, such Mortgagee shall have the right to self-insure with respect to the risks specified in this Section 1002 if such Mortgagee is an institutional lender. C. [§ 1003) Definition of"Full Insurable Value" The term`full insurable value"as used in Section 1002 shall mean the actual replacement cost (excluding the cost of excavation, foundation and footings below the ground level.and without deduction for depreciation)of the Improvements,including the cost of construction of the Improvements, architectural and engineering fees, and inspection and supervision. To ascertain the amount of coverage required, Lessee shall cause the full insurable value to be determined from time to time by the insurer or by a.qualified expert mutually acceptable to Agency and Lessee,not less often than once every three years.' _. _D. .. [§ 10041 General InsuranceProyigons All insurance provided under Section 1002 of this Lease shall be primary insurance for the benefit of Lessee, Agency, and City. Said insurance shall also be for the benefit of the leasehold mortgagee,if any. All insurance provided under Section 1002 shall be periodically reviewed by the parties for the purpose of mutually increasing or decreasing the minimum limits of such insurance,from time to time, to amounts which may be reasonable and customary for similar facilities of like size and operation. The insurance to be provided by Lessee may provide for a deductible or self-insured retention of not more than One Hundred Thousand Dollars($100,000.00),with such amount to increase at such times as Agency may require increases in'the policy limits as set'forth above; provided that the percentage increase in the deductible or self-insured retention shall not exceed the percentage increase in the Consumer Price Index since the last requested adjustment-, and further provided that Lessee may maintain such higher deductibles or self-insured retention as may be approved in writing by the Executive Director of Agency or his designee. In the event such insurance does provide for deductibles or self-insured retention, Lessee agrees that it will fully protect Agency, its boards, officers, and employees in the same manner as these interests would have been protected had the policy or policies not contained the deductible or retention provisions. All insurance herein provided for.under Section 1002 shall be effected under policies issued by insurers of recognized responsibility licensed or permitted to do business in the State of California,subject to the reasonable approval of the Agency's Executive Director. Any insurance required to be maintained by Lessee pursuant to Section 1002 may be j taken out under a blanket insurance policy or policies covering other premises or properties,and' other insureds in addition to the parties hereto; provided, however, that any such policy or policies of blanket insurance shall specify therein,or supplemental written certification from the insurers under such policies shall specify, the amount of insurance irrevocably allocated to the coverage to be provided under Section 1002 and provided further,that in all other respects,any such blanket policy shaft comply with the other provisions of Section 1002. -48- i i i i All policies or certificates. insurance shall provide that such policies or certificates P P shall not bc.canceled or materially changed without at least thirty(30) days prior written notice to Agency. Copies of such policies, or certificates thereof subject to the reasonable approval of Agency legal counsel, shall be deposited with Agency together with appropriate evidence of payment of the premiums therefor;and, at least thirty(30)days prior to expiration of any such policy,copies,of renewal policies shall be so deposited. E. [§ 1005] Failure to Maintain Insurance If Lessee fails or refuses to procure or maintaid insurance as required by this Lease, Agency shall have the right, at Agency's election, and without notice,to procure and maintain such insurance. The-premiums paid by Agency shall be treated as additional rent due from Lessee,to be paid on the first day.of the month following the date on which the premiums were paid. Agency shall give prompt notice of the payment of such premiums, stating the amounts paid and the name of the insured(s). F. [§ 1006] Disposition of Insurance Proceeds Resulting from Loss_or Damage to Improvements (a) Subject to the provisions of paragraph (b) below, proceeds of insurance with :respect to loss or damage to the Improvements to be maintained and repaired by Lessee during the term of this Lease shall be payable,under the provisions of the policy of insurance,to Lessee, or,if such loss or damage involves the need for Lessee to obtain any governmental approvals or permits,jointly to Lessee and Agency;and said proceeds shall constitute a trust fund-to be used for the repair, restoration or reconstruction of the Improvements in accordance with plans and specifications approved in writing by Agency. (b) - Notwithstanding the foregoing paragraph,within the period during which there is an outstanding Mortgage obtained in accordance with Section 901 of this Lease on all or part of the Site and Improvements,said proceeds shall be made payable as set forth in Sections 708.and 709 of this Lease. (c) In the event this Lease is terminated by mutual agreement of Agency and Lessee, and the Improvements are not repaired,restored or reconstructed,the insurance proceeds shall be applied first to any payments due under this Lease from Lessee to the Agency,second to restore the Site to a neat and clean condition,and,finaily any excess shall be paid to Lessee. Provided,. .however, that within any period when there is an outstanding mortgage or deed of trust upon the Improvements,such proceeds shall be applied first to discharge the debt secured by the mortgage and then for the purposes and in the order set forth above in this paragraph. (d) Lessee hereby waives any claim against Agency and City for any loss covered by insurance of the type specified in Section 1002; and Lessee, shalt obtain from its insurance company or companies a waiver of any right of subrogation that it may have against Agency and City. I -49- i 11001 EMINENT DOMAIN A. [§ 1101] Lessee to Give Notice In case of a Taking of all or any part of the Site and Improvements,. or the commencement of any proceedings or negotiations which might result in such Taking, Lessee shall promptly give written notice thereof to Agency generally describing the nature and extent of such Taking or the nature of such proceedings or negotiations and the nature pail extent of the Taking which might result therefrom,as the case may be. B. [§1102] Total Takfnu In case of a Taking of the.fee of the entire Site and Improvements,or in case of the taking of only a part of the Site and Improvements,.leaving the remainder of the Site and Improvements in such location,or in such forth,shape or reduced size as to render the same not effectively and practicably usable for the'cbnduct 'thereon of the. uses permitted hereunder, this Lease shall terminate as of the date title vests in the condemning authority or the date the condemning authority is entitled to possession,whichever fast occurs(the"Date of Taking'). Any Taking of the Site and Improvements of the character referred to in this Section 1102 which results in the terrinination of this Lease is referred to herein as a`Total Taking." C. [§ 11031 Ear ial akine j In case of a Taking of the Lease Site and Improvements other than d Total Taking (a "Partial Taking"),(i)this Lease shall remain in full force and effect as to the portion of the Site and Improvements remaining immediately after such Taking,without any abatement or reduction of Ground Rent or any other sum payable hereunder,and(ii)Lessee,to the extent the awards or payments, if any,on account of such Taking shall be sufficient for the purpose, at its expense; but first subject to Section 1104(a), shall within a reasonable period of time commence and complete,or cause to be commenced and completed,Restoration of the Site and Improvements as nearly as possible to its value,condition,and character immediately prior to such Taking,with such alterations and additions as maybe made at Lessee's election pursuant to and subject to the terms of Section 705,except for any reduction in area caused thereby;provided,however,that in case of a Taking for temporary use Lessee shall not be required to effect Restoration until such Taking is terminated D. [§ 11041 Appli ation of Awards and OthgEPi meets Awards and other payments on account of a Taking, less costs, fees and expenses incurred in the collection thereof("Net Awards and Payments")shall be applied as follows:. (a) In case of a taking other than a Total Taking or a Taking for temporary use, Lessee shall famish to Agency and any Mortgagee evidence satisfactory'to Agency and the. Mortgagee of the total cost of the Restoration required by Section 1103. I (b) Net Awards and Payments received on account of a Taking other than a Total Taking or a Taking for temporary use shall.be held and applied as provided with respect to -50- Proceeds of insurance in Section I006. The balance,if any,shall be paid to Lessee and Agency as their respective interests may appear in the Site and the Improvements. (c) Net Awards and Payments received on account of a Taking for temporary use shall initially be received by Lessee;provided,however,that the amount of such award shall be added to Gross Room Revenue for the purpose of calculating Ground Rent under this Lease,not to exceed however the average Gross Room Revenue of the three(3) years prior to the Taking, as adjusted for the period of the Taking, (d) Net Awards.and Payments received on account of a Total Taking shall be allocated as follows: First: There shall be paid to each Mortgagee an amount equal to the sum of any unpaid principal amount of the indebtedness secured by the Mortgage, if any, and any interest accrued thereon,all as of the date on which such payment is made;provided,however,that each such Mortgagee shall Wy be paid to the extent of its security in the applicable portion which Is the subject of the taking. Second: To the Lessee and the Agency as their respective interests may appear in the Site and the Improvements;provided, that any payment to a Mortgagee or pursuant to the preceding paragraph shall be charged against Lessee's interest. XII. [§ 1200] DEFAULTS, D TEgmINATION A. [§ 1201] Defaults.General (a) Subject to the extensions of time set forth in Section 1314 of this Lease,failure or delay by either party to perform any terns or provision of ibis Lease and failure or delay by Lessee to perform any of its obligations that are set forth in that certain`11cense Agreement to Provide Landscaping and Other Improvements in the Public Right-of-Way"entered into by and among the City, The Waterfront Hotel, LLC, and Mayer on or about February 20, 2WI (the "License Agreement'), constitutes a default under'this Lease, The party-who so fails or delays must immediately commence to cure, correct, or remedy such failure or delay, and shall complete such cure, correction or remedy with reasonable diligence and, in any event, for monetary defaults within thirty(30)days of such failure or delay,and for non-monetary defaults within the time reasonably required for cure with reasonable diligence, not to exceed or7e hundred and eighty(180) days plus any period or periods of enforced_delay required by Section 1314 of this Lease(the"Cure Period'). (b) The injured patty shall give written notice of default to the party in default, specifying the default complained of by the injured party. Except as required to protect against further damages, and except as otherwise expressly provided in Sections 1207 and 1208 of this . Lease, the injured party may not institute proceedings against the party in default until'the•' expiration of the applicable Cure Period. Agency's exercise of its remedies under this Article XII I shall be subject to the provisions of Article IX of this Lease. Failure or delay in giving such notice shall not constitute a waiver of any default,nor shall it change the time of default. -51- ........... ..,.._. ._..._........., ...__.._.__....__......._...... _..... . ................ _. _... . _. i i (c) Except as otherwise expressly provided in this Lease, any failure or delay by either party in asserting any of its remedies or rights as to any default shall not operate as a• waiver of any default or of any such rights or remedies or deprive either such party of its right to institute and maintain any actions or proceedings which it may deem necessary to protect, assert or enforce any such rights or remedies. B. [§ 1202) Legal Actions 1. [§ 1203] institution of Legal Actions In addition to any other rights or remedies,either party may institute legal action to cure, correct,or remedy any default,to recover damages for any default,or to obtain any other remedy consistent with the purpose of this Lease. Such legal actions must be instituted in the Superior Court of the County of Orange,State of California,in any other appropriate court in that county, or in the Federal District Court in the Central District of California. 2. [§1204) Applicable Law The laws of the State of California shall govern the interpretation and enforcement of this Lease. 3. [§12051 Acceptance of Service ofProce�s In the event that any legal action is commenced by Lessee against Agency, service of process on Agency shall be made by personal service upon the Chairman or Executive Director of Agency,or in such other manner as may be provided by law. In the event that any legal action is commenced by Agency against Lessee, service of process on Lessee shall be made by personal service upon an officer of the general partner of Lessee and shall be valid whether made within or without the State of California, or in such manner as may be provided by law, 4. [§ 12061 Attorneys'Fees and Court Costs In the event that either Agency or Lessee shall bring or commence an action to enforce the teams and conditions of this Lease or to obtain damages against the other party arising from any default under or violation of this Lease,then each party shall bear and pay the cost ofits own costs and attorneys fees. C. [§ 1207] Rights and Remedies are Cumulative Except with respect to rights and remedies expressly declared to be exclusive in this Lease,the rights and remedies of the parties are cumulative,and the exercise by either party of_. one or more of such rights or remedies shall not preclude the exercise by it,at the sarne or different times, of any other rights or remedies for the same default or any other default by the other party. i -52- D. (§ 1208] Damages If either party defaults with regard to any of the provisions of this Lease, the non- defaulting party shall serve written notice of such default upon the defaulting party. If the default is not commenced to be cured within thirty(30)days after service of the notice of default and is not cured prior to the expiration of the applicable Cure Period,the defaulting party shall be liable to the non-defaulting party for any damages caused by such default,and the non-defaulting party may thereafter (but not before) commence an action for damages against the defaulting party with respect to such default. E. B 12091 Specific Performance If either party defaults with regard to any of the provisions of this Lease, the tlon- defaulting party shall serve written notice of such default upon the defaulting party. If the default is not commenced to be cured within thirty(30)days after service of the notice of default and is not cured prior to the expiration of the applicable Cure Period,the non-defatlting party,at its option, may thereafter(but not before) commence an action for specific performance of the terms of this Lease pertaining to such default. F. B 12101 Additional Remedies of Aix (a) If Lessee defaults with regard to any of the provisions of this Lease,Agency shall serve written notice of such default upon Lessee. Subject to the provisions of Article lX of this Lease running in favor of Mortgagee,if the default is not commenced to be cured promptly after service of the notice of default and/or if the cure is not prosecuted to completion with all due diligence and in any event prior to the expiration of the applicable Cure Period,Agency,at its option,may thereafter(but not before): 1. Correct or cause to be corrected said default and charge the costs therefor to the account of Lessee; 2. Correct or cause to be corrected said default and pay the costs thereof from the proceeds of any insurance; 3. Continue this Lease and Lessee's right to possession in effect and enforce its rights and remedies under the Lease,including the right to recover rent as it becomes due, as provided in Section 1951.4 of the California Civil Code. 4. Have a receiver appointed to take possession of Lessee's interest.in the Site and Improvements,with power in said receiver to administer Lessee's interest therein,to collect all funds available to Lessee in connection with its operation and maintenance thereof, and to perform all other acts' consistent with Lessee's obligations under this Lease as the court deems proper, 5. Maintain and operate the Site and Improvements without terminating this Lease. -53- b. Terminate this Lease pursuant to Section 1211 hereof by written notice to Lessee of its intention to do so. (b) Agency reserves and shall have the right at all reasonable times to enter the Site and the Improvements for the purpose of viewing and ascertaining the condition of the same,or to protect its interests in the Site and the Improvements or to inspect the operations conducted thereon, subject to the limitations and requirements for Agency rights of access set forth in Section 405 of this Lease. Any such entry shall be made only after reasonable notice to Lessee. In the event that such entry or inspection by Agency discloses that the Site or the Improvements are not in a decent,safe(and sanitary condition,are damaged,or in disrepair,Agency shall have the right, after thirty(30)days written notice to Lessee and Lessee's failure to cure the problem . within the Cure Period,to have any necessary maintenance or.repair work done for and at the expense of Lessee and Lessee hereby agrees to pay promptly any and all costs incurred by Agency in having such necessary maintenance or repair work done in order to keep the Site and the Improvements in a decent,safe and sanitary condition. (c) The rights reserved in this Section 1210 shall not create any obligations on Agency or increase obligations imposed on Agency elsewhere in this Lease,and shall not defeat, render invalid or limit the rights or interests expressly provided in this Lease for the protection of leasehold mortgagees. G. [§ 1211] Remedies and Rights ofTermination (a) In the event that at any time during the term of this Lease,and in violation of this Lease,Lessee shall: 1. Fail to commence and/or complete the construction of the improvements as required by this Lease or within the time required by this Lease; 2. Abandon or substantially suspend construction of the Improvements as required by this Lease prior to the completion thereof and issuance of a Release of Construction Covenants therefor by Agency; 3. Use the Site and Improvements for any purpose other than those provided for in this Lease or fail to use and maintain the Site and Improvements in accordance with Section 501 of this Lease; 4. Fail or refuse to pay to Agency when due the applicable rents and other sums required by this Lease to be paid by Lessee,including but not limited to payments required under Sections 300 et seq,of this Lease; i 5. Fail or refuse to pay when due any taxes,assessments or other Impositions as required by this Lease; 6. Make or suffer to be made any voluntary or involuntary conveyance, . assignment,sublease or other Transfer of the leasehold interest in the Site and Improvements, or any part thereof, or of the rights of Lessee under this Lease; -54- I 7. Commit or suffer to be committed any waste or impairment of the Site or the Improvements,or any part thereof; 8. Alter the Improvements.in any manner except as expressly permitted by this Lease; 9. Fail to maintain insurance as required by this Lease; 10. Fail to make full repair and restoration of the Improvements in the event of damage or destruction; 11. Engage in any financing except as permitted by the terms of this Lease,or any other transaction creating any mortgage on the Site, or placing or suffering io be placed thereon any lien or ether encumbrance,or suffering any levy or attachment to be made thereon; 12. VoluntariIy file or have filed against it any petition under any bankruptcy or insolvency act or law,or be adjudicated a bankrupt, or make a general assignment for the benefit of creditors, 13. Fail to pay when due any payment or charge or otherwise default on any loan secured by a leasehold mortgage permitted by this Lease; 14. Abandon or surrender possession of the Site,or Lessee's interest therein; 15. Fail to perform any of Lessee's Hazardous Substances covenants; 15. Fail to perform any obligation of Lessee set forth in the License Agreement referred to in Section 1201(a)hereof;or 17. Fail to perform or comply with any other material term or provision hereof, and any such failure or violation shall not be cured or remedied withiri the applicable Cure Period;then,in such event,subject to the provisions of Article IX of this Lease running in favor of any Mortgagee,Agency may,at its option and in addition to any other remedy provided for in this Lease,terminate the Lease and revest in Agency the leasehold interest theretofore transferred to Lessee,by written notice to Lessee of its intention to do so. (b) Upon termination of this Lease pursuant to this Section 1211 it shall be lawful for Agency to re-enter and repossess the Site without process of law,and Lessee,in such event,does hereby waive any demand for possession thereof,and agrees to surrender and deliver peaceably to Agency immediately upon such termination in good order, condition and repair, except for. " reasonable wear and tear. Upon such termination title to all Improvements on the Site specified in this Lease to remain in Agency,shall remain in Agency. (c) No ejectment, re-entry or other act by or on behalf of Agency shall constitute a termination unless Agency gives Lessee notice of termination in writing. Such termination shall -55- i I not relieve or release Lessee from any obligation incurred pursuant to this Lease prior to the date of such termination. (d) Termination of this Lease under this Section 1211 shall not relieve Lessee from the obligation to pay any surn due to Agency or from any claim for damages against Lessee. Damages which Agency may recover in the event of default under this Lease shall include,but are not limited to,the worth at the time of award of the amount by which the unpaid rent for the balance of the Lease tern remaining after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided. (e) The right of termination provided by this Section 1211 is not exclusive and shall be cumulative to all other rights and remedies possessed by Agency, and nothing contained herein shall be construed so as to defeat any other rights or remedies to which Agency may be entitled. H. [§ 1212] No Cross Defaults Except as otherwise specifically set forth in this Lease or the Agreement, a breach or default by either party under the Agreement as to a parcel of property other than the Site of this Lease shall not constitute a breach or default hereunder, and,except as otherwise specifically set forth in this Lease or the Agreement, a termination,in whole or part, of the Agreement as to a parcel of property other-than the Site of this Lease shall not terminate or modify Agency's or .Lessee's rights or.obligations hereunder, XIII. [§ 13001 GENERAL PROVISIONS I A. [§ 1301] Notices Demands and Communications between the Parties Formal notices, demands and communications between Agency and Lessee shall be sufficiently given if dispatched by registered or certified mail, postage prepaid, return receipt. requested,to the principal offices of the Agency and of Lessee as designated in Section 108 and Section 109 hereof. Such written notices,demands and communications may be sent in the same manner to such other addresses as either party may from time to time designate by mail as provided in this Section. Sufficient notice may also be given by personal delivery or reputable overnight delivery service in lieu of mail if reasonably adequate records are maintained of such service in the ordinary course of business by the person or entity effecting such service. B. [§ 1302] Time of Essence Time is of the essence with respect to the performance of each of the covenants: and agreements contained in this Lease. C. [§ 1303] Conflict of Interests (a) No member, official or employee of Agency shalt have any personal interest, direct or indirect, in this Lease, nor shall any such member, official or employee participate in any decision relating to the Lease which affects his personal interests or the interests of any corporation,partnership or association in which he is directly or indirectly interested. -56- (b) Lessee warrants that it has not paid or given,and will not pay or give,any officer or employee of Agency or City any money or other consideration for obtaining this Lease. D. [§ 13041 Nonliability of Agency Officials and Emplove.es No member, official or employee of Agency shall be personally liable to Lessee,or any successor in interest, in the event of any default or breach by Agency or any for any amount which may become due to Lessee or successor or on any obligations under the terms of this Lease. E. [§ 13051 Inspection of Books and Records ° (a)• Agency has the right at all reasonable times to inspect the books and records of Lessee pertaining to the Site and Improvements as pertinent to the purposes of this Lease. j Lessee also has the right at a reasonable times to inspect the books and records of Agency pertaining to the Site and Improvements as pertinent to the purposes of this Lease. (b) In the event that the holder of a Mortgage obtained in accordance with Section 901 of this Lease acquires the leasehold estate created by this Lease, then, in such an event, Agency acknowledges and agrees that Agency shall not be entitled to examine and/or audit all of the books and records of said Mortgagee, but shall only be entitled to examine such books, records and tax returns of the Mortgagee or portions thereof solely to the extent that they relate to the Site and improvements and the Mortgagee's operation thereof. F. [§ 13061 No Partnership Neither anything in this Lease contained, nor any acts of Agency or Lessee shall be deemed or construed by any person to create the relationship of principal and agent, or of partnership,or of joint venture,or of any association between Agency and Lessee. G. [§1307] Compliance with Law Except as otherwise expressly provided in the Development Agreement and/or the Agreement,Lessee agrees,at its sole cost and expense,to comply and secure compliance with all the applicable and valid requirements now in force, or which may hereafter be in force,of all municipal,county,State and federal authorities,pertaining to the Site and Improvements,as well as operations conducted thereon,and to faithfully observe and secure compliance with,in the use of the Site and Improvements, all applicable county and municipal ordinances and state and federal statutes now in force or which may hereafter be in force, including all laws prohibiting discrimination or segregation in the use,sale,lease or occupancy of the property. H. [§ 1308] Sunonder of Prooemty Except as otherwise expressly provided in this Lease,upon the expiration or tennination' of this Lease pursuant to the terms hereof,it shall be lawful for Agency to reenter and repossess the Site and Improvements without process of law,and Lessee,in such event,does hereby waive any demand for possession thereof, and agrees to surrender and deliver the Site and I -57- i Improvements peaceably to Agency immediately upon such expiration or termination in good order,condition and repair,except for reasonable wear and tear. I. {§ 1309] Severability if any provision of this Lease shall be adjudged invalid or unenforceable by a court of competent jurisdiction,the remaining provisions of this Lease shall not be affected thereby and shall be valid and enforceable to the fullest extent permitted by law. J. R 1310] Binding Effect ' This Lease, and the terms,provisions,promises, covenants and conditions hereof,shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives,successors and assigns. K. ' [§ 1311] Assn,Ment or Sublease to CiIL Right of First Rel Tsai 1. Agency shall at all times have the right to assign and/or convey all or a portion of its interest in the Site and/or in the Lease to the City" or,subject to Lessee's right of first refusal set forth in Section 1311.2 of this Lease, to any other person or entity. In the event of any assignment of all or a part of Agency's interest in either the Site or the Lease to the City or other person or entity,Lessee shall attom to the City or such other person or entity and recognize City or such other person or entity as the landlord under this Lease,and the City or such other person or*entity shall not disturb Lessee's right to possess the Site and Improvements subject to the provisions of this Lease. 2. Between the Effective Date of the Lease and the expiration or termination of this Lease,and so long as Lessee is not in default hereunder,Agency shall not sell,convey,transfer, or otherwise dispose of all or any portion of or any interest in the Site to any third person or entity other than the City (other than a pledge of any of its income under this Lease or other financing transaction) until it shall first have offered such portion or interest to Lessee in the manner specified below; (a) Agency shall deliver a notice (the "Notice') to Lessee of(i) Agency's bona fide intention to sell,transfer or otherwise dispose of all or any portion of or any interest in the Site,(ii)the portion or interest proposed to be sold,transferred or otherwise disposed of(the "Offered Interest), and '(iii) the offering price and all other material terms for which Agency proposes to sell,transfer,or otherwise dispose of the Offered Interest. (b) Within sixty(60) days after receipt of the Notice, Lessee or its permitted assignee may accept Agency's offer by delivering to Agency a writing agreeing to purchase the Offered Interest on the terms offered by Agency. Any such acceptance of Agency's offer shall . be accompanied by a deposit equal to ten percent(10%)of the purchase price which deposit shall' be retained by Agency as liquidated damages in the event that the purchase is not completed due to a default by Lessee. If Lessee accepts Agency's offer to sell the Offered Interest the parties shall consummate such purchase promptly in accordance therewith. -58- I (c) If Lessee and Agency do not enter into an agreement to purchaselsell the Offered Interest as set forth in subparagraph(b) above, or(ii) if Lessee and Agency enter into such an agreement but Lessee fails to complete the purchase as set forth in subparagraph (b) above,Agency may sell the Offered Interest to any person at any price and upon any terms, as Agency shall determine,provided that the purchase price for the Offered Interest,and the terms of the sale, shall be no more favorable to the purchaser than the terms of the Notice. For . purposes of comparing whether an offer by Lessee is more or less favorable than an offer by a third party,any financed portion of the offered purchase price shall be discounted to present cash value using the prime lending rate of Wells Fargo Bank or comparable financial institution. If such sale is not consummated within two (2) years from the date of the Notice, Agency shall again be obligated to first offer to sell the Offered Interest to Lessee as set forth in this Section. L. [§ 1312] Captigns The captions•contained in' this Lease are merely a reference and are not to be used to construe or limit the text. M. [§ 1313) No Recording of this Lease This Lease shall not be recorded. Pursuant to the Agreement, a memorandum of this Lease will be recorded in the Official Records of Orange County. N. [§ 131A] Enforced Delay in Performance for Causes Beyond Control of Party In addition to specific provisions of this Lease, performance by either party hereunder shall not be deemed to be in default where delays or defaults are due to causes beyond the control and without the fault of the party claiming an extension of time to perform, including war,insurrection;strikes; lockouts;riots; floods; earthquakes;fires;casualties; acts of God; acts of the public enemy; epidemics; quarantine restrictions; freight embargoes; lack of transportation; governmental restrictions or priority; litigation; unusually severe weather; inability to secure necessary labor,materials or tools;delays of any contractor or supplier,acts or failure to act of the City or any other public or governmental agency or entity(other than any act or failure to act of Agency,which shall not excuse performance by Agency). An extension of time for any such cause shall be for the period of the enforced delay and shall commence to nut from the time of the commencement of the cause. If,however,notice by the party claiming-'such extension is sent to the other party more than thirty(30) days.after the commencement of the cause,the period shall commence to iun only thirty(30)days prior to the giving of such notice. Times of performance under this Lease may also be extended in writing by Agency and Lessee. U. [§ 1315) Entire Agreement Waivers and Amendments (a) This Lease is executed in two(2)duplicate originals,each of which is deemed to be an original. This Lease includes sixty-three(63)pages and three(3)exhibits. (b) All waivers of the provisions of this Lease must be in writing and signed by the appropriate authorities of Agency or Lessee and all amendments hereto must be in writing and signed by the appropriate authorities of the Agency and Lessee. During the terra of any Mortgage obtained in accordance with Section 901 of this Lease, any amendment to this Lease -59- shall require the written approval of the Mortgagee,which approval shall not unreasonably be withheld. P. [§ 1316] Off-set statement Attornment and subordination 1. Off-set Statement. The parties shall, at any time and from time to time upon not less than ten (10) days' prior written notice from the other party, execute, acknowledge and deliver to such requesting party a statement in writing(a)certifying that his Lease is unmodified and in full force and effect,or,if modified,stating the nature of such inodification and certifying that this Lease, as so modified,-is in full force and effect) and the dates to which the rent and other charges are paid in advance, if any, without any offset or defense thereto(if such be the case) and (b)acknowledging that there are not, to such certifying party's knowledge, any uncured defaults on the part of the requesting party hereunder,or specifying the defaults if any .are—claimed... Any such statement may be relied upon by any prospective purchaser or encumbrancer of the Improvements,the Site or of all or any portion of the real property of which the Site are a part. Lessee shall bear all costs with respect to any statements requested of Agency. 2. Attornment. In the event any proceedings are brought for the foreclosure of,or in the event of the conveyance by deed in lieu of foreclosure, or in the event of exercise of the power of sale under,any mortgage and/or deed of trust made by Agency covering the Site, or, subject to Section 1311.2 of this Lease,in the event Agency sells,conveys or otherwise transfers its .interest in the Site, Lessee hereby attorns to, and covenants and agrees to execute an instrument in writing reasonably satisfactory to the new owner whereby Lessee attorns to the successor in interest and recognizes the successor as the Agency under this Lease. 3. . Subordination. Lessee agrees that this Lease shall,at the request of the Agency, be subordinate to any mortgages or deeds of trust that may hereafter be placed upon the fee of the Site by Agency and to any and all advances to be made thereunder, and to the interest thereon,and all renewals,replacements and extensions thereof,provided that the mortgagees or beneficiaries named in said mortgages or trust deeds shall execute and deliver a written non- disturbance and attomment agreement by and among Lessee, Lessor and such mortgagees or beneficiaries, in form reasonably satisfactory to Lessee and its counsel and the holder of any Mortgage and their counsel, which shall provide the following assurances for the benefit of Lessee and its permitted assignees,sublessees,successors and assigns: (i) the leasehold estate granted by this Lease shall not be affected.in any manner by any foreclosure action,trustee's sale or other action taken orproceeding commenced under or in connection with any mortgages or deeds of trust placed upon the fee of the Site by Agency,or by any taking of possession of the Site pursuant thereto, or by the exercise of any rights or remedies in connection therewith; (ii) if the interest of Lessor under this Lease is transferred in connection with any foreclosure action, trustee's sale or other proceedings brought under any mortgages or deeds of trust placed upon the fee of the Site by Agency(including, without limitation, any transfer by deed in lieu of foreclosure), then, so long as Lessee is not in default in the performance of the terms, covenants and conditions of this Leaso beyond all applicable notice, grace and Cure -d0- Periods,the transferee of any such interest of Lessor(mcluding,without limitation;the holder of any such mortgage or deed of trust); together with its successors and assigns (collectively, "Lessor's Transferee"), shall not terminate this Lease or interfere with or disturb Lessee in its possession, use, occupancy or quiet enjoyment of the Site under this Lease, for the remaining term of this Lease (as the same may be earlier terminated pursuant to any other Article of this Lease),subject to all of the terns,covenants and conditions of this Lease; (iii) Lessee shall not be named or joined in any foreclosure action,trustee's sale or other'proceeding to enforce any mortgages or deeds of trust placed upon the fee of the Site by Agency;and (iv) any Lessor's Transferee will accept the attornment of Lessee and will assume and perform all of Lessor's obligations under the Lease for the benefit of Lessee and its successors and assigns. The foregoing written assurances shall, at Lessee's request, also be provided to any permitted assignee or sublessee of Lessee under the Lease. Lessee also agrees that in the event Agency and any mortgagee or beneficiary elect to have this Lease prior to such mortgage or deed of trust, and upon notification by Agency or such mortgagee or beneficiary to Lessee to that effect, this Lease shall be deemed prior in lien to such mortgage or deed of trust,whether this Lease is dated prior to or subsequent to the date of said mortgage or deed of trust. Lessee agrees that upon the request of Agency,or any mortgagee or beneficiary,Lessee shall execute whatever instruments may be required to carry out the intent of this section. [§ 1317] Approvals Except as expressly provided otherwise in this Lease, approvals required of Agency or Developer shall not be unreasonably withheld,conditioned or delayed.. [13.181 Counterparts This Lease may be executed in counterparts and when so executed,each such counterpart will constitute an original document and such counterparts will constitute one and the same agreement. [The remainder of this page has been intentionally Ieft blank. Signatures on next page.] -61- { "AGENCY" REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH, a public body,corporate and politic- Dated: 1/ -2001 C ATTEST: APPROVED AS TO FORM: e Agency Clerk A ency General Counsel REVIEWED AND APPROVED: INITIATED AND APPROVED: Ld Ray Siiv ,Executive Director Director of Economic Development 0 APPROVED AS TO FORM: 0 Dane,Ballmer Berkman ' Agency Special Counsel -62- "LESSEE" PCH BEACH RESORT,LLC,a California limited liability company By: GRAND RESORT,LLC,a California limited liability company,Managing Member By: RLM Management,Inc.,a California corporation,Manager By: Gfi obett L.Mayer, an fIhIWflCIosiagParalA B1Lcasc3 I I -63- i EXHIBIT'W MAP OF THE SITE [SEE ATTACHED] I E)MMIT"A' TO GROUND LEASE • I I I .MAP OF THE SITE E'LY LINE SEC 14, T. 6 S., R. 11 W., M.M. 51/14 1 ' k N'LY LINES 1/2, NE 1/4 SEC 14. T.6,S., R.11.W., k M.M. 51/1 4 \ N35'22'Z5E (R) NW42'STE 165&7 ' _L 4-05!54'18" R-t2452.00' L-252.68' -112 \\ N4643'21"W 38,85' THE SITE 45 56 AC. E n 00 i�00 i Y v , NOG44'27'W 12.63' N53'05'49rW 172.33' u . S7,934'[Z'W 45.01' r EXHTBTT`B" LEGAL DESCRIPTION OF.THE SITE That certain real land located in the City of Huntington Beach, County of Orange, State of California,described as follows: LOT I OF TRACT NO. 15535,AS SHOWN ON A MAP FILED IN BOOK 790 PAGES 44 TO 50 INCLUSIVE, OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. I EXHIBIT"C„ ARTICLE VIH OF THE THIRD AMENDED AND RESTATED LEASE [See attached] I i ppay a9 Ago # N as 10 eyl ra AVVOdi 441 is o as ab i pQp�� � k �'. g� 0 � � � O � Rgpf 0► 44 A. re 34 pp 1� ;�9 ® At ld6 O 4O d4 Q m fWA � B6 -� � •� � k � O � � y � � C 3 v1 U asa O& VAr- ikfj� H � .�+ � � K -41 IN J°. P. �j. f{I o8 O C�7 C N V! V � � R3 � R9 � � � . •� , �,' � r1e a •0 a 14 t et iG C614 e4 0 a ate! M M eo a a ►t +�i R W k a a opt a � n u - v z r Q - . m n N . C e O "lot uy, NOO.C, CALLM=n a DMnnMMI. CIO W4• unat wra.tJut U.uu. ., ' advantaga of the existing ocean views across pacific cc)ast Highway. Y.eassee deuireae to obtain assurances from Lessor that such views will not be abstruetod during the term, of , this J,sass. (+c) Pursuant to the Caiirarnin Coastal Act of 3.976, as AAendaad (Public Rerourees Code Section 30005, • o•t ,gag.). the city or muntington 1maaah has prepared •and the callsornia. CO&a%A1 Commission has certified a Local Coastaal Plan (hereinafter the *LCP") for that portion of the City of Huntington Beach that is leoated within the coastal Zone._ including the City beach Property. On -7anuary 9.9, joBl, the City Council of the City adopted Revolution Me. 4954 adopting the LCP in the form of the Coastal t2ement of the City°a G ensral Plan; the LCP hags oubsequently boon amend*d through the City CauneiVa adoption of ;Resolution No. 5147 on Auqumt 2, 1582, ACIsolution No. 5267 on May 15, 1983, and Resolution No. 5341 on .7anaery 3. 1984. The LCP is a public record, a copy of which 3s available for inspection at the offIca of the city Clerk at the City of Huntington Reach. 2000 Main Street, Huntington teach, Californian 926411 i The LCT requires "Preservation of as Inueb b€a&CU sand area an possible in order to accot moa9.aataa ruture.le ve3s of beach asttendance." UCV, Section 2.3.) The LCP further establishes on a policy the "increased numbers of hoi`eljmoteS rooms and restaurants in the Coastal Zone." (Tea., at section 3.3.) The Lcp designates the entire city seaciA property for UHIST "C" TO GROMM T-VASR 1�Arts. 7 rsf ai Rticolvad kar-2l-Ol OQ:06Pts from-t1! D26 0891 Yo-RUi11 peeQ 'Qg u • +Ai n u Av yu. .rR A U 4 A FR La C7 0 40 C1 66 j{ rt q 'a (7t .04 a C l{ .•t � -1 k . PA a U to V4 a�9 > 0 k It dui sl9 i4 p y a v' •.A.i � t.. ti A +r9 ••t � � •.,Am o u A 4 .. 91 �• 6!► w 6e a 4� d 1 �d a R1 A [J k} A 0 n r.p. a to totl 41 V iw �i 16 ~A+c its IQ C �1 '� 3C W C9 e�i A 'ri > n u v p, r4 a w o 'n ,� to � A a vrAi A V 0 y ra 410 -.i 61 C`i 0) �a Q p ' +0 r9 W E D d Q i. 0 p 'tom '�� �' �9e 3e A v4 , t,. a 4a a tl a •.a li .i as U N a2 9 0 pp C Q E k R1 m u m Ad I. G ld A. ak1 fh i) u A a N 41 IA - i o Ta u m ' e t m A • n c . w -. 0 fl Q Cti �/ sA +e 3a b1 fl 9 0 l+ H ° Q dl a k fl „{ JOj 0 � 8 Eti ? fl O ;1 i o+ YA 41� Y fl V4 16 M Oi '� d1 v�4 r 1 ' 96 �+ 'fl p fl it y O u 4� i1 fl y }7 u 9 ,t ' V ° W ' b so m 'N -0 10i ,4 fl � � fl � N a A UWx i° h �' o c v aQ •M Q ° a U A. p Y q a U O i1 Q A W u + 0 a U Y V �gg Q 0 N a Ae Q 0 • N '1 O '4 N „1 q X •�, ¢ Q w gs� N Dot fl c0 LL D J0 sA! °O 0-1TA �s d k W •� a .t v A p a fl +t fl rt o .•q W �1 H B1 B@ Q �. f� 'h W k a w N y M W d Pt roi rB .11 4/ E>6 ai N at la > i! U a'1 w ; S4 +i LL 90 `L J b Y• . o ��a c ® g mH1 � tt�u3 .°ai P4 . 0 4 a u13 34 'd � � � W ° a a 8 1 41 "� W Ai O V sy 9 a rd 4) ri ;, Ok 14 tw U lL yki +i R �yy j". °dsub {P T AGO -, > .1 °•U O O i v � ° b Ae a• e j W s 14 u c � a u 40 U 6E i0 �' re 16 > a� N MO. a u p > � a py G ,k G x a a b a x Q R ai to 4] �` 4 +{ M r iC U' it 0 w u 40 0{ P ao Q m a w ..i ^ . IB 41 O a In1D v w 8► M Q O G A MIt o49 f tH U 91 Pa N A Q .0 3 w {y o 41 A Noate! OW a Q► d e b e ix > 66 8�• BO U IAlz 4Y u .O ?A -4 ryy/ � � �` r1 iJ rf A► + � O f••' 64 1'+ "''4 � rpq! k 9 H X2 Oi W LA H 0 P9 H' V A. L 5 v u r L Bib a Ca 1C m F k o v di Oq k It ul444 �o � Q G O w 'V k H !Ei C .d � y ac W A tli k V a w a Ion i A U ,� A y -� !i li A 41 �+ =W. U 10 w M ® +� �+ d x U m a U u x e �' �q A ,� h w0 a R a .9 o J+ a O {o w+ 44 fi '"� !n LL, ry M y! A° tA 41�1 r° `r1 i.' ^'ll ° Id M ti 8 w Y m a C. a a .I ` G A A ? a x W & A @ b 1 C 0 ® N eo a cO W .mot �0 it . !p st rA Id ` �� �+ tL � H N a � y�f a d► � � X V A i► @ C tD if W ,l � a '�1 �a a N A a sa a 14 r � 7 - 69 a 4► {a ram( vCi p y Jf a i� r4 A O C d+ is m ?v 1 In C k D7' 8�e IVAa 4 A 4 44 ffi � � � q rlr4D U 40 �C Ri k o a 4 it 44 do co u A iP V 6i • q ji E yr qD eo 't 6v �y °c I• a a AL W O �e Is f p AS rt ii c IN U 1R 67 d1 6► H A tt a'o to bra la ,.i 8P; A ` +t p "A-0 0 a a 3, 34 .tea u fi .e ' as ti N O u R V u U 6 U G 0 • m U 01 mom' Si 0 H fa W • A4�'7n to a b ,t qp ° A 0a a+ A a (2 Id� ty r*u o w COa r43a 4) p 4 U 4.4 Y C a W H ao v tl m as A A k a s4 a P w V > I 0-4U a P. p a a k b W d� r0 a e mU r° �+ Udo Pr A go R of 9 ~ {l O u , > roeIN 0 to o d OJ Ro tt p �' U ��. to '0 4 033 H w, �7 Y r e m 'U D a a A > id 4 a O a 043 y t+ u u v H , v fig o t!a a+ .i A 4A C N A 81 63 W pp A N oa ti ►7 0 4 a G 0 H y enz Oyt rlAmr, MALLmCn a DennmMlY <la uc� v5ol, references the rettrict.ive covenant contained within this Articla VYTZ to be recorded against the City Beach Property. r , t ' & H BI "C" TO GROUND LE SE Peac 6 of 8 Racaivrd A1it•21�01 L6:03ma flora-ZiD fi25 Oil1 To-RVTAN Paaa OB ^� AGREEMENT BETWEEN CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT 2000-1 (GRAND COAST RESORT)AND THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH REGARDING FOREBEARANCE OF REMEDIES UNDER LEASE AGREEMENT THIS AGREEMENT, dated as of December 1, 2001, is made and entered into by and between the City of-Huntington Beach (the "City") on behalf of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) County of Orange, State of California, a legally constituted governmental entity(the"District")and the Redevelopment Agency of the City of Huntington Beach(the "Agency"). RECITALS A. The City of Huntington Beach, by its adoption of Resolution No. 2000-35 adopted April 17,2000(the"Resolution of Formation")established by the District pursuant to the provisions of Chapter 3.56 of the City's Municipal Code (the "Municipal Code") and the Mello-Roos Community Facilities Act of 1992, as amended, commencing with Section 533311 of the California Government Code(the "Act"). B. The City Council,by its Resolution No. 2000-36 adopted April 17,2000, completed proceedings for the authorization of bonded indebtedness on behalf of the District in an aggregate principal amount not to exceed $16,000,000 to finance the costs of acquisition and construction of certain public facilities(the"public Facilities"), on property within the District,including a leasehold interest,to pay debt service on such bonded indebtedness and to pay certain administrative expenses and other costs of the District. Pursuant to such authorization,the District contemplates the issuance and sale of bonds in the approximate amount of$16,000,000(the"Bonds")pursuant to the terms of a Fiscal Agent Agreement, dated as of December 1, 2001 by and between the District and U.S.Bank Corporate Trust, as fiscal agent (the "Fiscal Agent Agreement"). C. The City has established Agency and approved and adopted a redevelopment plan(the "Redevelopment Plan") for a redevelopment project known as the Merged Redevelopment Project (the "Redevelopment Project")pursuant to the provisions of Section 33000 et seq. of the California Health and Safety Code. D. The Agency entered into a Disposition and Development Agreement dated as of September 14, 1998, by and between the Agency and Mayer Financial, Ltd., a California limited partnership(the"DDA")together with a Ground Lease dated April 4,2001,under which the Agency has leased to PCH Beach Resorts,LLC its interest in real property in the District for a period of 99 years the("Lease Agreement"). E. Under the provisions ofthe Lease Agreement,the Agency has the right and power to terminate the Lease Agreement if an event of default by the Developer occurs as described in the Lease Agreement, The Agency acknowledges that payments of Special Taxes levied and collected with respect to the leasehold interest for payment of the Bonds, but only so long as there is a leasehold interest subject to the Special Taxes, and the Agency has determined not to exercise its right to terminate the Lease Agreement,unless the conditions set forth in this Agreement have been satisfied. RVPUB\KAB1620462 1 AGREEMENT NOW,THEREFORE,in consideration ofthe mutual promises and covenants set forth below, the parties hereto agree as follows: 1. Purpose. This Agreement establishes a binding obligation on the part of the Agency to act with the consent of the City when exercising certain remedies under the Lease Agreement. 2. Agency Forebearance of Remedies Under Lease Agreement. For good and valuable consideration of the City's participation in the financing of the Public Facilities,the Agency and the City hereby agree that the Agency shall not exercise its remedy under Section 1200 of the Lease Agreement to terminate the Lease Agreement unless the following shall have-occurred: a) There has been payment in full of all Special Taxes and the Bonds are no longer outstanding; or b) The Agency has prepared a new lease agreement with a subsequent lessee to maintain the leased premises,which lease has a maturity at least as long as the remaining term to maturity ofthe Bonds or any refunding bonds, and has obtained the written consent ofthe City to such termination and new Lease. 3. Term. This Agreement shall remain in effect as long as bonds issued and sold by the District remain outstanding and the levy of the Special Tax by the District is required. 4. Authority. Each party hereto does hereby represent and warrant to the other party that it has the power and authority to enter into this Agreement, and that each person executing this Agreement on its behalf has been duly authorized so to act for and on behalf of such party. 5. Incorporation ofProvisions Required by Law. Each provision and clause required by law to be inserted into this Agreement shall be deemed to be included herein,and this Agreement shall be read and enforced as though each were included herein, it being specifically provided that if through mistake or otherwise any such provision is not inserted or is not correctly inserted, the Agreement shall be amended to make such insertion upon application by any party hereto. 6. Entire Agreement. It is agreed that this Agreement expresses the entire agreement between the parties with regard to the matter hereof, and that no other agreement or understanding, verbal or otherwise, relative to the subject matter hereof exists between the parties at the time of execution,and that this Agreement may be modified or amended only by a written document signed by the duly authorized representative of each and all parties hereto. 7. Notices. Any notices required or permitted to be served by any party upon the other shall be addressed to the respective parties as set forth below, or to such other address as shall be designated by proper notice given from time to time by the respective parties hereto: CITY Administrative Services Department City of Huntington Beach P.O. Box 190 2000 Main Street Huntington Beach, CA 92648 RVPUB\KAM620462 2 AGENCY Economic Development Department P.O. Box 190 2000 Main Street Huntington Beach, CA 92648 8. Amendments, The City and the Agency agree that neither this Agreement nor the DDA shall be amended in any manner which adversely affects the City's obligation with respect to the Bonds. 9, Applicable Law.. This Agreement is made in the State of California and is to be construed under the laws and the constitution of such State. IN WITNESS WHEREOF,the parties hereto have executed this Agreement the day and year set forth above. I CITY OF HUNTINGTON BEACH By Mayor ATTEST: By CONNIE 13RfCKWAY City Clerk APPROVED AS TO FORM: REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH By .—', /0 '11141, &S-� City Attorney,fl=W/2— C airperson ATTEST: By CONNIE BROCKWAY e�eta APPROVED AS TOFORM: Agency General Counsel /z-/V a/ RVPUB\KAB\620462 3 RESOLUTION NO. 2013-19 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH ACTING AS THE LEGISLATIVE BODY OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) AUTHORIZING THE ISSUANCE OF ITS 2013 SPECIAL TAX REFUNDING BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED$14,000,000 AND APPROVING CERTAIN DOCUMENTS AND TAKING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City Council (the "City Council") of the City of Huntington Beach, California (hereinafter sometimes referred to as the "legislative body of the District"), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the.City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District") pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982,. as amended, being Chapter 2.5, Part 1, Division 2, Title 5, of the Government Code of the State of California (the "Act"), and the provisions of Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City(the"Municipal Code"); and Pursuant to proceedings taken and an election held on April 17, 2000, to authorize the issuance of bonds, the levy of special taxes and the establishment of an appropriations limit for the District,the District was authorized to issue bonds in one or more series,pursuant to the Act;and The District has previously issued its City of Huntington Beach Community'Facilities District No. 2000-I (Grand Coast Resort) 2001 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$I6,000,000 (the "Prior Bonds"), which were issued to finance certain infrastructure improvements within the District;and i The City Council, acting as the legislative body of the District, now desires to refund the Prior Bonds through the issuance of bonds in an aggregate principal amount not to exceed $14,000,000 designated as the "City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds" (the "2013 Bonds"); and In order to effect the issuance of the 2013 Bonds, the City Council, acting as the legislative body of the District, desires to enter into a Bond Indenture, dated as of July 1, 20I3 (the "Bond Indenture"), with U.S. Bank National Association, as Trustee, and an Escrow Agreement with U.S. Bank National Association, as Escrow Bank (the "Escrow Agreement") in substantially the forms presented herewith; and The legislative body of the District has determined in accordance with Government Code Section 53360.4 that a negotiated sale of the Bonds to Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter") in accordance with the terms of the Bond Purchase Agreement (defined below)approved as to form by this City Council herein will result in a lower overall cost to the District than a public sale; joy aping in$tru riGnt is v pore,z C'W of the orlglnW on::9ils In this CaPOD'J. URY clerk said :WficiO 0 13-3774/97074 1 Council ofi the t a1t of Huntington stu:A, jli'ff6 a °t „✓ /fir. E'r! - 1� Resolution No. 2013-19 NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH, ACTING AS THE LEGISLATIVE BODY OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1, DOES HEREBY RESOLVE, ORDER AND DETERMINE AS FOLLOWS: Section 1. Each of the above recitals is true and correct. Section 2. The issuance of the 2013 Bonds in a principal amount not to exceed $14,000,000 is hereby authorized pursuant to the Act with the exact principal amount to be determined by the officer signing the Bond Purchase Agreement in accordance with Section 7 below. The 2013 Bonds shall mature on the dates and pay interest at the rates set forth in the Bond Purchase Agreement to be executed on behalf of the District in accordance with Section 7 hereof and otherwise shall be substantially in the form set forth in the Bond Indenture (herein the "Bond Indenture") on file with the City Clerk and made a part hereof. All other provisions of the 2013 Bonds shall be governed by the terms and conditions set forth in the Bond Indenture prepared by Bond Counsel for the District and executed by the Mayor, City Manager or Director of Finance, or their written designees,which Bond Indenture shall be substantially in the form presented to the City Council, with such additions thereto and changes therein as are recommended or approved by Bond Counsel for the District and the officers executing the same, with such approval to be conclusively evidenced by the execution and delivery of the Bond Indenture. Capitalized terms used in this Resolution which are not defined herein have the meaning ascribed to them in the form of the Bond Indenture. In satisfaction of the requirements contained in Section 53363.2 of the Act, the legislative body of the District hereby determines that: (1) it is anticipated that the purchase of the 2013 Bonds will occur on or about June 26,2013, (2) the 2013 Bonds shall be dated their date of issuance, and be in the denominations, have the maturity dates (which do not exceed the latest maturity date of the Prior Bonds being refunded), and be payable at the place and be in the form specified in the Bond Indenture, (3)the aggregate principal amount of 2013 Bonds shall not exceed $14,000,000, (4)the 2013 Bonds shall not have a final maturity date later than September 1, 2032, (5)the issuance of the 2013 Bonds shall not result in a true interest cost for the 2013 Bonds in excess of 5.5%, (6)the Underwriter's discount for the 2013 Bonds shall not exceed 1.5% of the aggregate principal amount thereof, and (7)the designated cost of issuing the 2013 Bonds being used to refund the Prior Bonds, as defined by Section 53363.8 of the Act, shall include all of the costs specified in Section 53363.8(a), (b)(2)and (c). In satisfaction of the requirements contained in Section 53364.2 of the Act, the legislative body of the District hereby determines that any savings achieved through the issuance of the 2013 Bonds shall be used to finance further facilities authorized to be financed by the District with any amount in excess of the costs of the further facilities to be financed, as determined in the sole discretion of the Director of Finance, or her designees, being used to reduce special taxes of the District, and such reductions shall be made in accordance with the Act. Section 3. The 2013 Bonds shall be executed on behalf of the District by the manual or facsimile signature of the Mayor acting on behalf of the District, and attested with the manual or facsimile signature of the City Clerk. 2 13-3774/97074 Resolution No. 2013-19 Section 4. In accordance with the requirements of Section 53345.8(c) of the Act and the Municipal Code, the legislative body of the District hereby determines the Fiscal Year 2012-13 assessed value of the real property in the District subject to the special tax to pay debt service on the 2013 Bonds ($190,194,724) is at least three times the maximum principal amount of the 2013 Bonds and the principal amount of all other bonds outstanding that are secured by a special tax levied pursuant to the Act or a special assessment levied on property within the District ($14,000,000). Section 5. The proceeds of the 2013 Bonds and the Special Taxes may be invested in any of the Authorized Investments of the type described in the Bond Indenture. Section 6. The covenants set forth in the Bond Indenture to be executed in accordance with Section 2 above are hereby approved, shall be deemed to be covenants of the City Council in its capacity as the legislative body of the District and shall be complied with by the District and its officers. The Bond Indenture shall act as a bond indenture and constitute a contract between the District and the Owners of the 2013 Bonds, Section 7. U.S. Bank National Association is hereby appointed to act as Trustee, Registrar and Transfer Agent for the 2013 Bonds and as Escrow Bank under the Escrow Agreement. Willdan Financial Services ("Willdan") is hereby appointed to act as the Dissemination Agent under the Continuing Disclosure Agreement. The Mayor, City Manager, Assistant City Manager or the Director of Finance, or their written designees (collectively, the "Authorized Officers"), are hereby authorized to enter into an agreement with the Trustee and Willdan to provide such services to the District. The forms of the Continuing Disclosure Agreement, the Bond Purchase Agreement, the Escrow Agreement and the Official Statement presented at this meeting are hereby approved and each of the Authorized Officers is hereby authorized and directed to execute the Bond Purchase Agreement, the Continuing Disclosure Agreement,the Escrow Agreement and the Official Statement in substantially the form hereby approved, with such additions thereto and changes therein as are recommended or approved by Bond Counsel for the District and the officers executing the same, with such approval to be conclusively evidenced by the execution and delivery of such documents; provided, however, that the Bond Purchase Agreement shall be signed only if the interest rate on the 2013 Bonds is such that the principal and total interest cost to maturity on the 2013 Bonds is less than the principal and total interest cost to maturity on the Prior Bonds and the last maturity date of the 2013 Bonds is not later than the last maturity date of the Prior Bonds, The Underwriter is hereby authorized to distribute the Official Statement (in both preliminary and final forms) to prospective purchasers, and the Director of Finance,or her written designee, is hereby authorized to certify to the Underwriter prior to the distribution of the Official Statement in preliminary form that such Official Statement is deemed final by the District within the meaning of Rule 15c2-12 of the Securities and Exchange Commission. Section 8. The Authorized Officers are authorized to contract for all services necessary to effect the issuance of the 2013 Bonds. Such services shall include, but not be limited to, printing the 2013 Bonds, the Preliminary Official Statement and the final Official Statement, obtaining legal services,Trustee services and any other services deemed appropriate as set forth in a certificate of the Director of Finance, or her written designee. The Authorized Officers are authorized to pay for the cost of such services, together with other Costs of Issuance, with 2013 Bond proceeds deposited to the Costs of Issuance Fund established pursuant to the Bond Indenture. 3 13-3774/97074 Resolution No. 2013-19 Section 9. All actions heretofore taken by officers and agents of the District and the City of Huntington Beach with respect to the sale and issuance of the Bonds are hereby approved, confirmed and ratified, and the Authorized Officers and the other officers of the City of Huntington Beach and the District responsible for the fiscal affairs of the District are hereby authorized and directed to take any actions and execute and deliver any and all documents as are necessary to accomplish the issuance, sale and delivery of the Bonds in accordance with the provisions of this Resolution and the fulfillment of the purposes of the Bonds as described in the Bond Indenture. Any document authorized herein to be signed by the Clerk of the legislative body of the District may be signed by a duly appointed deputy clerk. PASSED AND ADOPTED By the City Council of the City of Huntington Beach at a regular meeting thereof held on the 3rdday of June,2013. layor REVIEWED AND APPROVED: APPROVED AS TO FORM: City Ma er it �yja�-� INITIATED AND APPROVED: WW",Q6'—'je� Director of Finance Exhibits to Include: Bond Indenture Escrow Agreement Preliminary Official Statement Bond Purchase Agreement 4 13-3774197074 Minutes City Council/Public Financing Authority City of Huntington Beach Monday, June 3, 2013 4:00 PM-Study Session 6:00 PM — Regular Meeting Civic Center, 2000 Main Street, Huntington Beach, California 92648 An audio recording of the 4:00 PM portion of this meeting, and a video recording of the 6:00 PM portion of this meeting, is on file in the Office of the City Cleric and is archived at www,surfcity-hb.org/government/aaendasJ 4:00 PM - ROOM B-8 CALL TO ORDER BY MAYOR PRO TEM HARPER—4:01 PM ROLL CALL - Pursuant to City Council Resolution No. 2001-54, Mayor Connie Boardman requested, and was granted permission to be absent from the June 3, 2013 meeting. I Present: Sullivan, Hardy (arrived 4:09 PM), Harper, Carchio, Shaw, and Katapodis Absent: Boardman ANNOUNCEMENT OF SUPPLEMENTAL COMMUNICATIONS (Received After Agenda Distribution) Pursuant to the Brown "Open Meetings"Act, City Clerk Joan Flynn announced supplemental communications received by her office for Study Session Item No. 1 following distribution of the Council agenda packet: A two-part PowerPoint communication submitted by Police Chief Ken Small, dated June 3, 2013, entitled, Recommendations Regarding Impact of Alcohol Sales and Consumption in Downtown Huntington Beach; and, Proposal to install Video Cameras Downtown. Communication submitted by Richardson Gray dated May 31, 2013 regarding: Strategic Objective—Downtown Alcohol Recommendations, City Council Study Session—June 3, 2013. Communication submitted by James Torres dated June 2, 2013 regarding ideas to help combat alcohol-related problems in Downtown Huntington Beach. Communication submitted by Ron McLin, The Longboard Restaurant and Pub, undated regarding Downtown Alcohol Recommendations. PUBLIC COMMENTS PERTAINING TO STUDY SESSION / CLOSED SESSION ITEMS (3 Minute Time Limit) Mark Bixby provided support for Police Chief Small's recommendations concerning alcohol sales and service in the downtown, but recommended taking a broader approach to facilitate good, responsible behavior. He also provided support for video surveillance in the public right-of-way, Council/PFA Regular Minutes June 3,2013 Page 2 of 14 but requested a small media retention period to avoid problems related to privacy. (00:02:04) Richardson Gray, downtown resident, provided support for Police Chief Small's recommendations concerning alcohol sales and service and video surveillance in downtown Huntington Beach. He also described four additional recommendations he provided in a written communication to Council. (00:03:58) Mary Urashima provided support for Police Chief Small's recommendations concerning alcohol sales and service, and.encouraged additional efforts to increase public safety. She described actions implemented in the City of Fullerton to combat alcohol-consumption issues, and informed Council of a young person's recent passing in a drinking-related accident. (00:04:46) Kim Kramer, downtown resident and Downtown Resident's Association board member, provided support for Police Chief Small's recommendations concerning alcohol sales and services. He also provided statistics related to public safety, criminal activity, and the number of alcohol licenses in the downtown. (00:08:27) STUDY SESSION 1. The Police Department presented recommendations concerning alcohol sales and service in Downtown Huntington Beach. The department also presented a proposal to install video cameras downtown. Police Chief Small provided the first of a two-part PowerPoint presentation entitled "Recommendations Regarding Impact of Alcohol Sales and Consumption in Downtown Huntington Beach,"with the following titled slides: City Council Strategic Plan, Background, Establishments with Alcohol Sales, Establishments with Alcohol Sales and Entertainment, March 7, 2011 Resolution 2011-16, Recommendations, and Questions. Councilmember Shaw and Chief Small discussed grandfathering of entertainment licenses and how approved conditional use permits (CUPs) stay with the business unless the business owner files for a new CUP. Councilmember Carchio and Chief Small discussed the differences between an entertainment and ABC license. Councilmember Shaw and Chief Small discussed how problems downtown impact the rest of the City (reassignment of public safety resources, etc.). Councilmember Carchio discussed the possibility of changing the downtown business model, including the time alcohol stops being served. Councilmember Hardy voiced concerns about how too many restrictions may keep new businesses from coming into the downtown. Mayor Pro Tern Harper and City Manager Wilson talked about the distribution of information to downtown businesses on this item, and it was recommended that multiple stakeholders participate in future discussions before Council takes any action. Chief Small continued with the PowerPoint presentation entitled, "Proposal to Install Video Cameras Downtown,"with the following titled slides: Why Video Cameras?, Use of Video Cameras in 2013, Possible Locations, Three Basic Types of Services, Proposal for Downtown, Council/PFA Regular Minutes June 3, 2013 Page 3 of 14 and Questions, Councilmember Carchio discussed the need for more Police officers downtown, and in his opinion, due to their limited numbers, surveillance cameras are the next best thing. RECESS TO CLOSED SESSION Mayor Pro Tem Harper called for a motion to recess for items 2-5 on the Closed Session agenda. A motion was made by Shaw, second Katapodis to recess to Closed Session. The motion carried by the following vote: i AYES: Sullivan, Hardy, Harper, Carchio, Shaw, and Katapodis NOES: None ABSENT: Boardman CLOSED SESSION 2. Pursuant to Government Code § 54956.9(d)(1), the City Council recessed into Closed Session to confer with the City Attorney regarding the following lawsuits [and potential lawsuits]: Lydia Boynton, et al. v. City of Huntington Beach, Orange County Superior Court Case No. 30-2012- 00570739. In this case, Plaintiff claims she tripped and fell in the City's Banning Branch Library parking lot on Banning Avenue. 3. Pursuant to Government Code § 54956.9(d)(1), the City Council recessed into Closed Session to confer with the City Attorney regarding the following lawsuit: Jeffrey Scott Freeman v. City of Huntington Beach, WCAB Case No. ADJ2566375; Claim No. COHB-03-0151. 4. Pursuant to Government Code § 54956.9(d)(1), the City Council recessed into Closed Session to confer with the City Attorney regarding the following lawsuits [and potential lawsuits]: Richardson v. City of Huntington Beach, Orange County Superior Court Case No. 30-2012- 00545144. In this case, minor Plaintiff was flying his kite with his father and fell into fire pit on Defendant's beach and sustained burn injuries. ! i 5, Pursuant to Government Code § 54956.9(d)(1), the City Council shall recess into Closed Session to confer with the City Attorney regarding the following lawsuits [and potential lawsuits]: Puszert v. City of Huntington Beach, Orange County Superior Court Case No. 30-2011-00467413. In this case, Plaintiff Carol Puszert claims she tripped and fell over a parking block at Murdy Recreation Center. 6:00 PM —COUNCIL CHAMBERS RECONVENE CITY COUNCIL/PUBLIC FINANCING AUTHORITY MEETING I CLOSED SESSION REPORT BY CITY ATTORNEY- None ROLL CALL- Pursuant to City Council Resolution No. 2001-54, Mayor Connie Boardman requested, and was granted permission to be absent from the June 3, 2013 meeting. Present: Sullivan, Hardy, Harper, Carchio, Shaw, and Katapodis Absent: Boardman Council/PFA Regular Minutes June 3,2013 Page 4 of 14 PLEDGE OF ALLEGIANCE— Led by Counciimember Sullivan INVOCATION — Led by Larry Schnitzer of the Huntington Beach Interfaith Council Mayor Pro Tem Harper announced the recent passing of Kelly Morehouse, daughter of Bill and Karen Morehouse, and requested adjourning tonight's meeting in her memory. AWARDS AND PRESENTATIONS Announcement-As part of the City's Human Relations Task Force recognition of federal diversity months, Mayor Pro Tem Harper announced the month of June as Lesbian, Gay, Bisexual and Transgender month. Presentation- Mayor Pro Tem Harper called on Children's Needs Task Force Chair Jim Hayden to present the 2013 Youth Character Award honorees. Mr. Hayden recognized Task Force members in attendance, and announced the retirement of Robert Dettloff. He addressed the importance of good role models and the criteria for selection of Youth Character Award honorees, noting consideration of 54 youths this year. He thanked Council Members who attended the recognition ceremony and called forward honorees providing background on them and presented them with Certificates of Recognition. Honorees present were Fredi Alvarez, Marco Barrales,Alma Barraza, Stephanie Cendro, Taylor Chocek, Quentin Cronk, Ken Gironda, Heather Harris, Lauren Harvey, Emily Izmirian, Yasmine Jaramillo, Mallika Nagarkatti, Bella Pirooz, Connor Reeves, Max Rivera, Ethen Sanchez, Chris Smith, and Douglas Young. Presentation -Team Power introductions and highlights of accomplishments were presented, along with members of the Chili Cook-Off Committee, culminating in a presentation of event proceeds to the Huntington Beach Relay for Life. City Clerk Joan Flynn commented positively on the Youth Character Awards and the amazing young people of the City. She expressed her hope that they will grow up and work for the City, as the City strives to employ only the best and she then recognized current employees who make a difference to the community. She provided introductions and highlights of accomplishments of Team Power and the Chili Cook-Off Committee and addressed recent blood drives, efforts by staff to improve the environment for City employees and the employee recognition program as well as successful measures of each. Ms. Flynn presented details of"Full Hearts and Helping Hands Pantry and Employees'Special Needs" and presented goals for next year. She introduced members of the Committees and addressed the recent Huntington Beach Relay for Life and the Committee Chairs presented proceeds of the Chili Cook-Off to the Huntington Beach Relay for Life. Relay for Life representative Donna Krizo expressed her appreciation for the efforts of the City and its contribution and provided information regarding services funded by contributions. She presented Certificates of Appreciation to the Council, Chili Cook-Off Committee and the Fire Department. ANNOUNCEMENT OF SUPPLEMENTAL COMMUNICATIONS (Received After Agenda Distribution) Council/ PFA Regular Minutes June 3, 2013 Page 5of14 Pursuant to the Brown "Open Meetings" Act, City Clerk Joan Flynn announced one supplemental communication received regarding Consent Item No. 6 submitted by Deputy City Manager Bob Hall identifying revisions to the subject agreement and which changed staffs recommended action. PUBLIC COMMENTS (3 Minute Time Limit) (The number(hh:mm:ss)following the speakers' comments indicates their approximate starting time in the archived video located at http://www.surfcity-hb./org/government/agendas/}. Mayor Pro Tern Harper opened the Public Comments portion of the meeting. Don MacAllister commented on Item No. 12 and acknowledged the efforts of Councilmember Carchio regarding Sister City Manly, New South Wales, Australia. He expressed support for the induction of Manly, New South Wales, Australia as a Sister City. (00:53A 0) Amory Hanson spoke in support of lowering the voting age to fourteen and indicated he would like to meet with Council to address the issue. (00:55:12) Catly Mai, small business owner, voiced concerns about receiving a notice of fees. (00:56:34) Tim Geddes referenced a mailer he received entitled, "An Ocean of Opportunity for Huntington Beach" noting it is part of a propaganda campaign from Poseidon, designed to convince local residents that the proposed desalination plant will be a major boom to the community. He stated that he, along with several residents who received the mailer, returned an enclosed postcard stating their opposition to the project. He noted that the mailer is misleading and contains many half truths and disputed claims and does not state the negative impacts and costs that the project will have on the City. He opined that the mailer, the project and the company are shams and is merely an "Ocean of Opportunity"for Poseidon Resources. (00:57:25) There being no others wishing to address Council, Mayor Pro Tern Harper closed the Public Comments portion of the meeting. COUNCIL COMMITTEE -APPOINTMENTS - LIAISON REPORTS AND ALL AB 1234 DISCLOSURE REPORTING Councilmember Sullivan reported chairing the Executive Committee and General Committee of the Orange County Senior Citizens' Advisory Council. Counciimember Carchio reported attending the Memorial Day Ceremony at the pier and commented positively on the event. He reported the passing of George Scott of Fountain Valley and provided a brief report of his background, qualities and experience in government. He announced upcoming memorial celebrations in honor of Mr. Scott. Mayor Pro Tern Harper reported attending the ACCOC Infrastructure Summit and commented positively on the event. CITY MANAGER'S REPORT City Manager Fred Wilson reported that the June 7th AQMD meeting regarding fire rings has 1 Council/PFA Regular Minutes June 3, 2013 Page 6 of 14 been postponed until July 12, 2013, tentatively. He added that a proposal has been submitted for a potential compromise which may allow the fire rings to remain. CONSENT CALENDAR 1. Approved and adopted minutes A motion was made by Councilmember Carchio, second by Councilmember Katapodis to approve and adopt the minutes of the City Council/Public Financing Authority Regular Meeting of May 20, 2013, as written and on file in the office of the City Clerk. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman 2. Approved City Position on Certain Legislation Mayor Pro Tern Harper pulled this item for separate consideration and discussion. He requested clarification regarding the Mayor taking a position on behalf of Council prior to the item being i agendized, City Attorney Jennifer McGrath reported it is perfectly appropriate for the Mayor to take a position and requesting ratification by Council Members. i Councilmember Hardy addressed a process regarding the IRC and its Chair generating an emergency letter and noted that the IRC is currently without a Chair. She felt that the policy and process need further consideration. City Manager Wilson suggested agendizing the matter regarding the IRC to obtain additional clarification. Councilmember Sullivan felt that it is appropriate only when it involves staff recommendations on time-sensitive financial matters affecting the City. Councilmember Hardy stated the original AQMD letter which was a time-sensitive issue was sent prior to Council ratification, Mayor Pro Tern Harper expressed concern with the Mayor taking action on behalf of Council prior to Council taking action, noted the need to discuss the item further and indicated that he will vote "no" on this matter. A motion was made by Councilmember Hardy, second by Councilmember Shaw to authorize the Mayor to sign a letter of Support for AB 416 (Gordon) - Local Emission Reduction Program; authorize the Mayor to sign a letter of Support for SB 64-Proposition 39 Implementation; ratify the submittal of the Mayor's Letter(dated May 1, 2013) of Opposition unless Amended for AB 1147 (Gomez)— Massage Therapy; ratify the submittal of the Mayor's Letter(dated May 23, 2013) of Opposition for AB 5 (Ammiano) - Homelessness; authorize the Mayor to sign a letter of Opposition for AB 1333 (Hernandez)— Local Government Contracts; authorize the Mayor to sign Council/PFA Regular Minutes June 3, 2013 Page 7 of 14 a letter of Support for AS 564(Mullin)— Community Redevelopment/Successor Agencies; authorize the Mayor to sign a Letter of Opposition for AS 325 (Alejo)- Land use and planning cause of actions/time limitations; and, approve and authorize the City Manager to sign the 2013 Federal Agenda Project Priorities. The motion carried with the following vote: AYES: Sullivan, Hardy, Carchio, Shaw, Katapodis NOES: Harper ABSENT; Boardman 3. Approved the West Orange County Water Board proposed budget for Fiscal Year 2013/14, with the City of Huntington Beach share in the amount of$91,924 Mayor Pro Tern Harper pulled this item for separate consideration and discussion. He indicated interest in hearing arguments against the matter. Councilmember Shaw reported that the Board operates with a narrow focus and felt that the task could be performed in-house thereby, saving a lot of money for the City. Mayor Pro Tern Harper felt this would be an appropriate matter to refer to the IRC. A motion was made by Mayor Pro Tern Harper, second by Councilmember Katapodis to approve the Fiscal Year 2013/2014 WOCWB proposed budget in the amount of$155,000, with the City of Huntington Beach share in the amount of$91,924, as amended to refer to the iRC a request to examine Huntington Beach's reiationship with the WOCWB. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Katapodis NOES: Carchio, Shaw ABSENT: Boardman 4. Approved and authorized execution of a Lease Agreement between the City and Huntington Shoreciiff, L.P. for storage of recreational vehicles A motion was made by Councilmember Carchio, second by Councilmember Katapodis to approve and authorize the Mayor to execute the "Lease Agreement Between the City of Huntington Beach and Huntington Shorecliff, L.P. for Use of City Property Near the Southwest Corner of Beach Boulevard and Frankfort Avenue (APN 024-250-01);" and, authorize the City Manager to take any actions necessary to effectuate the Agreement, The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman 5. Approved and authorized execution of a Third Amended Joint Powers Agreement with Metro Cities Fire Authority providing dispatch services for Huntington Beach i Council/PFA Regular Minutes June 3, 2013 Page 8 of 14 as part of a regionalized fire dispatch delivery system A motion was made by Councilmember Carchio, second by Councilmember Katapodis to approve and authorize the Mayor and the City Clerk to execute the"Metro Cities Fire Authority Third Amended Joint Powers Agreement." The motion carried with the following roll call vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman 6. Approved and authorized execution of Assignment and Assumption Agreement between DiM Aequisition Group, 1. , PC Group Retail, LLC, affiliate of DJM Capital, Olson Real Estate Group, Inc., and the City for Pacific City Hotel Parcel A motion was made by Councilmember Carchio, second by Councilmember Katapodis to approve the Assignment and Assumption Agreement between DJM cnqu&tian Group, r PC Group Retail LLC, an affiliate of DJM Capital, and Olson Real Estate'Group, Inc. and the City of Huntington Beach; and, authorize the Mayor and City Clerk to sign amended Agreement. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman 7. Adopted Resolution No. 2013-17 reducing salary and benefits for non-represented employees (Director of Community Services), and approved revised job specifications for the Director of Community Services Councilmember Katapodis pulled this item for separate discussion and consideration. He addressed the matter of salary and felt that a low salary of$10,359 to $13,843 would be more appropriate than a higher salary and requested modifying the matter as such. Manager Wilson addressed consideration of salaried positions and felt that the salary recommendation worked in terms of the structure of other departments. He felt there is a value in keeping the salary range as recommended. Councilmember Katapodis reported reviewing comparable salaries in other cities. Mr. Wilson felt that the City must pay a decent wage in order to get quality employees. Brief discussion followed regarding the possibility of continuing this item. Council/PFA Regular Minutes June 3, 2013 Page 9 of 14 *The.2n Gtinn carried with the F II Wi }e• AA,,^^Cc 1 ASSENTi BE)WdMaR *At the conclusion of the meeting, there was a motion to reconsider this item on June 17, 2013. a. Adopted Ordinance No. 3979 amending Chapter 14.56 of the Huntington Beach Municipal Code (HBMC) relating to the control and regulation of Fats, Oils, and Grease. Approved for introduction May 20, 2013 (Vote: 7-0) A motion was made by Councilmember Carchio, second by Councilmember Katapods to adopt Ordinance No. 3979, "An Ordinance of the City of Huntington Beach Amending Chapter 14.56 of the Huntington Beach Municipal Code Relating to the Control and Regulation of Fats, Oils, and Grease." The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman PUBLIC HEARING 9. Denied Site Plan Review No. 11-004 and Variance No. 12-004 (Casa Rincon) located at 18431 Beach Blvd. i Principal Planner Rosemary Medel presented details of the report addressing location, description of the project, details of the variance request, site plan, previous actions related to the request, site plan review application analysis, compatibility and grade differential, connectivity, traffic, architectural design and building materials and recommendations. She explained the rationale for denying as stated in the report and recommendations. Mayor Pro Tem Harper opened the Public Hearing, Morrie Golchek, property owner representing the applicant, felt that the project is simple and that it is an example of a great vision of what is good for the City. He reported that they are not requesting any variances and will implement all of staff recommendations regarding the project. He addressed the wall and stated that they will reduce the height. Regarding the architecture, he reported that they will adhere to the City's requirements and will design the project as required. He addressed the entry, maintaining the open area and the ingress/egress. Mr. Golchek reported on his efforts and hardships in trying to accommodate the City's requirements. (01:25:25) Catly Mai spoke in support of the project. (01:32:07) There being no others wishing to address Council, Mayor Pro Tem Harper dosed the Public Hearing. Council/PFA Regular Minutes June 3, 2013 Page 10 of 14 Councilmember Hardy wondered regarding restricting the professions of residential renters. Planner Medei reported that it would be based on income and meeting Federal and State guidelines if tax credits are desired. Planner Medel addressed the original submission of the project and previous opportunities to continue to work with staff to change the project but were never taken. She stated that the lack of change to the project indicates that the review is complete. She added that streamlining would involve acting at this time and encouraging the applicant to submit a new application with implementation of the proposed changes. Councilmember Hardy felt that Council should not attempt to fix the problems between staff and the applicant and indicated that she will not support any project that requests decreases in open public space. A motion was made by Councilmember Hardy, second by Councilmember Katapodis to deny Site Plan Review No. 11-004 and Variance No. 12-004 with findings for denial. Councilmember Carchio wondered regarding issues with public safety and related access. Staff noted ways that the applicant could design the site to comply with fire emergency access, and added that the plan as presented is inconsistent with the vision anticipated in the Beach/Edinger Corridor Specific Plan. Councilmember Carchio wondered why changes by the developer are being suggested at this time when they were not suggested during previous opportunities. Mr. Golchek indicated that he is the property owner and has nothing to do with the development of the project and addressed the length of the escrow. He added that he got involved recently and has been working with the developer to comply with City requirements. He suggested a continuance of thirty days to allow for presentation of changes. Staff stated that more than thirty days would be necessary. Mayor Pro Tern Harper suggested continuing the item to a date uncertain and Councilmember Carchio agreed. Councilmember Katapodis wondered if Mr. Golchek is authorized to request proposed changes and Mr. Golchek indicated that he has been authorized by the developer. Councilmember Hardy inquired regarding staff preferences and additional costs related to continuing the matter. Staff reported that it would be preferable for Council to make a decision on the project at this time, noted that similar commentaries were made at a previous Planning Commission meeting and that no changes were received subsequently. He noted the applicant could revise the project and submit an application as soon as the next day with appropriate fees. Councilmember Hardy noted all of the opportunities provided to the applicant to modify the plans without them doing so, and indicated she would not support a motion for continuance. Councilmember Shaw indicated agreement with Councilmember Hardy. He stressed that the plan does comply with the design guidelines of the BeacWEdinger Corridor Specific Plan and felt that as presented, it does not provide an asset to the City. Council/PFA Regular Minutes June 3,2013 Page 11 of 14 Councilmember Sullivan expressed agreement with Council Members Hardy and Shaw and indicated he will support staffs recommendations. Councilmember Carchio expressed concern that if the project is not developed, the City will not have another much-needed affordable housing project. A substitute motion was made by Councilmember Carchio, second by Mayor Pro Tem Harper to continue the matter to a date uncertain. Councilmember Katapodis felt that staff and the Planning Commission have worked hard on this matter without action by the developer to revise the plans. Staff noted the need to make a decision within a specified period of time. The substitute motion failed with the following vote: AYES: Harper, Carchio NOES: Sullivan, Hardy, Shaw, Katapodis ABSENT: Boardman The original motion made by Councilmember Hardy, second by Councilmember Katapodis to deny Site Plan Review No. 11-004 and Variance No. 12-004 with findings for denial carried with the following vote: AYES: Sullivan, Hardy, Shaw, Katapodis NOES: Harper, Carchio ABSENT: Boardman ADMINISTRATIVE ITEMS 10. Adopted City Council Resolutions Nos. 2013-18, 2013-19, 2013-20 and 2013-21 Authorizing the Issuance of Four (4) Huntington Beach 2013 Special Tax Refunding Bonds for and on Behalf of the City of Huntington Beach Community Facilities District No. 1990-1 (Goldenwest/Ellis Area), City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort), City of Huntington Beach Community Facilities District No. 2002-1 (McDonnell Centre Business Park), and City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) Manager Wilson introduced the matter and deferred to staff for a report. Finance Director Lori Ann Farrell presented details of the report and addressed background including existing Community Facilities Districts (CFD) within the City, the purpose of issuing the bonds, repayment and refunding. She presented an overview of the CFDs, bonds outstanding totals and present value savings from refunding. She addressed relative interest rates, next steps and recommendations. A motion was made by Councilmember Carchio, second by Councilmember Sullivan to adopt Resolution No. 2013-18, "A Resolution of the City Council of the City of Huntington Beach Acting 1 Council/PFA Regular Minutes June 3, 2013 Page 12 of 14 as the Legislative Body of the City of Huntington Beach Community Facilities District No. 1990-1 Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount Not to Exceed $1,200,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith," including Exhibits: Bond Indenture, Escrow Agreement, Preliminary Official Statement, Bond Purchase Agreement; adopt Resolution No. 2013-19, "A Resolution of the City Council of the City of Huntington Beach Acting as the Legislative Body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount Not to Exceed $14,000,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith," including Exhibits: Bond Indenture, Escrow Agreement, Preliminary Official Statement, Bond Purchase Agreement; adopt Resolution No. 2013-20, "A Resolution of the City Council of the City of Huntington Beach Acting as the Legislative Body of the City of Huntington Beach Community Facilities District No. 2002-1 (McDonnell Centre Business Park)Authorizing the issuance of its Improvement Area A 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount Not to Exceed $5,500,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith,"including Exhibits: Bond Indenture, Escrow Agreement, Preliminary Official Statement, Bond Purchase Agreement; adopt Resolution No, 2013-21, "A Resolution of the City Council of the City of Huntington Beach Acting as the Legislative Body of the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount Not to Exceed $22,000,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith," including Exhibits: Bond Indenture, Escrow Agreement, Preliminary Official Statement, Bond Purchase Agreement; authorize the City Manager and City Clerk to take all administrative actions necessary to perform the bond refunding; and, authorize the Mayor, City Manager, City Clerk and Finance Director to execute all related documents. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman ORDINANCES FOR INTRODUCTION 11. Approved for Introduction Ordinance No. 3980 repealing Chapter 9.60 of the Huntington Beach Municipal Code(HBMC) relating to Hypnotism Mayor Pro Tern Harper noted that this item was presented and discussed at a previous meeting and noted that the ordinance serves no purpose at this time. A motion was made by Mayor Pro Tern Harper, second by Councilmember Hardy to after the City Clerk reads by title, approve for Introduction Ordinance No. 3980, "An Ordinance of the City of Huntington Beach Repealing Chapter 9.60 of the Huntington Beach Municipal Code Relating to Hypnotism." The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None Council/PFA Regular Minutes June 3, 2013 Page 13 of 14 :ABSENT: Board man COUNCILMEMBER ITEMS 12. Request submitted by Councilmember Carchio regarding: Sister City Manly, New South Wales,Australia Councilmember Carchio presented brief background on the item noting previous adoption by Council of an informal relationship. He addressed the importance of Manly relative to similarities with Huntington Beach in terms of its surf culture, economics and business community. Mayor Pro Tem Harper acknowledged Councilmember Carchio's leadership in this regard. A motion was made by Councilmember Carchio, second by Mayor Pro Tern Harper to accept the Surfing Walk of Fame as the governing board of Sister City Manly, New South Wales, Australia. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman COUNCILMEMBER COMMENTS (Not Agendized) Councilmember Katapodis noted the need to reconsider Consent Item No. 7 per the advice of City Attorney McGrath who stated that staff requests continuing the matter to determine the appropriate compensation range. A motion was made by Councilmember Katapodis, second by Councilmember Shaw, to reconsider adoption of Resolution No. 2013-17 reducing salary and benefits for non-represented employees (Director of Community Services), and approved revised job specifications for the Director of Community Services. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman A motion was made by Councilmember Katapodis, second by Councilmember Shaw continue Consent Item No. 7 to June 17, 2013. The motion carried with the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman Councilmember Katapodis reported visiting Calgary, Canada where he read in a local newspaper an article regarding the City of Huntington Beach and saving the fire rings. Council/PFA Regular Minutes June 3, 2013 Page 14 of 14 Councilmember Shaw reported attending the Memorial Day Ceremony and commented positively on the event. Councilmember Carchio reported attending the Memorial Day Ceremony and commented positively on the event. He reported attending a celebration for the Huntington Beach High School Boys'Volleyball CIF Championship Win party and addressed the accomplishments of the team. Councilmember Hardy expressed congratulations to the Marina High School Baseball team which made it to the CIF finals played at Dodger Stadium. Councilmember Sullivan commented on the Memorial Day Ceremony and noted the participation of the Huntington Beach Band. Mayor Pro Tern Harper commented positively on the Memorial Day Ceremony and reported attending and officiating for the installation of new officers for the Huntington Beach Coordinating Council and wished them well. In addition, he announced the rejection of SB504 by the Legislation in Sacramento regarding a ban on plastic bags. ADJOURNMENT There being no other business to come before Council and the Public Financing Authority, Mayor Pro Tern Harper adjourned the meeting at 8:17 PM in memory of Kelly Morehouse and George B. Scott. The next regularly scheduled meeting of the Huntington Beach City Council/Public Financing Authority is Monday, June 17, 2013, at 4;00 PM in Room B-8, Civic Center, 2000 Main Street, Huntington Beach, California. + Cler and ex-officio Clerk of Ve City Council of the City of Huntington Beach, and Secretary of the Huntington Beach Public Finance Authority ATTEST: CilYClerk, Clerk, Secreta ayor- hair I i $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS i CERTIFICATE OF THE CITY CLERK BRINGING FORWARD RESOLUTIONS AND ORDINANCE I hereby certify that the resolutions and the ordinance listed on. Exhibit A attached hereto previously adopted by the City Council of the City of Huntington Beach (the "City"), acting on behalf of itself and in its capacity as the legislative body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort), have not been amended, supplemented, superseded or rescinded since their respective dates of adoption, except to the extent expressly set forth in the resolutions and the ordinance listed on Exhibit A attached hereto. i Dated: July 31, 2013 CITY OF HUNTINGTON BEACH City•Clerk ' fx I f I D O C S O C/163 3116/0222 7 3-0006 i EXMBIT A Resolution No. 2000-35 Establishing Community Facilities District No. 2000-1 (Grand Coast Resort)and Establishing the Boundaries thereof,adopted April 17,2000. Ordinance No. 3519 entitled"An Ordinance of the City of Huntington Beach Levying Special Taxes within the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)",adopted December 3, 2001 Resolution No. 2003-19 entitled "Resolution of the City Council of the City of Huntington Beach Acting as the Legislative Body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount not to $14,000,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith," adopted June 3,2013 A-1 BOND INDENTURE Between I CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) and U.S.BANK NATIONAL ASSOCIATION, as Trustee Relating To $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Dated as of July 1,2013 DOCSOC/161659M/Q22273-0006 Table of Contents Page ARTICLE U2PTNITD]N3 3ccduul.l Definitions.....................................................................................................................2 }\RIlCLED GENERAL AUTHORIZATION AND BOND TERMS 3cc1iuu2.| Amount, Issuance,Purpose and Nature of Bonds.........................................................8 Section 2.2 Type and Nature of Bonds ............................................................................................8 Section 2.3 Equality of Bonds and Pledge of Net Taxes .................................................................9 Section 2.4 Description of Bonds; Interest Rates.............................................................................9 Section 2.5 Place and Form of Payment........................................................................................lO Section2.6 Form of Bonds.............................................................................................................ll Section 2.7 Execution and Authentication.....................................................................................ll 3ccboul8Bond Register..............................................................................................................ll 3ccdoul9 Registrationof Exchange o«Transfer.........................................................................l2 3onbuu2.lO Mutilated, Loot,Destroyed or Stolen Bonds...............................................................l2 3ccdou2.11 Validity of Bonds........................................................................................................l2 8cctknn2.l2 Bo System.....................................................................................................l2 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Soctiou3.l Creation of Funds........................................................................................................l4 Section 3.2 Disposition of Bond Proceeds.....................................................................................l4 Section 3.3 Deposits to and Disbursements fi-omu Special Tax Fund.............................................|5 Section 3,4 Administration Fund...................................................................................................l5 Section 3.5 Debt Service Account ofthe Special Tax Fund..........................................................l6 Section 3.6 RedemptionAccount of the Special Tax Fund...........................................................l6 Section 3.7 Reserve Account of the Special Tax Fund..................................................................l7 Section3.8 Rebate Fund ................................................................................................................l7 Section 3.9 Costs of Issuance Fund................................................................................................l8 Section3.lO Surplus Fund...............................................................................................................l9 3ccdou3.11 Investments .................................................................................................................l9 ARTICLE IV REDEMPTION OF BONDS Section 4.l Redemption of Bonds..................................................................................................2l Section 4.2 Selection of Bonds for Redemption............................................................................23 Section 4.3 Notice of Redemption----------...-----.--,.--.--.—...—.—.-23 3cctioun4/4 Partial Redemptionof Bonds......................................................................................24 Section 4.5 Effect of Notice and Availability of RedemptionMoney...........................................24 o0C3OC/ vlv5YO,8/022273-000v Table of Contents (continued) Page ARTICLE V COVENANTS AND WARRANTY Section5.1 Warranty......................................................................................................................24 Section5.2 Covenants...................... ..................................................................24 ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent...................29 Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent..........................30 Section 6.3 Notation of Bonds; Delivery of Amended Bonds.......................................................31 ARTICLE VII TRUSTEE Section7.1 Trustee.........................................................................................................................31 Section7.2 Removal of Trustee.....................................................................................................32 Section 7.3 Resignation of Trustee ................................................................................................32 Section7.4 Liability of Trustee......................................................................................................32 Section 7.5 Merger or Consolidation.............................................................................................33 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section8.1 Events of Default.........................................................................................................33 Section 8.2 Remedies of Owners............. ..34 .................................................................................... ARTICLE IX DEFEASANCE Section9.1 Defeasance..................................................................................................................35 ARTICLE X MISCELLANEOUS Section 10.1 Cancellation of Bonds.................................................................................................36 Section 10.2 Execution of Documents and Proof of Ownership......................................................36 Section 10.3 Unclaimed Moneys .................................................... ....37 ............................................. Section 10.4 Provisions Constitute Contract....................................................................................37 Section10.5 Future Contracts..........................................................................................................37 Section 10.6 Further Assurances.............. ....37 .................................................................................... Section10.7 Severability .................................................................................................................37 Section10.8 Notices.........................................................................................................................38 ii DOCSOCJ 1616590v8J022273-0006 i Table of Contents (continued) Page Section 10.9 Action on Next Business Day.....................................................................................39 EXHIBITA FORM OF BOND.....................................................................................................A-1 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE...............................................................................................................B-1 4 f I 111 DOCSOC/I616590v8/022273-0006 BONDINDENTURE THIS BOND INDENTURE ("Indenture") dated as of July 1, 2013, by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the"District") and U.S. Bank National Association, as Trustee (the "Trustee"), governs the terms of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds (the"Bonds") issued in accordance herewith. RECITALS. i WHEREAS, the City Council of the City of Huntington Beach, California (hereinafter sometimes referred to as the "legislative body of the District"), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the District pursuant to the terms and pursuant to the provisions of Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City(the"Municipal Code") and the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part I of Division 2 of Title 5 of the California Government Code (the"Act"); and WHEREAS, the District has previously issued its City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2001 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$16,000,000 pursuant to that certain Fiscal Agent Agreement by and between the District and U.S. Bank National Association, as fiscal agent (the "Prior Fiscal Agent"), dated as of December 1, 2001 (the "Prior Fiscal Agent Agreement"), and the Refunded Bonds are the only bonds of the District outstanding; and WHEREAS, the Refunded Bonds were issued by the District to finance certain infrastructure improvements within the District; and WHEREAS, the legislative body of the District intends to accomplish the refunding of the Refunded Bonds through the issuance of bonds in an aggregate principal amount of $12,965,000 designated as the "the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds" (the "Bonds") and to fund a deposit to the Reserve Account and pay certain costs related to the issuance of the Bonds; and WHEREAS, the District has determined that the issuance of the Bonds will provide significant public benefits by reducing the total amount of Special Taxes to be levied for debt service on indebtedness of the District; and WHEREAS, the Bonds are to be issued and sold in accordance with Resolution No. 2013-19 of the City Council of the City of Huntington Beach (the "City"), acting in its capacity as the legislative body of the District, adopted on June 3,2013, and with this Indenture; and WHEREAS, the District has determined that all requirements of the Act for the issuance of the Bonds have been satisfied; and WHEREAS, upon their issuance, the Bonds will be the only outstanding bonds of the District, and the District is covenanting herein not to issue any future obligation or security having a DOC SOC/1616590v8/022273-0006 I i lien, charge, pledge or encumbrance on a parity with the Bonds upon the Special Taxes, except to defease the Bonds; NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Bonds which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. "Administrative Expenses Cap" means $20,000 per Fiscal Year, escalating 2% annually, commencing with Fiscal Year 2015. "Administration Fund" means that certain fund by that name established pursuant to Section 3.4 hereof. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Trustee and any Special Tax Consultant to the District, any costs related to the District's compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder. "Agency" means the former Redevelopment Agency of the City of Huntington Beach. "Alternative Penalty Account" means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized Investments" means any of the following investments, if and to the extent the same are at the time legal for investment of the District's funds (the Trustee is entitled to rely upon investment direction from the District as a certification such investment is an Authorized Investment): (a) Federal Securities; J, 1 1 2 DOCSOC/1616590v8/022273-0006 1 i (b) Senior debt obligations, participations, or other instruments issued by a federal agency or United States government-sponsored enterprise, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises (stripped securities are only permitted if they have been stripped by the agency itself); c Money market funds registered under the Federal Investment Company Act ( ) Y g p Y c of 1940, whose shares are registered under the Federal Securities Act of 1933 and having a rating of AAA or better by a Nationally Recognized Statistical Rating Organization(NRSRO); (d) Certificates of deposit issued by commercial banks, savings and loan associations or mutual savings banks with ratings in the top 2 rating categories; (e) Certificates of deposit, savings accounts, deposit accounts or money market deposits where the banks rating's fall within the top 2 ratings categories; (f) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase that is rated at least A-1 or its equivalent by a NRSRO and maturing no more than 360 days after the date of purchase (i.e., ratings on holding companies are not considered as the rating of the bank); (g) Commercial Paper rated, at the time of purchase, at least A-1 or its equivalent by a NRSRO and maturing no more than 270 days after the date of purchase; (h) Repurchase agreements with financial institutions insured by the FDIC; or any broker-dealer with "retail customers" which falls under the jurisdiction of the Securities Investors Protection Corporation (SIPC); or a bank or other financial institution rated in the top two rating categories by one or more Rating Agencies; provided that: (i) the over-collateralization is at one hundred two percent(102%), computed weekly, consisting of such securities as described in this section, items (a) through (c); (ii) a third party custodian, the Trustee or the Federal Reserve Bank shall have possession of such obligations; (iii) the Trustee shall have perfected a first priority security interest in such obligations; and(iv)failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral; (i) County or State-administered pooled investment funds in which the District is statutorily permitted or required to invest to the extent that any amounts are deposited by the Trustee into such funds and the Trustee shall have direct access to such fund; 0) California Asset Management Program (CAMP). "Bond Counsel" means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. 3 DOCSOC/1616590v8/022273-0006 I "Bond Year" means the twelve (12) month period commencing on September 2 of each year and ending on September 1 of the following year, and for the first Bond Year commencing on the Delivery Date and ending on September 1,2013. i "Bondowner" or"Owner" means the person or persons in whose name or names any Bond is registered. "Bonds" means the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds issued in the original principal amount of $12,965,000. "Business Day" means a day which is not a Saturday or Sunday or a day of the year on which banks in New York,New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located, are not required or authorized to remain closed. "Certificate of an Authorized Officer" means a written certificate executed by one of the Mayor, City Manager,Director of Finance of the City, or their written designees. "City"means the City of Huntington Beach, California. "City Council" means the City Council of the City. "Code"means the Internal Revenue Code of 1986,together with any amendments thereto. "Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement, dated July 1, 2013, by and between the District and Willdan Financial Services, as dissemination agent thereunder. "Corporate Trust Office" means the Corporate Trust Office of the Trustee at 633 West 5th Street, 24th Floor, Los Angeles, California 90071, Attention: Global Corporate Trust Services, or such other office designated by the Trustee from time to time. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and final Official Statements, financial consultants, special tax consultants and other fees and expenses set forth in a Certificate of an Authorized Officer. "County"means the County of Orange, California. "Costs of Issuance Fund" means the fund by that name established pursuant to Section 3.1 hereof. "Delivery Date" means the date on which the Bonds were issued and delivered to the initial purchasers thereof. "Depository"means the securities depository acting as Depository under Section 2.12 hereof. "Director of Finance"means the Director of Finance of the City, or his or her designee. 4 DOCSOC/1616590v8/022273-0006 I i "Dissemination Agent"means Willdan Financial Services, and any successor thereto. "District"means City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) established pursuant to the Act and the Resolution of Formation. "Escrow Agreement" means the Escrow Agreement, by and between U.S. Bank National Association, as Escrow Bank, and the District,dated as of July 1,2013. "Escrow Bank"means U.S. Bank National Association. "Escrow Fund"means the Escrow Fund established under the Escrow Agreement. "Extraordinary Administrative Expenses" means Administrative Expenses required for extraordinary District events such as foreclosure actions against delinquent taxpayers within the District required to be prosecuted on an expedited basis pursuant to this Indenture, the approval and implementation of actions requiring Bondowner consent under this Indenture, or actual or threatened Bondowner or property owner litigation arising out of the Bonds or the District. "Federal Securities"means any of the following: (1) Cash (insured at all times by the Federal Deposit Insurance Corporation ("FDIC") or otherwise collateralized with obligations described in paragraph(2)below), (2) Direct obligations of(including obligations issued or held in book-entry form on the books of)the Department of the Treasury of the United States of America, or (3) Obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "Gross Taxes" means the amount of all Special Taxes received by the District, together with the net proceeds collected from the sale of property pursuant to the foreclosure provisions of this Indenture, penalties and interest received by the District in connection with the delinquency of such Special Taxes and proceeds from any security for payment of Special Taxes taken in lieu of foreclosure after payment of administrative costs and attorneys' fees payable from such proceeds to the extent not previously paid as an Administrative Expense. "Indenture" means this Bond Indenture, together with any Supplemental Indenture approved pursuant to Article VI hereof. "Independent Financial Consultant" means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District or the City,who, or each of whom: (a) is in fact independent and not under the domination of the District or the City; 5 D OC SO C/1616590v8/022273-0006 l I I (b) does not have any substantial interest, direct or indirect, in the District or the City; and i (c) is not connected with the District as a member, officer or employee of the District,but who may be regularly retained to make annual or other reports to the District or the City. "Interest Payment Date"means each March 1 and September 1, commencing March 1, 2014; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. "Lease Remedy Forbearance Agreement" means that certain agreement dated as of December 1,2001, by and between the City and the Agency. "Maximum Annual Debt Set-vice" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of the Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Net Taxes" means Gross Taxes minus amounts, not in excess of the Administrative Expenses Cap, set aside to pay Administrative Expenses. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.12 hereof. "Ordinance" means Ordinance No. 3519 adopted by the legislative body of the District on December 3,2001 providing for the levying of the Special Tax. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the District, except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof; (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture; and (3) Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. "Participants"means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds the Bonds as a securities depository. 6 DO CS OC/1616590v8/022273-0006 "Rating Agency" means Moody's Rating Service and Standard & Poor's or both, as the context requires. "Rate and Method of Apportiomment" means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation as it may be amended from time to time in accordance with the Act and this Indenture. "Rebatable Arbitrage" means the amount (determinable as of the last day of each fifth Bond Year and upon retirement of the Bonds) of arbitrage profits payable to the United States at all times and in the amounts specified in Section 148(f) of the Code and any applicable Regulations. i "Rebate Regulations" means any final, temporary or proposed Regulations promulgated under Section 148(f)of the Code. i "Record Date" means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. � Y Y "Regulations" means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Representation Letter" shall mean the Blanket Letter of Representations fi•om the District to the Depository as described in Section 2.12 hereof. "Reserve Account" means the account established within the Special Tax Fund pursuant to Section 3.7 hereof. "Reserve Requirement"means that amount as of any date of calculation equal to the lesser of (i) 10% of the initial principal amount of the Bonds, if any, (ii)Maximum Annual Debt Service on the then Outstanding Bonds, if any; and (iii) 125% of average Annual Debt Service on the then Outstanding Bonds. "Resolution of Formation" means, Resolution No. 2000-35 adopted by the City Council on April 17, 2000,pursuant to which the City formed the District. "Resolution of Issuance" means Resolution No. 2013-19 duly adopted by the City Council, acting in its capacity as the legislative body of the District on June 3, 2013,approving this Indenture, and any supplemental bond indenture approved pursuant to Article VI hereof. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in Section 4.1(b)hereof. "Special Tax Prepayments" means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method of Apportionment. "Special Taxes" means the taxes authorized to be levied by the District in accordance with the Ordinance,the Resolution of Formation,the Act and the Rate and Method of Apportionment. "Special Tax Fund"means the fund by that name established pursuant to Section 3.1. 7 DOC SOC/1616590v8/022273-0006 "Successor Agency"means the City of Huntington Beach. "Supplemental Indenture" means any supplemental indenture amending or supplementing this Indenture. "Surplus Fund"means the fund by that name established pursuant to Section 3.10. "Tax Certificate" means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Taxable Property" means the area within the boundaries of the District which is not exempt from application of the Special Tax by operation of law or the Rate and Method of Apportionment. "Term Bonds" means the Bonds maturing on September 1, 2026, September 1, 2029 and September 1, 2031. "Treasurer" means the Treasurer-Tax Collector of the County of Orange. "Trustee"means U.S.Bank National Association,and any successor thereto. i "Underwriter" means Stifel,Nicolaus& Company, Incorporated. ARTICLE Il GENERAL AUTHORIZATION AND BOND TERMS Section 2.1 Amount, Issuance, Purpose and Nature of Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of$12,965,000 shall be issued for the purposes of refunding the Refunded Bonds, funding the Reserve Account and paying Costs of Issuance. The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the funds created hereunder, other than amounts in the Rebate Fund or the Administration Fund. Section 2.2 Type and Nature of Bonds. Neither the faith and credit nor the taxing power of the City, the State of California, or any political subdivision thereof other than the District is pledged to the payment of the Bonds. Except for the Special Taxes,no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City or general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund, as more fully described herein. The District's limited obligation to pay the principal of, premium, if any, and interest on the Bonds from amounts in the Special Tax Fund is absolute and unconditional, fi-ee of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption thereof, if-any, are not a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the District's property, or upon any of its income, receipts or revenues, except the Net Taxes and 8 D OC SO C/1616590v8/022273-0006 other amounts in the Special Tax Fund which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds and interest thereon and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds, are liable personally on the Bonds, by reason of their issuance. Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3 Equality of Bonds and Pledge of Net Taxes. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, in order to secure the payment of the principal of and interest on the Bonds in accordance with their terms, the provisions of this Indenture and the Act,the District hereby pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Taxes and any other amounts held in the Special Tax Fund. Said pledge shall constitute a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the District, its successors, purchasers of any of such assets, creditors and all others asserting rights therein, to the extent set forth in, and in accordance with, this Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery,recordation,filing or further act. Pursuant to the Act and this Indenture, the Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund, without priority for number, date of the Bonds, date of sale, date of execution, or date of delivery,and the payment of the interest on and principal of the Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund, which are hereby set aside for the payment of the Bonds. Amounts in the Special Tax Fund shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund or the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Rebate Fund, the Costs of Issuance Fund, the Surplus Fund or the Administration Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in this Indenture or any Supplemental Indenture shall preclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California. Section 2.4 Description of Bonds; Interest Rates. The Bonds shall be issued in fully registered form in denominations of$5,000 or any integral multiple thereof. The Bonds of each issue shall be numbered as desired by the Trustee. The Bonds shall be designated "CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 SPECIAL TAX REFUNDING BONDS." The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be 9 DOCSOC/1616590v8/022273-0006 subject to and shall bear interest at the rates set forth in the table below payable on September 1, 2014 and each Interest Payment Date thereafter: Period Ending September 1 Principal Interest Rate 2014 $ 475,000 2.000% 2015 535,000 2.000 2016 545,000 3.000 2017 560,000 3.000 2018 575,000 4.000 2019 600,000 4.000 2020 625,000 4.000 2021 645,000 4.000 2022 675,000 4.250 2023 705,000 5.000 2024 740,000 4.500 2026 1,585,000 5.000 2027 850,000 5.000 2029 1,830,000 5.000 2031 2,020,000 5.125 Interest shall be payable on each Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond has been paid; provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption) funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. Section 2.5 Place and Form of Pam. The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof, in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Corporate Trust Office of the Trustee in St. Paul, Minnesota, or at the designated office of any successor Trustee. Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i) such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication; (ii)the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication; or(iii)the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest shall be payable from the dated date of such Bond; provided, however,that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond, interest on that Bond shall be payable from its dated date. Interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed by first class mail,postage prepaid,to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date 10 DOCSOC/1616590v8/022273-0006 q from an Owner of$1,000,000 or more in principal amount of the Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated by such Owner. Section 2.6 Form of Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Until definitive Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds. If the District issues temporary Bonds, it shall execute and furnish definitive Bonds, as applicable, without unnecessary delay and thereupon any temporary Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued. Section 2.7 Execution and Authentication. The Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk, or any duly appointed deputy clerk, in their capacity as officers of the District and attested by the signature of the City Clerk. In case any one or more of the officers who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed have been authenticated and delivered by the Trustee (including new Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed or mutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed such Bonds had not ceased to hold such office. Only such Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Section 2.8 Bond Register. The Trustee will keep or cause to be kept, at the Corporate Trust Office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the District during all regular business hours upon reasonable prior notice, and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as herein provided. The District and the Trustee may treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be i 11 DOCSOCl16 16590v8l022273-0006 I the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner's address so that the Bond Register may be revised accordingly. Section 2.9 Registration of Exchange or Transfer. Subject to the limitations of the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Corporate Trust Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of(i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or(ii) any Bonds chosen for redemption. Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond shall become mutilated, the District, at the expense of the Bondowner, shall execute, and the Trustee shall authenticate and deliver, a new Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District, at the expense of the Bondowner, shall execute and the Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds issued hereunder. The Trustee shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds upon receipt of indemnification satisfactory to the Trustee. Section 2.11 Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any defect in any proceedings taken by the District and the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws ! of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12 Book-Entry System. The Bonds shall be initially issued in the form of a separate single fully-registered Bond for each maturity (which may be typewritten). Upon initial 12 DOCSOC/1616590v8/022273-0006 issuance,the ownership of each such Bond shall be registered in the registration books maintained by the Trustee in the name of the Nominee, as nominee of the Depository. Except hereinafter as provided, all of the Outstanding Bonds shall be registered in the registration books maintained by the Trustee in the name of the Nominee. With respect to the Bonds registered in the name of the Nominee,the District and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to (i)the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii)the delivery to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any notice with respect to the Bonds, including any notice of redemption, (iii)the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the District redeems the Bonds in part, or (iv)the payment to any Participant or any other person, other than an Owner as shown in the registration books maintained by the Trustee, of any amount with respect to principal of, premium, if any, or interest on the Bonds. The District and the Trustee may treat and consider the Person in whose name each Bond is registered in the registration books maintained by the Trustee as the absolute Owner of such Bond for the purpose of payment of principal, premium, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owner, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District's obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Owner, Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates,the term"Nominee" in this Indenture shall refer to such nominee of the Depository. In order to qualify the Bonds the District elects to register in the name of the Nominee for the Depository's book-entry system, the District shall execute and deliver the Representation Letter to the Depository concurrently with the issuance and delivery of the Bonds to their respective original purchasers. The execution and delivery of the Representation Letter shall not in any other way limit the provisions of this Section or in any other way impose upon the District any obligation whatsoever with respect to Persons having interests in the Bonds other than the Owners. In a separate agreement, the Trustee shall have agreed to take all action necessary to ensure compliance with all representations of the District in the Representation Letter with respect to the Trustee at all times. In addition to the execution and delivery of the Representation Letter, the District shall take such other actions, not inconsistent with this Indenture, as are reasonably necessary to qualify the Bonds for the Depository's book-entry program. i In the event (i)the Depository determines not to continue to act as securities depository for the Bonds or (ii)the Depository shall no longer so act and gives notice to the Trustee of such determination, then the District will discontinue the book-entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository,the District shall prepare or direct the preparation of a new single, separate, fully-registered Bond for each of the 13 DOCSOC/1616590v8/022273-0006 issues and maturities of the Bonds, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace the Depository then the Bonds shall no longer be restricted to being registered in the bond register in the name of the Nominee, but shall be registered in whatever name or names Owners transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 of this Indenture. Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. The initial Depository under this Section shall be The Depository Trust Company, New York,New York("DTC"). The initial Nominee shall be Cede& Co., as Nominee of DTC. ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Section 3.1 Creation of Funds. There is hereby created and established and shall be maintained by the Trustee the following funds and accounts: (1) The Community Facilities District No. 2000-1 Special Tax Fund (the "Special Tax Fund") in which there shall be established and created, a Debt Service Account, a Redemption Account and a Reserve Account; (2) The Community Facilities District No. 2000-1 Rebate Fund (the "Rebate Fund") in which there shall be established a Rebate Account and an Alternative Penalty Account; and (3) The Community Facilities District No. 2000-1 Costs of Issuance Fund (the"Costs of Issuance Fund"). The amounts on deposit in the foregoing funds and accounts shall be held by the Trustee;and the Trustee shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of this Article III and shall disburse investment earnings thereon in accordance with the provisions of Section 3.11 hereof. Section 3.2 Disposition of Bond Proceeds. (a) The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the District and deposited as follows: (1) $11,666,448.27 shall be transferred to the Escrow Bank for deposit into the Escrow Fund pursuant to the terms of the Escrow Agreement; (2) $9,000.00 shall be deposited into the Administration Fund; 14 DOCSOC/1616590v8/022273-0006 I (3) $83,930.03 representing the amount of Costs of Issuance with respect to the Bonds shall be deposited in the Costs of Issuance Fund, and such amount shall be applied to the payment of Costs of Issuance for the Bonds; and (4) $1,091,775.00 shall be deposited in the Reserve Account of the Special Tax Fund. The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits or transfers. Section 3.3 Deposits to and Disbursements from Special Tax Fund. The Director of Finance shall, no later than the last day of each month during which the Special Taxes are apportioned to the District, transfer the Special Taxes net of Special Tax Prepayments (which amounts shall immediately be transferred by the Director of Finance to the Trustee for deposit into the Redemption Account of the Special Tax Fund to be applied in accordance with Section 3.6(b) hereof) to the Trustee for deposit in the Special Tax Fund for the Bonds, to be held in trust by the Trustee in the Special Tax Fund. The Trustee will then transfer the money on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority, to: I (1) The Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied in the current Fiscal Year up to the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses) levied in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of(i)the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year, or (ii)March 2 of such Fiscal Year; (2) The Debt Service Account of the Special Tax Fund; (3) The Reserve Account of the Special Tax Fund; (4) Administration Fund for Administrative Expenses not previously deposited to the Administration Fund pursuant to this Section 3.3; (5) Rebate Fund; and (6) Surplus Fund. At the maturity of all Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose. Section 3.4 Administration Fund. There is hereby established as a separate fund to be held by the Director of Finance the Administration Fund. Moneys in the Administration Fund may be invested in any Authorized Investments,provided that the maturity or maturities thereof shall not exceed 30 days from the date of purchase. Moneys on deposit in the Administration Fund shall be 15 DOCSOC/1616590v8/022273-0006 withdrawn by the Director of Finance and paid to the City or its order upon receipt by the Director of Finance of a Certificate of Authorized Officer stating the amount to be withdrawn,that such amount is to be used to pay an Administrative Expense and the nature of the Administrative Expense. Section 3.5 Debt Service Account of the Special Tax Fund. The principal or Sinking Fund Payment of, and interest on,the Bonds until maturity shall be paid by the Trustee from amounts transferred to the Debt Service Account of the Special Tax Fund. For the purpose of assuring that the payment of principal or Sinking Fund Payment of and interest on,the Bonds will be made when due, at least one Business Day prior to each Interest Payment Date, the Trustee shall make the following transfers to the Debt Service Account; provided,however, that to the extent that deposits have been made in the Debt Service Account from the proceeds of the sale of the Bonds, or otherwise, or to the extent that a transfer will be made from the Reserve Account to the Debt Service Account in accordance with the last paragraph of Section 3.7 hereof,the transfer from the Special Tax Fund need not be made: an amount such that the balance in the Debt Service Account one (1) Business Day prior to each Interest Payment Date shall be equal to the installments of interest, principal and Sinking Fund Payment due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest and principal of the Bonds as the same become due. Section 3.6 Redemption Account of the Special Tax Fund. (a) After making the deposit to the Debt Service Account of the Special Tax Fund pursuant to Section 3.5 above and in accordance with the District's election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal of and interest on the Bonds called for redemption, and the premiums payable as provided in Section 4.1(a) hereof on the Bonds called for optional redemption one (1) Business Day prior to the redemption date; provided, however, that Net Taxes may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (b) Special Tax Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.l(c) hereof for the use of such Special Tax Prepayments to the payment of the principal of, premium, if any, and interest on the Bonds to be redeemed with such Special Tax Prepayments. (c) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, in lieu or partially in lieu of such call and redemption, upon receipt by the Trustee of written direction of the District to purchase Bonds, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, or, in the case of purchases to be made from funds to be applied to a redemption pursuant to Section 4.1(a), par plus accrued interest, plus premium, if any, in the case of moneys set aside for an optional redemption. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Special Tax Fund for the payment of interest on the next following Interest Payment Date. 16 DOCSOC/1616590v8/022273-0006 I Section 3.7 Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that the moneys in the Debt Service Account of the Special Tax Fund are insufficient therefor and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.8 upon written direction from the District; provided, however, amounts in the Reserve Account may be applied to pay the principal and interest due on any Bonds in the final Bond Year in which any Bonds are Outstanding. If the amounts in the Debt Service Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on the Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account for deposit in the Debt Service Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. Following any transfer to the Debt Service Account of the Special Tax Fund or to the Rebate Fund as described above,the District shall then take the steps necessary to cause to be deposited to the Reserve Account the amount needed to replenish the Reserve Account to the Reserve Requirement by transferring such amount from Special Taxes held by the Director of Finance or, if the District so elects, by including such amount in the next annual Special Tax levy to the extent of the permitted maximum Special Tax rates. Notwithstanding anything herein to the contrary, whenever moneys are withdrawn from the Reserve Account, after making the required transfers pursuant to Sections 3.5 and 3.6 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund the amount needed to restore the amount of such account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Debt Service Account of the Special Tax Fund. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. In connection with a redemption of Bonds pursuant to Section 4.](a) or (c), or a defeasance of Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account shall be applied to such redemption or defeasance so long as the amount on deposit in the Reserve Account following such redemption or any partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Officer the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to this Indenture to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. Notwithstanding any provision herein to the contrary, moneys in the Reserve Account in excess of the Reserve Requirement shall be withdrawn from the Reserve Account on the Business Day before each Interest Payment Date and transferred to the Debt Service Account to be applied to the interest on the Bonds on the next Interest Payment Date. Section 3.8 Rebate Fund. (a) The Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund and shall establish a separate Rebate Account and Alternative Penalty Account therein. The District shall cause to be deposited in 17 DOCSOC/1616590v8/022273-0006 l the Rebate Fund such amounts as required under the Tax Certificate. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by this Section 3.8 and the Tax Certificate. I Without limiting the generality of the foregoing,the District agrees that there shall be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any temporary, proposed or final treasury regulations as may be applicable to the Bonds from time to time, which the District covenants to pay or cause to be paid to the United States at the times and in the amounts determined under the Tax Certificate. The Trustee agrees to comply with all instructions given to it by the District in accordance with this covenant. The Trustee shall conclusively be deemed to have complied with the provisions of this Section 3.8 if it follows i the instructions of the District and shall not be required to take any actions hereunder in the absence of instructions from the District. (b) Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds after payment in full of such issue and after making the payments required to comply with this Section 3.8 and the Tax Certificate may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District. I (c) Survival of Defeasance and Final Payment. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Bonds. (d) Amendment Without Consent of Owners. This Section 3.8 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax exempt basis. Notwithstanding any provision of this Section, if the District shall provide to the Trustee an opinion of a nationally recognized bond or tax counsel that any specified action required under this Section 3.8 is no longer required or that some further or different action is required to maintain the tax-exempt status of interest on the Bonds,the Trustee and the District may conclusively rely on such opinion in complying with the requirements of this Section, and the covenants hereunder shall be deemed to be modified to that extent. Section 3.9 Costs of Issuance Fund. (a) The moneys in the Costs of Issuance Fund shall be applied exclusively to pay the Costs of Issuance for the Bonds. Amounts for Costs of Issuance shall be disbursed from the Costs of Issuance Fund by the Trustee only upon receipt of a sequentially numbered written requisition, substantially in the form attached hereto as Exhibit B from the Director of Finance or such other person as is designated in writing to the Trustee by the legislative body of the District. (b) Upon the receipt of a Certificate of an Authorized Officer that all or a specified portion of the amount remaining in the Costs of Issuance Fund is no longer needed to pay Costs of Issuance, respectively, the Trustee shall transfer all or such specified portion of the moneys remaining on deposit in such account to the Debt Service Account of the Special Tax Fund. Any moneys remaining in the Cost of Issuance Fund on September 1, 2013 shall be transferred to the Debt Service Account of the Special Tax Fund and the Costs of Issuance Fund shall be closed. 18 DOCS OC/1616590v8/022273-0006 Section 3.10 Surplus Fund. There is hereby created and established the "Surplus Fund,"to be held by the Director of Finance. After making the transfers required by Sections 3.5, 3.6, 3.7, 3.8 and 3.10, as soon as practicable after each September 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the District for deposit in the Surplus Fund. Moneys deposited in the Surplus Fund may be transferred by the District(i)to the Trustee for deposit in the Debt Service Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (ii)to the Trustee for deposit in the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iii)to the Administration Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administration Fund are insufficient to pay Administrative Expenses, or (iv)may be used by the District for any other lawful purpose of the District. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, the District shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a Yield not in excess of the Yield on the Bonds, unless, in the opinion of Bond Counsel, investment at a higher Yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds then Outstanding. Section 3.11 Investments. Moneys held in any of the Funds and Accounts under this Indenture shall be invested by the Trustee at the written direction of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds and Accounts. Any loss resulting from such Authorized Investments shall be charged to the Fund or Account from which such investment was made, and any investment earnings on a Fund or Account shall be applied as follows: (i) investment earnings on all amounts deposited in the Costs of Issuance Fund shall be deposited in that Fund, (ii) investment earnings on all amounts in the Rebate Fund shall be deposited in that Fund, (iii) investment earnings on all amounts deposited in the Reserve Account of the Special Tax Fund shall be used to satisfy the Reserve Requirement and any investment earnings not needed to satisfy the Reserve Requirement shall be withdrawn from the Reserve Account one (1)Business Day before each Interest Payment Date and transferred to the Debt Service Account as provided in Section 3.7 hereof; and (iv)all other investment earnings shall be deposited in the Debt Service Account of the Special Tax Fund. Moneys in the Funds and Accounts held under this Indenture may be invested by the Trustee, upon the written direction of the District, from time to time, in Authorized Investments which written direction shall be made in accordance with the following restrictions: (a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. (b) Moneys in the Debt Service Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature or are available for 19 D O C SO C/1616590v8/022273-0006 withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any,and interest on the Bonds as the same become due. (c) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than six (6) months from their date of purchase by the Trustee, and one-half of such amount shall be invested in,Authorized Investments which mature not more than two (2) years from the date of purchase by the Trustee; provided that such amounts may be invested in an investment or repurchase agreement so Iong as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.5 hereof; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the respective final maturity date of the Bonds to which such amounts relate. (d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause(a)of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.8 hereof. The Trustee, at the written direction of the District, shall sell, or present for redemption, any Authorized Investments so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations hereunder,the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Trustee may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment,transfer, withdrawal or disbursement from the Fund or Account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. In the absence of written investment direction the Trustee shall invest solely in Authorized Investments set forth in (c) of the definition thereof. The District acknowledges that regulations of the Comptroller of the Currency grant the District the right to receive brokerage confirmations of security transactions to be effected by the Trustee hereunder as they occur. The District specifically waives the right to receive such confirmations to the extent permitted by applicable law and agrees that it will instead receive periodic cash transaction statements which shall include detail for the investment transactions effected by the Trustee hereunder; provided, however, that the District retains its right to receive brokerage confirmation on any investment transaction requested by the District. 20 DOC S OC/1616590v8/022273-0006 ARTICLE IV REDEMPTION OF BONDS Section 4.1 Redemption of Bonds. (a) Optional Redemption. The Bonds maturing on or after September 1, 2024 are subject, at the option of the District, to call and redemption, as a whole or in part as selected by the District, from any available source of funds prior to their stated maturity on any date on or after September 1, 2023 at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption,without premium. In the event the District shall elect to redeem Bonds as provided in this Section 4.1(a), the District shall give written notice to the Trustee of its election so to redeem, the redemption date and the principal amount of the Bonds to be redeemed. The notice to the Trustee shall be given at least 45 but no more than 60 days prior to the redemption date or such shorter period as shall be acceptable to the Trustee in the sole determination of the Trustee, such notice for the convenience of the Trustee. (b) Mandatory Sinking Fund Redemption. Bonds maturing on September 1, 2026 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2025, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof,plus accrued interest to the redemption date,without premium, as follows: Term Bonds Due on September 1,2026 Year (September 1) Principal Amount 2025 $775,000 2026(Maturity) 810,000 Bonds maturing on September 1, 2029 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2028, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium,as follows: 21 DOCSOC/1616590v8/022273-0006 Term Bonds Due on September 1,2026 Year (September 1) Principal Amount 2028 $890,000 2029 (Maturity) 940,000 Bonds maturing on September 1, 2031 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2030, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Due on September 1,2029 Year (September 1) Principal Amount 2030 $ 985,000 2031 (Maturity) 1,035,000 Special Tax Prepayments and amounts released from the Reserve Account in connection with Special Tax Prepayments in accordance with Section 3.7 hereof shall be allocated to the redemption of the Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds. (c) Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments as a whole, or in part on a pro rata basis among maturities, on any Interest Payment Date, and shall be redeemed by the Trustee, from Special Tax Prepayments deposited to the Redemption Account pursuant to Section 3.6(b), plus amounts transferred from the Reserve Account pursuant to Section 3.7, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed,together with accrued interest to the date of redemption: Redemption Dates Redemption Price Any Interest Payment Date through March 1,2021 103% ! September 1,2021 and March 1, 2022 102 September 1, 2022 and March 1, 2023 101 September 1,2023 and any Interest Payment Date thereafter 100 In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. (d) Purchase of Bonds. In lieu of payment at maturity or redemption, moneys in the Special Tax Fund may be used and withdrawn by the Trustee for purchase of Outstanding Bonds, upon the filing with the Trustee of a Certificate of an Authorized Officer requesting such purchase, at 22 DOC SOC/1616590v8/022273-0006 I a public or private sale as and when, and at such prices (including brokerage and other charges) as such Certificate of an Authorized Officer may provide, but in no event will Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if the Bonds were to be redeemed in accordance with this Indenture. Section 4.2 Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed (except with respect to mandatory sinking fund redemption in which case selection shall be by lot),the Trustee shall select Bonds pro rata among maturities and by lot within a maturity. The portion of any Bond of a denomination of more than$5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Trustee shall promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption. Section 4.3 Notice of Redemption. When Bonds are to be called for optional, mandatory or special mandatory redemption under Section 4.1(a), (b) or (c), if the Trustee has received the required notice from the District, the Trustee shall give notice, in the name and at the expense of the District, of the redemption of such Bonds. Such notice of redemption shall (a) specify the serial numbers and the maturity date or dates of the Bonds selected for redemption, except that where all the Bonds subject to redemption, or all the Bonds of one maturity, are to be redeemed, the serial numbers thereof need not be specified; (b) state the date fixed for redemption and surrender of the Bonds nd to be redeemed; c state the redemption price; d state the lace or laces where the Bonds O P P � O P P are to be surrendered for redemption; and (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed. Such notice may state that redemption is j contingent upon the availability of refunding bond proceeds. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and neither the failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent not later than the date that notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section by registered or certified mail or overnight delivery service to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that 23 DOCS OC/1616590v8/022273-0006 the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds. Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Section 4.4 Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered,with the same interest rate and the same maturity. Section 4.5 Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture, anything in this Indenture or in the Bonds to the contrary notwithstanding; (b) Upon presentation and surrender thereof at the Corporate Trust Office of the Trustee,the redemption price of such Bonds shall be paid to the Owners thereof; (c) As of the redemption date the Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds, or portions thereof, shall cease to bear further interest; and (d) As of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. ARTICLE V COVENANTS AND WARRANTY Section 5.1 Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds against all claims and demands of all persons. Section 5.2 Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: 24 DOCSOC/161659M/022273-0006 I (a) Punctual Payment;Against Encumbrances. The District covenants that it will receive all Gross Taxes in trust and will deposit the Gross Taxes with the Trustee, as provided in Section 3.3, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by this Indenture. All such Gross Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money,funds, accounts or other resources of the District. Notwithstanding the provisions of this Section, as set forth in Section 8.2, the District shall have the right to accept less than the minimum bid on any delinquent parcel, and is indemnified from legal claim for Owners of the Bonds, if the City Council determines that the acceptance of less than the minimum bid or another action as described in Section 8.2 is in the best interest of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any,thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with this Indenture to the extent that Net Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and of the Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Gross Taxes, except as provided in this Indenture, and (except as set forth herein) will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds. The District hereby covenants not to issue any additional bonds secured by the Net Taxes on a parity with the Bonds,except for the purpose of defeasing and refunding Bonds in accordance with the Act. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. b Lev and Collection of Special Tax. Subject to the maximum Special Tax ( ) y p J p rates,the District will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation,the enforcement of delinquent Special Taxes. On or before each June 1, commencing June 1, 2014, the Trustee shall provide a written notice to the District stating the amounts then on deposit in the various funds and accounts established by the Trustee pursuant to this Indenture. The receipt of such notice by the District shall in no way affect the obligations of the District under the following paragraphs. Upon receipt of a copy of such notice,the District shall communicate with the Treasurer or other appropriate official of the County of Orange to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District shall retain an Independent Financial Consultant to assist in the levy of the Special Taxes each Fiscal Year, commencing Fiscal Year 2013-14, in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the Treasurer will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. Upon the completion of the computation of the amounts of the levy, and approval by the legislative body of the District, the District shall prepare or cause to be prepared, and shall transmit to the Treasurer, such data as the Treasurer requires to include the levy of the Special Taxes on the next secured tax roll. 25 D O C SO C/1616590 v8/0222 73-0006 The District shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year including any necessary replenishment or expenditure of the Reserve Account for the Bonds, an amount equal to the estimated Administrative Expenses and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes, The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax for so long as the Bonds are Outstanding, including the initiation of proceedings under the Act to reduce the Maximum Special Tax rates (the "Maximum Rates") on Taxable Property in the District below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Outstanding Bonds. The District hereby finds and determines that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also hereby covenants that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with this Section 5.2(b), The Special Taxes shall be payable and collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and hear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided,the legislative body of the District may provide for direct collection of the Special Taxes in certain circumstances. The fees and expenses of the Independent Financial Consultant retained by the District to assist in computing the levy of the Special Taxes hereunder and any reconciliation of amounts levied to amount received, as well as the costs and expenses of the District (including a charge for District staff time) in conducting its duties hereunder, shall be an Administrative Expense hereunder. (c) Commence Foreclosure Proceedings. Pursuant to Section 53356.1 of the Act, the District hereby covenants with and for the benefit of the Bondowners that, one Business Day after each Interest Payment Date, the Director of Finance or his or her designee will compare the amount of Special Taxes theretofore levied in the District to the amount of Net Taxes theretofore received by the District, and, if the amount collected is less than 100% of the amount of the Special Taxes so levied, the District will undertake and diligently prosecute foreclosure proceedings not later than thirty (30) days after Interest Payment Date (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due. Special Taxes collected as a result of a foreclosure proceeding shall be deposited in the Special Tax Fund and only inure to the benefit of the Bonds in the manner provided in Section 3.2. (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or any part thereof, or upon any funds in the hands of the Trustee, or which might impair the security of the Bonds then Outstanding;provided however that nothing herein contained shall require 26 DOC SOC/1616590v8/022273-0006 1 I the District to make any such payments so long as the District in good faith shall contest the validity I of any such claims. (e) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the improvements constructed with the proceeds of bonded indebtedness issued by the District, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Owners of not less than ten percent(10%) of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. (f) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis will not be adversely affected, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other monies or property which would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be "private activity bonds"within the meaning of Section 141 of the Code. (2) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be"arbitrage bonds"within the meaning of Section 148 of the Code. (3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be"federally guaranteed"within the meaning of Section 149(b) of the Code. (4) Information Repop rtin . The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code. (5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. (6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. 27 DOCSOC/1616590v8/022273-0006 (7) Other Tax Exempt Issues. The District will not use proceeds of other tax exempt securities to redeem any Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis. (g) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(b) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (h) Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds in full payment or partial payment of any Special Tax unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds when due. (i) Continuine Disclosure Covenant. The District hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement. Notwithstanding any other provision of this Indenture, failure of the District to comply with its obligations under the Continuing Disclosure Agreement shall not be considered an event of default under this Indenture, and the sole remedy, in the event of any failure of the District to comply with the Continuing Disclosure Agreement shall be an action to compel performance. 0) Opinions. In the event that an opinion is rendered by Bond Counsel as provided herein from a firm other than the firm which rendered the Bond Counsel opinion at closing, such subsequent opinion by Bond Counsel shall also include the conclusions set forth in numbered paragraphs 1, 2, 3 and 4 of the original Bond Counsel opinion. (k) Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture. (1) Prepayment of Special Taxes. In connection with prepayment of Special Taxes: (1) The District shall cause all applications of owners of leasehold interests in the District subject to the Rate and Method to prepay and satisfy the Special Tax obligation for their property to be reviewed by an Independent Financial Consultant and shall not accept any such prepayment by the District and the redemption of Bonds with such prepayment, unless the ratio of(i)the maximum amount of the Special Taxes that may be levied in the District following such prepayment to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption(e.g., 1.15 to 1.0)will not be less than such ratio as it existed prior to such prepayment. (2) The District will not include in any calculation of the amount necessary to prepay and permanently satisfy the Special Tax obligation of any parcel of taxable 28 DOC SOC/1616590v8/022273-0006 property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement; provided, however, that in such event the District may pay to the owner of any such property who prepays and permanently satisfies the Special Tax obligation for his or her property, under such circumstances, such a proportionate amount if the amount on deposit in the Reserve Fund is thereafter increased to the Reserve Requirement. (m) Compliance with Lease Remedy Forbearance Agreement. The District hereby covenants to cause the City to comply with and enforce its agreements and covenants in the Lease Remedy Forbearance Agreement(which the City entered into on behalf of the District), and to not allow the Successor Agency to enter into a new lease or leases(each, a"Replacement Lease")for substantially all of the real property subject to the Ground Lease or Replacement Lease then being terminated, unless (i) the Special Taxes that may be levied on the property so relet, in the opinion of an Independent Financial Consultant, are estimated to be not less than 110% of Maximum Annual Debt Service, and (ii) such lease or leases have a term at least as long as the remaining term to maturity of the outstanding Bonds. ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any Supplemental Indenture, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond payments; j (c) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; (d) to modify, alter or amend the Rate and Method of Apportionment in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on Developed Property (as defined in the Rate and Method of Apportionment) below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Bonds Outstanding as of the date of such amendment; 29 DOC SOC/1616590v8/022273-0006 (e) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bondowners; provided that any amendment or supplement to this Indenture which will affect the Trustee's duties or protections set forth hereunder shall be effective only upon written consent of the Trustee; or Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures set forth in Section 6.1, the Owners of not less than a majority of in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided,however,that nothing herein shall permit,or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon; (c) a preference or priority of any Bond over any other Bond; or (d) a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds then Outstanding. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Bondowners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed,by first class mail,postage prepaid,to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Indenture,Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such detennination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds in instances where such consent is required pursuant to the provisions of this section, this Indenture shalt be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. 30 DOCSOC/1616590v8/022273-0006 Section 6.3 Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. ARTICLE VII TRUSTEE Section 7.1 Trustee. U.S. Bank National Association, having a corporate trust office in Los Angeles, California, is hereby appointed Trustee for the District for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. In the event that the District fails to deposit with the Trustee any amount due hereunder when due, the Trustee shall provide telephonic notice to the District and shall confirm the amount of such shortfall in writing to the extent such amount is known to the Trustee. The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or pay by wire transfer as provided in Section 2.5 hereof, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in this Indenture, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Trustee shall deliver to the District a monthly accounting of the Funds and Accounts it holds under this Indenture; provided, however, that the Trustee shall not be obligated to deliver such accounting for any Fund or Account that has a balance of zero. The Trustee may establish such Funds and Accounts as it deems necessary or appropriate to perform its obligations hereunder. The Trustee is hereby authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless from and against costs, claims, expenses and liabilities not arising from its own negligence 31 D O C SO C/1616590v81022273-0006 or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. The obligations of the District under this Section shall survive the discharge of the Bands and the resignation or removal of the Trustee. Section 7.2 Removal of Trustee. The District may at any time at its sale discretion remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars($50,000,000), and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Section 7.3 Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shah be mailed to the Owners at their addresses appearing in the registration books in the office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall became effective only upon acceptance of appointment by the successor Trustee. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section within thirty (30) days after the Trustee shall have given to the District and the Owners written notice, the Trustee, at the expense of the District, or the District may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee, which successor shall be acceptable to the District. Section 7.4 Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bands shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture or the Bands and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bands, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bands for value. The Trustee shall not be liable in connection with the performance of its duties hereunder,except for its awn negligence or willful misconduct. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Band or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in goad faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Band is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. 32 DOCS OC/1616590v81022273-0006 Whenever in the administration of its duties under this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. No provision of this Indenture or any other document related hereto shall require the Trustee to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights hereunder. ! The immunities extended to the Trustee also extend to its directors, officers, employees and agents. Section 7.5 Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1 Events of Default. Any one or more of the following events shall constitute an "Event of Default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed,by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent(25%) in aggregate principal amount of the Outstanding Bonds. 33 DOCSOC/1616590v8/022273-0006 Section 8.2 Remedies of Owners. Following the occurrence of an Event of Default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners;or (c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in this Article or in any other provision of this Indenture, the Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners thereof at the respective dates of maturity, as herein provided, out of the Net Taxes pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in this Indenture. The principal of the Bonds shall not be subject to acceleration hereunder. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If an suit action or proceeding to enforce an right or exercise an remedy is abandoned or Y p g Y g Y Y determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Trustee after an Event of Default pursuant to Section 8.1(a) or (b) shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then, after payment of all fees and expenses and amounts due to the Trustee under this Indenture, all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. 34 DOCSOC/1616590v8/022273-0006 I l ARTICLE IX DEFEASANCE Section 9.1 Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond under this Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to this Section, upon payment of all amounts owed by the District to the Trustee hereunder, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall, after payment of amounts payable to the Trustee hereunder, pay over or deliver to the District's general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the interest due on and the principal of such Bonds. Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this section if such Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any,and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund are available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee, or another escrow bank appointed by the District, in trust, direct, noncallable Federal Securities, of the type defined in the definition thereof set forth in Section 1.1 hereof, in which the District may lawfully invest its money, in such amount as an Independent Financial Consultant shall determine will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund are available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond,as and when the same shall become due and payable; If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in Section 5.2(f) relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than thirty (30) days prior to the proposed defeasance date. In connection with a defeasance under (b) or (c) above, there shall be provided to the Trustee a certificate of a certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of and interest on all Outstanding Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the 35 DOCSOC/t 6 t 6590v8/022273-0006 I opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds when due and any fees and expenses of the Trustee remaining unpaid. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred. ARTICLE X MISCELLANEOUS Section 10.1 Cancellation of Bonds. All Bonds surrendered to the Trustee for payment upon maturity or for redemption shall upon payment therefor and any Bond purchased by the District as authorized herein shall be cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds, as provided by law, and, upon written request from the District, furnish to the District a certificate of such destruction. Section 10.2 Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. I Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the 36 DOCSOC/1616590v8/022273-0006 I 1 matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Trustee in pursuance of such request or consent. I Section 10.3 Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding and subject to the escheat laws of the State, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the said date when such Outstanding Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds; provided, however, that, before being required to make any such payment to the District or the Trustee shall, at the expense of the District, cause to be mailed to the registered Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that,after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Section 10.4 Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined j adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 10.5 Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which are subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes as defined herein. Section 10.6 Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture. Section 10.7 Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant,agreement or provision, or portion thereof,to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds issued pursuant 37 DOCSOC/1616590v8/022273-0006 fi hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8 Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed, first class, postage prepaid or personally delivered to the Director of Finance of the City of Huntington Beach, 2000 Main Street, Huntington Beach, California 92648, and all notices to the Trustee shall be mailed, first class, or personally delivered to the Trustee at U.S. Bank National Association, 633 West 5th Street, 24th Floor, Los Angeles, California 90071, Attention: Global Corporate Trust Services, Ref: City of Huntington Beach Community Facilities District No. 2000-1. Section 10.9 Action on Next Business Day. If the date for making any payment or the last f an e exercising of an right, as provided in this Indenture is not a date for performance o y act of the g y g p , Business Day, such payment, with no interest accruing for the period from and after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefore in this Indenture. 38 DOCSOC/1616590v8/022273-0006 I SIGNED AND APPROVED as of the day and year first written above by the Director of Finance of the City of Huntington Beach, acting on behalf of CITY OF HUNTINGTON BEACH FACILITIES COMMUNITY FACILITIES DISTRICT NO.2000-1 and attested to by the City Clerk and U.S. BANK NATIONAL ASSOCIATION, in token of its acceptance of the duties of the Trustee created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below,all as of the day and year first above written. f `' By: Director of Finance of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No.2000-1 ATTEST: City erk of the City of un on Beach, act' on behalf of City of Hu4fl igton Beach Coy nunity Facilities District No.2000-1 U.S. BANK NATIONAL ASSOCIATION,as Trustee By: Authorized Officer 1 i i S-1 DOCSOC/1616590/022273-0006 i I SIGNED AND APPROVED as of the day and year first written abode by the Director of Finance of the City of Huntington Beach, acting on behalf of CITY OF HUNTINGTON BEACH FACILITIES COMMUNITY FACILITIES DISTRICT NO. 2000-1 and attested to by the City Clerk and U.S.BANK NATIONAL ASSOCIATION, in token-of its acceptance of the ditties of the Trustee created hereunder, has caused this. Indenture to be sighed iri its corporate name by its officer identified below,all as of the day and year first above written. By: Director of Finance of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No. 2000-1 I ATTEST: j City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No.2000-1 U.S. BANK NATIONAL ASSOCIATION,as Trustee R I By: y Authorized Officer S-1 DOCSOC/1616590/022273-0006 EXHIBIT A [FORM OF BOND] Unless this Bond certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the District or its agent for registration of transfer, exchange, or payment, and any Bond certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. I No. $ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 2013 SPECIAL TAX REFUNDING BONDS INTEREST RATE MATURITY DATE DATED DATE CUSIP®NUMBER % September 1, July 31, 2013 REGISTERED OWNER: CEDE& CO. PRINCIPAL AMOUNT: AND NO/100 DOLLARS CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 (the"District"), located in the City of Huntington Beach,County of Orange, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof to which interest has been paid or duly provided in full, unless (i)the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii)the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication or (iii)the date of authentication is prior to j the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above; provided, however, that if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made I A-1 j DOCSOC/1616590v8/022273-0006 available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an "Interest Payment Date"), commencing March 1,2014, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of this Bond is payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office of U.S. Bank National Association (the "Trustee"). Interest on this Bond shall be paid by check of the Trustee mailed by first class mail, postage prepaid, or, upon request of any Registered Owner of at least $1,000,000 of Bonds, by wire transfer to an account in the continental United States of the Registered Owner hereof prior to the Record Date as of the close of business on the fifteenth day of the month preceding an Interest Payment Date (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of "City of Huntington Beach Community Facilities District No. 2000-1 2013 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of$12,965,000 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311,et seq., of the California Government Code(the"Act"), for the purpose of refunding the District's 2001 Special Tax Refunding Bonds, and paying certain costs related to the issuance of the Bonds and funding a reserve account. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Huntington Beach, acting in its capacity as the legislative body of the District (the "Legislative Body") on June 3, 2013, and a Bond Indenture dated as of July 1, 2013,by and between the District and U.S. Bank National Association, as Trustee, executed in connection therewith (the "Indenture"), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with, the laws of the State of California. Pursuant to the Act and the Indenture, the principal of and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District and which are pledged to the repayment of the Bonds (the"Special Taxes"). Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts on deposit in the Special Tax Fund, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. The Bonds maturing on or after September 1, 2024 are subject, at the option of the District,to call and redemption, as a whole or in part as selected by the District, from any available source of funds prior to their stated maturity on any date on or after September 1, 2023 at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption,without premium. The Bonds maturing on September 1, 2026 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2025, and on each September 1 thereafter prior to maturity, in accordance with the A-2 DOCSOC/1616590v8/022273-0006 it schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Due on September 1,2026 Year (September 1) Principal Amount 2025 $775,000 2026(Maturity) 810,000 The Bonds maturing on September 1, 2029 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2028, and on each September I thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium,as follows: Term Bonds Due on September 1,2026 Year (September 1) Principal Amount 2028 $890,000 2029 (Maturity) 940,000 The Bonds maturing on September 1, 2031 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2030, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Due on September 1,2029 Year (September 1) Principal Amount 2030 $ 9859000 2031 (Maturity) 19035,000 The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments on any Interest Payment Date, in whole or in part, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed, together with accrued interest to the date of redemption: A-3 DOCSOC/1616590v8/022273-0006 Redemption Redemption Dates Price Any Interest Payment Date through March 1,2021 103% September 1, 2021 and March 1,2022 102 September 1,2022 and March 1,2023 101 September 1, 2023 and any Interest Payment Date thereafter 100 Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully-registered form in the denomination of$5,000 or any integral multiple of$5,000 and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the corporate trust office of the Trustee,but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Trustee shall not be required to register transfers or make exchanges of(i)any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii)any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture. The principal of this Bond is not subject to acceleration. If the District shall pay or cause to be paid to the Owner of this Bond the interest due hereon and the principal hereof, at the times and in the manner stipulated herein and in the Indenture, or if there has been deposited with the Trustee moneys or investment securities, which together with the interest to accrue thereon without further investment, will be fully sufficient to pay and discharge the principal of, premium, if any, and interest on all Bonds Outstanding as and when the same shall become due and payable, then the Owner of this Bond shall cease to be entitled to the pledge of Net Taxes under the Indenture, and all covenants, agreements and other obligations of the District to the i A-4 DOCSOC/1616590v8/022273-0006 i Owner of this Bond under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF HUNTINGTON BEACH OR OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 FOR WHICH THE CITY OF HUNTINGTON BEACH OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY OF HUNTINGTON BEACH, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY i CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. j IN WITNESS WHEREOF, the City of Huntington Beach Community Facilities District No. 2000-1 has caused this Bond to be dated as of the Dated Date,to be executed on behalf of the District by the Mayor of the City of Huntington Beach by facsimile signature and attested by the facsimile signature of the City Clerk. i i Mayor of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No. 2000-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2000-1 A-5 DOCSOC/1616590v8/022273-0006 : i [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-defined Indenture. Dated: July 31,2013 U.S. BANK NATIONAL ASSOCIATION,as Trustee By: Authorized Officer I A-6 DOC SOC/16 I 6590v8/022273-0006 i [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. i i I City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No.2000-1 [FORM OF ASSIGNMENT] i For value received,the undersigned do(es) hereby sell, assign and transfer unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitutes and appoint(s) attorney,to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: I Signature Guarantee: j I Notice: Signature(s)must be guaranteed by a Notice: The signature on this assignment must qualified guarantor. correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. A-7 DOCS OC/1616590v8/022273-0006 i EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 2013 SPECIAL TAX REFUNDING BONDS The undersigned, a duly authorized representative of City of Huntington Beach Community Facilities District No. 2000-1 (the "District"), hereby certifies to U.S. Bank National Association, as trustee (the"Trustee") for purposes of disbursing funds from the Costs of Issuance Fund to pay Costs of Issuance that: I I (1) The Trustee is to pay to the payees set forth on Exhibit A hereto the amount set forth next to each payee's name for the item described on Exhibit A hereto; (2) The conditions to the release of these amounts from the Costs of Issuance Fund have been satisfied;and (3) There has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on Exhibit A hereto which has not been released or will not be released simultaneously with the payment of such amounts, other than materialmen's or mechanic's liens accruing by mere operation of law. Dated: July 31,2013 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 By: Authorized Officer B-1 DOCSOC/1616590v8/022273-0006 i EXHIBIT A Payee Amount Due Purpose of Expenditure I i s-2 DOCSOC/1616590v8/022273-0006 I i CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement (the "Disclosure Agreement'), dated as of July 1, 2013, is executed and delivered by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and Willdan Financial Services, Inc., as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to that certain Bond Indenture(the"Indenture"), dated as of July 1, 2013, by and between the Issuer and U.S. Bank National Association,as trustee(the"Trustee"). The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule(as defined below). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneftcial Owner" shall mean any person which (a)has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees,depositories or other intermediaries), or(b)is treated as the owner of any Bonds for federal income purposes. "Disclosure Representative"shall mean the City Manager of the City,the Finance Director of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean, initially, Willdan Financial Services, Inc., or any successor Dissemination Agent designated in writing by the Issuer which has filed with the then current Dissemination Agent a written acceptance of such designation. "EAA,M"shall mean the Electronic Municipal Market Access system of the MSRB. "Listed Events"shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Participating Undeinvriter"shall mean Stifel,Nicolaus&Company,Incorporated. "Repository" shall inean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB,currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5)adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. "Tax-exempt" shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes,whether or not such interest is includable as an item of tax preferences or otherwise includable directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax. SECTION 3. Provision of Annual Reports. (a) Not later than nine months after the end of the City's fiscal year (which shall be July 1 of each year, so long as the City's fiscal year ends on September 30), commencing with the report for the report for the 2012-13 fiscal year (which is due not later than July 1, 2014), the Issuer shall provide, or shall cause the Dissemination Agent to provide, to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement;provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Issuer's fiscal year is currently effective from October I to the immediately succeeding September 30 of the following year. The Issuer will promptly notify the Repository of a change in the fiscal year dates. (b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b)shall apply. Not later than fifteen(15)Business Days prior to the date specified in subsection(a)for providing the Annual Report to the Repository,the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to such date the Dissemination Agent has not received a copy of the Annual Report,the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report. (c) If the Issuer is the Dissemination Agent and the Issuer is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the Repository in substantially the form attached to this Disclosure Agreement as Exhibit A. If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository,in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB;and (ii) promptly after receipt of the Annual Report, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. (e) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or include by reference: 2 DO CSOC/1634685/022273-0006 (a) Financial Statements. The audited financial statements of the City for the most recent fiscal year of the Issuer then ended. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of 1 the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board;provided,however,that j the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon j which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its i financial statements are prepared, the Issuer shall provide a notice of such modification to the Repository, including a reference to the specific federal or State law or regulation specifically describing the legal requirements for the change in accounting basis. I (b) Financial and Operating Data. The Annual Report shall contain or incorporate by j reference the following information: (i) the principal amount of Bonds outstanding as of September 30 of each year; I (ii) the balance in each fund under the Indenture as of the September 30 preceding the filing of the Annual Report, including the Reserve Account and a statement of the Reserve Requirement; (iii) any changes to the Rate and Method approved or submitted to the electors for approval prior to the filing of the Annual Report; (iv) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes as of May 1 of each year; (v) the identity of any ground lessee whose delinquent special taxes represent more than 5% of the amount levied and the number of lots, assessed value, delinquency amount value-to-lien ratios,prior delinquencies and foreclosure status of the applicable properties as of May I of each year; (vi) information regarding the percentage of delinquency, if any, in the collection of special taxes levied on a leasehold interest in the District for the Fiscal Year preceding the Annual Report date in the form set forth in Table 4,the number of parcels delinquent, amount delinquent compared to the total levy and the assessed value of each delinquent leasehold interest as of May 1 of each year; (vii) a description of any ongoing defaults under the Ground Lease and any remedial action taken by the Successor Agency and any change in the leasehold interest that is subject to the Special Tax;and (viii) any information not already included under (i)through (vii)above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission i pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982,as amended. In addition to any of the information expressly required to be provided under paragraphs (a)or (b)of this Section, the District shall provide such further information, if any, as may be necessary to j make the specifically required statements set forth in clauses(i)to(viii),in the light of the circumstances under which they were made,not misleading. (c) Any or all of the items listed in (a)or (b)above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public 3 DOC SOC/1634685/022273-0006 I entities,which have been submitted to the Repository. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5,the Issuer shall give, or cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten(10)business days after the event: l. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; I 4. substitution of credit or liquidity providers,or their failure to perform; i 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or j final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701- TEB); 6. tender offers; 7. defeasances; 8. ratings changes;and 9. bankruptcy,insolvency,receivership or similar proceedings. Note: for the purposes of the event identified in subparagraph(9),the event is considered to occur when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assurned jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. j (b) Pursuant to the provisions of this Section 5,the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds,if material: 1. unless described in paragraph 5(a)(5)above,notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person,other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions,other than pursuant to its terms; 4 DOCS OC/1634685/022273-0006 I J 3. appointment of a successor or additional trustee or the change of the name of a trustee; 4. nonpayment related defaults; 5. modifications to the rights of Owners of the Bonds; 6. notices of redemption;and 7. release,substitution or sale of property securing repayment of the Bonds. (c) Upon the occurrence of a Listed Event under Section 5(b) above, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the Issuer determines that knowledge of the occurrence of a Listed Event under Section 5(b)would be material under applicable federal securities laws,the Issuer shall file a notice of such occurrence with the Repository in a timely manner not more than 10 business days after the event. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and that the Dissemination Agent shall not be responsible for determining whether the Issuer's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services, Inc. The Dissemination Agent may resign by providing(i)thirty days written notice to the Issuer, and(ii)upon appointment of a new Dissemination Agent hereunder. SECTION 8. Amendment. (a) This Disclosure Agreement may be amended, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (1)such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law,or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (2) this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the Issuer shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer and the Participating Underwriter, to the same effect as set forth in clause (2) above,(4)the Issuer shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners, or such amendment shall have been approved by the Owners in the same manner as an amendment to the Indenture, and (5)the Issuer shall have delivered copies of such opinion and amendment to the Repository. 5 DOCSOC/1634685/022273-0006 (b) This Disclosure Agreement also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Indenture for amendments to the Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(1),(2)and(3)have been satisfied. (c) To the extent any amendment to this Disclosure Agreement results in a change in the type of financial information or operating data provided pursuant to this Disclosure Agreement, the first Annual Report provided thereafter shalt include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (d) If an amendment is made to the basis on which financial statements are prepared, the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. SECTION 9, Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shalt have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. The District acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended may apply to the District, and that under some circumstances compliance with this Disclosure Agreement,without additional disclosures or other action,may not fully discharge all duties and obligations of the District under such laws. 6 DOCS OC/1634685/022273-0006 SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses(including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (i)compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and(ii)all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Agreement. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds,and shall create no rights in any other person or entity. SECTION 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 14. Governing Law. This Disclosure Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION 15. Notices. Any notice or communications to be among any of the parties to this Disclosure Agreement may be given as follows: To the Issuer: City of Huntington Beach Community Facilities District No. 2000-1 c/o City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance Telephone: (714)536-5630 To the Trustee: U.S.Bank National Association 633 West 5th Street,24th Floor Los Angeles,California 90071 Attention: Corporate Trust Services Telephone: (213)615-6024 7 DOC SOC/1634685/022273-0006 i To the Dissemination Agent: Willdan Financial Services,Inc. 27368 Via Industria, Suite 110 Temecula,California 92590 Telephone: (800)755-6864 To the Participating Underwriter: Stifel,Nicolaus&Company, Incorporated One Ferry Building San Francisco,California 94111 Attention: Municipal Research Department Telephone: (415)445-2602 Any person may,by written notice to the other persons listed above,designate a different address or telephone number(s)to which subsequent notices or communications should be sent. I SECTION 16. Future Determination of Obligated Persons. In the event the Securities Exchange Commission amends, clarifies or supplements the Rule in such a manner that requires any landowner within the District to be an obligated person as defined hn the Rule, nothing contained herein shall be construed to j require the District to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the District to disclose information concerning any owner of property within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof. The validity,interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California. SECTION 17. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid; illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. SECTION 18. Merge . Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 By ' 9 51"' r-- z- Its: Finance Director of the City o Huntington.Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 WILLDAN FINANCIAL SERVICES,as Dissemination Agent { i By: Its: Authorized Officer 8 DOCSOC/1634685/022273-0006 i To the Dissemination Agent: Willdan Financial Services,Inc. 27368 Via Industria,Suite 110 Temecula,California 92590 Telephone: (800)755-6864 To the Participating Underwriter: Stifel,Nicolaus&Company,Incorporated One Ferry Building San Francisco,California 94111 Attention: Municipal Research Department Telephone: (415)445-2602 Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s)to which subsequent notices or communications should be sent. SECTION 16. Future Determination of Oblieated Persons. In the event the Securities Exchange Commission arnends, clarifies or supplements the Rule in such a manner that requires any landowner within the District to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the District to ineet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the District to disclose information concerning any owner of property within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof. The validity,interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California. SECTION 17, Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, SECTION 18. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. CITY OF HUNTINGTON -BEACH COMMUNITY FACILITIES DISTRICT NO.,2000-1 By:. Its: Finance Director of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 WILLDAN FINANCIAL SERVICES,as Dissemination Agent B Its: -` rAuthorized Officer I 8 I DOCSOC/1634685v1/022273-0006 EXHIBIT A NOTICE TO THE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) Name of Bond Issue: $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: July 31,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2000-1 (the "Issuer") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement,dated as of July 1,2013. [The Issuer anticipates that the Annual Report will be filed by ] Dated: WILLDAN FINANCIAL SERVICES,as Dissemination Agent cc: City of Huntington Beach I I 9 DOCSOC/1634685/022273-0006 I 10 DOC S OC/1634685/022273-0006 1 i i i ESCROW AGREEMENT By and Between I COMMUNITY FACILITIES DISTRICT NO.2000-1 OF THE CITY OF HUNTINGTON BEACH(GRAND COAST RESORT) and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank Dated as of July 1,2013 Relating to CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2001 SPECIAL TAX BONDS DOCSOC/1622673v4/022273-0006 f ESCROW AGREEMENT (2001 SPECIAL TAX BONDS) THIS 2013 ESCROW AGREEMENT, dated as of July 1, 2013 (the "Escrow Agreement"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District") and U.S. Bank National Association, as escrow bank (the "Escrow Bank"), is entered into in accordance with Resolution No. 2013-19 of the City Council of the City of Huntington Beach, acting as the legislative body of the District, adopted on June 3, 2013 and a Bond Indenture dated as of July 1, 2013 between the District and U.S. Bank National Association, as Trustee (the "Indenture"), to refund all of the outstanding bonds issued pursuant to the Fiscal Agent Agreement dated as of December 1,2001 (the "Prior Fiscal Agent Agreement"),between the District and U.S. Bank National Association, as successor-in-interest to U.S. Bank Trust National Association, as Fiscal Agent(the"Prior Fiscal Agent"). WITNESSETH: WHEREAS, pursuant to the Prior Fiscal Agent Agreement, the City of Huntington Beach (the "City") on behalf of the District has previously issued its 2001 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of $16,000,000, which are currently outstanding in the aggregate principal amount of$13,300,000; and WHEREAS, the District has determined to issue its 2013 Special Tax Refunding Bonds in the aggregate principal amount of$12,965,000 (the "_Bonds") for the purpose in part of providing moneys which will be used to refund and defease and optionally redeem all of the Refunded Bonds on September 1, 2013 (the "Redemption Date") at a redemption price equal to 100% of the outstanding aggregate principal amount thereof, together with interest accrued on the Refunded Bonds through the Redemption Date (the "Redemption Price"), as required under the Prior Fiscal Agent Agreement; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained,the District and the Escrow Bank agree as follows: SECTION 1. Deposit of Moneys. (a) The District hereby deposits with the Escrow Bank$13,757,328.75 to be held uninvested in irrevocable escrow by the Escrow Bank separate and apart from all other securities, investments or moneys on deposit with the Escrow Bank, in the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) 2013 Special Tax Bonds Escrow Fund hereby created and established and to be known as the "Escrow Fund,"and to be applied solely as provided in this Escrow Agreement. Such moneys are at least equal to an amount sufficient to pay the Redemption Price of the Refunded Bonds on the Redemption Date. The $13,757,328.75 consists of$11,666,448.27 in Bond proceeds, $1,238,231.95 held in the Reserve Fund under the Prior Fiscal Agent Agreement, $9,014.95 held in the Administrative Expense Fund under the Prior Fiscal Agent Agreement, and $843,633.58 from cash on hand and the balance in the Debt Service Fund under the Prior Fiscal Agent Agreement, both held with the City. DOCSOC/1622673v4/022273-0006 (b) The Escrow Bank hereby acknowledges receipt of the written Verification Report of Grant Thornton LLP, certified public accountants, dated July 31, 2013 relating to the redemption of the Refunded Bonds on the Redemption Date (the"Verification Report"). SECTION 2. Use of Moneys. The Escrow Bank acknowledges receipt of the moneys described in Section 1 and agrees to make the payments required under Section 3 hereof at the times set forth in Section 3 hereof. SECTION 3. Refunding of the Refunded Bonds. From the moneys on deposit in the Escrow Fund, the Escrow Bank shall, on the Redemption Date, apply the amounts on deposit in the Escrow Fund to pay when due all interest on the Refunded Bonds and to pay the Redemption Price equal to the principal of and redemption premium of the Refunded Bonds. The District hereby directs the Escrow Bank, including the Irrevocable Instructions and Request to Fiscal Agent attached hereto as Schedule B,to complete any and all actions necessary to be taken by the Prior Fiscal Agent in connection with the redemption of the Refunded Bonds pursuant to the Prior Fiscal Agent Agreement on the Redemption Date. SECTION 4. Performance of Duties. The Escrow Bank agrees to perform the duties set forth herein. SECTION 5. Indemnity. The District hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated)to indemnify,protect, save and keep harmless the Escrow Bank and its respective successors, assigns, directors, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees j and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the District or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds deposited therein, and any payment, transfer or other application of moneys by the Escrow Bank in accordance with the provisions of this Escrow Agreement; provided, however, that the District shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's respective agents and employees or the breach by the Escrow Bank of the terins of this Escrow Agreement. In no event shall the District or the Escrow Bank be liable to any person by reason of the transactions I contemplated hereby other than to each other as set forth in this Section 5. The indemnities contained in this Section 5 shall survive the termination of this Escrow Agreement. SECTION 6. Responsibilities of the Escrow Bank. The Escrow Bank and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of this Escrow Agreement, the establishment of the Escrow Fund, the acceptance of the moneys deposited therein, or any payment, transfer or other application of moneys or obligations by the Escrow Bank in accordance with the provisions of this Escrow Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the District, and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representation as to the sufficiency of the deposit of moneys in the Escrow Fund to 2 DOCSOC/1622673 v4/022273-0006 accomplish the refunding of the Refunded Bonds on the Redemption Date or to the validity of this Escrow Agreement as to the District and, except as otherwise provided herein, the Escrow Bank shall incur no liability with respect thereto. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Escrow Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the District, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the District. The liability of the Escrow Bank to make the payments required by this Escrow Agreement shall be limited to the moneys in the Escrow Fund. No provision of this Escrow Agreement shall require the Escrow Bank to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. The Escrow Bank shall not be liable for the accuracy of any calculations provided herein. Any company into which the Escrow Bank may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Escrow Bank may sell or transfer all or substantially all of its corporate trust business shall be the successor to the Escrow Bank without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. The District shall pay the Escrow Bank full compensation for its duties under this Escrow Agreement, including out-of-pocket costs such as publication costs, redemption or redemption expenses, legal fees and other costs and expenses relating hereto. Under no circumstances shall amounts deposited in the Escrow Fund be deemed to be available for said purposes. The Escrow Bank may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed. The Escrow Bank agrees to accept and act upon instructions or directions pursuant to this Escrow Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Escrow Bank shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the District elects to give the Escrow Bank e-mail or facsimile instructions (or instructions by a similar electronic method) and the Escrow Bank in its discretion elects to act upon such instructions, the Escrow Bank's understanding of such instructions shall be deemed controlling. The Escrow Bank shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Bank's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a 3 DOCSOC/1622673v4/022273-0006 I subsequent written instruction. The District agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Bank, including without j limitation the risk of the Escrow Bank acting on unauthorized instructions, and the risk of interception and misuse by third parties. SECTION 7. Irrevocable Instructions as to Notice. The Escrow Bank hereby acknowledges that upon the funding of the Escrow Fund as provided in this Escrow Agreement, the receipt of the Verification Report described in Section 1(b) of this Escrow Agreement and the 1 Irrevocable Instructions and Request to Fiscal Agent attached hereto as Schedule B it is in receipt of the items constituting all of the conditions precedent to the redemption of the Refunded Bonds under the Prior Fiscal Agent Agreement. SECTION 8. Amendments. This Escrow Agreement is made for the benefit of the District and the holders from time to time of the Bonds and it shall not be repealed, revoked, altered or amended without the written consent of all such holders,the Escrow Bank and the District; provided, however, but only after the receipt by the Escrow Bank of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest evidenced and represented by the Bonds and the Bonds will not be adversely affected for federal income tax purposes, the District and the Escrow Bank may, without the consent of, or notice to, such holders, amend this Escrow Agreement or enter into such agreements supplemental to this Escrow Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Escrow Agreement for any one or more of the following purposes: (i)to cure any ambiguity or formal defect or omission in this Escrow Agreement; (ii)to grant to, or confer upon, the Escrow Bank for the benefit of the holders of the Refunded Bonds any additional rights,remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (iii)to include under this Escrow Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized bond counsel with respect to compliance with this Section 8, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the Refunded Bonds or that any instrument executed hereunder complies with the conditions and provisions of this Section 8. SECTION 9. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either (i)the date upon which the Refunded Bonds have been paid in accordance with this Escrow Agreement, or (ii)the date upon which no unclaimed moneys remain on deposit with the Escrow Bank and all amounts owed to the Escrow Bank shall have been paid in full. Any unclaimed money which remains in the Escrow Fund for 2 years from the date upon which the Refunded Bonds have been paid in accordance with this Escrow Agreement shall be remitted by the Escrow Bank to the District. SECTION 10. Compensation. The Escrow Bank shall receive its reasonable fees and expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien nor will it assert a lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under this Escrow Agreement. SECTION 11. Resignation or Removal of Escrow Bank. (a) The Escrow Bank may resign by giving 30 days prior written notice in writing to the District. The Escrow Bank may be removed (1)by (i)filing with the District and the 4 DOCSOC/I622673v4/022273-0006 Escrow Bank an instrument or instruments executed by the holders of at least 51% in aggregate principal amount of the Refunded Bonds then remaining unpaid, and (ii)the District delivering written notice to the Escrow Bank, or (2)by a court of competent jurisdiction for failure to act in accordance with the provisions of this Escrow Agreement upon application by the District or the holders of 5% in aggregate principal amount of the Refunded Bonds then remaining unpaid. (b) No resignation or removal of the Escrow Bank shall become effective until a successor Escrow Bank has been appointed hereunder and until the cash held under this Escrow Agreement are transferred to the new Escrow Bank. The District or the holders of a majority in principal amount of the Refunded Bonds then remaining unpaid may, by an instrument or instruments filed with the District, appoint a successor Escrow Bank who shall supersede any Escrow Bank theretofore appointed by the District. If no successor Escrow Bank is appointed by the District or the holders of such Refunded Bonds then remaining unpaid, within 45 days after notice of any such resignation or removal, the holder of any such Refunded Bonds or any retiring Escrow Bank may apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank. SECTION 12. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the District or the Escrow Bank to be performed should be j determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. SECTION 13. Counterparts, This Escrow Agreement may be executed in several counterparts,all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. SECTION 14. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. SECTION 15. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Escrow Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Bank are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Escrow Agreement, and no interest shall accrue for the period after such nominal date. i SECTION 16. Assi nment. This Escrow Agreement shall not be assigned by the Escrow Bank or any successor thereto without the prior written consent of the District. 5 DOC SOC/1622673v4/022273-0006 IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed by their duly authorized officers and attested as of the date and year first written above. COMMUNITY FACILITIES DISTRICT NO. 2000-1 OF THE CITY OF HUNTINGTON BEACH (GRAND COAST RESORT) By: , a,'- 6;-,, Director of Finance of the City of Huntington Beach, acting as the legislative body of Community Facilities District No. 2000-1 of the City of Huntington Beach(Grand Coast Resort) ATTEST: /; r City erk of the City Council f he City of Hunt' gton Beach,acting as tl a egislative b,6d,y of Community Facilities District No. 2T00-1 of the City of Huntington Beach (Grand Coast Resort) [SIGNATURES CONTINUED ON NEXT PA GE i i I I I I S-1 DOCSOC/1622673/022273-0006 [SIGNATURE PAGE CONTINUED:] U.S.BANK NATIONAL ASSOCIATION,. as Escrow Bank By: Authorized Officer i i i l II' �I �I f i i i S-2 DOCSOC/1622 673/022273-0006 �I i I SCHEDULE A I ESCROW REQUIREMENTS Principal Redeemed with Required Deposit to Payment Date Principal Interest Premium the Escrow Fund September 1,2013 $380,000.00 $427,328.75 $12,950,000.00 $13,757,328.75 i I 1 I i I i 1 I 1 I { 1 1 A-1 DOCSOC/1622673v4/022273-0006 , I i SCHEDULE B IRREVOCABLE INSTRUCTIONS AND REQUEST TO FISCAL AGENT July 31,2013 U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent I ESCROW AGREEMENT RELATING TO THE REFUNDING OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2001 SPECIAL TAX BONDS (the"Refunded Bonds") Ladies and Gentlemen: { As Fiscal Agent under that certain Fiscal Agent Agreement dated as of December 1, 2001, between the District and U.S. Bank National Association, as successor-in-interest to U.S. Bank Trust National Association, the Fiscal Agent (the "Fiscal Agent Agreement'), you are hereby notified of j the irrevocable election of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)to redeem on September 1, 2013 all of the outstanding Bonds (as such term is defined in the Fiscal Agent Agreement) issued pursuant to the Fiscal Agent Agreement (the "Refunded Bonds"). You are hereby irrevocably instructed to mail to the holders of the Refunded Bonds, as provided in Section 2.03 of the Fiscal Agent Agreement, notice of redemption of the Refunded Bonds scheduled to be redeemed prior to maturity. Such notice shall be substantially in the form required by the Fiscal Agent Agreement, a copy of which form is annexed hereto as Exhibit X. B-1 DOCSOC/1622673 v4/022273-0006 You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the holders of the Refunded Bonds (in the form annexed hereto as Exhibit Y) that the deposit of moneys has been made with U.S. Bank National Association, as Escrow Bank, and that the projected withdrawals fi•om such escrow have been calculated to be adequate to pay the principal, redemption price and interest due on said Refunded Bonds outstanding as such become due or are subject to redemption. COMMUNITY FACILITIES DISTRICT NO. 2000-1 OF THE CITY OF HUNTINGTON BEACH(GRAND COAST RESORT) By: Director of Finance of the City of Huntington Beach, acting as the legislative body of Community Facilities District No. 2000-1 of the City of Huntington Beach(Grand Coast Resort) Receipt acknowledged and consented to: U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer i i i I i i B-2 DOCS OC/162 2 673 v4/02 2273-0006 EXHIBIT X NOTICE OF FULL REDEMPTION to the Holders of Community Facilities District No.2000-1 of the City of Huntington Beach (Grand Coast Resort)2001 Special Tax Bonds CUSIP#s:446188BC7,446188BD5,446188BE3,44618813170,and 446188BV5 NOTICE IS HEREBY GIVEN, pursuant to the terms of the Fiscal Agent Agreement (the "Fiscal Agent Agreement") dated as of December 1, 2001, between the Community Facilities District No. 2000-1 of the City of Huntington Beach (Grand Coast Resort) as Issuer, and U.S. Bank National Association, as successor-in-interest to U.S. Bank Trust National Association, as Fiscal Agent, that all outstanding above-referenced bonds (the `Bonds") maturing on and after September 1, 2014, in the aggregate principal amount of$12,950,000, originally issued on December 19, 2001, have been called for redemption in full on September 1, 2013 (the "Redemption Date") at a price of 100% of the principal amount thereof(the "Redemption Price") together with interest accrued to the Redemption Date. Payment of the Redemption Price on the Bonds called for redemption will become due and payable on the Redemption Date upon presentation and surrender thereof in the following manner: If by Mail: (REGISTERED BONDS) If by Hand or OvernijZht Mail: U.S.Bank Corporate Trust Services U.S.Bank Corporate Trust Services P.O.Box 64111 60 Livingston Avenue St.Paul,MN 55164-0111 1st Floor—Bond Drop Window St.Paul,MN 55107 800-934-6802 i Subject to the terms of this Notice of Full Redemption, Bondholders are required to surrender their Bonds to the Fiscal Agent at the address above on the Redemption Date and there will become due and payable on each of the Bonds the principal amount thereof, together with interest accrued thereon. to the Redemption Date and from and after such Redemption Date interest thereon shall cease to accrue. Bondholders presenting their Bonds in person for same day payment must surrender their Bond(s)by 1:00 P.M. on the Redemption Date and a check will be available for pick up after 2:OOP.M. Checks not picked up by 4:30 P.M. will be mailed out to the Bondholder via first class mail. If payment of the Redemption Price is to be made to the registered holder,you are not required to endorse the Bond to collect the prepayment. REQUIREMENT INFORMATION For a list of redemption and tender requirements please visit our website at www.usbank.cotn/corporatetrust and click on the"Bondholder Information"link. IMPORTANT NOTICE Under Section 3406(a)(1)of the Internal Revenue Code, the paying agent making payinent of interest or principal on securities may be obligated to withhold a percentage of the payurent to a holder who has failed to furnish the registrar with a valid taxpayer identification number, certification that the number supplied is correct, and that the holder is not subject to backup withholding. Holders of the Bonds who wish to avoid the application of these provisions should submit either a completed IRS Forrrr W-9 (rise only if the holder is a US. person, including a resident alien), or the appropriate Fornr W-8 (use only if you are neither a U.S.person or a resident alien), when presenting the Bonds for payment. See IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Publication 515 and W-8 forms and instructions are available through the IRS website at www.irs.gov. * The CUSIP numbers are included solely for the convenience of the Holders of the Bonds. Neither the Issuer nor the Fiscal Agent shall be responsible for any error of any nature relating to such numbers. Dated: August 1,2013 By: U.S.Bank National Association,as Fiscal Agent X-1 DOC SOC/1622673 v4/022273-0006 'i EXHIBIT Y NOTICE OF DEFEASANCE OF OUTSTANDING THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2001 SPECIAL TAX BONDS (THE"REFUNDED BONDS") CUSIP#s:446188BB9,446188BC7,446188BD5,446188BE3,446188BF0,and 446188BV5 Notice is hereby given to the holders of the outstanding above-captioned Bonds (the "Refunded Bonds") that (i)the Refunded Bonds will be redeemed and defeased; (ii)there has been deposited with U.S.Bank National Association,as Escrow Bank,moneys as permitted by that certain Fiscal Agent Agreement dated as of December 1,2001, between the District and U.S. Bank National Association, as successor-in-interest to U.S. Bank Trust National Association, the prior Fiscal Agent (the "Fiscal Agent Agreement"), relating to the Refunded Bonds, the principal of and the interest on which will provide moneys which,together with such other moneys deposited with the Escrow Bank, will be sufficient and available to redeem on September 1, 2013 the Refunded Bonds at the applicable redemption price contained in the Fiscal Agent Agreement; and (iii)the Escrow Bank has been irrevocably instructed to redeem such outstanding Refunded Bonds on September 1,2013. Dated this 31 st day of July, 2013. U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent Y-1 DOCSOC/1622673v4/022273-0006 REPORT OF PROPOSED DEBT ISSUANCE California Debt and Investment Advisory Commission 915 Capitol Mall,Room 400,Sacramento,CA 95814 P.O.Box 942809,Sacramento,CA 94209-0001 Tel.:(916)653-3269 Fax:(916)654-7440 Completion and timely submittal of this form to the California Debt and Investment Advisory Commission(CDIAC)at the above address will assure your compliance with existing California State law and will assist in the maintenance of a complete database of public debt in California.Thank you for your cooperation.' ISSUERNAME City of Huntington Beach (If pool bond,list participants) ISSUE NAME Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Please specify type/name of project: PROPOSED SALE DATE 06/26/2013 PRINCIPAL TO BE SOLD$ 12,990,000.00 IS ANY PORTION OF THE DEBT FOR REFUNDING?2 (` No (.• Yes,proposed amount for refunding $ 12,990,000.00 JPrivate Placement? Q Issuer Contact First Name Lori Middle Name Ann Last Name Farrell Title Director of Finance E-mail Loriann.farrell@surfcity-hb.org Address 2000 Main Street Addr,cont. Addr.Cont. Addr.cont. city Huntington Beach state CA zip Code 92648 Phone 714 5365225 Extension ISSUER LOCATED IN Orange COUNTY Filing Contact:Name of Individual(representing (ie Bond Counsel (• Financial Advisor ( Lead Undernriter ) who completed this form and may be contacted for information. Name Brian Middle Name Last Name Forbath Firm/Agency Stradling Yocca Carlson&Rauth Address 660 Newport Center Drive,Suite 1600 Addr.Cont. Addr.Cont. Addr.Cont. City Newport Beach State CA zip Code 92660 Phone 949 7254000 Extension 4193 E-mail bforbath@sycr.com Send acknowledgement to: Julie Alvarez E-mail jalvarez@sycr.com FINANCING PARTICIPANTS: BOND COUNSEL Stradling Yocca Carlson&Rauth FINANCIAL ADVISOR Public Financial Management, Inc. UNDERWRITEMPURCHASER Stifel,Nicolaus&Company, Incorporated IS THE INTEREST ON THE DEBT TAXABLE? Under State law: No(tax-exempt) ` Yes(taxable) j Under Federal law: (io No(tax-exempt yr Yes(taxable) If the issue is federally tax-exempt,is interest a specific preference item for the purpose of alternative minimum tax? (` Yes,preference item (i No,not a preference item TYPE OF SALE: ( Competitive (4 Negotiated 'Section 8855(k)ofthe California Government Code requires the issiter ofmi9 propased neu,public debt issue to give irrinea notice of the proposed sale to the CDIAC ao later than 30 days prior to the sale.Under California Government Code Section 8855(1),'The issuer ofany new public debt issue shall,not later than 45 days after the sighing ofthe bond pitrehase contract in a negotiated or prirate financing,or after the acceptance ofa bid in a competitive offering,submit a report offinai sale and official statement to the Commission.The Commission inap require iiiforivaiiati to be submitted in the report offinal sale that is considered appropriate. 2 Section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding bonds at private sale or on a negotiated basis shall send a written statement,within two weeks after the bonds are sold,to the CDIAC explaining the reasons why the local agency determined to sell the bonds at private sale or on a negotiated basis instead of at public sale. TYPE OF DEBT INSTRUMENT NOTE BOND (" Bond anticipation(BAN) ( Conduit revenue(Private obligor)(CRB) (' Other note(Please specify below.)(OTHN) ( General obligation(GOB) (: Grant anticipation(GAN) (i Limited tax obligation(LTOB) (. Revenue anticipation(RAN) (' Other bond(Please specify below.)(OTHB) Tax allocation(TALN) (': Public lease revenue(PLRB) Tax and revenue anticipation(TRAN) (" Revenue(Pool)(RB) Tax anticipation(TAN) (' Revenue(Public enterprise)(PERB) ( Sales tax revenue(STRB) Commercial paper(CP) (' Special assessment(SAB) Certificates of participation/leases(COP/L) ( Tax allocation(TAB) Other(Please specify below.)(OTH) Please specify if"Other note/Other bond/Other"was checked SOURCE(S)OF REPAYMENT F Bond proceeds(BDPR) F—, Property tax revenues(PRTX) F- General fund of issuing jurisdiction(GNFD) F7 Public enterprise revenues(PER) F— Grants(GRNT) r Sales tax revenues(SATR) F-; Intergovernmental transfers other than grants(ITGV) F—,i Special ssessments(SA) F- Local obligations(LOB) Special tax revenues(SPTR) F; Other(Please specify.)(OTHS) F Tax-increment(TI) F- Private obligor payments(POP) Please specify if"Other"was checked PURPOSE(S)OF FINANCING F Airport(APRT) F—! Cash flow,interim financing(CFIF) r; Bridges and highways(BRHI) F; Project,interim financing(PIF) Convention center(CCTR) j � Equipment(EOUP) �j College/university housing(CUH) r; Flood control/storm drainage(FLDS) F! Multifamily housing(MFH) Multiple capital improvements and public works(MCAP) F Single-family housing(SFH) r Other capital improvements and public works(OCAP) r Parking(PRKG) Health care facilities(HCF) Parks/Open space(PRKG) r Hospital(HOSP) Ports and marinas(PRTS) r Other/multiple health care purposes(equipment;etc.)(OMHC) Power generations/transmission(PWR) rl Prisons/jails/correctional facilities(PRSN) F- College/university facility(CUF) F7, Public building(PB) K-12 school facility(KSCH) Public transit(PTR) F—j Other/multiple educational uses(equipment,etc.)(OMED) [ Recreation and sports facilities(RCSP) F! Student Loans(SLC) F-- Seismic safety improvments/repair(SSI) F, Solid waste recovery facilities(SWST) r Redevelopment,multiple uses(RD) (�; Street construction and improvements(SCI) r Wastewater collection and treatment(WSTW) F7 Commercial development(CMDV) r Water supply/storage/distribution(WTR) r; Industrial development(INDV) F7 Pollution control(PC) r Insurance/pension funds(IPF) r Other than listed above(OTH) Please specify type/name of project if different from above propo.d.p&03-05 Bill Lockyer st STATE OF CALIFORNIA State Treasurer and Chair CALIFORNIA DEBT AND INVESTMENT ADVISORY COMMISSION 915 CAPITOL MALL ROOM 400 PO BOX 942809 SACRAMENTO,CA 94209-0001 TELEPHONE: (916)653-3269 FAX: (916)654-7440 May 24,2013 TO: Julie Alvarez Stradling Yocca Carlson&Rauth 660 Newport Ctr Dr Ste 1600 Newport Beach,CA 92660 1 FROM *'1v1ai`k.� pbell,Executive Director RE: 'ACKNOWLEDGEMENT OF REPORT OF PROPOSED DEBT ISSUANCE California Government Code Section 8855 requires written notice to be given to the California Debt and Investment Advisory Commission(CDIAC)no later than 30 days prior to the proposed sale of any public agency debt issue. CDIAC acknowledges receipt of your notice of the following proposed debt issuance` CDIAC Number: 2013-1203 Issuer: Huntington Beach CFD No 2000-1 Project: Grand Coast Resort Proposed Amount: $12,990,000 Proposed Sale Date: June 26,2013 Date Notice Received: May 20,2013 Issuers may electronically file the Report of Final Sale through CDIAC's website,using.the following information: CDIAC Number: 2013-1203 Password: 25001421 A CDIAC Number and.Password will be provided for each electronic filing,of the Report of Proposed Debt Issuance.This information is unique to this filing and must be used for any subsequent reporting under this CDIAC Number. Please submit the Report of Final Sale and the Official Statement/Offering Memorandum or other Bond Documents in accordance with Government Code Section 8855 on this issue within 45 days of the signing of the bond purchase contract or the acceptance of a bid to purchase the debt,to www.treasurer.cA.gov/ediac/reporting.asp under the heading"Reporting Forms". Official Statements/Offering Memorandums or other Bond Documents can be sent by e-mail to CDIA:C_issuance@treasurer.ca.gov. Any questions regarding reporting requirements may be directed to CDIAC's Data.Unit at(91.6)653-3269. 3 Cc: Lori Ann Farrell j Finance Director i 1 REPORT OF FINAL SALE California Debt and Investment Advisory Commission Submitted: Monday,August 12,2013 915 Capitol Mall,Room 400,Sacramento,CA 95814 3:13:32PM P.O.Box 942809,Sacramento,CA 94209-0001 Tel:(916)653-3269 Far:(916)654-7440 CDIAC# 2013-1203 Under California Government Code Section 8855(i),"The issuer of any new public debt issue shall,not later than 45 days after the signing of the bond purchase contract in a negotiated or private financing,or after the acceptance of a bid in a competitive offering,submit a report of final sale and official statement(or alternate bond documents)to the Commission.The Commission may require information to be submitted in the report of final sale that is considered appropriate." ISSUER NAME Huntington Beach CFD No 20001 (if pool bond,list participants) ISSUE NAME 2013 Special Tax Ref Bonds i IF THIS IS A POOLED FINANCING,WHICH ISSUANCE STATUTE IS IT AUTHORIZED UNDER? i N/A ACTUAL SALE DATE: 7/10/2013 PRINCIPAL SOLD: $12,965,000.00 DATED DATE: 7/31/2013 I IS ANY PORTION OF THE DEBT FOR REFUNDING?(see 1) No Q Yes,refunding amount(including costs) $12,965.000.00 Issuer Contact: Name: Lori Ann Farrell Title: Finance Director Address: 2000 Main Street P.O.Box 190 City/State/Zip Huntington Beach,CA 92648 Phone: 714 5365630 ISSUER LOCATED IN Orange COUNTY E-Mail: loriann.farrell@surfcity-hg.org Filing Contact: Name of Individual representing Bond Counsel who completed this form and may be contacted for information. Name: Brian Forbath Firm/Agency: Stradling Yocca Carlson&Rauth Address: 660 Newport Center Drive Suite 1600 City/State/Zip Newport Beach,CA 92660 Phone: 949 7254000 E-Mail: bforbath@sycr.com Send acknowledgement/copies to: Quang Le E-Mail: qle@sycr.com Name of individual to who an invoice for the CDIAC issue fee should be sent:(see 2) Name: Sara Brown Firm/Agency Stifel Nicolaus&Company Incorporated Address: One Ferry Building City/State/Zip San Francisco,CA 94111 Phone: 213 4435004 E-Mail: sbrown@stifel.com I Section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding bonds at private sale or on a negotiated basis shall send a written statement,within two weeks after the bonds are sold,to CDIAC explaining the reasons why the local agency determined to sell the bonds at a private sale or on a negotiated basis instead of at a public sale. 2 This fee is authorized by Section 8856 of the California Government Code and is charged to the lead underwriter or purchaser of the issue.The fee is CDIAC:Report of Final Sale Page 2 FINANCING PARTICIPANTS(Firm Name) Office Location(City/State): Financial Advisor: PFMPublic Financial Management Inc Los Angeles,CA Lead Underwriter/Purchaser Stifel Nicolaus&Company Inc San Francisco,CA Bond Counsel: Stradling Yocca Carlson&Rauth Newport Beach,CA Co-Bond Counsel: NA Trustee/Paying Agent: U.S.Bank National Association Los Angeles,CA Placement Agent: , MATURITY SCHEDULE IS THE INTEREST ON THE DEBT EXEMPT FROM TAXATION? Attached 0 Included in Official Statement Under State Law: Yes(taxable) ❑X No(tax-exempt) MATURITY STRUCTURE Under Federal Law: Yes(taxable) ❑X No(tax-exempt) Serial(S) ElTerm(T) If the issue is federally tax-exempt,is interest a specific preference x❑ Serial and term bonds or two or more term(B) item for the purpose of alternative minimum tax? Yes ❑X No FINAL MATURITY DATE: 9/1/2031 INTEREST TYPE(Please provide both NIC&TIC if available) FIRST OPTIONAL CALL DATE: 9/1/2013 0 NIC Int.Cost 4.842% SENIOR STRUCTURE: ❑ Yes No Q TIC Int.Cost 4.8240A SUBORDINATE STRUCTURE: Yes No Variable OFFICIAL STATEMENT/OFFERING MEMORANDUM: CAPITOL APPRECIATION BOND: Yes n No 0 Enclosed EJ None prepared ISSUANCE COSTS AND FEES: WAS THE ISSUE INSURED OR GUARANTEED? A.Management Fee $0.00 0 No B.Total Takedown $0.00 Bond Insurance(1) C.Underwriter Expenses $0.00 Letter of Credit(L) Underwriter Spread or Discount $78,087.50 State Intercept Program(T) D.Bond Counsel $65,500,00 Other E.Co-Bond Counsel $0.00 GUARANTOR: F.Disclosure Counsel $0.00 ENHANCEMENT EXPIRATION DATE: G.Financial Advisor $8,750.00 INDICATE CREDIT RATING: (For example,"AAA"or"Aaa") H.Rating Agency $0.00 0 Not Rated n Rated I.Credit Enhancement $0.00 Standard&Poor's J.Trustee Feet $4,250.00 Fitch K.Placement Agent $0.00 Moody's L.Other Expenses $4,000.00 Other Total Issuance Costs $160,587.50 I REASON FOR NEGOTIATED REFUNDINGS Original Issue Premium $0.00 If the issue is a negotiated refunding,indicate the reason(s) Original Issue Discount $33,759.20 why the bonds were issued at a private or negotiated versus a competitive sale. Net Original Premium/Discount $0.00 (1)Timing of the sale provided more flexibility than a public sale. (2)More cost savings were expected to be realized than a public sale. (3)More flexibility in debt structure was available than a public sale. (4)Issuer able to work with participants familiar with issue/r than a public sale. �X (5)All of the above. (6)Other(please specify) N/A I I I! $12,990,000* CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS RULE 15c2-12 CERTIFICATE The undersigned hereby certifies and represents that she is the Director of Finance of the City of Huntington Beach (the "City"), and, as such, is duly authorized to execute and deliver this certificate and. further hereby certifies that: (1) this certificate is being delivered in connection with the sale and issuance of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds (the "Bonds") in order to enable the underwriter of the Bonds to comply with. Rule 15c2-12 promulgated under the Securities and Exchange Act of 1934, as amended(the"Rule"); (2) in connection with the sale and issuance of the Bonds, there has been prepared a. Preliminary Official Statement dated June 10, 2013 setting forth information concerning the Bonds, the City and Community Facilities District No.2000-1 therein (the"Preliminary Official Statement"); and i (3) except for the Permitted Omissions, the Preliminary Official Statement is deemed final within the meaning of the Rule. As used herein, the term "Permitted Omissions" refers to the offering price(s), interest rates(s), selling compensation, aggregate principal amount, principai amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all as set forth in the Rule. IN WITNESS WHEREOF,I have hereunto set my hand as of June 10,2013. CITY OF HUNTINGTON.BEACH By: Lori Ann Farrell Director of Finance 1 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS INCUMBENCY AND SIGNATURE CERTIFICATE OF THE CITY AND DISTRICT i 1. Each of the undersigned hereby certify that they are now the duly elected or appointed and qualified officers of the City of Huntington Beach (the "City") holding the offices of the City set forth below opposite their respective names,and that the signatures affixed opposite their respective names and offices are their genuine signatures. 2. Connie Boardman, Mayor of the City and Joan L. Flynn, City Clerk of the City, further certify that they were duly authorized by the City Council of the City, acting in its capacity as the legislative body of the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) (the"District")to execute the District's 2013 Special Tax Refunding Bonds, in the aggregate principal amount of$12,965,000, issued in accordance with Resolution No. 2003-19 adopted by the City Council of the City, acting in its capacity as the legislative body of the District, on June 3, 2013 (the "Resolution of Issuance"), and that, pursuant to such authority, the Bonds have been executed by the facsimile signatures of the Mayor and the City Clerk, each of whom hereby adopts their respective facsimile signature thereon. The Mayor and the City Clerk hereby further certify that each of them has filed with the Secretary of State of the State of California their manual signatures, certified by each of them under oath as provided by the Uniform Facsimile Signatures of Public Officials Act(Government Code Section 5550 et seq.). 3. Each of the undersigned further certify that they were duly authorized by the District pursuant to the Resolution of Issuance to execute each of the documents that they executed on behalf of the District in connection with the issuance of the Bonds. All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Bond Purchase Agreement dated July 10, 2013, by and between the District and Stifel, Nicolaus&Company, Incorporated,as Underwriter. DOCSOC/1633116/022273-0006 I IN WITNESS WHEREOF, the undersigned have signed this certificate this 31st day of July, 2013. Name Office Sign tune l Connie Boardman Mayor d � G� fL"2r1` ` Joan L.Flynn City Clerk Lori Ann Farrell Director of Finance The undersigned are the City Clerk and the Director of Finance, respectively, of the City of Huntington Beach and hereby state that the foregoing signatures are the true and correct signatures of the persons named above. } I Ci Llerkof the City of HuTgton Beach i Director of Finance of the City of Huntington Beach 1 i I i I I 2 DOCSOC11633116/022273-0006 I i 1 $12,965,000 I CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE RE CITY TREASURER DESIGNATION 1. The undersigned hereby certifies that she is the Director of Finance of the City of Huntington Beach(the"City")and has the authority to issue Certificates of an Authorized Officer,as such term is defined in that certain Bond Indenture dated as of July 1,2013 (the"Indenture"),by and between the City of Huntington Beach Community Facilities District No. 20004 (Grand Coast Resort) and U.S.Bank National Association, as trustee(the"Trustee"),for the purpose of°instructing the Trustee regarding the disbursement and investment of the proceeds of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special.Tax Refunding Bonds(the"Bonds"). 2. The undersigned hereby further certifies that she has the authority under the Indenture to authorize other persons to issue Certificates of an Authorized Officer pursuant to the Indenture. 3. The undersigned hereby designates Alisa Cutchen, the Treasurer of the City; as a person authorized under the Indenture to issue Certificates of an Authorized Officer for the purpose of instructing the Trustee regarding the disbursement and investment of the proceeds of the Bonds. 4. The undersigned hereby further certifies that the below signature is that of Alisa Cutchen,Treasurer of the City. Ahsa Cutchen e Treasurer f ��--- i i i Dated August 21,2013 ' L i Ann Farrell,Director of Finance of the City of Huntington Beach I DOCSOG 1'63 803 5v 1/022273-0006 j $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS ISSUER CLOSING CERTIFICATE The undersigned, hereby certifies that I am the Director of Finance of the City of Huntington Beach, the City Council of which is the legislative body for City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District"), a community facilities district duly organized and existing under the laws of the State of California, and, as such, I am authorized to execute this Certificate on behalf of the District in connection with the issuance of the above- captioned bonds(the"Bonds"). I hereby further certify on behalf of the Issuer that: 1. The representations and warranties made by the Issuer in the Issuer Documents are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date. 2. As of the date hereof, the Bond Indenture is in full force and effect in accordance with its terms and has not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter. 3. No event has occurred since the date of the Final Official Statement that, as of the Closing Date, would cause any statement or information contained in the Final Official Statement (excluding therefrom the section entitled "LEASHOLD OWNERSHIP AND THE HOTEL", as to which no opinion need be expressed) to be incorrect or incomplete in any material respect or would cause the information in the Final Official Statement (excluding therefrom the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL", as to which no opinion need be expressed) to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading. 4. No litigation is pending with respect to which the Issuer has been served with process or,to my best knowledge after reasonable inquiry, threatened (a) to restrain or enjoin the issuance of any of the Bonds or the collection of Special Taxes pledged under the Bond Indenture; (b) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds, the Ground Lease, the Bond Indenture, the Escrow Agreement, the Continuing Disclosure Agreement or the Purchase Agreement; or (c) in any way contesting the existence or powers of the Issuer. 5. The Issuer has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Issuer Documents prior to issuance of the Bonds. DOC SOC/l 633116/022273-0006 I Capitalized terms used in this Certificate and not defined herein shall have the same meaning set forth in the Bond Purchase Agreement dated July 10, 2013, between the Issuer and Stifel, Nicolaus&Company,Incorporated, as Underwriter. Dated: July 31, 2013 THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND CO ST RESORT) By: �^- t Director of Finance of the City of Huntington Beach 2 DOCSOC/1633116/022273-0006 $12,965,000 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF THE CITY The undersigned, in her capacity as Director of Finance of the City of Huntington Beach (the "City") and not in his individual capacity, on behalf of the City, represents and warrants as of the date hereof in connection with the sale and issuance of the above-captioned bonds (the `Bonds") i pursuant to the Bond Purchase Agreement, dated July 10, 2013 (the "Purchase Agreement"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the"Issuer") and Stifel,Nicolaus &Company, Incorporated,as Underwriter as follows. 1. The City is duly organized and validly existing as a municipal corporation and charter city under the Constitution and laws of the State of California and the City Council has duly and validly adopted each of the Resolutions and Ordinance and authorized the formation of the Issuer pursuant to the Act. 2. The information contained in the Official Statement (other than information in the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL," information provided by Willdan Financial Services, the County of Orange and information relating to The Depository Trust Company and its book-entry only system, as to which no view is expressed) is, as of the date thereof and as of the date hereof, true and correct in all material respects and does not, as of the date thereof and as of the date hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading. 3. Except as is specifically disclosed in the Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court,public board or body, pending with respect to which the City has been served with process or is known to have been threatened, which in any way questions the powers of the City Council to adopt the Resolutions and the Ordinance, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Purchase Agreement, or of any other Issuer Document, or which, in any way, could adversely affect the validity or enforceability of the Resolutions, the Ordinance, the Bond Indenture, the Escrow Agreement, the Bonds or the Purchase Agreement. 4. The city hereby acknowledges and agrees to enforce on behalf of the Issuer and owners of the Bonds, the Agency's agreement not to terminate the Ground Lease so long as the Bonds remain outstanding, pursuant to and in accordance with the Agreement between the City and the Redevelopment Agency of the City of Huntington Beach regarding Forebearance of Remedies under the Lease Agreement dated as of December 1,2001 DOCSOC/163 3116/022273-0006 i 5. Any certificate signed by an official of the City authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Issuer Documents shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein contained. 6. Except as disclosed in the Official Statement, the City has not failed in any material respect to comply with any undertaking of the Issuer under the Rule in the previous five years. The securities listed as Exhibit A to the certificates of Willdan Financial Services and Harrell& Company Advisors, LLC required by Section 8(c)(xvii) of the Purchase Agreement are all of the City, the Successor Agency to the Redevelopment Agency of Huntington Beach,the Huntington Beach Public Finance Authority and all other entities related to the City that were obligated to provide continuing disclosure pursuant to undertakings under the Rule during the past five years. 1 +,I I 2 DOC SOC/1633116/022273-0006 I All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Purchase Agreement. Dated; July 31,2013 CITY OF7TINGTON BEACH By. Director of Finance of the City of Huntington Beach I i I i i I 3 DOCS OC/1633116i 022273-0006 i f l $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS INSTRUCTIONS TO TRUSTEE The undersigned, Director of Finance of the City of Huntington Beach (the "City"), a duly authorized representative of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)(the"District"), hereby states and certifies to U.S. Bank National Association ., as trustee (the"Trustee")under the Bond Indenture dated as of July 1,2013 (the "Indenture"),by and between the District and the Trustee,pursuant to the terms thereof that: i. The undersigned is a duly appointed Authorized Representative of the District, as such tern is defined in Section 1.1 of the Indenture, with authority to instruct the Trustee regarding the disbursement and investment of the Bond proceeds and authentication of the above-captioned bonds (the"Bonds"). 2. Pursuant to the terms of the Indenture, the District has executed and delivered to the Trustee its Bonds, in an aggregate principal amount of $12,965,000. The Trustee is hereby authorized and directed to authenticate the definitive Bonds by signing the certificate of authentication and registration appearing thereon and to hold said Bonds as FAST Agent on behalf of The Depository Trust Company for the account of Stifel, Nicolaus & Company, Incorporated, as Underwriter(the"Underwriter"). 3. The Trustee is instructed to apply the portion of the proceeds from the sale of the Bonds received by the Trustee, $12,851,153.30 (consisting of the principal amount of $12,965,000.00, less Net Original Issue Discount of$35,759.20 and less Underwriter's discount of $78,087.50) together with $2,090,880.48 in funds on deposit relating to the Refunded Bonds, as follows: $ 13,757,328.75 shall be transferred to the Escrow Bank for deposit into the Escrow Fund 9,000.00 shall be deposited in the Administration Fund 83,930.03 shall be deposited in the Costs of Issuance Account 1,091,775.00 shall be deposited in the Reserve Account of the Special Tax Fund 14.942.033.7$ TOTAL PROCEEDS RECEIVED DOCSOC/1 633 1 1 6/022273-0006 I I All capitalized terms used herein without definition shall have the meanings assigned to such P g g terms in the Indenture. Dated: July 31, 2013 THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) j �By: � "` 4t,-44,-e Director of Finance of the City of Huntington Beach 2 DOCSOC/1633116/022273-0006 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS INSTRUCTIONS TO TRUSTEE RE ADMINISTRATION FUND The undersigned, Director of Finance of the City of Huntington Beach (the "City"), a duly authorized representative of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) ("CFD 2000-1") and a duly authorized representative of the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) ("CFD 2003-1"), hereby states and certifies to U.S. Bank National Association, as trustee (the "Trustee") under the Bond Indenture dated as of July 1, 2013 (the "CFD 2000-1 Indenture"),by and between CFD 2000-1 and the Trustee, and under the Bond Indenture dated as of August 1, 2013 (the "CFD 2003-1 Indenture"), by and between CFD 2003-1 and the Trustee, pursuant to the terms thereof that: 1. The undersigned is a duly appointed authorized officer of CFD 2000-1 authorized to issue Certificates of an Authorized Officer, as such term is defined in Section 1.1 of the CFD 2000-1 Indenture, to instruct the Trustee regarding the disbursement and investment of the proceeds of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds. 2. The undersigned is a duly appointed authorized officer of CFD 2003-1 authorized to issue Certificates of an Authorized Officer, as such term is defined in Section 1.1 of the CFD 2003-1 Indenture, to instruct the Trustee regarding the disbursement and investment of the proceeds of the City of Huntington Beach Community Facilities District No. 2003=1 (Huntington Center) 2013 Special Tax Refunding Bonds. 3. The Trustee is hereby instructed to transfer to the City all amounts held in the Administrative Fund under the CFD 2000-1 Indenture and the Administrative Fund amounts referenced in Section 3.2(a)(2) of the CFD 2003-1 Indenture pursuant to the wire instructions that were previously provided to the Trustee. DOCSOC/1637490v 1/022273-0006 i{ I i All capitalized terms used herein without definition shall have the meanings assigned to such terms in the CFD 2000-1 Indenture or the CFD 2003-1 Indenture, as applicable. Dated: August 21, 2013 THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) i THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) By: Director of Finance of the City of Huntington Beach DOCSOC/1637490v 1/022273-0006 i I $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL,TAX REFUNDING BONDS REQUISITION NO. 1 FOR DISBURSEMENT OF 1 COSTS OF ISSUANCE The undersigned, a duly authorized representative of City of Huntington Beach Cormnunity Facilities District No. 2000-1 (the "District"),hereby certifies to U.S. Bank National Association, as trustee (the "Trustee") for purposes of disbursing funds from the Costs of Issuance Fund to pay Costs of Issuance that: (1) The Trustee is to pay to the payees set forth on Exhibit A hereto the amount set forth next to each payee's name for the item described on Exhibit A hereto; (2) The conditions to the release of these amounts from the Costs of Issuance Fund have been satisfied;and (3) There has not.been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on Exhibit A hereto which has not been released or will. not be released simultaneously with the payment of such amounts; other than materialmen's or mechanic's liens accruing by mere operation of law. Dated: July 31, 20t3 THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO 2000-1 (GRAND COAST RESORT) By:, Director of Finance of the City of Huntington Beach DOC S001633116/022273-0006 I I i I EXHIBIT A $12,965,000 { CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS COSTS OF ISSUANCE Payee Description Amount Stradling Yocca Carlson&Rauth Bond Counsel/Disclosure Counsel Fee $ 65,500.00 and Expenses U.S. Bank National Association Trustee/Escrow Bank Fee and Expenses 1,250.00 Public Financial Management, Inc. Financial Advisor Fee and Expenses 8,750.00 Wold Printing Printing and Mailing of POS and OS 1,500.00 Grant Thornton Verification Report 3,000.00 CalMuni OS Tables 450.00 Contingency 2,500.00 TOTAL 5QQ QQ DOCSOC/1633116/022273-0006 IRREVOCABLE INSTRUCTIONS AND REQUEST TO FISCAL AGENT July 31,2013 U.S. BANK NATIONAL ASSOCIATION,as Fiscal Agent ESCROW AGREEMENT RELATING TO THE REFUNDING OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2001 SPECIAL TAX BONDS (the"Refunded Bonds") Ladies and Gentlemen: As Fiscal Agent under that certain Fiscal Agent Agreement dated as of December 1, 2001, between the District and U.S. Bank National Association, as successor-in-interest to U.S. Bank Trust National Association, the Fiscal Agent (the "Fiscal Agent Agreement"), you are hereby notified of the irrevocable election of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) to redeem on September 1, 2013 all of the outstanding Bonds (as such term is defined in the Fiscal Agent Agreement) issued pursuant to the Fiscal Agent Agreement (the "Refunded Bonds"). You are hereby irrevocably instructed to mail to the holders of the Refunded Bonds, as provided in Section 2.03 of the Fiscal Agent Agreement, notice of redemption of the Refunded Bonds scheduled to be redeemed prior to maturity. Such notice shall be substantially in the form required by the Fiscal Agent Agreement, a copy of which form is annexed hereto as Exhibit X. DOC SOC/1633116/022273-0006 1 i You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the holders of the Refunded Bonds (in the form amiexed hereto as Exhibit Y)that the deposit of moneys has been made with U.S. Bank National Association, as Escrow Bank, and that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal,redemption price and interest due on said Refunded Bonds outstanding as such become due or are subject to redemption. COMMUNITY FACILITIES DISTRICT NO. 2000-1 OF THE CITY OF HUNTINGTON I BEACH(GRAND COAST RESORT) By- Director of Finance of the City of Huntington Beach,acting as the legislative body of Community Facilities District No.2000-1 of the City of Huntington Beach(Grand Coast Resort) Receipt acknowledged and consented to: U.S.BAND NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer i i a i i I 1 2 DOCSOC/1633116/022273-0006 You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the holders of the Refunded Bonds (in the form annexed hereto as Exhibit Y)that the deposit of moneys has been made with U.S. Bank National Association, as Escrow Bank, and that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal, redemption price and interest due on said Refunded Bonds outstanding as such become due or are subject to redemption. COMMUNITY]FACILITIES DISTRICT NO. 2000-1 OF THE CITY OF HUNTINGTON BEACH(GRAND COAST RESORT) a By: I Director of Finance of the City of Huntington Beach,acting as the legislative body of Community Facilities District No.2000-1 of the City of Huntington Beach(Grand Coast Resort) Receipt acknowledged and consented to: U.S.BAND NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer I l i i i i i i I i I 2 DOCS OC/1633116/022273-0006 I i as W&M4 I Alerts I Feedback I Contact MSR EMMAO- Electronic Municipal Market Access Munid a Smritics The Official Source for Municipal Disclosures and Market Data 1W g Boud Milli about EMMA Search 529 Plans Market Activity Education Center EMMA Dataport Quick Search EnterCUSIPorName Home>Wrket Activity>Continuing Disclosure Continuing Disclosure Details EVENT FILING(CUSIP-9 BASED) Rule 15c2-12 Disclosure VIEW DOCUMENTS Bond Call as of 08/14/2013 G Event Fling as of 08/14/2013 I Total CUSIPs associated with this submission:5 File 1 posted 0811512013 View j [-)CUSIP-6s HUNTINGTON BEACH CALIF CMNTY FACS DIST SPL TAX,CA(446188) Displaying 1 issue. >HUNTINGTON BEACH CALIF CMNTY FAGS DIST Total CUSIPs selected for this CUSIP-6:5. SPL TAX,CA,(4461881 __T Maturity Issue Description' Dated Date Official Statement Dates - [+]NO2000-1GRAND COAST RESORT 12I912001 12004to2031 Preview j SUBMITTFJ2'S CONTACT INFORMATION I Company. Fiduciary Com munications Company Name: EZ DISCLOSE Address: ONE STATE STREET PLAZA City,State NEW YORK,NY 10004 Zip: Phone Number,2128038600 Email: ezdisclose@scurcemedia.com I i I NOTICE*CUSP numbers and certain related descriptive information are copyrighted by the American Bankers Association(ABA1 and are used with permission from the CUSP Service Bureau ,I managed on behalf of the ABA by Standard&Poor's.©2013 ABA See ENW's Terns and Conditions of Use for a description of proprietary rights in and restrictions on use of such data."CIASIP' is a registered trademark of ABA. I, Slenap I Rrivacy Policy I Terns of Use I NiSRB.org I MSRB System Status Portions of BVMA data provided by Standard&Poor's Securities Evaluations,Inc., 92013 Municipal Securities Rulemaking Board(MSRB) CUSIP Service Bureau&American Bankers Association. EIAMA is a service of the Wnicipal Securities Rulerraking Board, Copyright©2013,Standard and Poor's Financial Services LLC.All rights reserved. which protects investors,state and local governments,and the public interest. Copyright©2013 Filch,Inc.Reprinted w ith permission. 00:00.2800472 1.0.13224.1130-.41-A 459063 NOTICE OF FULL REDEMPTION to the Holders of Community Facilities District No.2000-1 of the City of Huntington Beach (Grand Coast Resort)2001 Special Tax Bonds CUSIP 9s:446188BC7,446188BD5,446188BE3,446188BF0,and 446188BV5 NOTICE IS HEREBY GIVEN, pursuant to the terms of the Fiscal Agent Agreement (the "Fiscal Agent Agreement") dated as of December I, 2001, between the Community Facilities District No. 2000-1 of the City of Huntington Beach(Grand Coast Resort) as Issuer, and U.S.Bank National Association,as successor-in-interest to U.S. Bank Trust National Association, as Fiscal Agent, that all outstanding above-referenced bonds(the`Bonds") maturing on and after September 1, 2014, in the aggregate principal amount of$12,950,000, originally issued on December 19, 2001,have been called for redemption in full on September 1, 2013 (the"Redemption Date") at a price of 100% of the principal amount thereof(the "Redemption Price") together with interest accrued to the Redemption Date. Payment of the Redemption Price on the Bonds called for redemption will become due and payable on the Redemption Date upon presentation and surrender thereof in the following manner: If by Mail: (REGISTERED BONDS) If by Hand or Overniaht Mail: U.S.Bank Corporate Trust Services U.S.Bank Corporate Trust Services P.O.Box 64111 60 Livingston Avenue St.Paul,MN 55164-0111 1st Floor—Bond Drop Window St.Paul,MN 55107 800-934-6802 Subject to the terms of this Notice of Full Redemption, Bondholders are required to surrender their Bonds to the Fiscal Agent at the address above on the Redemption Date and there will become due and payable on each of the Bonds the principal amount thereof,together with interest accrued thereon. to the Redemption Date and from and after such Redemption Date interest thereon shall cease to accrue. Bondholders presenting their Bonds in person for same day payment must surrender their Bond(s)by 1:00 P.M, on the Redemption Date and a check will be available for pick up after 2:00P.M. Checks not picked up by 4:30 P.M. will be.mailed out to the Bondholder via first class mail. If payment of the Redemption Price is to be made to the registered holder,you are not required to endorse the Bond to collect the prepayment. REQUIREMENT INFORMATION For a list of redemption and tender requirements please visit our website at www.usbank.com/corporatetrust and click on the`Bondholder Information" link. IMPORTANT NOTICE Under Section 3406(a)(1)ojThe Internal Revenue Code thepaying agent makingpayrnent of interest or principal on securities may be obligated to withhold a percentage of the payment to a holder who has failed to furnish the registrar with a valid taxpayer identification number, certification that the number supplied is correct, and that the holder is not subject to backup withholding Holders of'the Bonds who wish to avoid the application of these provisions should submit either a canipleted IRS Form W-9 (use only if the holder is a US. person, including a resident alien), or the appropriate Form 13'8 (use only if you are neither a U.S.person or a resident alien), when presenting the Bonds forpayment See IRS Publication 515, )Withholding of'Tax on Nonresident,4liens andForeign Entities. Publication 515 and W-8 forms and instructions are available through the IRS website at vn4nv.irs.g v. *The CUSIP numbers are included solely for the convenience of the Holders of the Bonds. Neither the Issuer nor the Fiscal Agent shall be responsible for any error of any nature relating to such numbers. By: U.S.Bank National Association,as Fiscal Agent Dated:August 14,2013 X-1 DOCSOC/1622673 v4/022273-0006 ezDisclose Notice Proof Summary Report 459063 08/14/2013 Client Name: U.S.Bank N.A.(St.Paul) Reliance: 2 Notice Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO 2000-1 (GRAND COAST RESORT) Issue Title: 2001 SPECIAL TAX BONDS Job Type: Redemption Issue Date: 12/01/2001 Pub Date: 08/14/2013 Call Type: Full Call Date: 09/01/2013 Total Amt Called:$12,950,000.00 Notice Memo: Customers: Role Bank,Name .9 Bank# DTCA nt. Address City State Zip' ;Phone;>. AddressDesc 9? Paying Agent U.S.Bank N.A.(St.Paul) 096000690 40071706 60 Livingston Avenue 1st Floor, St,Paul MN 55107 651-973-5800 Default Org Paying Agent Bond Drop Window Address Issues: Accrin ' 'eGu Int Marte Y a ,p �, ul efPau da OutP Ualue �r Trans); 446188BC7 6.1000 0.0000 09/01/2014 00 MU F $405,000.00 100.00000000 N/A N/A N/A Total for CUSIP Amount.Called: 446188BC7 $405,000.00 44618813D5 6.2000 0.0000 09/01/2015 00 MU F $430,000.00 100.00000000 N/A N/A N/A =total for.CUSIP,' Amount.Called 446188BD5 $430,000 00 446188BE3 6.3000 0.0000 09/01/2016 00 MU F $455,000.00 100.00000000 N/A N/A N/A <Total=for,CUSIR"� Amount.Called- 446188BE3 $455,000.00 446188BF0 6.4000 0.0000 09/01/2017 00 MU F $485,000.00 100.00000000 N/A N/A N/A Total for CUSIP Amounf Called 446188BFO $485,000.00 446188BV5 6.4500 0.0000 09/01/2031 00 MU F $11,175,000.00 100.00000000 N/A N/A N/A • ,`Total fo CUSIP �Amount,Called 446188BV5 $11,175,000,00 ezDisclose Notice Proof Summary Report Page 1 of 1 $12,965,000 CITY OF HUNTINGON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS TAX CERTIFICATE The City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District"), on behalf of, and together with the City of Huntington Beach (the "City"), hereby make the following representations of facts and expectations and covenants to comply with the requirements of this Tax Certificate in connection with the $12,965,000 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds, (the "Obligations"). These representations and covenants are in furtherance of the covenants contained in Section 5.2 of the Bond Indenture dated as of July 1, 2013, by and between the District and U.S. Bank National Association, as Trustee (the "Indenture"), and in part are made pursuant to Section 1.141-2(d)(2) and Section 1.148-2(b)(2) of the Treasury Regulations. Capitalized terms used herein which are not otherwise defined herein shall have the respective meanings set forth in the Issuance Document. I. General Matters. (a) Authority for Issuance. The undersigned and other officers and members of the Issuer are charged with the responsibility of authorizing and requesting the issuance .of the Obligations. The Obligations are being issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended. (b) Sale of Obligations. The Obligations are being delivered to Stifel, Nicolaus & Company, Incorporated,as underwriter(the"Underwriter") on the date hereof. (c) Purpose of Obligations. The Obligations are being sold and delivered for the purpose of(i) currently refunding the outstanding City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2001 Special Tax Bonds (the "Current Refunded Obligations"), (ii)paying costs of issuance with respect to the Obligations(the"Issuance Costs"),and(iii)funding a reasonably required reserve fund for the Obligations. The Issuer covenants to use the proceeds of the Obligations solely for the above-described purposes, unless an opinion of Bond Counsel is received permitting uses of proceeds for other than the above-described purposes The Current Refunded Obligations were issued for new money purposes(the"Project"). (d) Nature of Issue. All the Obligations are being sold and issued at the same time, have been sold pursuant to the same plan of financing, and are reasonably expected to be paid from substantially the same source of funds. Accordingly,the Obligations are a single issue of obligations for certain federal income tax purposes relating to the exclusion from gross income of interest on the Obligations. No other governmental obligations which are reasonably expected to be paid from 1 substantially the same source of funds are being sold or issued at substantially the same time and sold pursuant to the same plan of financing as the Obligations. II. Private Activity. (a) Governmental Use of Proceeds. Absent an opinion of nationally-recognized bond counsel that the exclusion from gross income of interest on the Obligations will not be adversely affected for federal income tax purposes, and except as provided below,the Issuer will not allow any of the proceeds of the Obligations, or any refinanced obligations thereof, or any of the facilities financed or refinanced with such obligations to be used in the trade or business of any nongovernmental persons (other than in their roles as members of the general public) and will not loan any of the proceeds of the Obligations or any refinanced obligations to any nongovernmental persons. In furtherance of the foregoing, the Issuer represents the following with respect to the use of proceeds of the Obligations and the facilities financed and refinanced therewith. (b) In General. No more than 10% of the proceeds of the Obligations or the Project (based on the cost of the components of the Project or, with respect to a unitary structure, on the relative fair rental value of such components) has been or will be used in the aggregate for any activities that constitute a"Private Use" (as such term is defined in Section(e) below). No more than 10% of the principal of or interest on the Obligations, under the terms thereof or any underlying arrangement, has been or will be secured by any interest in property(whether or not the Project)used for a Private Use or in payments in respect of property used for a Private Use, or will be derived from payments in respect of property used for a Private Use. (c) No Private Loan Financing. No more than the lesser of 5% of the proceeds of the Obligations or$5,000,000 will be used to make or finance loans to any person other than to a state or local governmental unit (other than loans to finance any governmental tax or assessment of general application for a specific essential governmental function or loans that are used to acquire or carry Nonpurpose Investments(as such term is defined below)). (d) No Disproportionate or Unrelated Use. No more than 5% of the proceeds of the Obligations or the Project has been or will be used for a Private Use that is unrelated or disproportionate to the governmental use of the proceeds of the Obligations (an "Unrelated or Disproportionate Use"), and no more than 5%of the principal of or interest on any of the Obligations has been or will be, under the terms of the Obligations or any underlying arrangement, directly or indirectly, secured by any interest in property used or to be used for a Private Use that is an Unrelated or Disproportionate Use or in payments in respect of property used or to be used for a Private Use that is an Unrelated or Disproportionate Use. (e) Definition of Private Use. For purposes of this Tax Certificate, the term "Private Use" means any activity that constitutes a trade or business that is carried on by persons or entities other than governmental entities. The leasing of property financed or refinanced with proceeds of the Obligations or the use by or the access of a person or entity other than a governmental unit to property or services on a basis other than as a member of the general public shall constitute a Private Use. (f) Management and Service Contracts. With respect to management and service contracts, the determination of whether a particular use constitutes Private Use under this Tax 2 i Certificate shall be determined on the basis of applying the relevant sections of the Treasury Regulations and Revenue Procedure 97-13. No portion of the proceeds derived from the sale of the Obligations is being used to provide property subject to contracts or other arrangements with persons or entities engaged in a trade or business (other than governmental units) that involve the management of property or the provision of services with respect to property financed or refinanced by proceeds of the Obligations that do not comply with the standards of the Treasury Regulations or Revenue Procedure 97-13. III. Arbitrage Certifications. The following states the expectations of the Issuer with respect to the amount and uses of the proceeds of the Obligations and certain other monies or property: (a) Source and Use of Funds. The total proceeds to be derived by the Issuer from the sale of the Obligations, in the aggregate amount of $12,851,153.30 (representing $12,965,000.00 principal amount of the Obligations, less net original issue discount of $35,759.20, less an Underwriter's discount of$78,087.50), are expected to be needed and fully expended as follows: (i) $83,930.03 of such proceeds will be deposited in the Costs of Issuance Fund and, together with investment earnings thereon, will be expended to pay Issuance Costs within one year of the date hereof; (ii) $1,091,775.00 of such proceeds will be deposits in the Reserve Account; (iii) $11,665,448.27 of such proceeds will be deposited in the Escrow Fund (the "Escrow Fund") created pursuant to the Escrow Agreement (the "Escrow Agreement") and such monies will be used to pay all principal and interest due on the Current Refunded Obligations on September 1, 2013 and redeem the Current Refunded Obligations on September 1,2013; and (iv) $10,000.00 will be deposited in the Administration Fund. (b) Over-Issuance. The total proceeds to be received by the Issuer from the sale of the Obligations, together with anticipated investment earnings thereon, do not exceed the total amount necessary for the purposes described above. { (c) Refunding Plan. (i) Escrow Fund. $11,665,448.27 (together with $2,091,880.48 held in funds and accounts with respect to the Current Refunded Obligations) will be deposited in the Escrow Fund held and maintained by the Escrow Bank pursuant to the Escrow Agreement and will be utilized to pay all principal and interest due on the Current Refunded Obligations on September 1, 2013 and to redeem the remaining Current Refunded Obligations on September 1,2013. i (ii) Purpose of Refunding. The Obligations are being issued for present value debt service savings. I 3 Other Monies. Other than as stated above, there are no unexpended proceeds of the Current Refunded Obligations. (d) Working Capital. No operational expenditures of the Issuer or any related entity are to be financed directly or indirectly with proceeds derived from the sale of the Obligations. (e) Reimbursement. No portion of the proceeds of the Obligations are being used to reimburse the Issuer for any expenditures that were incurred and paid thereby with respect to the Project prior to the issuance of the Obligations. (f) Funds and Accounts. The Issuance Document creates and establishes the following funds with respect to the Obligations: (i) the Special Tax Fund, and within such fund, (A) the Debt Service Account, (B) the Redemption Account,and (C) the Reserve Account; (ii) the Costs of Issuance Fund; (iii) the Rebate Fund; (iv) the Administration Fund; and (v) the Surplus Fund. (g) Sinking Funds. i (i) Bona Fide Debt Service Funds. The Debt Service Account, and Redemption Account of the Special Tax Fund (to the extent monies therein will be depleted within one i year of receipt) (collectively, the"Bona Fide Debt Service Funds"), will be used primarily to achieve a proper matching of revenues (and certain other monies) and payments of principal and interest with respect to the Obligations within each year. Amounts deposited in the Bona Fide Debt Service Funds will be depleted at least once a year except for a reasonable carryover amount, if any,which, in the aggregate,will not exceed the greater of(i) one year's earnings on such funds for the immediately preceding bond year, or (ii) one-twelfth of the annual debt service with respect to the Obligations for the immediately preceding bond year. Reasonably Required Reserve. Proceeds of the Obligations deposited in the Reserve Account will not be greater than the least of(i) maximum annual debt service with respect to the Obligations, (ii) 125% of average annual debt service with respect to the Obligations, or(iii) 10%of the face amount of Obligations (less original issue discount if in excess of two percent (2%) of the stated redemption amount at maturity) (the "Tax Reserve Limit"). The creation of the Reserve Account was vital to the marketing of the Obligations, and reasonably required to assure the j payment of debt service on the Obligations. 4 I (iii) No Other Proceeds. Other than the Bona Fide Debt Service Funds and the Reserve Account, there are no funds or accounts of the Issuer established pursuant to the Issuance Document, or otherwise,that are reasonably expected to be used for the payment of principal and interest with respect to the Obligations or that are pledged as collateral for the Obligations and for which there is a reasonable assurance that amounts on deposit therein j will be available for the payment of principal and interest with respect to the Obligations if the Issuer encounters financial difficulties. The term of the Obligations is not longer than is reasonably necessary for the governmental purpose of the issue, and the weighted average maturity of the Obligations does not exceed 120 percent of the average reasonably expected economic life of the refinanced Project. (h) Rebate Liability Account. Amounts deposited in the Rebate Fund are to assist the Issuer with compliance of Section 148(f)of the Code. (i) Investment. The proceeds derived from the sale of the Obligations and the amounts on deposit in the aforementioned funds and accounts may be invested as follows: (i) Proceeds derived from the sale of the Obligations and deposited in the Costs of Issuance Fund, and such monies held in the Rebate Fund, may be invested at an unrestricted yield for a term of thirteen months from the date hereof. Amounts described in this Subparagraph(i) that may not be invested at an unrestricted yield pursuant to the previous sentence shall be invested either at a yield not in excess of the yield on the Obligations or in"Tax-Exempt Obligations" (within the meaning of Section IV hereof). (ii) Amounts deposited in the Bona Fide Debt Service Funds may be invested at an unrestricted yield for a period not in excess of 13 months from the date of deposit of such amounts to such funds. Amounts described in the previous sentence that may not be invested at an unrestricted yield pursuant to such Subparagraph shall be invested either at a yield not in excess of the yield on the Obligations or in Tax-Exempt Obligations. (iii) Amounts held in the Rebate Fund (not described above), Administration Fund, and Surplus Fund may be invested without regard to yield. (iv) Amounts held in the Redemption Account (not described above) will be invested at a yield not in excess of the yield on the Obligations. (v) Amounts held to retire the Current Refunded Obligations have been invested at a yield below the yield on the Obligations. (vi) Amounts held in the Reserve Account, not in excess of the Tax Reserve Limit,may be invested without regard to yield. 0) Yield. For purposes of this Section III of this Tax Certificate, yield is calculated as set forth in Section 148 of the Code and Section 1.148-4 of the Treasury Regulations. Thus, yield generally means that discount rate which when used in computing the present value of aII unconditionally payable payments representing principal, interest, and the fees of qualified guarantees paid and to be paid with respect to the Obligations produces an amount equal to the issue price of the Obligations. The issue price of the Obligations is $12,929,240.80 which is equal to the price paid by the first buyer of the Obligations, as represented by the Underwriter in Exhibit B. 5 Yield with respect to the obligations allocable to proceeds of the Obligations, is that discount rate which when used in computing the present worth of the payments of principal and interest with respect to the obligations produces an amount equal to the purchase price of the obligation. Absent an opinion of nationally recognized bond counsel that the exclusion from gross income of interest on the Obligations will not be adversely affected for federal income tax purposes, the Issuer will not enter into any hedges(including swaps or caps)with respect to the Obligations. (k) No Artifice or Device. The Obligations are not and will not be part of a transaction or series of transactions (i)that attempts to circumvent the provisions of Section 148 of the Code, or any successor thereto, and the regulations promulgated thereunder or under any predecessor thereto, enabling the Issuer or any related person to exploit the difference between tax-exempt and taxable interest rates to gain a material financial advantage, and (ii)that increases the burden on the market for tax-exempt obligations in any manner, including, without limitation, by selling bonds that would not otherwise be sold, or selling more bonds, or issuing bonds sooner, or allowing bonds to remain outstanding longer,than otherwise would be necessary. IV. Rebate Compliance. (a) Covenants. The Issuer hereby covenants to comply with the rebate requirements of Section 148(f) of the Code. The Issuer acknowledges that the United States Department of the Treasury has issued certain regulations with respect to certain requirements relating to compliance with Section 148(f) of the Code. The Issuer covenants that it will determine precisely what is required with respect to Section 148(f) of the Code and will comply with any requirements applicable to the Obligations. The Issuer acknowledges that, to the extent that an exception to the rebate requirements of Section 148(f) of the Code is not available with respect to the Obligations, under Section 148(f) of the Code, the federal government must be paid the sum of (i)the excess of the amount earned on all "nonpurpose investments" with respect to the Obligations over the amount that would have been earned had such investments been invested at a rate equal to the yield with respect to the Obligations, plus (ii) any income attributable to the excess described in (i) (the "Rebate Requirement"). The Issuer acknowledges that currently, unless an exception to the Rebate Requirement is available, compliance with Section 148(f) of the Code generally involves a multi-step process: (1)ascertaining the funds (the "Gross Proceeds") and investments (the "Nonpurpose Investments") subject to the Rebate Requirement of Section 148(f) of the Code after applying, if applicable, a universal cap with respect to the Obligations (the "Universal Cap"), (2)creating an investment history cash flow report with respect to the investment of Gross Proceeds of the Obligations, (3) determining the yield with respect to the Obligations (the "Yield"), (4) future valuing receipts and payments in the cash flow report (including certain deemed receipts and payments) using the Yield as the discount factor, and (5)determining the amount of rebatable arbitrage with respect to the Obligations and paying the appropriate amount to the United States Treasury. See Treas. Reg. §§ 1.148-0 through 1.148-11, 1.149(d)-1, and 1.150-1 for rules with 6 i i respect to rebate compliance methodology. See Subparagraph (b)(i) below for a description of j Nonpurpose Investments with respect to the Obligations, Subparagraph(b)(ii) below for a description of Gross Proceeds of the Obligations, Subparagraph (b)(iii) below for the description of a Universal Cap with respect to the Obligations, Subparagraph (b)(iv) below for a description of Yield with respect to the Obligations for purposes of compliance with Section 148(f) of the Code, and Subparagraph(d) with respect to permitted investment of Gross Proceeds. The Issuer also acknowledges that additional or different requirements may be applicable to the Obligations if certain exceptions are satisfied. See Paragraph (c) herein. (b) Operative Terms. I (i) Nonpurpose Investments. Subject to the limitation in Subparagraph(b)(iii) below,Nonpurpose Investments are generally securities, obligations, annuity contracts or any other investment-type property that are not acquired to carry out the governmental purpose of the Obligations that are allocated to Gross Proceeds. However, Nonpurpose Investments do not include: I (A) United States Treasury- State and Local Government Series, Demand Deposit Securities;or (B) tax-exempt obligations. The term "tax-exempt obligations" for the purposes of this Tax Certificate includes only obligations the interest on which is excludable from gross income for federal income tax purposes that do not constitute "specified private activity bonds" for purposes of Section 57(a)(5)(C) of the Code. The term "tax-exempt obligations" does, however, include stock in a "qualified regulated investment company," which is a corporation that (A) is a regulated investment company within the meaning of Section 851(a)of the Code and meets the requirements of Section 852(a) of the Code for the taxable year; (B)has only one class of stock authorized and outstanding; (C) invests all of its assets in tax-exempt obligations (as defined above) to the extent practicable; and (D)has at least 98% of its gross income derived from interest on, or gain from the sale or other disposition of, tax-exempt obligations or at least 98% of the weighted average value of its assets is represented by investments in tax-exempt obligations. (ii) Gross Proceeds. Subject to the limitation in Subparagraph(b)(iii) below, "Gross Proceeds"with respect to the Obligations means: (A) amounts actually or constructively received from the sale (or other disposition)of the Obligations; (B) amounts actually or constructively received from investing amounts described in (A); I (C) amounts (other than proceeds derived from the sale of the Obligations)that are reasonably expected to be or are in fact used to pay debt service with respect to the Obligations; 7 i (D) amounts pledged as security for the payment of debt service with respect to the Obligations or otherwise serving as a reserve fund with respect to the Obligations; (E) "transferred proceeds"of the Obligations; and (F) any other amounts which are replacement proceeds of the Obligations within the meaning of Treasury Regulation § 1.148-1(c). (iii) Universal Can. Except as provided below, in no event shall the value of Nonpurpose Investments allocated to Gross Proceeds of the Obligations exceed the Universal Cap of the Obligations computed in accordance with Section 1.148-6 of the Treasury Regulations. The Universal Cap of the Obligations is equal to the value of the outstanding 1 Obligations computed in accordance with Section 1.148-4 of the Treasury Regulations. The i value of a Nonpurpose Investment on a date allocated to Gross Proceeds of the Obligations for this purpose is equal to the value of such investment in accordance with Treasury Regulation § 1.148-5(d). The Universal Cap value and the value of Nonpurpose Investments are to be computed as of the first day of each bond year that commences after the second anniversary of the issue date and if the applicable obligations, are a refunding issue, as of each date that, without regard to the Universal Cap, proceeds of any refunded issue become "transferred proceeds" of the Obligations within the meaning of Section 1.148-9 of the Treasury Regulations (a "Cap Computation Date"). Amounts described in Subparagraph (c)(i) are not subject to the Universal Cap. Between Cap Computation Dates, Nonpurpose Investments cease to be allocated to the Obligations to the extent they are expended or otherwise cease to be allocated to the Obligations under Section 1.148-6 of the Treasury Regulations. To the extent Nonpurpose Investments cease to be allocated to the { obligations of an Obligations, other investments become so allocated up to the amount of the unused Universal Cap, computed in accordance with Section 1.148-6 of the Treasury Regulations. If on a Cap Computation Date Nonpurpose Investments have a value in excess of the Universal Cap, an amount of such investments necessary to eliminate that excess ceases to be allocated to the Obligations. Nonpurpose Investments cease to be allocated to the Obligations in the following order, within the meaning of Section 1.148-6 of the Treasury Regulations: (1) first, amounts held in a sinking fund, pledged fund, or reserve or replacement fund for the Obligations (other than proceeds derived from the sale of the Obligations), (2) second,transferred proceeds, and (3) third, proceeds derived from the sale of the Obligations and earnings thereon, all within the meaning of Section 1.148-6 of the Treasury Regulations. (4) A failure to do a Universal Cap calculation on a Cap Computation Date will not result in noncompliance with Section 148(f) of the Code if, in the absence of that failure, the Obligations would have satisfied the Rebate Requirement. 8 (iv) Yield. See Section III hereof. (c) Rebate Exception. (i) Bona Fide Debt Service Funds. The Issuer will be relieved of the obligation to pay the Rebate Requirement with respect to amounts earned on funds in the Bona Fide Debt Service Funds and the Escrow Fund. (d) Prohibited Investments and Dispositions. The Issuer acknowledges that compliance with Section 148(f) of the Code may involve taking no action to artificially reduce the Rebate Requirement by the manner of investing Gross Proceeds. The Issuer covenants that absent an opinion of nationally recognized bond counsel that the exclusion from gross income of interest with respect to the Obligations will not be adversely affected, it will comply with the rules of this Subsection to assure compliance with Section 148(f)of the Code. (i) No Nonpurpose Investment may be acquired with Gross Proceeds for an amount in excess of the fair market value of such Nonpurpose Investment. No Nonpurpose Investment may be sold or otherwise disposed of for an amount less than the fair market value of the Nonpurpose Investment. i (H) The fair market value of any Nonpurpose Investment is the price which a willing buyer would pay to a willing seller to acquire the Nonpurpose Investment in a bona fide, arm's-length transaction, with no amounts to artificially reduce or increase the yield on the Nonpurpose Investment. Fair market value generally is determined on the date on which a contract to purchase or sell the Nonpurpose Investment becomes binding(i.e.,the trade date rather than the settlement date). The purchase or sales price of a Nonpurpose Investment is not adjusted (except as provided below) to take into account any administrative costs of the Nonpurpose Investment. For calendar year 2013, a brokerage commission or similar fee for an investment contract is included as a receipt with respect to the investment contract and for investments for a yield restricted defeasance escrow to the extent the commission exceeds the lesser of(A) $37,000.00 and (B) .2%of the computational base or, if more, $4,000; provided, a brokers fee or similar fee is included as a receipt to the extent all brokers fees or similar fees of the issue of Bonds exceed $106,000.00. For purposes of this Tax Certificate "computational base" means (A) for a guaranteed investment contract, the amount of Gross Proceeds to be deposited in the contract, and (B)for investments (other than guaranteed investment contracts) to be deposited in a yield restricted defeasance escrow, the amount of Gross Proceeds initially invested in those investments. For subsequent calendar years, the dollar limits described in this Subsection may be increased for cost-of-living adjustments. See Treas. Reg. § 1.148-5(e)(2)(iii). Certain administrative costs, including reasonable direct administrative costs, other than carrying costs, such as brokerage commissions or selling commissions, but not legal and accounting fees, recordkeeping, custody and similar costs, may be taken into account in computing the Rebate Requirement with respect to investments. See Treas. Reg. § 1.148-5. General overhead costs and similar indirect costs of the City such as employee salaries and office expenses and costs of computing rebatable arbitrage may not be taken into account. The following provisions provide guidelines as to when the Nonpurpose Investment will be deemed to be acquired for its fair market value. Other methods may be used,however,to establish fair market value. 9 i i i Nonpurpose Investments that are investment contracts or an investment purchased for a yield restricted defeasance escrow will be considered acquired and disposed of for an amount equal to the fair market value of such obligations if the following Subsections are satisfied: (A) The Issuer makes a bona fide solicitation for the purchase of the investment. A bona fide solicitation is a solicitation that satisfies all of the following requirements: (1) The bid specifications are in writing and are timely forwarded to potential providers. (2) The bid specifications include all material terms of the bid. A term is material if it may directly or indirectly affect the yield or the cost of the investment. (3) The bid specifications include a statement notifying potential providers that submission of a bid is a representation that the potential provider did not consult with any other potential provider about its bid, that the bid was determined without regard to any other formal or informal agreement that the potential provider has with the Issuer or any other person (whether or not in connection with the bond issue), and that the bid is not being submitted solely as a courtesy to the Issuer or any other person for purposes of satisfying the requirements of paragraph(13)(1) or(2)below. (4) The terms of the bid specifications are commercially reasonable. A term is commercially reasonable if there is a legitimate business purpose for the term other than to increase the purchase price or reduce the yield of the investment. For example, for solicitations of investments for a yield restricted defeasance escrow, the hold firm period must be no longer than the Issuer reasonably requires. (5) For purchases of guaranteed investment contracts only, the terms of the solicitation take into account the Issuer's reasonably expected deposit and drawdown schedule for the amounts to be invested. (6) All potential providers have an equal opportunity to bid. For example, no potential provider is given the opportunity to review other bids (i.e.,a last look)before providing a bid. (7) At least three reasonably competitive providers are solicited for bids. A reasonably competitive provider is a provider that has an established industry reputation as a competitive provider of the type of investments being purchased. (B) The bids received by the Issuer meet all of the following requirements: 10 (1) The Issuer receives at least three bids from providers that the Issuer solicited under a bona fide solicitation meeting the requirements of paragraph(A) of this section and that do not have a material financial interest in the issue. A lead underwriter in a negotiated underwriting transaction is deemed to have a material financial interest in the issue until 15 days after the issue date of the issue. In addition, any entity acting as a financial advisor with respect to the purchase of the investment at the time the bid specifications are forwarded to potential providers has a material financial interest in the issue. A provider that is a related party to a provider that has a material financial interest in the issue is deemed to have a material financial interest in the issue. (2) At least one of the three bids described in paragraph(13)(1) of above is from a reasonably competitive provider, within the meaning of paragraph(A)(7)of this section. i (3) If the Issuer uses an agent to conduct the bidding process, the agent did not bid to provide the investment. (C) The winning bid meets the following requirements: (1) Guaranteed investment contracts. If the investment is a guaranteed investment contract, the winning bid is the highest yielding bona fide bid (determined net of any broker's fees). (2) Other investments. If the investment is not a guaranteed investment contract, the following requirements are met: a. The winning bid is the lowest cost bona fide bid (including any broker's fees). The lowest cost bid is either the lowest cost bid for the portfolio or, if the Issuer compares the bids on an investment-by-investment basis, the aggregate cost of a portfolio comprised of the lowest cost bid for each investment. Any payment received by the Issuer from a provider at the time a guaranteed investment contract is purchased (e.g., an escrow float contract) for a yield restricted defeasance escrow under a bidding procedure meeting the requirements of paragraph(iii) is taken into account in determining the lowest cost bid. 11 b. The lowest cost bona fide bid (including any broker's fees) is not greater than the cost of the most efficient portfolio comprised exclusively of State and Local Government Series Securities from the United States Department of the Treasury,Bureau of Public Debt. The cost of the most efficient portfolio of State and Local Government Series Securities is to be determined at the time that bids are required to be submitted pursuant to the terms of the bid specifications. C. If State and Local Government Series Securities from the United States Department of the Treasury, Bureau of Public Debt are not available for purchase on the day that bids are required to be submitted pursuant to terms of the bid specifications because sales of those securities have been suspended, the cost comparison of (C)(2)(b) is not required. (D) The provider of the investments or the obligor on the guaranteed investment contract certifies the administrative costs that it pays (or expects to pay, if any)to third parties in connection with supplying the investment. (E) The Issuer retains the following records with the bond documents until three years after the last outstanding bond is redeemed: (1) For purchases of guaranteed investment contracts, a copy of the contract, and for purchases of investments other than guaranteed investment contracts,the purchase agreement or confirmation. (2) The receipt or other record of the amount actually paid by the Issuer for the investments, including a record of any administrative costs paid by the Issuer, and the certification under paragraph(D) above. (3) For each bid that is submitted, the name of the person and entity submitting the bid,the time and date of the bid, and the bid results. (4) The bid solicitation form and, if the terms of the purchase agreement or the guaranteed investment contract deviated from the bid solicitation form or a submitted bid is modified, a brief statement explaining the deviation and stating the purpose for the deviation. For example, if the Issuer purchases a portfolio of investments for a yield restricted defeasance escrow and, in order to satisfy the yield restriction requirements of Code Section 148, an investment in the winning bid is replaced with an investment with a lower yield,the Issuer must retain a record of the substitution and how the price of the substitute investment was determined. If the Issuer replaces an investment in the winning bid portfolio with another investment, the purchase price of the new investment is not covered by the safe harbor unless the investment is bid under a bidding procedure meeting the requirements of paragraph(iii). 12 (5) For purchases of investments other than guaranteed investment contracts, the cost of the most efficient portfolio of State and Local Government Series Securities, determined at the time that the bids were required to be submitted pursuant to the terms of the bid specifications. (iv) Nonpurpose Investments that are certificates of deposit with a fixed interest rate, a fixed principal payment schedule, a fixed maturity, and a substantial penalty for early withdrawal, will be considered acquired for their fair market value if the following requirements are satisfied: (A) the yield on the certificate of deposit is not less than the yield on reasonably comparable direct obligations of the United States; and (B) the yield on the certificate of deposit is not less than the highest yield that is published or posted by the provider to be currently available from the provider on comparable certificates of deposit offered to the public. 1 (v) Except as otherwise provided in paragraph (d), any Nonpurpose Investment j that is not of a type traded on an established securities market, within the meaning of Code §1273, shall be rebuttably presumed to be acquired or disposed of for an amount in excess of the fair market value of the Nonpurpose Investment. (vi) The fair market value of a United States Treasury obligation that is purchased directly from the United States Treasury is its purchase price. (e) Bond Year. For purposes of this Certificate, Bond Year ends on each September I and begins on each September 2; provided that the first Bond Year begins on the date hereof and the last Bond Year ends on the date no Obligations are outstanding. V. Recordkeeping and Allocation. (a) Recordkeeping. The Issuer will maintain or cause to be maintained sufficient records to support compliance with the provisions of this Tax Certificate and to support the exclusion from gross income of interest on the Obligations for federal income tax purposes, including, but not limited to,the following: (i) basic records relating to the Obligations (e.g., indenture, loan agreement, and opinions); (ii) documentation evidencing expenditure of Obligation proceeds; (iii) documentation evidencing use of Obligation financed property (e.g., management and service contracts); (iv) documentation evidencing sources of payment and security for Obligations; and 13 (v) documentation pertaining to the investment of Obligation proceeds (including rebate calculations). In particular, the Issuer will maintain or cause to be maintained detailed records with respect to each security, obligation, annuity contract, or another investment-type property allocated to Gross Proceeds, including: (i)purchase date, (ii)purchase price, (iii) information establishing fair market value on the date such investment is allocated to Gross Proceeds, (iv)any accrued interest paid, (v) face amount, (vi) coupon rate, (vii)periodicity of interest payments, (vii) disposition price, (ix)any accrued interest received, and (x) disposition date. The Issuer shall establish separate sub-accounts or take other accounting measures in order to account fully for all Gross Proceeds. The Issuer shall maintain books and records with respect to the allocation of Gross Proceeds in accordance with this Tax Certificate. All records required to be maintained pursuant to this Tax Certificate must be kept as long as the Obligations are outstanding plus three years after all Obligations are retired, and with respect to obligations refunded by the Obligations, for the same period required for the Obligations. (b) Allocation. The Issuer may use any reasonable, consistently applied accounting method to account for Gross Proceeds of the Obligations in accordance with Treasury Regulation § 1.148-6; for purposes of allocating Gross Proceeds to capital expenditures intended to be financed pursuant to this Tax Certificate after the date of issue of the applicable tax-exempt obligation, and paid to unrelated third parties ("Qualified Capital Expenditures"), the Issuer may use the following accounting methods: "specific tracing," "gross-proceeds-spent-first,""first-in, first-out," or a ratable allocation method. The Issuer covenants to consult with nationally recognized bond counsel with respect to the applicable method of allocation of Gross Proceeds to expenditures that are not Qualified Capital Expenditures. In addition, the accounting method applied must account uniformly for (i) Gross Proceeds commingled with other moneys in excess of $25,000 and such other commingled moneys and (ii) Gross Proceeds for each fiscal year or interim fiscal period therein during which the issue is outstanding. Another accounting method may, however, be utilized for moneys if it is for a bona fide purpose unrelated to federal income tax restrictions. If Gross Proceeds are commingled with other moneys (other than in an open-end regulated investment company) in an amount in excess of$25,000 (a "Commingled Fund"), the following additional requirements must be satisfied. First, all payments and receipts with respect to investments in the Commingled Fund must be allocated among the different moneys ratably based upon either(i) average daily balances during a "Computation Period" (as defined below) or(ii)the average of the beginning and ending balances of the amounts in the Commingled Fund for a Computation Period that does not exceed one month. A Commingled Fund may use as its Computation Period any consistent time period within its fiscal year that does not exceed three months. Not less frequently than at the end of each Computation Period, the Commingled Fund must compute and allocate to different types of moneys all payments, receipts, income, gain or losses realized, and expenditures. Second, except as provided below, the Commingled Fund must treat all of its investments as if sold at fair market value on the last day of the fiscal year or as of the last day of each Computation Period, and so allocate net gains or losses from such deemed sales (the"Mark-to-Market Requirement"). A Commingled Fund need not satisfy the Mark-to-Market Requirement if(i)the remaining weighted average maturity of all investments held by the Commingled Fund during a fiscal year does not exceed eighteen months and such investments consist exclusively of debt obligations, (ii)the Commingled Fund serves as a common reserve fund or sinking fund for two or more issues of the same issuer or (iii)the Issuer (and any related party) do not own more than twenty-five percent of beneficial interests in the Commingled Fund. Common reserve funds or sinking funds for two or more issues must be ratably allocated (not less fi•equently than once every five years and on each date a new issue is added or retired(if relative 14 original principal amounts are used to so allocate)) in accordance with (i)the value of the bonds under Treasury Regulation § 1.148-4(e), (ii)the relative amounts of the remaining maximum annual debt service payable on the issues, or (iii)the relative original stated principal amounts of the outstanding issues. Notwithstanding any other provision of this Tax Certificate, the allocation methodology applied must be consistent for all purposes of this Tax Certificate. The Issuer must account for the allocation of Gross Proceeds to expenditures not later than eighteen months after the later of the date the expenditure is paid and the date the applicable Project is placed in service and in any event, by the date sixty days after the fifth anniversary of the issue date of the Obligations or the date 60 days after the retirement of the Obligation if earlier. VI. Miscellaneous. (a) Federal Guarantee. The Issuer will not invest any of the proceeds of the Obligations in a manner which would result in the Obligations being considered "federally guaranteed" within the meaning of Section 149(b) of the Code, except as permitted therein (i.e., will not cause interest with respect to the Obligations to be included in gross income for federal income tax purposes). (b) Information Reporting. Attached as Exhibit C is a copy of the Form 8038-G filed with respect to the Obligations. (c) No Pooling. The Issuer does not expect to use and will not use the proceeds of the Obligations, nor any refinanced obligations, to make or finance loans to two or more ultimate borrowers. (d) Hedge Bonds. As of the date of issuance of the Current Refunded Obligations, the Issuer reasonably expected to expend at least 85% of the proceeds derived from the sale of those obligations or obligations refinanced thereby (less amounts deposited in the respective reasonably required reserve funds for the obligations) on the costs of the projects financed by those obligations within three years of the date of issuance of those obligations. Not more than 50%of the proceeds of the Current Refunded Obligations will be (or have been) invested at a guaranteed rate of return for a term of four years or more. 1 15 i VII. Concluding Matters. (a) Reliance. The expectations of the Issuer concerning certain uses of Obligation proceeds and certain other moneys described herein and other matters are based in whole or in part upon representations of other parties as set forth in this Tax Certificate or the exhibits attached hereto. The Issuer is not aware of any facts or circumstances that would cause it to question the accuracy or reasonableness of any representations made in this Tax Certificate or exhibits attached hereto. (b) Authori . The undersigned is an authorized representative of the Issuer, and is acting for and on behalf of the Issuer in executing this Tax Certificate. To the best of the knowledge and belief of the undersigned, there are no other facts, estimates or circumstances that would materially change the expectations as set forth herein, and said expectations are reasonable. (c) Amendment. Notwithstanding any provision of this Tax Certificate, the Issuer may amend this Tax Certificate and thereby alter any actions allowed or required by this Tax Certificate if such amendment is based on an opinion of bond counsel that the exclusion from gross income of interest with respect to the Obligations and any refinanced obligations will not be adversely affected. Dated: July 31,2013 COMMUNITY FACILITIES DISTRICT NO. 2000-1 OF THE CITY OF HUNTINGTON BEACH (GRAND CO ST RESORT) By: Lori Ann Farrell Director of Finance of the City of Huntington Beach, acting as the legislative body of Community Facilities District No. 2000-1 of the City of Huntington Beach(Grand Coast Resoit) l CITY OF TINGTON BEACH {i Lori Ann Farrell Director of Finance i S-1 DOCSOC/1 G34197/022273-000b EXHIBIT A [RESERVED] i i i A-1 EXHIBIT B $12,965,000 CITY OF HUNTINGON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF THE UNDERWRITER This Certificate is furnished by Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter") of the $12,965,000 stated principal amount of the above-captioned bonds (the "Obligations"). The Underwriter, hereby certifies and represents the following, based upon the information available to it: A. Issue Price. 1. As of the sale date (the "Sale Date"), we reasonably expected to sell a substantial amount of each maturity (i.e., at least 10%) of the Obligations to the general public (excluding bond houses, brokers, or similar persons acting in the capacity of underwriter or wholesalers) in a bona fide public offering at the prices listed on Schedule A. 2. In our opinion, and based upon our estimate as of the Sale Date, the initial offering prices of the Obligations set forth in Schedule A are within a reasonable range of, and should reflect,the fair market prices for such Obligations. 3. As of the date of execution of this Certificate, all of the Obligations have actually been offered to the general public at the prices listed in Schedule A. 4. As of the Sale Date, at least 10% of each maturity of the Obligations was sold at the prices referred to in Schedule A. B. Arbitrage Yield. I. We have calculated the arbitrage yield with respect to the Obligations to be 4.748617% in accordance with the instructions provided in the Tax Certificate with respect to the Obligations. To the extent that we provided the Issuer and Bond Counsel with certain computations that show a bond yield, issue price, weighted average maturity and certain other information with respect to the Obligations, as shown in Schedule B, these computations are based on our understanding of directions that we have received from Bond Counsel regarding interpretation of the applicable law. We express no view regarding the legal sufficiency of any such computations or the correctness of any legal interpretation made by Bond Counsel. B-1 _ I C. Reserve Account. The establishment of the Reserve Account in the amount of the Reserve Requirement was: vital to the marketing of the Obligations and reasonably required to assure the payment of debt service on the Obligations. Nothing herein represents our interpretation of any laws or regulations under the Internal Revenue Code of 1986, as amended. All terms not defined herein have the meanings ascribed to those terms in the attached.Tax. Certificate. Dated: July 31,2013 STIFEL, NICOLAUS & COMPANY, INCORPORATED By: IVfa agi irectar I I I i I I i I B-2 DOCSOC/1634197l022273-0006 EXHIBIT A Price of Obligations Offered or Reasonably Expected to be Offered to the General Public in a Bona Fide Public Offering Maturity Premium Bond Component Date Amount Rate Yield Price (-Discount) Takedown Serial Bond: 09/01/2014 475,000 2.000% 0.950% 101.128 5,358.00 2.500 09/01/2015 535,000 2.000% 1.700% 100.610 3,263.50 3.750 09/01/2016 545,000 3.000% 2.500% 101.473 8,027.85 3.750 09/O1/2017 560,000 3.000% 3.080% 99.693 -1,719.20 3.750 09/01/2018 575,000 4.000% 3.400% 102.777 15,967.75 5.000 09/01/2019 600,000 4.000% 3.750% 101.346 8,076.00 5.000 09/01/2020 625,000 4.000% 4.000% 100.000 5.000 09/01/2021 645,000 4,000% 4.250% 98.301 -10,958.55 5.000 09/01/2022 675,000 4.250% 4.5000/a 98.149 -12,494.25 5.000 09/01/2023 705,000 5.000% 4.625% 102.990 21,079.50 5,000 09/01/2024 740,000 4.500% 4.750% 97.861 -15,828.60 5,000 09/01/2027 850,000 5,000% 5,050% 99.496 -4,284.00 5.000 7,530,000 16,488.00 Tenn Bond 2026: 09/01/2025 775,000 5.000% 5,000% 100,000 5.000 09/01/2026 810,000 5.000% 5.000% 100.000 5,000 1,585,000 Tenn Bond 2029: 09/01/2028 890,000 5.000% 5.150% 98.368 -14,524.80 5.000 09/01/2029 940,000 5.000% 5.150% 98.368 -15,340.80 5.000 1,830,000 -29,865.60 Tenn Bond 2031: 09/O1/2030 985,000 5.125% 5.220% 98.892 -10,913.80 5.000 09/01/2031 1,035,000 5.125% 5.220% 98.892 -11,467.80 5.000 2,020,000 -22,381.60 12,965,000 -35,759.20 B-3 PROOF OF ARBITRAGE YIELD PROOF OF ARBITRAGE YIELD City of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.2000-1(Grand Coast Resort) Refunding of the 2001 Special Tax Bonds MMMMMMa.MMMMMMMMMMMMMMMrt�+M:kkMM#M/vrt#MMMrtirt##M###M#MdaxMMM#Mi..uh:kMMMM+!R#M#fi#ax#MMae:kMM%+:kk?+M»#M/v»MNM:kfiAMMM:k# FINAL CASHFLOWS #y:M##MMMMMMMM MMMax#M#MM#MM:kkM#MMMMMMM#rt#MM#M w#####rtx:kMMM:kMMd:####d#MMMMyyeuiaxKM:YxMMMM#M:kd#MMMi:#:kM##9#MM Present Value to 07/31/2013 Date Debt Service @ 4.7486167695% 03/01/2014 331,248.02 322,26059 09/01/2014 757,581.25 719,933.10 03/01/2015 277,831.25 257,901,01 09/01/2015 812,831.25 737,023,53 03/01/2016 272,481.25 241,338.50 09,101l2016 817,481.25 707,256,26 03/01/2017 264,306.25 223,365,17 09/01/2017 824,306.25 680,464,75 03/01/2018 255,906.25 206,351.18 09/OI/2018 830,906,25 654,466.02 03/01/2019 244,406.25 188,042.67 09/01/2019 844,406.25 634,606.56 03/OM020 232,406.25 170,612.14 09/01/2020 857,406.25 614,833.89 03/01/2 021 219,906.25 154,034.41 09/01/2021 864,906.25 591,777,20 03/01/2022 207,006.25 138,350.80 09/01/2022 882,006.25 575,809.59 03/Ol/2023 192,662.50 122,860.83 09/01/2023 897,662.50 559,162.91 03/01/2024 175,037.50 106,503.87 09/01/2024 915,037.50 543,853.84 03JO1/2025 158,387.50 91,954.55 09/01/2025 933,387.50 529,326,12 03/01/2026 139,012.50 77,005.94 09/01/2026 949,012.50 513,512.85 03/01/2027 118,762.50 62,772.26 0910112027 968,762.50 500,166,67 03/0112028 97,512.50 49,177.53 0910112029 987,512,50 486,472.24 03101/2029 75,262.50 36,216,22 0910112029 1,015,262.50 477,212.54 03/01/2030 51,762,50 23,766.09 09/01/2030 1,036,762.30 464,976.30 03/01/2031 26,521.88 11,618.90 09/01/2031 1,061,521.88 454,253.76 19,597,173.03 12,929,240,80 Proceeds Summary Delivery date 07/31/2013 Par Value 12,965,000,00 Premium(Discount) -35,759.20 Target foryield calculation 12,929,240.80 i Jul 10,2013 10:39 am,Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 12 B-4 DOCSOC/1634197/022273-0006 EXHIBIT C I INFORMATION REPORTING FORM 8038-G C-1 Form 803 -G Information return for Tax-Exempt Governmental Obligations (Rev.September 2011) ►Under Internal Revenue Code section 149(e) OMB No.1545-0720 Department of the Treasury ®See separate Instructions. Internal Revenue Service Caution.If the issue price is under$100,000,use Form 8038-GC. Reporting Authority If Amended Return,check here b ❑ 1 Issuer's name 2 Issuer's employer identification number(EIN) Community Facilities District No.2000-1 (Grand Coast Resort)of the City of Huntington Beach 95 6000723 3a Name of person(other than issuer)with whom the IRS may communicate about this return(see instructions) 3b Telephone number of other person shown on 3a Carol Lew,Esq. 949-725-4237 4 Number and street(or P.O.box if mail is not delivered to street address) RoomJsuite 5 Report number(For IRS Use Only) 2900 Main Street 3 , 6 City,town,or post office,state,and ZIP code 7 Date of issue Huntington Beach,CA 92648 07/31/2013 8 Name of issue 9 CUSIP number 2013 Special Tax Refunding Bonds 446188DX9 10a Name and title of officer or other employee of the issuer whom the IRS may call for more information(see 10b Telephone number of officer or other instructions) employee shown on 10a Lori Ann Farrell,Director of Finance 714-536-5225 Type of Issue(enter the issue price).See the instructions and attach schedule. 11 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 12 Health and hospital . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 14 Public safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Environment(including sewage bonds) . . . . . . . . . . . . . . . . . . . . 15 16 Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 17 Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 18 Other.Describe 0- Public Infrastructure 18 1 12,929,2401 80 19 If obligations are TANS or RANs,check only box 19a . . . . . . . . . . . . ® ❑ � If obligations are BANS,check only box 19b . . . . . . . . . . . . . . . . ® ❑ „ 20 If obligations are in the form of a lease or installment sale,check box . . . . . . . . ® ❑ Description of Obligations. Complete for the entire issue for which this form is being filed. (a)Final maturity date (b)Issue price (c)Stated redemption (d)Weighted (e)Yield price at maturity average maturity 21 091`0112031 $ 12,929,240.80 $ 12,965,000 10.7030 Vears 4.748617 Uses of Proceeds of Bond Issue(including underwriters' discount) 22 Proceeds used for accrued interest . . . . . . . . . . . . . . . . . . . . . 22 0 00 23 Issue price of entire issue(enter amount from line 21,column(b)) . . . . . 23 12,929,240 80 24 Proceeds used for bond issuance costs(including underwriters'discount). 24 162,017 53 °X- ' 25 Proceeds used for credit enhancement . . . 25 0 00} 26 Proceeds allocated to reasonably required reserve or replacement fund 26 1,091,775 00 27 Proceeds used to currently refund prior issues . . . . . . . . . 27 11,665,448 27 28 Proceeds used to advance refund prior issues . . . . . . . . . 28 0 00 0-1 29 Total(add lines 24 through 28) . . . . . . . . . . . . . . . . . . . . 29 12,929,240 80 30 Nonrefunding proceeds of the issue(subtract line 29 from line 23 and enter amount here) 130 1 10,000 00 Description of Refunded Bonds. Complete this part only for refunding bonds. 31 Enter the remaining weighted average maturity of the bonds to be currently refunded . ® 10,9091 years 32 Enter the remaining weighted average maturity of the bonds to be advance refunded . ® NIA years 33 Enter the last date on which the refunded bonds will be called(MM/DD/YYYY) . . . . . . ® 09/01/2013 _34 Enter the date(s)the refunded bonds were issued®(MMJDD/YYYY) 12/19/2001 For Paperwork Reduction Act Notice,see separate instructions. Cat.No.63773S Form 8038-G(Rev.9-2011) Form 8038-G(Rev.9-2011) Page 2 RM Miscellaneous 35 Enter the amount of the state volume cap allocated to the issue under section 141(b)(5) . . . . 35 0 00 36a Enter the amount of gross proceeds invested or to be invested in a guaranteed investment contract (GIC)(see instructions) . . . . . . . . . . . . . . . . . . . . . . . . 36a 0 00 b Enter the final maturity date of the GIC P> c Enter the name of the GIC provider 37 Pooled financings: Enter the amount of the proceeds of this issue that are to be used to make loans `.' to other governmental units . . . . . . . . . . . . . . . . 3.., • 7 0 00 38a If this issue is a loan made from the proceeds of another tax-exempt issue,check box> ❑and enter the following information: b Enter the date of the master pool obligation c Enter the EIN of the issuer of the master pool obligation d Enter the name of the issuer of the master pool obligation Do- 39 If the issuer has designated the issue under section 265(b)(3)(13)(i)(111)(small issuer exception),check box . . . . ® ❑ 40 If the issuer has elected to pay a penalty in lieu of arbitrage rebate,check box . . . . . . . . . . . . . ❑'. 41a If the issuer has identified a hedge, check here 1> ❑ and enter the following information: b Name of hedge provider 0, c Type of hedge to- d Term of hedge 42 If the issuer has superintegrated the hedge,check box . . . . . . . . . . . . . . . . . . . . . ® ❑ 43 If the issuer has established written procedures to ensure that all nonqualified bonds of this issue are remediated according to the requirements under the Code and Regulations(see instructions),check box . . . . . . . ❑ 44 If the issuer has established written procedures to monitor the requirements of section 148,check box . . . . . ❑ 45a If some portion of the proceeds was used to reimburse expenditures,check here® ❑ and enter the amount of reimbursement . . . . . . . . . b Enter the date the official intent was adopted 11> Under penalties of perjury,I declare that I have examined this return and accompanying schedules and statements,and to the best of my knowledge Signature and belief,the are true,correct,and complete.I further declare that I consent to the IRS's disclosure of the issuer's return information,as necessary to and process thi eturn,to the person that I have a-thorized above. ' 1P U 7/31/2 U 13 Lori Ann Farrell,Director of Finance Consent � Signature of issuer's aethor zed er presentativ I Da al Type or print name and title ��,� Print/Type preparer's name {epaJs si nature' Date Check ❑ if PTIN PrBE3arBr Carol L.Lew,Esq. ( F U`3'1 Z 1 self-employed P01259683 Use Only I.Firm's name > Stradling Yocca Carlsen-9 Rauih Firm's EIN 0 Firm's address � 660 Newport Center Drive,Suite 1600,Newport Beach,CA 92660 Phone no. 949-725-4237 Form 8038-G(Rev.9-2011) $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000>l (GRAND COAST RESORT) ! 2013 SPECIAL,TAX REFUNDING BONDS E CERTIFICATE OF MAILING I i 1, Quang :Le, of Stradling.Yocca Carlson & Rautli, a Professional Corporation, 660 Newport j Center Drive, Suite 1600, Newport Beach, California 92660, hereby:state and certify that for and on behalf of the City of Huntington Beach, acting in its capacity as the legislative body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand (7101ast Resort) Huntington Beach, California, and on the date Hereof, I caused to be mailed a Internal/ievenue Service Form 8038-G relating to the above-captioned financing, postage prepaid, to the".I,Aternal Revenue Service Center, Ogden, Utah 84201 a true copy of which Form is attached liereto. ;. Dated: August 7,2013' Qualg fey T STTADLING YOCCA CARLSON&RAUTH, a >ofessional Corporation i I i I f i i i f i i dr A;,,R_ r ..,by,(t'I __r€r€11'`�1=arty} .„E3, ❑MA I 4'hv�_ f_I. 71,96 -9008. 9111-51. 01,9 1,312 . o !s_d !N, yad;t 5 drire€sn1rori,uen',S? Q"i_r' , •_- 1€:;' enr i1i Iv faddiesse lu a.' ff NO Serv+c Type: CERTIFIED MAIL`" R-,_W&ad beaver y Yes 7 Article Addre s d to: INTEMNAI L REVENUE SEkVICE CE-TER I4 J f OGDEN, UTAE 54201 P S Fr rrt '811,Eebruary'2003 pom st€c Return: ec apt .w., QNi T Eb STATES PQSTAL SERVICE tirst Class Maii`' 11 Pa4t ge fees Paid USF'S Peer�il I la. 1fl o P int your nam Mdr€;ss and,SIP G deS below ! sill'I I'lll��d l�Illi 1��613 SII1S1311S t�I iYl Et2[ S$1lip" STRA[ L1NG YOA tARLSO CC NIAwRAM 6y,6(�,?(pp'1r14®EINPTCRppyC i3CR {g �Agy/�yry /�pITE i�yyy0` '022273_60 fC�LE I `I i EXHIBIT D i $12,965,000 CITE'OF HUNTINGON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS POST ISSUANCE COMPLIANCE On this 31 st day of July, 2013, the City and the District understand that post issuance compliance with the restrictions contained in the attached Tax Certificate is required to ensure that interest on the Obligations remains excluded from gross income for federal income purposes. The City and the District understand that the attached Tax Certificate, together with this exhibit, contains written post issuance procedures of the City and the District to effectuate post issuance compliance. In furtherance thereof,the City and the District hereby agree to: I. Assign responsible personnel of the City and the District to monitor and ensure compliance with the restrictions contained in the attached Tax Certificate. 2. Provide adequate training to responsible City and District personnel to effectuate the purposes of this exhibit. 3. Have City and District personnel regularly review the restrictions of the Tax Certificate and establish adequate record retention and calendaring mechanisms internally to ensure that the City and the District will be able to establish post issuance compliance with the restrictions of the attached Tax Certificate. In particular,the City and District will maintain records detailing the investment and expenditures of Obligation proceeds, as provided in the Tax Certificate. The City and District will seek expert advice regarding compliance with the arbitrage rebate and yield restriction provisions of the Tax Certificate, and carefully monitor and calendar the dates by which Obligation proceeds should be expended to comply with yield restriction and rebate exceptions and the dates rebate must be paid. 4. Regularly consult with Bond Counsel and other City and District advisors regarding any issues that arise regarding post issuance compliance with the attached Tax Certificate (including any failure or anticipated failure to expend Obligation proceeds during the periods described in the attached Tax Certificate or any changes in use of the Project). The City and District understand that the use of the Project financed by the Obligations must be monitored throughout the term to maturity of the Obligations, and records must be retained regarding any contracts or other arrangements relating to such use as provided in the Tax Certificate. D-1 D O C S O C/163 4197/0222 73-0006 I All terms not defined herein have the meanings ascribed in the attached Tax Certificate. COMMUNITY FACILITIES DISTRICT NO. 2000-1 OF THE CITY OF HUNTINGON BEACH (GRAND COAST RES?RT) By: ' - Lori Ann Farrell Director of Finance of the City of Huntington Beach, acting as the legislative body of Community Facilities District No. 2000-1 of the City of Huntington Beach(Grand Coast Resort) I CITY OF HUNTINGTOfN BEACH f a4 By: Lori Ann Farrell Director of Finance i i j I l I 1 i i i D-2 DOCSOC/16341971022273-0006 j I [SECRETARY OF STATE: PLEASE AFFIX STAMP BELOW THIS SPACE] ENDORSED • FILED In the office of the Secrelfiry Of 610 j of the State of CalNorola STATE OF CALIFORNIA ) ('UL�2.5 2013 ss. COUNTY OF ORANGE ) i In accordance with the Uniform Facsimile Signatures of Public Officials Act(Government Code Sections 5500,et seq.),I hereby file with the Secretary of State my manual signature and hereby certify under oath my manual signature as follows: Manual Signature 1,19'V � Gt-t CfthcDl —i Connie Boardman Title of Office Mayor of the City of Huntington Beach, acting as the legislative body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) I certify under penalty of perjury that the foregoing is true and correct. EXECUTED this day of July, 2013, at Huntington Beach,California. Signed Connie Boardman I I i [SECRETARY OF STATE: PLEASE AFFIX STAMP BELOW THIS SPACE] ENDORSED - FILE in the office of the secretary.of 31afe of the State of Caftla STATE OF CALIFORNIA ) TjU'2_5 13 )ss. COUNTY OF ORANGE ) I In accordance with the Uniform.Facsimile Signatures of Public Officials Act(Government Code Sections 5500,et seq.), I hereby file with the Secretary of State my manual signature and hereby certify under oath my manual signature as follows: Manual Signature �. Joan . Flynn Title of Office City Cleric of the City of Huntington Beach,. acting as the legislative body of the City of Huntington. Beach Community Facilities District No. 2000-1 (Grand Coast Resort) I certify under penalty of perjury that the foregoing is true and correct. EXECUTED this day of July, 2013, at Huntington Beach, California. Signed ' Joa . Flynn 1 1 i DOCSOC/t 6333 t 6v 1 i022273-0006 i i Unless this Bond certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the District or its agent for registration of transfer; exchange, or payment, and any Bond certificate issued is registered in the name of Cede &Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity, as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VAL UE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered oivner hereof, Cede & Co., has an interest herein. No. 15 $2,020,000 UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 2013 SPECIAL TAX REFUNDING BONDS INTEREST RATE MATURITY DATE DATED DATE CUSIP®NUMBER 5.125% September 1, 2031 Jul 31,2013 446188DX9 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: TWO TY THOUSAND DOLLARS CITY OF HUNTNGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 (the"District"), located in the City of Huntington Beach, County of Orange, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) nest preceding the date of authentication hereof to which interest has been paid or duly provided in full, unless (i)the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii) the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication or (iii)the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above; provided, however, that if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an "Interest Payment Date"), commencing March 1, 2014, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of this Bond is payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office of U.S. Bank National Association (the "Trustee"). Interest on this Bond shall be paid by check of the Trustee mailed by first class mail, postage prepaid, or, upon request of any Registered Owner of at least $1,000,000 of Bonds, by wire transfer to are account in the continental United States of the Registered Owner hereof prior to the Record Date as of-th-e close of business on the fifteenth day of the month preceding an Interest Payment Date (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of "City of Huntington Beach Community Facilities District No. 2000-1 2013 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of$12,965,000 pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the "Act"), for the purpose of refunding the District's 2001 Special Tax Refunding Bonds, and paying certain costs related to the issuance of the Bonds and funding a reserve account. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Huntington Beach, acting in its capacity as the legislative body of the District (the "Legislative Body") on June 3, 2013, and a Bond Indenture dated as of July 1, 2013, by and between the District and U.S. Bank National Association, as Trustee, executed in connection therewith (the "Indenture"), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be.construed in accordance with, the laws of the State of California. Pursuant to the Act and the Indenture, the principal of and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District and which are pledged to the repayment of the Bonds (the"Special Taxes"). Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts on deposit in the Special Tax Fund, except to the extent that other,provision for payment has been made by the Legislative Body, as' may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. The Bonds maturing on or after September 1, 2024 are subject, at the option of the District, to call and redemption, as a whole or in part as selected by the District, from any available source of funds prior to their stated maturity on any date on or after September 1, 2023 at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption,without premium. The Bonds maturing on September 1, 2026 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2025, and on each September I thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: 2 Term Bonds Due on September 1,2026 Year (September 1) Princip.ol Amount 2025 $775,000 2026 (Maturity) 810,000 The Bonds maturing on September 1, 2029 shall be called before maturity-and redeemed, from the Sinking Fund Payments that have been deposited into -the Redemption Account,. on September 1, 2028., and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Due on September 1,2026 Year (September 1) Principal Amount 2028 $890,000 2029 (Maturity) 940,000 The Bonds maturing on September 1, 2031 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2030, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium, as follows: Term Bonds Due on September 1,2029 Year (September 1) Principal Amount 2030 $ 985,000 2031 (Maturity) 1,035,000 I� The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments on any Interest Payment Date, in whole or in part, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed, together with accrued interest to the date of redemption: I 3 Redemption Redemption Dates Priee Any Interest Payment Date through March 1, 2021 103% September 1,2021 and March 1, 2022 102 September 1, 2022 and March 1, 2023 101 September 1, 2023 and any Interest Payment Date thereafter 100 Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 50 days prior to the redemption date by first class mail, postage prepaid,to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully-registered form in the denomination of$5,000 or any integral multiple of$5,000 and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Trustee shall not be required to register transfers or make exchanges of(i)any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii) any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners,to the extent and upon the terms provided in the Indenture. The principal of this Bond is not subject to acceleration. If the District shall pay or cause to be paid to the Owner of this Bond the interest due hereon and the principal hereof, at the times and in the manner stipulated herein and in the Indenture, or if there has been deposited with the Trustee moneys or investment securities, which together with the interest to accrue thereon without further investment, will be fully sufficient to pay and discharge the principal of, premium, if any, and interest on all Bonds Outstanding as and when the same shall become due and payable, then the Owner of this Bond shall cease to be entitled to the pledge of Net Taxes under the Indenture, and all covenants, agreements and other obligations of the District to the 4 Owner of this Bond under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF HUNTD-IGTO'N BEACH OR OF THE CITY OF HUNTNGTON -BEACH COMMUNITY FACILITIES DISTRICT NO.. 2000-1 FOR WHICH THE CITY OF HUNTNGTON BEACH OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION -OF THE SPECIAL TAXES PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY OF-HUNTNGTON BEACH, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. N WITNESS WHEREOF, the City of Huntington Beach Community Facilities District No. 2000-1 has caused this Bond to be dated as of the Dated Date,to be executed on behalf of the District by the Mayor of the City of Huntington Beach by facsimile signature and attested by the facsimile signature of the City Clerk. Mayor of the gton Beach,for and on behalf o 11 tington Beach Community cities District No. 2000-1 ATTEST: City k o�. ty�y� n6kington on Beach, actin n �1 rY of H Beach Communi ilities District No. 2000-1 5 TRUSTEE'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within-defined Indenture. li I Dated: July 31,2013 U.S.BANK NATIONAL ASS IATION,as Trustee By: �. Aut &Alcer f I i 1: t; As I is I i� 1 sI FI 6 ' I LEGAL OPINION The following is a true copy of the opinion rendered by Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in-my office. City Clerk ', untingt each, acting on behalf of City of 'ipb jn Beach Cone nity Facilities District No. 2000-1 7 STRADLING YOCCA CARLSON & RAUTH ORANGE COUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO ATTORNEYS AT LAW (775)393.1960 SAN DIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (858)926.3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)283-2240 TELEPHONE(949)725-4000 - SANTA BARBARA FACSIMILE(949)725-4100 (B05)73USCO SANTA N1014ICA (424)214-7000 SACRAMENTO (916)449-2350 July 31, 2013 City Council of the City of Huntington Beach l Huntington Beach, California Re: $12,965,000 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Huntington Beach (the "City") taken in connection ,with the formation of the City of Huntington Beach Community Facilities District No. 2000-1 (the"District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds in the aggregate principal amount of $12,965,000 (the `Bonds") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the initial purchasers of the Bonds and others. We have not undertaken to verify through independent.investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended(comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), the Municipal Code of the City of Huntington Beach and Resolution No.2013- 19 (the "Resolution of Issuance"), adopted by the City Council (the "City Council") of the City on June 3, 2013, and by a Bond Indenture dated as of July 1, 2013 (the "Indenture"), by and between the District and U.S. Bank National Association, as trustee. All capitalized terms not defined herein shall have the meanings set forth in the Indenture. The Bonds are dated the date of delivery and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on each September 1 and March 1, commencing on March 1, 2014, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: DOCSOC/1634877v I/022273-0006 City Council of the City of Huntington Beach July 31, 2013 Page 2 (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit nor the taxing power of the City,the State of California, or any of its political subdivisions is pledged for the payment thereof. (2) The Indenture has been duly executed and delivered by the City Council on behalf of the District. The Indenture creates a valid pledge of, and the Bonds are secured by the Net Taxes and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California; provided,however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification,penalty, contribution, choice of law, choice of forum or waiver provisions contained therein. (3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. i (5) The difference between the issue price of a Bond(the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to -a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues for the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating 1 I, DOCSOC/1634877v 1/022273-0006 i City Council of the City of Huntington Beach July 31,2013 Page 3 the federal alternative minimum tax imposed on individuals or corporations (as described in j paragraph(3) above)and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's-original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond owner's basis in i the applicable Bond (and the amount of tax-exempt interest received), and is not deductible_for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances)than the original cost of the Bond to the owner. The opinion expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest(and original issue discount) on the Bonds is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes.retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5) and (6) above, we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax .Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the: circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradlin;Yocca Carlson&Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. I DOCSOCi 1634877v1/022273-0006 City Council of the City of Huntington Beach July 31,2013 Page 4 We express no opinion herein as to the accuracy, completeness or sufficiency of the Official- Statement or other offering material relating to the Bonds.and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material. Respectfully submitted, 1 DOCSOC/1634377v 1/022273-0006 I a ASSIGNMENT For value received,the undersigned do(es) hereby sell, assign and transfer unto (Name,Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es) hereby irrevocably constitute(s) and appoint(s) attorney,to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guarantee: Notice: Signature(s)must be guaranteed by a Notice: The signature on this assignment must qualified guarantor. correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. Jones Hall,A Professional Law Corporation Execution version BOND PURCHASE AGREEMENT $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS July 10, 2013 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) c/o City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (the "Underwriter"), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement(this "Purchase Contract") with City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"), which, upon your acceptance of this offer, will be binding upon the Issuer and the Underwriter. Capitalized terms used in this Purchase Contract and not otherwise defined herein have the meanings given to such terms in the Bond Indenture described below. This offer is made subject to the acceptance by the Issuer of this Purchase Contract on or before 5:00 p.m. on the date set forth above. 1. Upon the terms and conditions and in reliance upon the respective representations, warranties and covenants herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, all (but not less than all) of the above-captioned bonds (the "Bonds") at a purchase price (the "Purchase Price") of $12,851,153.30 (equal to the par amount of the Bonds ($12,965,000) less a net original issue discount of$35,759.20, less an Underwriter's discount of$78,087.50). i i The Bonds will be issued by the Issuer under the authority of the Mello-Roos Community Facilities Act of 1982 (constituting Section 53311 et seq. of the California Government Code) (the"Act"), the provisions of Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City of Huntington Beach (the "Municipal Code"), and Resolution No. 2013-19 (the "Bond Resolution") adopted on June 3, 2013 by the City Council (the "City Council") of the City of Huntington Beach (the"City"), acting as the legislative body of the Issuer. The special taxes that will provide a source of payment for the Bonds (the "Special Taxes") are being levied pursuant to (i) Resolution No. 2000-35, adopted by the City Council on April 17, 2000 (the "Resolution of Formation"), which established the Issuer and authorized the levy of a special tax within the Issuer (ii) a two-thirds vote of the qualified electors at an election held in the boundaries of the Issuer on April 17, 2000, and (iii)the ordinance enacted by the City Council (the "Ordinance"), pursuant to which the Special Taxes were levied on the taxable property in the boundaries of the Issuer. Together, the Bond Resolution, the Resolution of Formation and the Ordinance are referred to as the "Resolutions and the Ordinance" in this Purchase Contract. All of the property in the boundaries of the District is owned by the City as successor agency (the "Successor Agency") to the Redevelopment Agency of the City of Huntington Beach (the 'Redevelopment Agency") and leased to PCH Beach Resort, LLC (the "Lessee") under a Ground Lease, dated April 4, 2001(the "Ground Lease"). The City and the Redevelopment Agency entered into an agreement, dated as of December 1, 2001 (the "Forbearance Agreement"), which restricts the exercise of remedies by the Successor Agency under the Ground Lease, The Bonds will be issued pursuant to the terms of a Bond Indenture, dated as of July 1, 2013 (the "Bond Indenture"), by and between the Issuer and U.S. Bank National Association, as trustee (the"Trustee"). The proceeds of the sale of the Bonds will be applied in accordance with the Bond Indenture to (i) refund in full the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2001 Special Tax Bonds (the "Prior Bonds"); (ii) fund a debt service reserve fund for the Bonds; and (iii) pay costs of issuing the Bonds. The refunding of the Prior Bonds will be accomplished as described in an Escrow Agreement, dated as of July 1, 2013 (the "Escrow Agreement"), by and between the Issuer and U.S. Bank National Association, as escrow bank(the "Escrow Bank"). 2. The Bonds will mature on the dates and in the principal amounts, and will bear interest at the rates, as set forth in Exhibit B hereto. The Underwriter agrees to make a bona i fide public offering of all of the Bonds at the offering prices set forth on Exhibit B hereto. The Bonds will be subject to redemption as set forth on Exhibit B. 3. The Issuer agrees to deliver to the Underwriter as many copies of the Official Statement dated the date hereof relating to the Bonds (as supplemented and amended from time to time, the "Final Official Statement") as the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the 'Rule"). The Issuer agrees to deliver such Final Official Statements within seven (7) business days after the execution hereof, or such earlier date identified by the Underwriter to be necessary to allow the Underwriter to meet its obligations under the Rule and Rule G-32 of the Municipal Securities Rulemaking Board ("MSRB"). The Underwriter agrees to file the Final Official Statement with the MSRB on or as soon as practicable after the Closing Date (defined below), The Underwriter agrees to deliver a copy of the Final Official Statement to each of its customers purchasing Bonds no later than the settlement date of the transaction. The Issuer has authorized and approved the Preliminary Official Statement dated June 10, 2013 relating to the Bonds (the 'Preliminary Official Statement") and the Final Official Statement and consents to their distribution and use by the Underwriter in connection with the 2 I i 11i offer and sale of the Bonds. The Issuer deems such Preliminary Official Statement final as of its date for purposes of the Rule, except for information allowed by the Rule to be omitted, and has executed a certificate to that effect in the form of Exhibit C. In connection with the printing and distribution of the Preliminary Official Statement, PCH Beach Resort, LLC(the"Lessee")executed a certificate in the form attached hereto as Exhibit I. In connection with issuance of the Bonds, and in order to assist the Underwriter in complying with the Rule, the (i) Issuer will execute a Continuing Disclosure Agreement dated as of July 1, 2013 (the "Issuer Continuing Disclosure Agreement"), by and between the Issuer and Willdan Financial Services, as dissemination agent (the "Dissemination Agent") and (ii) the Lessee will execute a Continuing Disclosure Agreement-Lessee dated as of July 1, 2013 (the "Lessee Continuing Disclosure Agreement"), by and between the Issuer and the Dissemination Agent. The forms of the Issuer Continuing Disclosure Agreement and the Lessee Continuing Disclosure Agreement are attached as Appendix E to the Final Official Statement. 4. The Issuer represents and warrants to the Underwriter that: (a) The Issuer is a community facilities district duly organized and validly existing under the laws of the State of California (the "State"), including the Act and the Municipal Code. The Issuer has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this Purchase Contract and the Bond Indenture, to issue the Bonds for the purpose specified in Section 1 hereof, (ii) to secure the Bonds in the manner contemplated in the Bond Indenture and (iii)to levy the Special Taxes according to the rate and method of apportionment of special taxes for the Issuer (the"Rate and Method"). (b) The City Council has the full legal right, power and authority to adopt the Resolutions and the Ordinance, and the Issuer has the full legal right, power and authority (i) to enter into this Purchase Contract, the Bond Indenture, the Escrow Agreement and the Issuer Continuing Disclosure Agreement (such documents are collectively referred to herein as the "Issuer Documents"), (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by each of the Issuer Documents and the Resolutions and the Ordinance, and the Issuer and the City Council have complied with all provisions of applicable law, including the Act and the Municipal Code, in all matters relating to such transactions. (c) The Issuer has duly authorized (i) the execution and delivery by the Issuer and the execution, delivery and due performance by the Issuer of its obligations under the Issuer Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Final Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Issuer to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals necessary to be obtained by the Issuer in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The Resolutions and the Ordinance have been duly adopted by the City Council, acting as legislative body of the Issuer, and are in full force and effect; and the Issuer Documents, when executed and delivered by the Issuer and the other party 3 i thereto, will constitute legal, valid and binding obligations of the Issuer enforceable j against the Issuer in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally. (e) When delivered to the Underwriter, the Bonds will have been duly authorized by the City Council, acting as legislative body of the Issuer, and duly executed, issued and delivered by the Issuer and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally, and will be entitled to the benefit and security of the Bond Indenture. (f) The information relating to the Issuer contained in the Preliminary Official Statement is, and as of the Closing Date such information in the Final Official Statement will be, true and correct in all material respects, and neither the Preliminary Official Statement nor the Final Official Statement will as of the Closing Date contain any untrue or misleading statement of a material fact relating to the Issuer or omit to state any material fact relating to the Issuer necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) If, at any time prior to the date twenty-five (25) days following the later of the Closing (as described in Section 6 below) or the date the Underwriter no longer retains, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public, which date, if other than the date of the Closing, shall be provided to the Issuer by written notice of the Underwriter (the "End of the Underwriting Period"), any event of which the Issuer has knowledge shall occur which might or would cause the Final Official Statement to contain an untrue statement of a material fact or to omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer will promptly notify the Underwriter in writing of the circumstances and details of such event. If, as a result of such event or any other event, it is necessary, in the opinion of the Underwriter, the Issuer or their respective counsel, to amend or supplement the Final Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer will forthwith cooperate with the Underwriter in the prompt preparation and furnishing to the Underwriter of a reasonable number of copies of an amendment of or a supplement to the Final Official Statement, in form and substance reasonably satisfactory to the Underwriter, which will so amend or supplement the Final Official Statement so that, as amended or supplemented, it will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) None of the adoption of the Resolutions and the Ordinance, the execution and delivery of the Issuer Documents or the Final Official Statement, the consummation of the transactions on the part of the Issuer contemplated herein or therein and the compliance by the Issuer with the provisions hereof or thereof will conflict with, or constitute on the part of the Issuer, a material violation of, or a material breach of or default under, (i) any indenture, mortgage, commitment, note or other agreement or instrument to which the Issuer is a party or by which it is bound, (ii) any provision of the State Constitution, or(iii)any existing law, rule, regulation, ordinance,judgment, order or 4 i I decree to which the Issuer (or the members of the City Council or any of its officers in their respective capacities as such) is subject, that would have a material adverse affect on the ability of the Issuer to perform its obligations under the Issuer Documents. (i) The Issuer has never been in default at any time, as to principal of or interest on any obligation which it has issued, including those which it has issued as a conduit for another entity, which default may have an adverse effect on the ability of the Issuer to consummate the transactions on its part under the Issuer Documents, except as specifically disclosed in the Final Official Statement; and other than the Bond Indenture, the Issuer has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Taxes following issuance of the Bonds. Q) Except as is specifically disclosed in the Final Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Issuer has been served with process or known by the official of the Issuer executing this Purchase Contract to be threatened, which in any way questions the powers of the City Council or the Issuer referred to in paragraph (b) above, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions on the part of the Issuer contemplated by this Purchase Contract, or of any other Issuer Document, or which, in any way, could adversely affect the validity or enforceability of the Resolutions, the Ordinance, the Bond Indenture, the Escrow Agreement, the Bonds or this Purchase Contract or, to the knowledge of the official of the Issuer executing this Purchase Contract, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under State tax laws or regulations. (k) Any certificate signed by an official of the Issuer authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Issuer Documents shall be deemed a representation and warranty by the Issuer to the Underwriter as to the truth of the statements therein contained. (1) The Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. (m) The Bonds will be paid from Special Taxes received by the Issuer and moneys held in certain funds and accounts established under the Bond Indenture and pledged thereunder to the payment of the Bonds. (n) The Special Taxes may lawfully be levied in accordance with the Rate and Method, and the Ordinance, and, when levied, will be secured by a lien on the property on which they are levied. (o) The Bond indenture creates a valid pledge of and first lien upon the Special Taxes deposited thereunder, and the moneys in certain funds and accounts established pursuant to the Bond Indenture, subject in all cases to the provisions of the Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. 5 i (p) Except as disclosed in the Preliminary Official Statement and the Final Official Statement, the Issuer has not failed in any material respect to comply with any undertaking of the Issuer under the Rule in the previous five years. (q) The Issuer acknowledges and agrees that: (i) the purchase and sale of the Bonds pursuant to this Purchase Contract is an arm's length, commercial transaction between the Issuer and the Underwriter, (ii) in connection with such transaction, the Underwriter is acting solely as a principal and is not acting as a municipal advisor, financial advisor or fiduciary to the Issuer; (iii) the Underwriter has not assumed any advisory or fiduciary responsibility to the Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and proceedings leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Issuer on other matters) or any other obligation to the Issuer except the obligations expressly set forth in this Purchase Contract and (iv) the Issuer has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate in connection with the transaction contemplated herein. 5. The Issuer covenants with the Underwriter that the Issuer will cooperate with the Underwriter (at the cost and written directions of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may reasonably request; provided, however, that the Issuer shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Issuer consents to the use by the Underwriter of the Issuer Documents, the Preliminary Official Statement and the Final Official Statement in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions related to the offering and sale of the Bonds. 6. At 9:00 a.m. on July 31, 2013 (the "Closing Date") or at such other time and/or date as shall have been mutually agreed upon by the Issuer and the Underwriter, the Issuer will j deliver or cause to be delivered to the Underwriter the Bonds in definitive form duly executed j and authenticated by the Fiscal Agent together with the other documents mentioned in Section 8 hereof; and the Underwriter will accept such delivery and pay the Purchase Price of the Bonds by delivering to the Fiscal Agent for the account of the Issuer a check payable in federal funds or making a wire transfer in federal funds payable to the order of the Fiscal Agent. The activities relating to the final execution and delivery of the Bonds and the Bond Indenture and the payment therefor and the delivery of the certificates, opinions and other instruments as described in Section 8 of this Purchase Contract shall occur at the offices of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Bond Counsel"). The payment for the Bonds and simultaneous delivery of the Bonds to the Underwriter is herein referred to as the "Closing." The Bonds will be delivered as fully j registered, book-entry only Bonds initially in denominations equal to the principal amount of each maturity thereof. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, and will be made available for checking by the Underwriter at such place as the Underwriter and the Fiscal Agent shall agree not less than 24 hours prior to the Closing. i 6 i 1 7. The Underwriter shall have the right to cancel its obligations to purchase the Bonds if between the date hereof and the date of Closing: (a) the House of Representatives or the Senate of the Congress of the United States, or a committee of either, shall have pending before it, or shall have passed or recommended favorably, legislation introduced previous to the date hereof, which legislation, if enacted in its form as introduced or as amended, would have the purpose or effect of imposing federal income taxation upon revenues or other income of the general character to be derived by the Issuer or by any similar body under the Bond Indenture or upon interest received on obligations of the general character of the Bonds, or of causing interest on obligations of the general character of the Bonds, to be includable in gross income for purposes of federal income taxation, and such legislation, j in the Underwriter's opinion, materially adversely affects the market price of the Bonds; or (b) a tentative decision with respect to legislation shall be reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported or re-reported by such a committee or be introduced, by amendment or otherwise, in or be passed by the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted or a decision by a federal court of the United States or the United States Tax Court shall have been rendered, or a ruling, release, order, circular, regulation or official statement by or on behalf of the United States Treasury Department, the Internal Revenue Service or other governmental agency shall have been made or proposed to be made having the purpose or effect, or any other action or event shall have occurred which has the purpose or effect, directly or indirectly, of adversely affecting the federal income tax consequences of owning the Bonds, including causing interest on the Bonds to be included in gross income for purposes of federal income taxation, or imposing federal income taxation upon revenues or other income of the general character to be derived by the Issuer under the Bond Indenture or upon interest received on obligations of the general character of the Bonds, or the Bonds and also including adversely affecting the tax-exempt status of the Issuer under the Code, which, in the opinion of the Underwriter, materially adversely affects the market price of or market for the Bonds; or i (c) legislation shall have been enacted, or actively considered for enactment j with an effective date prior to the Closing, or a decision by a court of the United States shall have been rendered, the effect of which is that the Bonds, including any underlying obligations, or the Bond Indenture, as the case may be, is not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (d) a stop order, ruling, regulation or official statement by the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Bonds, including any underlying obligations, or the execution and delivery of the Bond Indenture as contemplated hereby or by the Final Official Statement, is or would be in violation of any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in 7 I) effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (e) any event shall have occurred or any information shall have become known to the Underwriter which causes the Underwriter to reasonably believe that the Final Official Statement includes an untrue statement of a material fact, or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer fails to amend or supplement such Final Official Statement to cure such omission or misstatement pursuant to Section 4(g); or (f) there shall have occurred any outbreak of hostilities or any national or international calamity or crisis, including a financial crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (g) there shall be in force a general suspension of trading on the New York Stock Exchange, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (h) a general banking moratorium shall have been declared by federal, New York or State authorities; or (i) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Issuer; or 0) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange which adversely affects the Underwriter's ability to sell the Bonds; or (k) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; or (1) an amendment to the federal or State constitution shall be enacted or action taken by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Issuer, its property, income or securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Issuer to issue the Bonds and levy the Special Tax as contemplated by the Bond Indenture, the Rate and Method and the Final Official Statement;or (m) any rating on the Bonds shall have been downgraded or withdrawn by a national rating service, which, in the Underwriter's reasonable opinion, materially adversely affects the marketability of the Bonds or the sale, at the contemplated offering prices, by the Underwriter of the Bonds. 8 8. The obligation of the Underwriter to purchase the Bonds shall be subject (a)to the performance by the Issuer of its obligations to be performed by it hereunder at and prior to the Closing, (b)to the accuracy as of the date hereof and as of the time of the Closing of the representations and warranties of the Issuer herein, and (c) to the following conditions, including the delivery by the Issuer of such documents as are enumerated herein in form and substance satisfactory to the Underwriter: (a) At the time of Closing, (i)the Final Official Statement, this Purchase Contract, the Issuer Continuing Disclosure Agreement, the Lessee Continuing Disclosure Agreement, the Escrow Agreement and the Bond Indenture shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to by the Underwriter, and (ii)the Issuer shall have duly adopted and there shall be in full force and effect such resolutions and ordinances (including, but not limited to, the Resolutions and the Ordinance) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated hereby. (b) Receipt of the Bonds, executed by the Issuer and authenticated by the Fiscal Agent, at or prior to the Closing. The terms of the Bonds, when delivered, shall in all instances be as described in Final Official Statement. j (c) At or prior to the Closing, the Underwriter shall receive the following documents in such number of counterparts as shall be mutually agreeable to the Underwriter and the Issuer: (i) A final approving opinion of Bond Counsel dated the date of Closing in the form attached to the Final Official Statement as Appendix B. I (ii) A letter or letters of Bond Counsel addressed to the Underwriter, which includes a statement to the effect that Bond Counsel's final approving opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to the Underwriter, and further provides: (A) the statements contained in the Official Statement on the cover page and under the captions "INTRODUCTION," "THE BONDS" (other than information relating to DTC and its book-entry only system, as to which no opinion need be expressed), "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS," and "TAX EXEMPTION," and in Appendices B and D thereto, are accurate insofar as such statements expressly summarize certain provisions of the Bonds, the Bond Indenture and Bond Counsel's opinion concerning certain federal tax matters relating to the Bonds; (B) this Purchase Contract constitutes the legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; and (C) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Indenture is 9 exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. (iii) A letter of Stradling Yocca Carlson & Rauth, a Professional Corporation ("Disclosure Counsel"), addressed to the Issuer and the Underwriter, to the effect that: (A) during the course of serving as Disclosure Counsel in connection with the issuance of the Bonds and without having undertaken to determine independently or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Official Statement, no information came to the attention of the attorneys in such firm rendering legal services in connection with the issuance of the Bonds that would lead them to believe that the Final Official Statement (excluding therefrom the financial statements, any financial or statistical data, or forecasts, charts, numbers, estimates, projections, assumptions or expressions of opinion included in the Official Statement, information regarding DTC, and the appendices to the Official Statement, as to which no opinion need be expressed), as of the date thereof or the Closing Date, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iv) A letter of Jones Hall, A Professional Law Corporation ("Underwriter's Counsel"), addressed to the Underwriter, in form and substance acceptable to the Underwriter. (v) The Final Official Statement executed on behalf of the Issuer by a duly authorized officer of the Issuer. (vi) Certified copies of the Resolutions and the Ordinance. (vii) Evidence of recordation in the real property records of the County of Orange of the Notice of Special Tax Lien in the form required by the Act. I (viii) A certificate, in form and substance as set forth in Exhibit A hereto,of the Issuer, dated as of the Closing Date. (ix) Evidence that Federal Form 8038 has been executed by the Issuer and will be filed with the Internal Revenue Service, (x) Executed copies of the Bond Indenture, the Escrow Agreement, the Issuer Continuing Disclosure Agreement and the Lessee Continuing Disclosure Agreement. (xi) A tax certificate in form satisfactory to Bond Counsel. (xii) An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, to the effect that: 10 (A) the Issuer is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State, with full legal right, power and authority to adopt the Resolutions and the Ordinance; (B) the Resolutions and the Ordinance were each duly adopted at a meeting of the City Council, acting as legislative body of the Issuer, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and the Ordinance are in full force and effect and have not been amended or repealed, except as set forth therein; (C) the Escrow Agreement and the Issuer Continuing Disclosure Agreement were duly authorized, executed and delivered by the Issuer, and constitute the legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application 1 of equitable principles if equitable remedies are sought; (D) no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the Issuer has been served with process or to the knowledge of the City Attorney, is threatened, in any way affecting the existence of the Issuer or the titles of the Issuer's officials to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Bond Indenture, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents or any action of the Issuer contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Final Official Statement or the powers of the Issuer or its authority with respect to the Bonds, the Issuer Documents or any action on the part of the Issuer contemplated by any of said documents, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (E) the execution and delivery of the Bonds and the issuer Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Issuer is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Issuer to perform its obligations under the Bonds or the Issuer Documents; (F) all approvals, consents, authorization, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, 11 the ability of the Issuer, to perform its obligations under the Bonds or the Issuer Documents, have been obtained or made, as the case may be, and are in full force and effect; (G) based upon the information made available to the City Attorney in the course of its participation in the transaction and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Official Statement, nothing has come to the attention of the City Attorney which has led the City Attorney to believe that the Final Official Statement (excluding therefrom the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL" and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect; (H) the Ground Lease and the Forbearance Agreement were duly authorized, executed and delivered by the Redevelopment Agency, and constitute the legal, valid and binding obligations of the Successor Agency, as the successor agency to the Redevelopment Agency, enforceable against the Successor Agency in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; and (1) the Forbearance Agreement was duly authorized, executed and delivered by the City on behalf of the Issuer, and constitutes the legal, valid and binding obligation of the City, enforceable against the City in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. (xiii) In connection with printing and distribution of the Preliminary Official Statement, an executed certificate of the Issuer in the form attached hereto as Exhibit C. (xiv) A certificate in form and substance as set forth in Exhibit D hereto of the Fiscal Agent/Escrow Bank and an opinion of its counsel in form and substance satisfactory to the Underwriter. (xv) A certificate in form and substance as set forth in Exhibit E hereto, of Willdan Financial Services, in its capacity as special tax consultant ("Special Tax Consultant"), dated as of the Closing Date. (xvi) A certificate in form and substance as set forth in Exhibit F hereto, of Willdan Financial Services, in its capacity as Dissemination Agent, dated as of the Closing Date. 12 I I I (xvii) A Verification Report issued by Grant Thornton LLP (the "Verification Agent") regarding the sufficiency of the securities and cash on deposit pursuant to the Escrow Agreement to pay the redemption prices of and the debt service due on the Prior Bonds; (xviii) A defeasance opinion of Bond Counsel with respect to the Prior Bonds. (xix) (A) Certificates of Willdan Financial Services and Harrell & Company Advisors, LLC, in substantially the form of Exhibit G, to the collective effect that, except as set forth in the Preliminary Official Statement and the Final Official Statement, the Issuer, the City, the Huntington Beach Public Financing Authority, other community facilities districts established by the City and any other related entities have not failed to comply in all material respects with any continuing disclosure undertakings during the past five years. (B) Evidence satisfactory to the Underwriter that the Lessee has not failed to comply in all material respects with any continuing disclosure undertakings during the past five years. (xx) A Certificate of Representations and Warranties of the City, dated as of the date of this Purchase Contract (the "City Pricing Certificate"), in substantially the form of Exhibit H, with only such changes therein as shall have been accepted by the Underwriter on or prior to the date of this Purchase Contract. (xxi) A certificate dated the Closing Date and signed by the City Manager of the City certifying that the representations and warranties of the City contained in the City Pricing Certificate are true and correct in all material respects on and as of the Closing Date, with the same effect as if made on the Closing Date, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement. (xxii) Executed certificates of the Lessee in the form of Exhibits I and J hereto. (xxiii) Executed copies of the Ground Lease and the Forbearance Agreement. (xxvi) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Issuer with legal requirements, the truth and accuracy, as of the time of Closing, of the respective representations of the Issuer herein contained and the due performance or satisfaction by the Issuer at or prior to such time of all agreements then to be performed and all conditions then to be satisfied. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Contract, or if the obligations of the Underwriter to purchase and accept delivery of the Bonds shall be terminated for any reason permitted by this Purchase Contract,this Purchase Contract shall terminate and neither the Underwriter nor the Issuer shall 13 be under further obligation hereunder; except that the respective obligations to pay expenses, as provided in Section 11 hereof shall continue in full force and effect. 9. The obligations of the Issuer to issue and deliver the Bonds on the Closing Date shall be subject, at the option of the Issuer, to the performance by the Underwriter of its obligations to be performed hereunder at or prior to the Closing Date, and to the delivery by Bond Counsel of the opinion described in Section 8(c)(i) and by Disclosure Counsel of the letter described in Section 8(iii), 10. All representations, warranties and agreements of the Issuer hereunder shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter, and shall survive the Closing. 11. The Issuer shall pay or cause to be paid all expenses incident to the performance of its obligations under this Purchase Contract, including, but not limited to, delivery of the Bonds, costs of printing the Bonds, the Preliminary Official Statement and the Final Official Statement, any amendment or supplement to the Preliminary Official Statement or Final Official Statement and this Purchase Contract, fees and disbursements of Bond Counsel and Disclosure Counsel, the financial advisor and other consultants engaged by the Issuer, including the fees and expenses of the Special Tax Consultant, the California Debt Investment and Advisory Commission fee, fees of the Fiscal Agent and the Escrow Bank, and fees and disbursements in connection with the qualification of the Bonds for sale under the securities or "Blue Sky" laws of the various jurisdictions and the preparation of"Blue Sky" memoranda. The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds, and all other expenses incurred by it in connection with its public offering and distribution of the Bonds, including fees and expenses of its counsel, if any. 12. Any notice or other communication to be given to the Issuer under this Purchase Contract may be given by delivering the same in writing at its address set forth above, and any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to the following: Stifel, Nicolaus & Company, Incorporated, One Ferry Building, San Francisco, CA 94111, Attention: Sara Brown. 13. This Purchase Contract is made solely for the benefit of the Issuer and the Underwriter (including the successors or assigns of the Underwriter) and no other person, including any purchaser of the Bonds, shall acquire or have any right hereunder or by virtue hereof. 14. This Purchase Contract shall be governed by and construed in accordance with the laws of the State applicable to contracts made and performed in the State. 14 1 I i 15. This Purchase Contract shall become effective upon acceptance hereof by the Issuer. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: /d]/10,'4 �,17, uth d Represen t' e 1 i Accepted and agreed to as of the date first above written and the time set forth below: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (Grand Coast Resort) By: . Authorized Representative Time: (Pacific Time) 15 15. This Purchase Contract shall become effective upon acceptance hereof by the Issuer. STIFEL, NICOLAUS & COMPANY, INCORPORATED i By: Authorized Representative Accepted and agreed to as of the date first above written and the time set forth below: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (Grand Coast Resort) By: � A"-V Ti"� Authorized Representative Time: (Pacific Time) �. D 2 �. ►Lt . 15 EXHIBIT A CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS ISSUER CLOSING CERTIFICATE I, the undersigned, hereby certify that I am the of the City of Huntington Beach, the City Council of which is the legislative body for City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"), a community facilities district duly organized and existing under the laws of the State of California (the "State") and that as such, I am authorized to execute this Certificate on behalf of the Issuer in connection with the issuance of the above-referenced bonds(the"Bonds'). I hereby further certify on behalf of the Issuer that: (A) no litigation is pending with respect to which the Issuer has been served with process or, to my best knowledge after reasonable inquiry, threatened (1)to restrain or enjoin the issuance of any of the Bonds or the collection of Special Taxes pledged under the Bond Indenture; (2) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds, the Bond Indenture, the Escrow Agreement, the Issuer Continuing Disclosure Agreement or the Purchase Contract; or(3)in any way contesting the existence or powers of the Issuer; (B) the representations and warranties made by the Issuer in the Issuer Documents are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date; (C) no event has occurred since the date of the Final Official Statement that, as of the Closing Date, would cause any statement or information contained in the Final Official Statement (excluding therefrom the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL" and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed) to be incorrect or incomplete in any material respect or would cause the information in the Final Official Statement (excluding therefrom the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL" and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed)to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading; and (D) as of the date hereof, the Bond Indenture is in full force and effect in accordance with its terms and has not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter; and (E) the Issuer has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Issuer Documents prior to issuance of the Bonds. A-1 Capitalized terms used in this Certificate and not defined herein shall have the same meaning set forth in the Bond Purchase Agreement dated July 10, 2013, between the Issuer and Stifel, Nicolaus &Company, Incorporated IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below. Dated: [Closing Date] CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) By: Authorized Representative A-2 EXHIBIT B CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Serial Bonds Maturity Date Principal Interest (September 1) Amount Rate Yield Price 2014 $475,000 2.000% 0.950% 101.128 2015 535,000 2.000 1.700 100.610 2016 545,000 3.000 2.500 101.473 2017 560,000 3,000 3.080 99.693 2018 575,000 4.000 3,400 102.777 2019 600,000 4.000 3.750 101.346 2020 625,000 4.000 4.000 100.000 2021 645,000 4.000 4.250 98.301 2022 675,000 4.250 4.500 98.149 2023 705,000 5.000 4,625 102.990 2024 740,000 4.500 4.750 97.861 2027 850,000 5.000 5.050 99.496 Term Bonds 2026 $1,585,000 5.000% 5.000% 100.000 2029 1,830,000 5.000 5,150 98.368 2031 2,020,000 5.125 5.220 98.892 Redemption Provisions Optional Redemption. The Bonds maturing on or after September 1, 2024 are subject to redemption prior to maturity, at the option of the City, in whole or in part among maturities on such basis as shall be designated by the City and by lot within a maturity, from any available source of funds, on September 1, 2023, or on any date thereafter, at a price equal to 100% of the principal amount thereof, without premium, plus accrued interest thereon to the date of redemption. Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2026, September 1, 2029 and September 1, 2031, are subject to mandatory sinking fund redemption on September 1 of each years in accordance with the schedules set forth below. $1,585,000 Term Bonds Maturing September 1,2026 Redemption Date Sinking Fund (September 1) Redemption 2025 $775,000 2026 810,000 B-1 $1,830,000 Term Bonds Maturing September 1,2029 Redemption Date Sinking Fund (September 1) Redemption 2028 $890,000 2029(Maturity) 940,000 $2,020,000 Term Bonds Maturing September 1,2031 Redemption Date Sinking Fund (September 1) Redemption 2030 $985,000 2031 (Maturity) 1,035,000 Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to mandatory redemption from prepayments of Special Taxes, at the following redemption prices (expressed as percentages of the principal amount of Bonds called for redemption), together with accrued interest to the date fixed for redemption, as shown in the following table: Redemption Period Redemption Price Any Interest Payment Date through March 1,2021 103% September 1,2021 and March 1,2022 102 September 1, 2022 and March 1,2023 101 September 1,2023 and any Interest Payment Date Thereafter 100 B-2 EXHIBIT C CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS RULE 15C2-12 CERTIFICATE The undersigned hereby certifies and represents that she is the duly elected and acting of the City of Huntington Beach (the "Issuer"), the City Council of which is the legislative body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"), and is duly authorized to execute and deliver this Certificate and further hereby certifies on behalf of the Issuer as follows: (1) This Certificate is delivered in connection with the offering and sale of the above-referenced bonds (the'Bonds") in order to enable the underwriter of the Bonds to comply with Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the "Rule"). (2) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement, setting forth information concerning the Bonds and the Issuer(the`Preliminary Official Statement"). (3) As used herein, "Permitted Omissions" shall mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all with respect to the Bonds. (4) The Preliminary Official Statement is, except for the Permitted Omissions, deemed final within the meaning of the Rule. IN WITNESS WHEREOF, I have hereunto set my hand as of 2013. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) By: Authorized Representative C-1 i EXHIBIT D CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF TRUSTEEIESCROW BANK The undersigned hereby states and certifies that the undersigned is an authorized officer of U.S. Bank National Association, (the "Bank"), which is acting (A) as trustee (the "Trustee") under that certain Bond Indenture, dated as of 1, 2013 (the "Bond Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and the Bank, and (B) as escrow bank (the "Escrow Bank") under the Escrow Agreement, dated as of 1, 2013 (the "Escrow Agreement"), between the Issuer and the Bank, and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Bank: (1) The Bank is duly organized and existing as a national banking association under the laws of the United States of America, having the full power and authority to enter into and perform its duties under the Bond Indenture and the Escrow Agreement. (2) The Bond Indenture and the Escrow Agreement have been duly authorized, executed and delivered by the Bank, and are legal, valid and binding agreements of the Bank enforceable upon the Bank in accordance with their respective terms. (3) The Bonds have been authenticated by a duly authorized representative of the Bank in accordance with the Bond Indenture. (4) To the best knowledge of the Bank, after due inquiry, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Bank or threatened against the Bank which in the reasonable judgment of the Bank would affect the existence of the Bank or in any way contesting or affecting the validity or enforceability of the Bond Indenture or the Escrow Agreement or contesting the powers of the Bank or its authority to enter into and perform its obligations under the Bond Indenture and the Escrow Agreement. Dated: [closing date] U.S. BANK NATIONAL ASSOCIATION By Authorized Officer D-1 EXHIBIT E i CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF SPECIAL TAX CONSULTANT Willdan Financial Services(the "Special Tax Consultant') has been retained as Special Tax administrator for the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the"Issuer") and has reviewed the Rate and Method of Apportionment of Special Tax for the Issuer (the "Rate and Method"), a copy of which is set forth in Appendix A to the Official Statement, dated July 10, 2013 (the "Official Statement') relating to the above- captioned bonds (the"Bonds"). I Based upon such review, the Special Tax Consultant hereby certifies that the Special Tax, if collected in the maximum amounts permitted pursuant to the Rate and Method on the date hereof, would generate at least 110% debt service coverage on the Bonds, provided that the annual debt service figures on the attached debt service schedule, which were relied upon by Special Tax Consultant, are substantially true and correct. Although the Special Tax if collected in the maximum amounts pursuant to the Rate and Method, would generate the debt service coverage described in the previous paragraph, no representation is made herein as to actual amounts that will be collected in future years. All information with respect to the Rate and Method in the Official Statement and all other information sourced to the Special Tax Consultant is true and correct as of the date of the Official Statement and as of the date hereof, and a true and correct copy of the Rate and Method is attached to the Official Statement as Appendix A. Dated: 2013 WILLDAN FINANCIAL SERVICES By: Authorized Officer E-1 EXHIBIT F CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF DISSEMINATION AGENT The undersigned hereby states and certifies that the undersigned is an authorized officer of Willdan Financial Services, as dissemination agent (the "Dissemination Agent") pursuant to (i) a Continuing Disclosure Agreement dated as of July 1, 2013 and (ii) a Continuing Disclosure Agreement — Lessee (the "Continuing Disclosure Agreements"), by and between the Issuer and the Dissemination Agents, and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Dissemination Agent: (1) The Dissemination Agent has the full power and authority to enter into and perform its duties under the Continuing Disclosure Agreements. (2) The Continuing Disclosure Agreements have been duly authorized, executed and delivered by the Dissemination Agent, and re legal, valid and binding agreement of the Dissemination Agent enforceable upon the Dissemination Agent in accordance with their terms. (3) To the best knowledge of the Dissemination Agent, after due inquiry, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Dissemination Agent or threatened against the Dissemination Agent which in the reasonable judgment of the Dissemination Agent would affect the existence of the Dissemination Agent or in any way contesting or affecting the validity or enforceability of the Continuing Disclosure Agreements or contesting the powers of the Dissemination Agent or its authority to enter into and perform its obligations under the Continuing Disclosure Agreements. Dated: [closing date] WILLDAN FINANCIAL SERVICES I I By Authorized Officer F-1 EXHIBIT G CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE REGARDING CONTINUING DISCLOSURE The undersigned hereby states and certifies that: (i) I am an authorized representative of which acts as dissemination agent (the "Dissemination Agent") in connection with the continuing disclosure undertakings (the "Previous Undertakings") of the issuer (the "Issuer") of the bonds listed on Schedule 1 (the "Listed Bonds") pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule"), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; and (ii) in our capacity as Dissemination Agent, we have reviewed the Previous Undertakings, and all annual filings and other event filings (if any) made pursuant thereto, and conclude that in the previous five years, [Option #1: the Issuer has filed each annual report in a complete and timely manner, and all event filings required to be made pursuant to the Rule have also been made in a timely manner pursuant to the Rule] [Option #2: the information in the Official Statement under the heading "CONTINUING DISCLOSURE" is accurate with respect to the Issuer's filing history for the previous five years]. Dated: [NAME OF CERTIFYING PARTY] By: Authorized Officer G-1 l i Schedule 1 Issuer Name of Bonds I i I G-2 EXHIBIT H CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF REPRESENTATIONS AND WARRANTIES OF THE CITY , 2013 To: Stifel, Nicolaus &Company, Incorporated One Ferry Building San Francisco, CA 94111 Ladies and Gentlemen: We are delivering to you this certificate in connection with the issuance and sale of the captioned bonds (the"Bonds") and pursuant to the Bond Purchase Agreement, dated the date hereof (the "Purchase Agreement'), by and between you and City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"). All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Purchase Agreement. The undersigned, in his capacity as an officer of the City of Huntington Beach (the "City") and not in his individual capacity, on behalf of the City, represents and warrants to you that: (1) The City is duly organized and validly existing as a municipal corporation and charter city under the Constitution and laws of the State of California and the City Council has duly and validly adopted each of the Resolutions and Ordinance and authorized the formation of the Issuer pursuant to the Act. (2) The information contained in the Preliminary Official Statement (other than information in the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL," information provided by Willdan Financial Services, the County of Orange and information relating to The Depository Trust Company and its book-entry only system, as to which no view is expressed) is, as of the date thereof and as of the date hereof, true and correct in all material respects and does not, as of the date thereof and as of the date hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. I H-1 I (3) Except as is specifically disclosed in the Preliminary Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the City has been served with process or is known to have been threatened, which in any way questions the powers of the City Council to adopt the Resolutions and the Ordinance, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Purchase Contract, or of any other Issuer Document, or which, in any way, could adversely affect the validity or enforceability of the Resolutions, the Ordinance, the Bond Indenture, the Escrow Agreement, the Bonds or the Purchase Contract. (4) Any certificate signed by an official of the City authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Issuer Documents shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein contained. (5) Except as disclosed in the Preliminary Official Statement, the City has not failed in any material respect to comply With any undertaking of the Issuer under the Rule in the previous five years. The securities listed as Exhibit A to the certificates of Willdan Financial Services and Harrell & Company Advisors, LLC required by Section 8(c)(xviii) hereof are all of the securities of the City, the Successor Agency to the Redevelopment Agency of Huntington Beach, the Huntington Beach Public Finance Authority and all other entities related to the City that were obligated to provide continuing disclosure pursuant to undertakings under the Rule during the past five years. CITY OF HUNTINGTON BEACH j By: Authorized Representative I H-2 I 11II I EXHIBIT I i CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS 10b-5 CERTIFICATE OF LESSEE The undersigned (the "Lessee"), in 'connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer" or the "District") of the bonds captioned above (the "Bonds"), hereby certifies as follows as of the date hereof: (1) The undersigned is duly authorized to execute this Certificate on behalf of the Lessee. (2) This Certificate is delivered in connection with the offering and sale of the Bonds. (3) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement (the "Preliminary Official Statement"), setting forth certain information concerning, among other things, the Bonds, the Lessee, the Lessee's organization, activities, properties and financial condition, and the Lessee's development within the District. (4) The section in the Preliminary Official Statement entitled "LEASEHOLD OWNERSHIP AND THE HOTEL" contains no untrue statement of a material fact and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (5) The Lessee has never failed in any material respect to comply with previous undertakings to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. (6) The Lessee and its affiliates have never defaulted to any material extent in the payment of special taxes or assessments in connection with the District or any other community facilities districts or assessment districts in California within the past five years. (7) The Lessee and its affiliates are not currently in default on any loans, lines of credit or other obligation, the result of which could materially adversely affect the property leased by the Lessee in the District. J-1 i i { (8) The Lessee and its affiliates are solvent and no proceedings are pending or threatened in which they may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of their debts or obligations, or granted an extension of time to pay their debts or a reorganization or readjustment of their debts. (9) There is no litigation or administrative proceeding of any nature in which the Lessee has been served, or is pending or threatened which, if successful, would materially adversely affect the Lessee's ability to own and operate the property leased by the Lessee within the District, or to pay the Special Taxes, the special benefit assessments or ordinary ad valorem property tax obligations when due on its property within the District, or which challenges or questions the validity or enforceability of the Bonds or the Continuing Disclosure Agreement- Lessee executed by the Lessee. Capitalized terms not defined herein have the same meaning as is set forth in the Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated and the Issuer relating to the Bonds. A Dated: 2013 [SIGNATURE BLOCK OF LESSEE] i I J-2 1 I I EXHIBIT J CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS I j CLOSING CERTIFICATE OF LESSEE The undersigned (the "Lessee"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer" or the "District") of the bonds captioned above (the "Bonds"), hereby certifies as follows as of the date hereof: (1) The undersigned is duly authorized to execute this Certificate on behalf of the Lessee. (2) The Lessee is duly authorized to execute, deliver and perform its Continuing Disclosure Agreement- Lessee. (3) The Lessee has duly executed and delivered the Lessee Continuing Disclosure Agreement. (4) The Lessee has full power and authority to lease the property located within the District and to carry on its business as presently conducted and as described in the Final Official Statement. I i (5) Except as disclosed in the Final Official Statement, no event has occurred since the date of the Preliminary Official Statement which has materially and adversely affected or is reasonably expected to materially and adversely affect the business, properties, operations or financial condition of the Lessee. (6) The representations and warranties made by the Lessee in the 10b-5 Certificate of Lessee are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date. If at any time subsequent hereto and within 25 days after the Closing Date any such statements in the Official Statement become untrue, the Developer agrees to notify the County and the Underwriter immediately. Capitalized terms not defined herein have the same meaning as is set forth in the Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated and the Issuer relating to the Bonds. Dated: , 2013 [SIGNATURE BLOCK OF LESSEE] J-1 i J-2 PRELIMINARY OFFICIAL STATEMENT DATED AIUNE 10,2013 r NEW ISSUE—BOOK-ENTRY-ONLY NO RATING y In the opinion of Stradling Yocca Carlson &Rauth, a Professional Corporation,Newport Beach, California("Bond Counsel'), E under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest(and original issue discount)on the Bonds is excludedfrom gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest(and original issue discount)on the Bonds is exempt from r State of California personal income tax. See "TAX EXEMPTION"herein with respect to other tax consequences with respect to the Bonds. ti $12,990,000* CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 ✓ U (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS s Dated: Delivery Date Due: September 1,as shown on the inside cover c S w The City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding _ Bonds(the`Bonds")are being issued by the City of Huntington Beach Community Facilities District No.2000-1 (the"District")to refund the District's outstanding 2001 Special Tax Bonds (the"Refunded Bonds"),to fund a deposit to the Reserve Account securing the Bonds and to pay the costs of issuance of the Bonds. See"THE REFUNDING PLAN"herein. The Bonds are authorized to be issued pursuant to _ the Mello-Roos Community Facilities Act of 1982,as amended(Sections 53311 et seq.of the Government Code of the State of California), the Municipal Code of the City of Huntington Beach(the"City")and a Bond Indenture(the"Indenture"),dated as of July 1,2013,by and between the District and U.S.Bank National Association,as trustee(the"Trustee"). The Bonds are special obligations of the District and are payable from Net Taxes(as defined herein)derived from a certain annual v Special Tax(as defined herein)to be levied on the leasehold interest in the property within the District and from certain other funds pledged under the Indenture, all as further described herein. The Special Tax is to be levied according to the rate and method of apportionment approved by City Council of the City and the qualified electors within the District. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS"and APPENDIX A—"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"herein. The Bonds are issuable in fully-registered form and when issued will be registered in the name of Cede&Co.,as nominee of The -75 Depository Trust Company, New York, New York ("DTC"). Individual purchases of the Bonds may be made in principal amounts of C $5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing ti their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be _ transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be c ' payable commencing March I,2014 and semiannually thereafter on each September 1 and March 1. Principal of and interest on the Bonds r will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners y of the Bonds. See"THE BONDS—General Provisions"herein. o _ NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE SUCCESSOR AGENCY, THE o COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE J •° PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET r r, TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments, and mandatory °; v sinking fund redemption as set forth herein. See"THE BONDS—Redemption of the Bonds"herein. ° Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the j ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled r "SPECIAL RISK FACTORS"for a discussion of certain risk factors that should be considered,in addition to the other matters set forth herein,in evaluating the investment quality of the Bonds. } This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms c of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. w u MATURITY SCHEDULE T (See Inside Cover Page) -c The Bonds are offered when,as and if issued and accepted by the Underwriter,subject to approval as to their legality by Stradling _ Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, and subject to certain other conditions. ' ;= Stradling Yocca Carlson& Rauth, a Professional Corporation, is serving as Disclosure Counsel to the District with respect to the Bonds. U Certain legal matters will be passed on for the City and the District by Jennifer McGrath,Esq.,City Attorney. Certain legal matters will be passed on by Jones Hall,A Professional Law Corporation,San Francisco,California,as counsel to the Underwriter. It is anticipated that the r Bonds in book-entry form will be available for delivery on or about July.2013. O r �TIFEL v -j Dated: July_2013 a� n *Preliminary,subject to change. $12,990,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS MATURITY SCHEDULE (Base CUSIPt: ) Maturity Date Price or (September 1) Principal Amount Interest Rate Yield C(ISIPt $ %Term Bonds due September 1,2031 Price: CUSIP No! Preliminary,subject to change. Copyright 2013, American Bankers Association. CUSIP data herein is provided by Standard and Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. Neither the District nor the Underwriter make any representations as to the accuracy of CUSIP data herein. CITY OF HUNTINGTON BEACH CITY COUNCIL Connie Boardman,Mayor Matthew Harper,Mayor Pro Tern Joe Carchio,Council Member Jill Hardy,Council Member Jim Katapodis,Council Member Joe Shaw,Council Member Dave Sullivan,Council Member CITY OFFICIALS Fred Wilson,City Manager Robert Hall,Assistant City Manager Alisa Cutchen,City Treasurer Joyce Zacks,Deputy City Treasurer Lori Ann Farrell,Director of Finance Joan L.Flynn,City Clerk Jennifer McGrath,Esq., City Attorney Kellee Fritzal,Deputy Director of Economic Development Sunny Han, Senior Administrative Analyst,Finance Department BOND COUNSEL AND DISCLOSURE COUNSEL Stradling Yocca Carlson&Rauth, a Professional Corporation Newport Beach,California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula,California FINANCIAL ADVISOR Public Financial Management,Inc. Los Angeles,California TRUSTEE/ESCROW BANK U.S.Bank National Association Los Angeles,California VERIFICATION AGENT Grant Thornton LLP Minneapolis,Minnesota Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District,the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer,solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,whether or not expressly so described herein,are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction,but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. Certain statements included or incorporated by reference in this Official Statement constitute "forward- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a"plan,""expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT"and"LEASEHOLD OWNERSHIP AND THE HOTEL." The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results,performance or achievements expressed or implied by such forward-looking statements. Except as set forth in the District's Continuing Disclosure Agreement and the Leasehold Owner's Continuing Disclosure Agreement forms of which are attached hereto as Exhibit E, neither the District nor the City plans to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. A wide variety of other information, including financial information,concerning the City, is available from publications and websites of the City and others. No such information is a part of or incorporated into this Official Statement. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. TABLE OF CONTENTS Page INTRODUCTION................................................................................................................................................I TheDistrict.......................................................................................................................................................1 TheSuccessor Agency......................................................................................................................................2 DistrictFormation.............................................................................................................................................2 ForwardLooking Statements............................................................................................................................3 Sources of Payment for the Bonds......... .........................................................................................................4 Descriptionof the Bonds..................................................................................................................................4 TaxExemption..................................................................................................................................................5 Professionals Involved in the Offering.............................................................................................................5 ContinuingDisclosure......................................................................................................................................5 BondOwners' Risks.........................................................................................................................................6 OtherInformation.............................................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS............................................................................................6 THEREFUNDING PLAN...................................................................................................................................7 THEBONDS........................................................................................................................................................7 Authorityfor Issuance......................................................................................................................................7 Purposeof the Bonds........................................................................................................................................7 GeneralProvisions............................................................................................................................................7 DebtService Schedule......................................................................................................................................8 Redemptionof the Bonds.................................................................................................................................8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS..................................................................10 SpecialTaxes..................................................................................................................................................10 Lease Remedy Forbearance Agreement.........................................................................................................12 Proceeds of Foreclosure Sales........................................................................................................................13 Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met...........................................14 ExistingLiens.................................................................................................................................................14 No Obligation of the City Upon Delinquency................................................................................................14 Special Taxes Are Not Within Teeter Plan.....................................................................................................14 ReserveAccount.............................................................................................................................................15 Priority of Bonds and Pledge of Net Taxes.....................................................................................................15 NoAdditional Bonds......................................................................................................................................15 THE COMMUNITY FACILITIES DISTRICT.................................................................................................16 Location..........................................................................................................................................................16 Authorization..................................................................................................................................................16 Rate and Method of Apportionment of Special Tax.......................................................................................17 PublicFacilities...............................................................................................................................................18 Estimated Direct and Overlapping Indebtedness............................................................................................18 Estimated Assessed Value-to-Lien Ratio........................................................................................................19 DelinquencyHistory.......................................................................................................................................20 LEASEHOLD OWNERSHIP AND THE HOTEL............................................................................................21 TheProperty Owner........................................................................................................................................21 TheHotel........................................................................................................................................................21 Summaryof the Ground Lease.......................................................................................................................23 TransientOccupancy Tax...............................................................................................................................25 THE CITY OF HUNTINGTON BEACH..........................................................................................................26 SPECIALRISK FACTORS...............................................................................................................................26 Concentration of Ownership...........................................................................................................................26 Risks Associated with Ground Lease and the Dissolution Act.......................................................................26 i TABLE OF CONTENTS (continued) Page Risks of Real Estate Secured Investments Generally .....................................................................................27 LimitedObligations........................................................................................................................................27 Insufficiency of Special Taxes........................................................................................................................28 NaturalDisasters.............................................................................................................................................29 HazardousSubstances.....................................................................................................................................29 Payment of the Special Tax is not a Personal Obligation of the Leasehold Owner........................................30 LeaseholdValue.............................................................................................................................................30 Parity Taxes and Special Assessments............................................................................................................30 Disclosures to Future Purchasers....................................................................................................................31 FDIC/Federal Government Interests in Properties..........................................................................................31 Bankruptcyand Foreclosure...........................................................................................................................32 Funds Invested in the County Investment Pool ..............................................................................................33 NoAcceleration Provision..............................................................................................................................33 LimitedSecondary Market.............................................................................................................................33 Proposition218...............................................................................................................................................34 Ballot Initiatives and Legislative Measures....................................................................................................35 Lossof Tax Exemption...................................................................................................................................35 IRS Audit of Tax-Exempt Bond Issues...........................................................................................................35 Limitationson Remedies................................................................................................................................35 CONTINUINGDISCLOSURE..........................................................................................................................36 TAXEXEMPTION............................................................................................................................................36 LEGALOPINION..............................................................................................................................................38 ABSENCEOF LITIGATION............................................................................................................................38 NORATING......................................................................................................................................................38 UNDERWRITING.............................................................................................................................................38 FINANCIALINTERESTS.................................................................................................................................39 NEWLEGISLATION........................................................................................................................................39 ADDITIONALINFORMATION.......................................................................................................................39 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1 APPENDIX B FORM OF OPINION OF BOND COUNSEL.......................................................................B-1 APPENDIX C GENERAL ECONOMIC AND DEMOGRAPHIC DATA FOR THE CITY OF HUNTINGTON BEACH AND THE COUNTY OF ORANGE..................C-1 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE...................................D-1 APPENDIX E FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER......................................................................E-1 APPENDIX F BOOK-ENTRY-ONLY SYSTEM.........................................................................................F-1 ii City of Huntington Beach Community Facilities District No. 2000-1 Grand Coast Resort) - I _ pai tll pqi r . .' � . - - 10 Y wm h�IVIVIuGu?IV - MuAur' »N w u" '""" rya e �� IIM- flh , - 4 r X r' a „ ��� � 119 Ill�r"ter I �: r a .>� - ';�p�l�ul V �i•�, a� - - `",I :,fin - - ;u .�r',a�...;,r'�k��.w�# ',w� { �u��"y �� " °Itl�w+,� a !I'�r�w•r �K�,m�,�l'�Il is _ .,a -� - ,^ N-j4.mil,I,I I. NII,IIIIIII e�� -- - .�•,,,. � .�� ,, ,�. „ � �_� ..�—,-_ _.,, . dV�� m "IIII -- = - _- ti-=�,� � r o-nr VItl;N,I '9�u •F�'��N"��,ru° ,�--�, w � uiv a�I,uuull r�i 11 ry,r,»^ I�II�+uu�u�INUI IVII�II�I"1�I INIu� - - _ .r e � �::=� ,iva,�,���ury - �w'i '^�r#"�"III _ - IV,, r u�y!N',r�l�n�Nlm» '�1 :� , p< uu Ir,'d, uil , � V� "'„ _ - - - �, ,a!h`�- �• p�� - r' �.�wul, r-- _ �*r"�-^r• 's+ - r�r����h+}rlml�ii„fir�""'�s<�: I� - - - _ III Nlf 'a-��.- � �„ ,�� I c,ll� ..° %�: _ '�+`*r Imu �j� �,Iu`�,VII ,a�> .- - _". � INIr��;"w y whwlNu'"� �s� � m,''f I "T�,�,az„� •� N°1I'I�IIII kr" ' �ak : - IIw - kY � III Fl�c a,. ��r� �:"u'•'.:,�: I 'I�I'IVI�'','In - ': _." - a» .�„-, �� ��� �_: ` `x'��� I �I�Q I'"'�,µ ;�,I��III � ��- __ -^ ,q, I II I _ _ - �q mllliNVVI � � � VII IIIII�GIIp ro - �� 9u^ . ua na (THIS PAGE IS INTENTIONALLY LEFT BLANK) $12,990,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS INTRODUCTION The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)(the "District") of its City of Huntington Beach Community Facilities District No. 2000-1 2013 Special Tax Refunding Bonds in the aggregate principal amount of $12,990,000* (the "Bonds"). The proceeds of the Bonds, together with certain existing funds of the District, will be used to defease all of the District's outstanding 2001 Special Tax Bonds, originally issued in the aggregate principal amount of$16,000,000 and now outstanding in the principal amount of$13,330,000(the"Refunded Bonds"). A portion of the Bonds will be used to fund a deposit to the Reserve Account and to pay costs of issuance of the Bonds. See "THE REFUNDING PLAN" and"ESTIMATED SOURCES AND USES OF FUNDS"herein. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Act"), the provisions of Chapter 3.56 (commencing with 3.56.010) of the Municipal Code of the City of Huntington Beach(the"City") and that certain Bond Indenture dated, as of July 1,2013 (the"Indenture"),by and between the District and U.S. Bank National Association, as trustee (the"Trustee"). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as defined herein) to be levied within the District and all moneys in the Special Tax Fund as described in the Indenture. This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in "APPENDIX D — SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." The District The District consists of a single parcel of 15,103 acres located on Pacific Coast Highway directly across from the beach and the Pacific Ocean at the northwest corner of the intersection of Beach Boulevard and Pacific Coast Highway in the City. The District is fully developed with a 517 guest room hotel generally known as the"Hyatt Regency Huntington Beach Resort and Spa" (the"Hotel") owned by PCH Beach Resort, LLC, a California limited liability company (the"Leasehold Owner" or"Lessee"). See"THE COMMUNITY FACILITIES DISTRICT"and"LEASEHOLD OWNERSHIP AND THE HOTEL." The fee simple interest in the land in the District is owned by the City as Successor Agency (the "Successor Agency") to the Redevelopment Agency of the City of Huntington Beach (the "Agency"). The Leasehold Owner has entered into a ground lease, dated April 4, 2001, with the Agency (the "Ground Lease"), with a term of 99 years (the "Term"), whereby the Leasehold Owner has leased all of the land in the District. The Ground Lease provides that throughout the Term, all improvements constructed pursuant to the Ground Lease are the property of the Lessee; at the expiration or termination of the Ground Lease,the improvements become the property of the fee owner. The Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Ground Lease. See "— The Successor Agency," "LEASEHOLD OWNERSHIP AND THE HOTEL — Preliminary,subject to change. 1 Summary of the Ground Lease"and"SPECIAL RISK FACTORS—Risks Associated with Ground Lease and the Dissolution Act." The leasehold interest created by the Ground Lease constitutes the taxable property in the District. In the event the Special Taxes are not paid, the District will foreclose on the leasehold interest, not on the fee simple interest which is owned by the Successor Agency. The City and the Agency entered into an agreement, dated as of December 1, 2001 (the "Lease Remedy Forbearance Agreement"), whereby the Agency agreed that, in the event of the occurrence of an uncured default by the Leasehold Owner or any successor thereto under the Ground Lease,the Agency will not exercise a remedy under the Ground Lease that would allow the Agency to terminate the Ground Lease unless either the Special Taxes have been paid in full and the Bonds are no longer outstanding, or the Agency has prepared a new lease agreement with a subsequent lessee to maintain the leased premises and has obtained the written consent of the City to such termination and new lease. The Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Lease Remedy Forbearance Agreement. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS— Lease Remedy Forbearance Agreement." The Successor Agency On June 29, 2011, Assembly Bill No. 26 ("AB IX 26") was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27("AB 1X 27"). A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 299 2011) (the "California Redevelopment Association case"), challenging the constitutionality of AB IX 26 and AB IX 27. The California Supreme Court largely upheld AB IX 26, invalidated AB IX 27, and held that AB IX 26 may be severed from AB 1X 27 and enforced independently. As a result of AB 1X 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies. The primary provisions enacted by AB 1X 26 relating to the dissolution and wind down of former redevelopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484 ("AB 1484"), enacted as Chapter 26, Statutes of 2012(as amended from time to time, the"Dissolution Act"). On January 10, 2012, pursuant to Sections 341710) and 34173 of the Dissolution Act, the City Council elected for the City to serve as successor agency to the Agency. Pursuant to legislation enacted by the California Legislature in 2011 (AB 1X 26)and 2012(AB 1484),the Successor Agency continues to collect the ground rent and all other payments from the Lessee; however, under the Dissolution Act, such payments are allocable among the County of Orange, the City and other taxing agencies having jurisdiction within the Huntington Beach Redevelopment Project (per Ordinance No. 3343 of the City as adopted December 16, 1996). Under the Dissolution Act,the administration by the Successor Agency of assets of the former Agency is subject to an oversight board consisting of representatives of the City, the County of Orange and other taxing agencies(the"Oversight Board")and the California Department of Finance("DOF"). District Formation The District was formed on April 17, 2000. The Bonds are being issued pursuant to the Act, the Municipal Code of the City, and the Indenture. The Act was enacted by the State of California (the "State") legislature to provide an alternative method of financing certain public capital facilities and services, especially in developing areas of the State. Any local agency(as defined in the Act) may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its 2 legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. On May 3, 1999,the City Council of the City adopted Ordinance No. 3417 which added Chapter 3.56 to the Huntington Beach Municipal Code entitled "City of Huntington Beach Special Tax Financing Improvement Code."On March 18, 2002, the City Council of the City adopted Ordinance No.3546 amending Chapter 3.56 of the City's Municipal Code to allow for the levy of special taxes to pay for the maintenance of facilities financed under said section of the City's Municipal Code. The proceedings to form the District have been conducted under said section of the City's Municipal Code and, where applicable by reason of the provisions of the Municipal Code,the Act,as amended(collectively,the"Law"). Pursuant to the Law, on January 18,2000,the City Council of the City(the"City Council"),adopted a resolution stating its intention to form the District and to authorize the levy of a special tax on the taxable property within the District,which consisted of the leasehold interest in the only parcel in the District. The fee simple interest in such parcel was owned by the Agency. Additionally, on January 18, 2000, the City Council adopted a resolution stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $16,000,000 within the District for the purpose of financing the costs of certain public facilities consisting of the acquisition of land for and construction of certain roadway, pedestrian bridge and other improvements generally related to the development of the Hotel within the District (collectively, the "Public Facilities"). Subsequent to a noticed public hearing on April 17, 2000, the City Council adopted Resolution No.2000-35 (the "Resolution of Formation") which established the District and authorized the levy of a special tax within the District in accordance with the rate and method of apportionment for the District (the "Rate and Method"). The City Council also adopted on April 17,2000,Resolution No. 2000-36("Resolution to Incur Bonded Indebtedness") which determined the necessity to incur bonded indebtedness in an amount not to exceed $16,000,000 within the District, called an election within the District on the propositions of forming the District, incurring bonded indebtedness not to exceed$16,000,000 as set forth in the Resolution to Incur Bonded Indebtedness, levying a special tax within the District in accordance with the Rate and Method and setting an appropriations limit. All propositions were approved by the Agency as the sole qualified elector within the District, which was the sole record landowner within the District at the time of the election,at an election held on April 17,2000. On April 24, 2000, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No.20000210584 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by Resolution No. 2001-90 adopted by the City Council on November 19,2001. The Bonds are being issued and delivered pursuant to the provisions of the Law and the Indenture. The Bonds are being sold pursuant to a Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated, as underwriter(the "Underwriter") and the District. For more complete information, see "THE BONDS—General Provisions"herein. Forward Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements"within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 2 1 E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" and "LEASEHOLD OWNERSHIP AND THE HOTEL." 3 THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. Sources of Payment for the Bonds As used in this Official Statement, the term "Special Tax" is that tax which has been authorized to be levied against the leasehold interest in the property within the District pursuant to the Act and in accordance with the Rate and Method. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"herein. Under the Indenture,the principal of and interest on the Bonds are payable from Net Taxes and all amounts in the Special Tax Fund (including the Debt Service Account, the Principal Account and the Reserve Account) established under the Indenture. The "Net Taxes" are the Special Tax proceeds, including all proceeds from foreclosure sales for delinquent Special Taxes, remaining after payment of the Administrative Expenses in an amount not exceeding the Administrative Expenses Cap (as defined below). The Bonds are secured only by the Net Taxes collected within the District and amounts in the Special Tax Fund. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES LEVIED WITHIN THE DISTRICT AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Net Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in certain funds under the Indenture, including amounts held in the Reserve Account of the Special Tax Fund. The District has covenanted for the benefit of the owners of the Bonds that it will, under certain circumstances described herein, commence, or cause to be commenced, and diligently prosecute to judgment(unless the delinquency is brought current),judicial foreclosure proceedings against the leasehold interest within the District for the collection of delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales"herein." The District has covenanted not to issue additional indebtedness secured by the Special Taxes on a parity basis to the lien of the Bonds, except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied on the property within the District. See"SPECIAL RISK FACTORS— Parity Taxes and Special Assessments"herein. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. Description of the Bonds The Bonds will be issued and delivered as fully-registered Bonds, registered in the name of Cede& Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to 4 actual purchasers of the Bonds (the `Beneficial Owners") in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry-only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX F—"BOOK-ENTRY-ONLY SYSTEM." Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See APPENDIX F—"BOOK- ENTRY-ONLY SYSTEM." The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments, and mandatory sinking fund redemption as described herein. For a more complete descriptions of the Bonds and the basic documentation pursuant to which the Bonds are being sold and delivered,see"THE BONDS"and APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE"herein. Tax Exemption In the opinion of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California("Bond Counsel"), under existing statutes,regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel,interest on the Bonds is exempt from State of California personal income tax. See"TAX EXEMPTION"herein. Set forth in APPENDIX B is the opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain other tax consequences incidental to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, see "TAX EXEMPTION"herein. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will act as Trustee under the Indenture and as Escrow Bank under the Escrow Agreement (each as defined herein). Stifel, Nicolaus & Company, Incorporated,is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California,Bond Counsel and Disclosure Counsel. Certain legal matters will be passed on for the City and the District by the City Attorney, Jennifer McGrath, Esq. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. Other professional services have been performed by Public Financial Management, Inc., Los Angeles, California, as Financial Advisor, Willdan Financial Services, Temecula, California, as Special Tax Consultant and Grant Thornton LLP,Minneapolis,Minnesota, as verification agent. For information concerning whether certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see "FINANCIAL INTERESTS"herein. Continuing Disclosure The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system available on the Internet at http://emma.msrb.org 5 ("EMMA") certain annual financial information and operating data. The District will further agree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the"Rule"). In addition,the Leasehold Owner will agree to provide or cause to be provided, to EMMA certain annual information with respect to the Leasehold Owner and the Hotel and notice of certain listed events to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" herein and APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and the Leasehold Owner and notices of listed events to be provided by the District and the Leasehold Owner. See"CONTINUING DISCLOSURE." Bond Owners'Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled"SPECIAL RISK FACTORS"for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. See"SPECIAL RISK FACTORS"herein. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture,the Bonds and the constitution and laws of the State as well as the proceedings of the City, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture. Copies of the Indenture and other documents and information are available for inspection and (upon request and payment to the District of a charge for copying,mailing and handling)for delivery from the City at 2000 Main Street,Huntington Beach,California 92648,Attention: Director of Finance. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of Bond proceeds, together with prior funds on hand. Sources of Funds Principal Amount of Bonds $ [Less/Plus]: Original Issue[Discount/Premium] Less: Underwriter's Discount Plus: Prior Funds(i) Total Sources $ Uses of Funds: Escrow Fund $ Reserve Account of the Special Tax Fund Costs of Issuance Fund('") Total Uses $ Includes Special Tax collections and prior reserve fund. (2) Includes legal,financial advisory,Special Tax Consultant and Trustee fees and costs. 6 THE REFUNDING PLAN A portion of the proceeds from the sale of the Bonds will be used along with other funds held by the District to defease the Refunded Bonds. The District will enter into an Escrow Agreement with regard to the Refunded Bonds (the "Escrow Agreement"), dated as of July 1, 2013, by and between the District and U.S. Bank National Association, as prior trustee and as escrow bank (the"Escrow Bank"). An irrevocable escrow fund will be established under the Escrow Agreement (the "Escrow Fund"). The moneys deposited with the Escrow Bank will be sufficient to pay the principal and interest due on September 1, 2013 on the Refunded Bonds and to redeem the Refunded Bonds maturing on and after September 1, 2014, on September 1, 2013 (the "Redemption Date"). Moneys on deposit in the Escrow Fund will be held uninvested as cash or invested in non-callable federal securities. Upon the establishment of the Escrow Fund as described above, the Refunded Bonds will be discharged under the Indenture and the owners of the Refunded Bonds will have no rights thereunder except to be paid the principal and interest due on the Refunded Bonds from amounts in the Escrow Fund. Grant Thornton LLP, Minneapolis, Minnesota, upon delivery of the Bonds, will deliver a verification report relating to the sufficiency of moneys deposited into the Escrow Fund to pay the principal of, interest on and the redemption price with respect to the Refunded Bonds on the Redemption Date. THE BONDS Authority for Issuance The Bonds in the aggregate principal amount of $12,990,000* are authorized to be issued by the District under and subject to the terms of the Indenture, the Law and other applicable laws of the State of California and the City. Purpose of the Bonds The Bonds are being issued to provide funds to (i)redeem the Refunded Bonds, (ii)fund a deposit to the reserve account securing the Bonds, and (iii)pay the costs of issuance of the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS"and"THE REFUNDING PLAN"herein. General Provisions The Bonds will be issued and delivered initially in book-entry form and will bear interest at the rates per annum and will mature on the dates set forth on the inside cover page hereof. Individual purchases of the Bonds may be made in principal amounts of$5,000 and any integral multiple thereof. The Bonds will be dated the Delivery Date and interest will be payable thereon on September 1 and March 1 of each year, commencing March 1, 2014 (individually, an "Interest Payment Date"). Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i)the date of authentication is an Interest Payment Date, in which event it shall bear interest from such date, (ii)the date of authentication is after the 15th day of the month,regardless of whether such day is a Business Day but prior to the immediately succeeding Interest Payment Date(a"Record Date"), in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii)the date of authentication is prior to the close of business on the first Record Date, in which event interest shall be payable from the Delivery Date; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment,or if no interest has been paid or made available for payment on that Bond,interest on that Bond shall be payable from the Delivery Date. Preliminary,subject to change. The Bonds are issued as fully-registered bonds and will be registered in the name of Cede& Co., as nominee DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. See APPENDIX F—"BOOK-ENTRY-ONLY SYSTEM." Debt Service Schedule The Special Tax is to be levied against the leasehold interest in the property within the District and collected according to the Rate and Method. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The District has covenanted to levy the Special Tax each year in time to have it placed on the property tax roll of the County of Orange (the "County"). Actual collections of the Special Tax will depend on the Special Tax delinquencies. See "THE COMMUNITY FACILITIES DISTRICT—Delinquency History." The following table sets forth the debt service schedule for the Bonds assuming no optional or special mandatory redemption. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS DEBT SERVICE SCHEDULE Period Ending Total September I Principal Interest Debt Service 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Source: The Underwriter. Redemption of the Bonds Optional Redemption.* The Bonds maturing on or after September 1, 2024 are subject, at the option of the District, to call and redemption, as a whole or in part as selected by the District, from any available source of funds prior to their stated maturity on any date on or after September 1, 2023 at a redemption price equal to the principal amount to be redeemed,together with accrued interest to the date of redemption,without premium. Preliminary,subject to change. 8 Special Mandatory Redemption from Special Tax Prepayments.. The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments as a whole, or in part on a pro rata basis among maturities,on any Interest Payment Date, and shall be redeemed by the Trustee, from Special Tax Prepayments deposited to the Redemption Account, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed,together with accrued interest to the date of redemption: Redemption Dates Redemption Price Any Interest Payment Date through March 1,2021 103% September 1,2021 and March 1,2022 102 September 1,2022 and March 1,2023 101. September 1,2023 and any Interest Payment Date thereafter 100 Mandatory Sinking Fund Redemption. Bonds maturing on September 1, 20 (the `'Term Bonds") shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20_, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date, without premium,as follows: Term Bonds Due on September 1,20_ Year (September 1) Principal Amount (Maturity) In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed (except with respect to mandatory sinking fund redemption in which case selection shall be by lot),the Trustee shall select Bonds pro rata among maturities and by lot within a maturity. The portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of$5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Trustee shall promptly notify the District in writing of the Bonds,or portions thereof,selected for redemption. Notice of Redemption. At least 30 days but no more than 60 days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and neither the failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. Any notice of redemption may condition such redemption upon the receipt of sufficient available funds on the date of redemption. 9 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS As described below, the principal of and interest on the Bonds are payable from Net Taxes and all amounts in the Special Tax Fund (including the Debt Service Account and the Reserve.Account) established under the Indenture. Amounts in the Administration Fund, the Surplus Fund and the Rebate Fund are not pledged to the repayment of the Bonds. The Net Taxes are the Special Tax proceeds, including all proceeds from foreclosure sales for delinquent Special Taxes,remaining after payment of the Administrative Expense in an amount not to exceed the Administrative Expenses Cap of$20,000, escalating 2% annually commencing with Fiscal Year 2014-15. The Bonds are secured only by the Net Taxes collected within the District. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Special Taxes In accordance with provisions of the Law, the District was established by the City Council on April 17,2000. The Agency,as the sole owner of the land within the District,voted to authorize the District to incur bonded indebtedness to finance costs related to the Public Facilities, said indebtedness to be secured by the Special Tax to be levied upon the leasehold interest of the Leasehold Owner to be created under the Ground Lease. See "LEASEHOLD OWNERSHIP AND THE HOTEL — Summary of the Ground Lease" herein. At the same time, the Agency approved the levy of the Special Tax as provided in the Rate and Method to pay the principal and interest on the Bonds, to pay the administrative expenses of the District, and to replenish the Reserve Account to the amount of the Reserve Requirement, all consistent with the Rate and Method,the Law and the Indenture. See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Tax" herein for a description of the Rate and Method, and APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" attached hereto for the complete text of the Rate and Method. In the Indenture, the District has agreed to effect the levy of the Special Taxes each Fiscal Year in accordance with the Law by August 1 of each year(or such later date as may be authorized by the Law or any amendment thereof) that the Bonds are outstanding, such that the computation of the levy is complete before the final date on which the County Auditor will accept the transmission of the Special Tax amounts for the leasehold interest created by the Ground Lease, for inclusion on the tax roll for the Fiscal Year then beginning. Upon the completion of the computation of the amounts of the levy of the Special Taxes, the District is obligated under the Indenture to prepare or cause to be prepared, and to transmit to the County Auditor, such data as the County Auditor requires to include the levy of the Special Taxes on the tax roll. The City Treasurer or his or her designee is directed to fix and levy the amount of Special Taxes within the District required for the payment of principal and of interest on the Bonds becoming due and payable on the next Interest Payment Date, including any necessary replenishment or expenditure of the Reserve Account and an amount estimated to be sufficient to pay the Administrative Expenses during such year, taking into account the balances in the funds, and any transfer or expected transfers expected to occur for such purpose, under the Indenture. The Special Taxes may not exceed the authorized maximum amount in the Rate and Method. See "THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Taxes"herein. The Indenture provides that the Special Tax shall be collected in the same manner as ordinary ad valorem property taxes are collected and, except as otherwise provided in the foreclosure covenant in the Indenture and in the Law, the Special Tax shall be subject to the same penalties and the same collection 10 procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. Notwithstanding the foregoing, the Indenture provides that the City Council may elect, as permitted by the Law, to collect the Special Taxes to be levied for any Fiscal Year directly from the lessee of the parcel of taxable property upon which the Special Taxes are levied rather than by transmitting the Special Taxes to the Auditor for collection on the tax roll. The Finance Director will, no later than the last day of each month during which the Special Taxes are apportioned to the District, transfer Special Taxes to the Trustee to be deposited in the Special Tax Fund. Special Tax Prepayments will immediately be transferred by the Finance Director to the Trustee for deposit to the Redemption Account of the Special Tax Fund to redeem Bonds in accordance with the Indenture. See "THE BONDS — Redemption of the Bonds — Special Mandatory Redemption for Special Tax Prepayments." On the dates specified in the Indenture and if there are sufficient amounts available in the Special Tax Fund for such purposes, the Trustee shall make the following transfers and in the priority as follows: First: To the Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied for in the current Fiscal Year up to the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of Administrative Expenses up to half of the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses) levied for in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of (i) the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year,or(ii)March 2 of such Fiscal Year; Second: To the Debt Service Account, an amount such that the balance in the Debt Service Account one Business Day prior to each Interest Payment Date shall be equal to the principal of, and interest on the Bonds, on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest and principal of the Bonds as the same become due; Third: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement; Fourth: To the Administrative Expense Fund for Administrative Expenses not previously deposited to the Administrative Expense Fund; Fifth: To the Rebate Fund established by the Indenture for payment to the United States pursuant to the Indenture;and Sixth: To the Surplus Fund. See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." Although the Special Tax will constitute a lien on the leasehold interest in the Taxable Property, it does not constitute a personal indebtedness of the Leasehold Owner or any future owner of such leasehold interest. There is no assurance that the Leasehold Owner or any future owner of the leasehold interest in the Taxable Property within the District will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. The risk of the Leasehold Owner,or subsequent owner of the Hotel, if any, not paying the annual Special Tax is more fully described under the heading "SPECIAL RISK FACTORS—Insufficiency of Special Taxes." The Successor Agency's fee interest in the land in the District is not subject to the levy of Special Taxes, and may not be foreclosed upon to pay delinquent Special Taxes. For further information 11 regarding the Rate and Method, see "THE COMMUNITY FACILITIES DISTRICT — Rate and Method of Apportionment of Special Taxes" herein and Appendix A hereto. The following Table sets forth the estimated debt service coverage from the Maximum Special Taxes. TABLE 1� CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 ESTIMATED MAXIMUM TAXING CAPACITY Estimated Year Ending Maximum Administrative 2013 Bonds Debt Service September 1st Special Tax(" Expenses(2) Debt Service(3) Coverage(3) 2014 $1,963,000.00 $20,000.00 $1,015,105.21 1.91 2015 1,963,000.00 20,400.00 1,018,425.00 1.91 2016 1,963,000.00 20,808.00 1,016,825.00 1.91 2017 1,963,000.00 21,224.16 1,015,025.00 1.91 2018 1,963,000.00 21,648.64 1,013,025.00 1.92 2019 1,963,000.00 22,081.62 1,017,775.00 1.91 2020 1,963,000.00 22,523.25 1,018,875.00 1.90 2021 1,963,000.00 22,973.71 1,014,375.00 1.91 2022 1,963,000.00 23,433.19 1,012,762.50 1.92 2023 1,963,000.00 23,901.85 1,013,787.50 1.91 2024 1,963,000.00 24,379.89 1,017,162.50 1.91 2025 1,963,000.00 24,867.49 1,019,412.50 1.90 2026 1,963,000.00 25,364.84 1,013,612.50 1.91 2027 1,963,000.00 25,872.13 1,016,812.50 1.91 2028 1,963,000.00 26,389.58 1,013,612.50 1.91 2029 1,963,000.00 26,917.37 1,014,212.50 1.91 2030 1,963,000.00 27,455.71 1,016,175.00 1.90 2031 1,963,000.00 28,004.83 1,016,437.50 1.90 (1) As determined pursuant to the steps listed in Section C of the Rate and Method,the Maximum Special Tax is calculated to be$130,000 per acre and totals$1,963,000. (z) Based on the Administrative Expenses Cap of$20,000 for Fiscal Year 2013-14 and escalating 2%annually thereafter. (3) Maximum Special Tax,less Administrative Expenses Cap,divided by 2013 Bonds Debt Service. Source: Bonds Debt Service provided by the Underwriter; Maximum Special Taxes and Debt Service Coverage provided by Willdan Financial Services. Lease Remedy Forbearance Agreement The City and the Agency entered into an agreement, dated as of December 1, 2001 (the "Lease Remedy Forbearance Agreement"), whereby the Agency agreed that, in the event of the occurrence of a default by the Leasehold Owner or any successor thereto under the Ground Lease,the Agency will not exercise a remedy under the Ground Lease that would allow the Agency to terminate the Ground Lease unless either the Special Taxes have been paid in full and the Bonds are no longer outstanding, or the Agency has prepared a new lease agreement with a subsequent lessee to maintain the leased premises and has obtained the written consent of the City to such termination and new lease. Pursuant to the Dissolution Act and actions taken by the City, the Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Lease. Certain actions and the exercising of certain rights by the Successor Agency are subject to review and approval by the Huntington Beach Oversight Board (the "Oversight Board") and the State of California Department of Finance(the"Department of Finance"). Preliminary,subject to change. 12 In the Indenture, the District has covenanted to cause the City to comply with and enforce its agreements and covenants in the Lease Remedy Forbearance Agreement(which the City entered into on behalf of the District), and to not allow the Successor Agency to enter into a new lease or leases (each, a "Replacement Lease") for substantially all of the real property subject to the Ground Lease or Replacement Lease then being terminated, unless (i)the Special Taxes that may be levied on the property so relet, in the opinion of an Independent Financial Consultant, are estimated to be not less than 110% of Maximum Annual Debt Service, and(ii)such lease or leases have a term at least as long as the remaining term to maturity of the outstanding Bonds. However, nothing in the Lease Remedy Forbearance Agreement or the Indenture in any way restricts the Successor Agency from enforcing any provision of the Ground Lease or any Replacement Lease, or from pursuing any remedy available under the Ground Lease or any Replacement Lease following a default by a tenant thereunder, other than a termination thereof that is not in accordance with the requirements of the Indenture described in the preceding sentence. Proceeds of Foreclosure Sales Pursuant to the Law, in the event any Special Tax or installment thereof or any interest thereon is not paid when due,the District may order the institution of a court action to foreclose the lien therefore. In such an action, the leasehold interest subject to the unpaid amount may be sold at judicial foreclosure sale. The purchase at a foreclosure sale is of the leasehold interest of the Leasehold Owner under the Ground Lease and not of the fee interest in the parcel. This foreclosure sale procedure is not mandatory under the Law. However, in the Indenture,the District covenants with and for the benefit of the owners of the Bonds that, one Business Day after each Interest Payment Date for the Bonds, the City Treasurer or the Treasurer's designee will compare the amount of Special Taxes theretofore levied in the District to the amount of Net Taxes theretofore received by the District, and if the amount collected is less than 100%of the amount of the Special Taxes so levied, the District will undertake and diligently prosecute foreclosure proceedings not later than thirty (30)days after each Interest Payment Date in the manner prescribed in the Act to collect the amount of any delinquent Special Tax. Under the Indenture, the City's Director of Finance is directed to notify the City Attorney of any such delinquency of which it is aware, and the City Attorney is directed to commence, or cause to be commenced, such proceedings. In the event such superior court foreclosure or foreclosures are necessary, after the Reserve Account has been depleted, there could be a delay in principal or interest payments being made to the Bondowners pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. No assurances can be given that a judgment ordering foreclosure will be granted or that the leasehold interest subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Procedural delays, bankruptcy filings and necessary court and administrative actions incident to any foreclosure proceeding can result in an extended period of time(in some circumstances, more than two years)to complete any foreclosure sale. See "SPECIAL RISK FACTORS — Bankruptcy and Foreclosure," and "— FDIC/Federal Government Interests in Properties" herein. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion,the District is not obligated to purchase or otherwise acquire the leasehold interest sold at the execution sale if there is no other purchaser at such sale. Effective July 1, 1983 a judgment debtor (property owner) has at least 140 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 6 months of the date of sale. If,as a result of such an action a foreclosure sale is set aside,the judgment is revived and the judgment creditor (i.e., the District) is entitled to interest on the revived judgment as if the sale had not been made. 13 The Special Taxes are to be levied on the leasehold interest in the land located in the District, initially being that leasehold interest created by the Ground Lease between the Leasehold Owner and the Successor Agency. The Successor Agency's fee interest in the property within the District is not subject to the levy of Special Taxes and will not be subject to any foreclosure or sale in the event of a delinquency in payment of the Special Taxes. The Ground Lease contains certain remedies that may be available to the Successor Agency in the event of a default by the Leasehold Owner of its obligations under the Ground Lease, including termination of the Ground Lease. However, as described under the heading "SECURITY FOR THE BONDS — Agreement Not to Terminate Lease,"the Successor Agency and the City have entered into the Lease Remedy Forbearance Agreement whereby the Agency agreed to forbear in the exercise of any such termination unless, so long as the Bonds are outstanding, the Successor Agency enters into a replacement ground lease. In such event, the leasehold interest under such replacement ground lease would be subject to the levy of Special Taxes. As discussed above under the caption "Agreement Not to Terminate Lease," certain actions taken by the Successor Agency may be subject to Oversight Board and Department of Finance approval. See "SPECIAL RISK FACTORS—Risks Associated with Ground Lease and the Dissolution Act." Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met The District has covenanted in the Indenture that it will not take any actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax so long as the Bonds are Outstanding, including the initiation of proceedings under the Act to reduce the maximum Special Tax rates on then existing Taxable Property below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to 110%of annual debt service on the Outstanding Bonds. The District has further covenanted that in the event an initiative is adopted which purports to reduce maximum Special Tax rates or to limit the power of the District to levy Special Taxes for the purposes set forth above,it will commence and pursue legal action seeking to preserve its ability to comply with its covenants. There are no California court cases interpreting the enforceability of the foregoing covenants in light of Article XIIIC. See"SPECIAL RISK FACTORS—Proposition 218." Existing Liens The property within the District is subject to additional public indebtedness as set forth under the heading "THE COMMUNITY FACILITIES DISTRICT— Estimated Direct and Overlapping Indebtedness" herein. The lien for the Special Taxes is co-equal to the lien for the overlapping assessments and special taxes and the lien for general property taxes. Except as disclosed in this Official Statement, the District is unaware of any present or contemplated assessment district or community facilities district that includes property within the District. The District has no control, and the City has only limited control, over the amount of additional indebtedness that may be issued in the future by other public agencies,the payment of which,through the levy of a tax or an assessment, will be on a parity with the Special Taxes. No Obligation of the City Upon Delinquency The City is under no obligation to transfer any funds of the City into the Special Tax Fund for payment of the principal of or interest on the Bonds if a delinquency occurs in the payment of any Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales"for a discussion of the District's obligation to foreclose Special Tax liens upon delinquencies. Special Taxes Are Not Within Teeter Plan The Special Taxes are not encompassed within the alternate procedure for the distribution of certain property tax levies on the secured roll pursuant to Chapter 3, Part 8, Division 1 of the California Revenue and Taxation Code(Section 4701 et seq.), commonly referred to as the"Teeter Plan." The County of Orange has 14 adopted a Teeter Plan under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies with the County on the basis of the tax levy,rather than on the basis of actual tax collections. However,the City has not elected to have the District participate in the County's Teeter Plan. Reserve Account In order to further secure the payment of principal of and interest on the Bonds, upon delivery of the Bonds, the District will deposit in the Reserve Account on amount equal to the Reserve Requirement with respect to the Bonds. Thereafter,the District is required,subject to the limits on the levy of the Special Tax,to deposit and to maintain the Reserve Requirement in the Reserve Account at all times while any of the Bonds are outstanding. The Reserve Requirement for the Bonds is defined as the amount equal to the lowest of: (i) 10% of the initial principal amount of the Bonds; (ii)Maximum Annual Debt Service on then Outstanding Bonds or (iii) 125% of the average Annual Debt Service on then Outstanding Bonds. See APPENDIX D— "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein. Subject to the limits on the maximum annual Special Tax which may be levied within the District, as described in APPENDIX A, the District has covenanted to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax proceeds,to maintain the balance in the Reserve Account at the Reserve Requirement while any Bonds are outstanding. Amounts in the Reserve Account are to be applied to the payment of(i)redemption of the Bonds in whole or in part, (ii)debt service on the Bonds to the extent other moneys are not available therefor, and(iii)the principal and interest due on the final maturity of the Bonds. In addition, moneys in the Reserve Account may be used to make any required transfer to the Rebate Fund. In the event of a prepayment of Special Taxes,under certain circumstances, a portion of the Reserve Account will be added to the amount being prepaid and be applied to redeem Bonds; provided, however, that no such transfer shall be made if it would result in the amount in the Reserve Account being less than the Reserve Requirement. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein for a description of additional requirements. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. Priority of Bonds and Pledge of Net Taxes The District has pledged and assigned to the Trustee all Net Taxes (Special Taxes remaining after setting aside and depositing amounts sufficient to pay the Administrative Expenses in an amount that does not exceed the Administrative Expenses Cap of $20,000, escalating 2% annually commencing in Fiscal Year 2014-15)for the payment of principal of,premium, if any, and interest on the Bonds. Pursuant to the Act and the Indenture, the Bonds shall be and are equally secured by a pledge of and lien upon the Net Taxes, and certain other amounts on deposit in the Special Tax Fund and the Reserve Account of the Special Tax Fund. So long as any of such Bonds are Outstanding and unpaid,the Net Taxes and the interest thereon may be used only as provided in the Indenture unless the Bondowners authorize other uses of such Net Taxes pursuant to the provisions of the Indenture. Nothing in the Indenture or in any Supplemental Indenture shall preclude the redemption prior to maturity of any Bonds subject to call and redemption or the payment of the Bonds from proceeds of refunding bonds issued under the Act or under any other law of the State. Amounts in the Administration Fund, the Surplus Fund and the Rebate Fund are not pledged to the repayment of the Bonds. No Additional Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Net Taxes on a parity within the Bonds, except for the purpose of defeasing and refunding Bonds in accordance with the Act. 15 THE COMMUNITY FACILITIES DISTRICT Location The property within the District (Orange County Assessor's Parcel No. 024-251-01) consists of a single parcel of 15.103 acres in a roughly trapezoidal shape, located on Pacific Coast Highway directly across from the beach and the Pacific Ocean in the City. The property within the District is on the northwest corner of the intersection of Beach Boulevard and Pacific Coast Highway,a couple of blocks south of Main Street and the Huntington Beach Pier. Beach Boulevard (State Highway 39) is a major north- south artery, which provides access to Interstate 405 (the San Diego Freeway)one of the major freeways in Southern California. The District is fully developed with a 517 guest room hotel generally known as the "Hyatt Regency Huntington Beach Resort and Spa" which opened on January 19, 2002 and is owned by PCH Beach Resort, LLC, a California limited liability. See "LEASEHOLD OWNERSHIP AND THE HOTEL" for a more complete description of the Hotel. On the other side of a 3.5 acre parcel on the northwest side of the District is the Hilton Waterfront Beach Resort, a twelve story, 290 room hotel tower with accompanying conference facilities and restaurants, which opened for business in July, 1990. The 3.5 acre site between the District and the Hilton Waterfront Beach Resort development has been improved with a pavilion, a wedding gazebo, a tennis court and parking. The 3.5 acre site is not within the District or part of the Taxable Property. As a component of the Public Facilities financed with the proceeds of the Refunded Bonds, a pedestrian bridge was constructed from the District site across Pacific Coast Highway to the beach so that guests and visitors of the Hotel are able to cross the heavily traveled Pacific Coast Highway in order to reach the beach. All of the land within the District is owned by the Successor Agency and is leased by the Successor Agency to the Leasehold Owner under the terms of the Ground Lease. See "LEASEHOLD OWNERSHIP AND THE HOTEL— Summary of the Ground Lease" for a description of some of the primary terms of the Ground Lease. The Ground Lease was entered into in implementation of an Amended and Restated Disposition and Development Agreement dated as of September 14, 1998 between the Agency and Mayer Financial, L.P., as thereafter amended and as assigned by Mayer Financial, L.P.to the Lessee (as so amended, the "DDA"). It is expected that at all times the Bonds are Outstanding there will always be a single owner of the leasehold interest in the District which is subject to the levy of the Special Tax. Authorization On May 3, 1999, the City Council of the City adopted Ordinance No. 3417 which added Chapter 3.56 to the Huntington Beach Municipal Code entitled "City of Huntington Beach Special Tax Financing Improvement Code." The proceedings to form the District were conducted under said section of the City's Municipal Code and, where applicable by reason of the provisions of the Municipal Code, the Mello-Roos Community Facilities Act of 1982,as amended(collectively,the"Law"). Pursuant to the Law, the City Council adopted Resolution No.2000-5 on January 18, 2000, stating its intention to establish the District and Resolution No.2000-6 on January 18, 2000 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos.2000-35,2000-36 and 2000-37 adopted by the City Council on April 17, 2000,the District was formed,bonded indebtedness in an aggregate principal amount not to exceed $16,000,000 was determined necessary for the District and an election was called pursuant to the Law. The Agency, as the sole owner of the property within the District, voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $16,000,000 to finance the Public Facilities and the levy of a special tax consistent with the Rate and Method on leasehold interests in the property within the District to pay the principal and interest on the Bonds, to pay administrative expenses of the District,and to make any replenishments to the Reserve Account. See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Tax." 16 The Refunded Bonds were authorized to be issued by the Resolution of Issuance adopted by the City Council on November 19,2001. The Bonds were authorized to be issued to refund the Refunded Bonds by the Resolution of Issuance adopted by the City Council, acting as the legislative body of the District, on June 3, 2013. Rate and Method of Apportionment of Special Tax The Special Tax will be levied on and collected from the leasehold interest in the land in the District as set forth in the Rate and Method,the complete text of which is contained in APPENDIX A—"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." There is only one County Assessor's parcel of land in the District,and it is expected that there will always be a single lessee of all of the land in the District,which currently is the Leasehold Owner. Under the Rate and Method, not less than fifteen business days prior to the beginning of each Fiscal Year (as defined in the Rate and Method), a representative of the City will determine the parcel(s) in the District the leasehold interest in which are subject to the Special Tax (the "Taxable Property"). The City Council will levy the Special Tax proportionately on the leasehold interest in each parcel of Taxable Property in the District up to 100%of the Maximum Special Tax,as needed to satisfy the Special Tax Requirement. Under the Rate and Method, the Maximum Special Tax for the leasehold interests in the land in the District constituting "Taxable Property" is the greater of(i)$130,000 per acre or (ii)the amount determined pursuant to the following steps: Step 1: determine the maximum annual debt service on all Outstanding Bonds; Step 2: multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: determine the Acreage of Taxable Property within the District; and Step 4: divide the amount from Step 2 by the acreage from Step 3 to determine the Maximum Special Tax per acre of Taxable Property. As there are slightly in excess of 15 acres of Taxable Property in the District,the Maximum Special Tax is at least $1,950,000, which amount is approximately 1.90* times the expected maximum annual debt services on the Bonds. The Special Tax Requirement is defined in the Rate and Method as the amount required in any Fiscal Year for the District necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Fund for all Outstanding Bonds, (iii)to pay Administrative Expenses, and (iv)to pay costs of any credit enhancement(including fees and expenses related to any letter of credit)for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property includes all Assessor's Parcels in the District, except real property owned by a governmental agency for public right-of-way purposes including, but not limited to, streets, public walkway corridors, and slopes, as determined in each Fiscal Year by a representative of the City or any otherwise Taxable Property for which the Special Tax with respect to the leasehold interest has been paid in full, or any property which is otherwise exempt from the Special Tax pursuant to law. Under the Rate and Method, the Special Taxes applicable to any leasehold interest in any parcel of property within the District may be prepaid in whole or in part. See Appendix D for the detailed methodology related to any such prepayment. The Indenture contains covenants related to the prepayment of Special Taxes including the following: • The District shall cause all applications of owners of leasehold interests in the District subject to the Rate and Method to prepay and satisfy the Special Tax obligation for their property to be reviewed by an Independent Financial Consultant and shall not accept any such prepayment by the District and the redemption of Bonds with such prepayment, unless the ratio of (i)the maximum amount of the Special Taxes that may be levied in the District following such Preliminary,subject to change. 17 prepayment to (ii)Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption(e.g., 1.15 to 1.0) will not be less than such ratio as it existed prior to such prepayment. • The District will not include in any calculation of the amount necessary to prepay and permanently satisfy the Special Tax obligation of any parcel of taxable property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement; provided,however,that in such event the District may pay to the owner of any such property who prepays and permanently satisfies the Special Tax obligation for his or her property, under such circumstances, such a proportionate amount if the amount on deposit in the Reserve Fund is thereafter increased to the Reserve Requirement. Public Facilities The proceeds of the Refunded Bonds were used to finance the construction of certain Public Facilities integral to the development of the Hotel. The "Public Facilities" included the land acquisition, clearance and roadway construction within or adjacent to the District, construction of a pedestrian bridge over Pacific Coast Highway connecting the Hotel with the beach, and a contribution to the construction of a City beach maintenance yard. All construction with respect to the Hotel has been completed and all of the Public Facilities were completed by December,2002. Estimated Direct and Overlapping Indebtedness Within the boundaries of the District are numerous overlapping local agencies providing public services. Some of these local agencies have outstanding bonds which are secured by taxes and assessments on the parcels within the District and others have authorized but have not yet issued bonds which, if issued, will be secured by taxes and assessments levied on the property within the District. Table 2 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied on the leasehold interest within the District, prepared by California Municipal Statistics, Inc., and dated March 1, 2013 (the "Debt Report"). The Debt Report is included for general information purposes only. The District and the Underwriter believe the information is current as of its date, but make no representation as to its completeness or accuracy. Other public agencies may issue additional indebtedness at any time, without the consent or approval of the District. See"SPECIAL RISK FACTORS—Parity Taxes and Special Assessments." The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. In many cases long term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. Additional indebtedness could be authorized by other public agencies at any time. 18 TABLE 2 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 DIRECT AND OVERLAPPING DEBT AS OF MARCH 1,2013 2012-13 Assessed Valuation: $190,194,724 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 3/1/13 Metropolitan Water District General Obligation Bonds 0.010% $ 15,862 Coast Community College District General Obligation Bonds 0.197 606,507 Huntington Beach Union High School District General Obligation Bonds 0.491 1,091,655 Huntington Beach City School District General Obligation Bonds 1.314 311,431 City of Huntington Beach Community Facilities District No.2000-1 100. 13,330,000(1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $15,355,455 OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 0.047% $ 101,120 Orange County Pension Obligations 0.047 166,310 Orange County Office of Education Certificates of Participation 0.047 7,556 Coast Community College District General Fund Obligations 0.197 39,893 Huntington Beach Union High School District Certificates of Participation 0.491 295,034 Huntington Beach School District Certificates of Participation 1.314 219,382 City of Huntington Beach General Fund Obligations 0.671 313,371 City of Huntington Beach Judgment Obligations 0.671 23,302 Municipal Water District of Orange County Water Facilities Corporation 0.057 5,680 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,171,648 Less: MWDOC Water Facilities Corporation(100%supported by revenues) 5,680 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,165,968 OVERLAPPING TAX INCREMENT DEBT: $1,908,712 GROSS COMBINED TOTAL DEBT $18,435,815(2) NET COMBINED TOTAL DEBT $18,430,135 Ratios to 2012-13 Assessed Valuation: Direct Debt($13,330,000)...............................................................7.01% Total Direct and Overlapping Tax and Assessment Debt..................8.07% Gross Combined Total Debt..............................................................9.69% Net Combined Total Debt.................................................................9.69% Ratios to Redevelopment Incremental Valuation($180,096.172): Total Overlapping Tax Increment Debt............................................. 1.06% 11) Represents the outstanding par amount of the Refunded Bonds. (2) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics,Inc. Estimated Assessed Value-to-Lien Ratio The assessed value of the leasehold interest in the Taxable Property within the District for Fiscal Year 2012-13 is $190,194,724. The estimated assessed value-to-lien ratio of the leasehold interest in the Taxable Property within the District based upon the principal amount of the Bonds, overlapping debt payable from other taxes and assessments levied on the property within the District, and the assessed values included on the 2012-13 Assessor's roll is approximately 14.64'-to-1. Because a parcel's assessed value generally represents the lower of its acquisition cost and adjustments for inflation(but not more than 2%per year)and the value of Preliminary,subject to change. 19 any subsequent improvements, it may not be indicative of the parcel's market value. No assurance can be given that the assessed value-to-lien ratio for the District will be maintained during the period of time that the Bonds are outstanding. The District does not have any control over future property values or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which is made through the levy of a tax or an assessment with a lien on a parity with the Special Taxes. See"SPECIAL RISK FACTORS—Leasehold Values." The following Table 3 summarizes the assessed value of the leasehold interests in the Taxable Property within the District for Fiscal Years 2006-07 through 2012-13. TABLE 3 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 ASSESSED VALUES OF LEASEHOLD INTEREST IN TAXABLE PROPERTY FISCAL YEAR 2006-07 THROUGH 2O12-13 Assessed Value of Tax Year Leasehold Interesti4) 2006-07 $174,397,317 2007-08 177,885,263 2008-09 181,442,968 2009-10 185,056,129 2010-11 185,071,826"' 2011-12 186,465,416(2) 2012-13 190,194,724(3) (1) Assessed value successfully appealed by Leasehold Owner to$147,000,000. (2) Assessed value successfully appealed by Leasehold Owner to$152,000,000. (3) Assessed value successfully appealed by Leasehold Owner to$165,600,000, (4) Excludes personal property. Source: Orange County Secured Rolls,as compiled by Willdan Financial. Delinquency History Table 4 below summarizes the Special Tax levies and delinquencies for the leasehold interest in the taxable property within the District for Fiscal Years 2008-09 through Fiscal Year 2012-13. The Leasehold Owner has not been delinquent in the payment of Special Taxes. 20 TABLE 4 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 SPECIAL TAX LEVIES AND DELINQUENCIES FISCAL YEAR 2008-09 THROUGH 2O12-13 Delinquencies as of September 30 of Fiscal Year Delinquencies as of May 7,2013 Remaining Remaining Remaining Fiscal Amount Parcels Parcels Amount Percent Parcels Amount Percent Year Levied Levied Delinquent Delinquent"l Delinquent Delinquent Delinquent Delinquent 2008-09 $1,213,082.00 1 0 $0.00 0.00% 0 $0.00 0.00% 2009-10121 1,227,014.00 1 0 0.00 0.00 0 0.00 0.00 2010-11 1,224,300.50 1 0 0.00 0.00 0 0.00 0.00 2011-12 1,265,074.37 1 0 0.00 0.00 0 0.00 0.00 2012-13 1,249,569.75 1 N/A N/A N/A 0 0.00 0.00 (1) Amount does not include any penalties,interest or fees. (2) Delinquency information as of October 5 for this Fiscal Year only. Source: Orange County Tax Collector,as compiled by Willdan Financial Services. LEASEHOLD OWNERSHIP AND THE HOTEL Information set forth below regarding the Leasehold Owner and the Hotel was provided by the Leasehold Owner and has not, in most instances, been verified by the District or the Underwriter, and the District and the Underwriter make no representation as to its accuracy or completeness. The Property Owner The Property Owner is PCH Beach Resort, LLC, a California limited liability company formed on April 11, 2001 for the primary purpose of being the lessee under the Ground Lease, constructing and owning the Hotel leased to the Property Owner under the Ground Lease. The managing member of the Property Owner is Grand Resort, LLC, a California limited liability company, which has a 59.99996% interest in the Property Owner, which, in turn, is controlled by Mayer Financial L.P., Lizard Thicket, L.P. and the Bone Family Trust, all of which entities are comprised of various trusts or other entities controlled by Robert L. Mayer, Jr. and Stephen K. Bone. The other members of the Property Owner are Coast Beach, LLC, with a 39.99994% interest in the Property Owner, which is an entity related to the Pritzker Trusts, and SPE PCH Beach Resort,with a 0.0001%interest in the Property Owner. The Robert Mayer Corporation and related entities,headquartered in Irvine,California,developed The Hilton Waterfront Beach Resort, a 290 room hotel with conference facilities and two restaurants and lounges located on a parcel along Pacific Coast Highway in the City adjacent to the parcel leased to the Property Owner under the Ground Lease, and manages that property through a related entity, Mayer Hospitality Group, LLC. The Robert Mayer Corporation previously assisted in the development of the Quality Inn Hotel and Casino, a 324-suite hotel and casino in Las Vegas, Nevada and through Ambassador Gaming, Inc. managed the casino; Villa Capri Apartments, a 110-unit residential apartment complex located in La Habra, California; and Merano, a 30 acre,gate-guarded development with 126 home sites in Palm Desert, California. In addition to the properties listed above in which it previously had interests,The Robert Mayer Corporation maintains an active development program to identify and develop new commercial and residential opportunities. The Hotel The Hotel is generally known as the Hyatt Regency Huntington Beach Resort and Spa. The focus of the Hotel is oriented toward ocean views that are available throughout the Hotel, four ocean view courtyards, and two pool areas. 21 The following is a description of the principal features of the Hyatt Regency Huntington Beach Resort and Spa: • Main lobby • 517 guest rooms • 990 covered parking spaces in a two story subterranean garage. • 52,000 square feet of conference center at west end of the Hotel • 9,090 square feet of net retail space • 20,000 square foot spa with state of the art facilities including 18 indoor treatment rooms, some with private patios and six outdoor semi-private treatment stations. • Seven restaurants/lounges • Beach access via pedestrian overpass of Pacific Coast Highway. The public areas consist of the main lobby and a number of courtyards. The Lighthouse Courtyard is the access point to the pedestrian overpass to the beach. The courtyard is approximately 34,650 square feet and provides a lawn area with panoramic ocean views. The California Courtyard is adjacent to the main lobby and is surrounded by patios and palm trees. The approximately 22,190 square foot courtyard facility has a large fountain and small grass knoll. The conference center is located at the west end of the Hotel and has a separate lobby/entrance area. That facility consists of a total of 52,000 square feet that can be divided into a number of event spaces. This conference center is adjacent to the Grand Ballroom and the approximately 10,700 square foot exhibition hall. Ocean views are available from the Grand Ballroom. An outdoor-event area is also available with 15,000 square feet of lawn area and ocean views. The 517 hotel guest rooms are considered upscale in appointments, design and quality. The room sizes range from 465 to 3,100 square feet(presidential suites). Custom king bedrooms range from 651 to 854 square feet. A state of the art spa facility known as Pacific Waters Spa is an integral part of the Hotel. The design of this 20,000 square foot facility is an early California luxury estate theme. Spa facilities include the. following: (i)eighteen indoor treatment rooms, (ii)weight training room with weight/exercise machines and free weights, (iii)a cardiovascular exercise room with exercise equipment and a water station, (iv)a full service beauty salon with manicure/pedicure stations and custom tile foot baths, (v)a separate reception area, (vi)a steam room with eucalyptus oil mist, (vii)a dry sauna, (viii)a cool down lounge, (ix)private showers, (x)Kohler"body spa" custom waterfall shower, (xi)an eight-person hydrotherapy whirlpool, (xii)lockers and private toilets,and(xiii)a relaxation lounge. The outdoor recreation areas include a water playground featuring three water slides, two splash pools, a ribbon shaped main pool,a shallow children's wading pool and a poolside cafe and a lagoon style pool that dominates the pool courtyard and the surrounding decks. A panoramic view is available from the pool area,which has a number of ocean view terraces and decks. Hotel Construction. Construction of the Hotel commenced in April of 2001 and was completed in December of 2002 at a cost of approximately $164,000,000. The Hotel opened January 19, 2002 (the "Opening Date"). In 2009,the Leasehold Owner spent an additional approximately$4,000,000 on a new pool for the Hotel. Hotel Operation. The Leasehold Owner has entered into a Hotel Management Agreement,dated as of April 11, 2001 (the "Hotel Management Agreement"), with Hyatt Hotels Corporation, formerly known as Hyatt Corporation ("Hyatt Hotels Corporation"), with respect to the management and operation of the Hotel. The Hotel Management Agreement has a stated term of twenty years, which commences with the Opening Date of the Hotel and ends on December 31 of the year in which the 20th anniversary of the Opening Date occurs. Hyatt Corporation has the right and option, in its discretion, to extend the term of the Hotel 22 Management Agreement for two renewal terms of five years each. No assurance can be given that the Hotel Management Agreement will remain in effect for the term of the Bonds. The Hotel Operator. Hyatt was founded by Jay Pritzker in 1957. Over the following decade, Jay Pritzker and his brother Donald Pritzker, working together with other Pritzker family business interests, grew the company into a North American management and hotel ownership company, which became a public company in 1962. In 1968, Hyatt International was formed and subsequently became a separate public company. Hyatt Corporation and Hyatt International Corporation were taken private by the Pritzker family business interests in 1979 and 1982, respectively. On December 31, 2004, substantially all of the hospitality assets owned by Pritzker family business interests, including Hyatt Corporation and Hyatt International Corporation, were consolidated under a single entity, now named "Hyatt Hotels Corporation." Hyatt Hotels Corporation manages,franchises, owns and develops Hyatt branded hotels,resorts and residential and vacation ownership properties around the world. As of June 30, 2012,the company's worldwide portfolio consisted of 492 properties. Average Occupancy Rates. The following table sets forth the average occupancy rates for the Hotel in each of the calendar years ending December 31,2003 through December 31,2012. TABLE 5 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 AVERAGE HOTEL OCCUPANCY CALENDAR YEARS 2003 THROUGH 2O12 Calendar Year Average Hotel Occupancy Ending December 31 Rate(by percentage) 2003 55.2(" 2004 66.2 2005 71.1 2006 70.0 2007 71.7 2008 67.7 2009 59.2% 2010 67.7 2011 73.4 2012 75.9 Partial year. Source:Leasehold Owner. Summary of the Ground Lease Pursuant to the DDA, the Successor Agency (as successor-in-interest to the Agency), as lessor, and the Leasehold Owner, as lessee entered into the Ground Lease pursuant to which the Agency leased all of the property within the District to the Leasehold Owner. In order to facilitate the Redevelopment Plan for the Huntington Beach Redevelopment Project,the Agency, which owned the parcel in fee simple, agreed to lease Parcel A,consisting of the 15.103 acres of land in the District to the Leasehold Owner for a term of 99 years as part of a variety of documents culminating in the Ground Lease executed on April 4, 2001. The Leasehold Owner did not obtain any mineral or water rights to the land and took the site in an"as is" condition,thereby assuming responsibility for hazardous substance removal, remediation, and indemnification to the Agency in accordance with applicable law. 23 As a financial incentive to the Leasehold Owner for entering into the DDA, the Agency agreed to repay the.Leasehold Owner for $16 million of costs plus interest thereon advanced by the Leasehold Owner toward the construction of offsite infrastructure and other costs of the Hotel. As of July 1, 2013, approximately $5.3 million in costs remain to be paid. See"Transient Occupancy Tax"below. The Successor Agency's obligations under the Ground Lease and DDA have been approved by DOF on each of the Successor Agency's Recognized Obligation Payment Schedules submitted to date. The effective date of the lease is April 4,2001, and the term of the lease is 99 years from that date. As consideration for obtaining the lease,the Successor Agency is to receive the following payments. • During the first year of hotel operations, a base rent of$25,000 per year prorated over the fraction of the year the hotel is open. During the second year, a base rent of$75,000; during the third year a base rent of$150,000; from the fourth year onward, a base rent of$150,000 per year plus an amount equal to the annual increase in the CPI (lagged by three months for computational purposes) with an annual cap of no more than 5 percent and a five-year cumulative cap of no more than 20 percent. • Starting in the third year, the Successor Agency is also to receive participation rent equal to 3 percent of"Adjusted Room Revenue." Adjusted Room Revenue takes Gross Room Revenue not counting any food, beverage, parking, telephone, health club, or other ancillary revenue and subtracts off a threshold amount equal to $25 million. The resulting remainder is what is used to calculate the 3 percent participation rent (as described below). This $25 million threshold amount, however, escalates in year four and thereafter by an amount equal to the increase in the CPI index with an annual cap of no more than 5 percent and a five-year cumulative cap of no more than 20 percent. Section 507 of the Ground Lease provides that for each Lease Year commencing with 2001 through 2013, an additional payment is required to be made by Lessee to the Successor Agency of$8,333.34. For each subsequent Lease Year during the Term, the foregoing amount is to be payable as adjusted upward each year based upon the consumer price index. The amounts payable pursuant to Section 507 are not included in Table 6,below. It is expressly stated that the Ground Lease is an absolute net lease. The terms of the Ground Lease may be amended by the Leasehold Owner and the Successor Agency(subject to the approval of the Oversight Board)at any time without notice to or the consent of the Bondowners. The following table sets forth the Base Rent, Gross Room Revenue and Adjusted Room Revenue under the Ground Lease for Fiscal Years 2006-07 through 2012-13. The rental payments received by the Successor Agency are not pledged to or available to pay debt service on the Bonds. 24 TABLE 6 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 BASE RENT,GROSS ROOM REVENUE,ADJUSTED ROOM REVENUE FISCAL YEAR 2006-07 THROUGH 2O12-13 Participation Gross Room Rent Received Fiscal Year Base Rent Revenue by Agency() 2006-07 $157,700 $30,142,981 $121,055 2007-08 162,855 34,181,076 215,819 2008-09 166,600 31,831,207 111,319 2009-10 174,098 25,151,223 -0- 2010-11 174,098 28,016,844 -0- 2011-12 174,167 30,815,679 53,633 2012-13 179,567 33,208,940 106,273 Successor Agency receives these revenues. Source: The Leasehold Owner. Transient Occupancy Tax Even though the Successor Agency still owns the fee simple interest in the property, it is a triple net lease;therefore,the Leasehold Owner is responsible for paying property taxes on the Hotel and the land to the County. However, an additional source of revenue from the Successor Agency to repay the Leasehold Owner for its $16 million advance consists of a defined portion of the "property tax increment" as well as a defined portion of the Available Site Generated Transient Occupancy Tax (the "TOT"). This special hotel tax is currently 12%, 10% of which is allocated 60 percent to the Agency and 40 percent to the City, and 2% of which is allocated to the Marketing and Visitors Bureau. Five-sixths of the Agency's portion of the TOT is also a dedicated source of revenue to repay the Leasehold Owner the Agency's $16 million plus interest obligation. The following table sets forth the TOT collected in each of the last five Fiscal Years. The TOT is not pledged to or available to pay debt service on the Bonds. TABLE 7 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 TRANSIENT OCCUPANCY TAXES FISCAL YEARS 2007-08 THROUGH 2O11-12 Fiscal Year Total Transient Occupancy Tax 2007-08 $3,352,079 2008-09 2,755,409 2009-10 2,684,695 2010-11 3,010,115 2011-12 3,249,408 Source: District. 25 THE CITY OF HUNTINGTON BEACH Under the Law, the City Council of the City is authorized to establish and act as the legislative body for community facilities districts. However, the City has no obligations in connection with the District or.the Bonds, other than with respect to the Lease Remedy Forbearance Agreement. See Appendix C hereto for general information regarding the City and the County. SPECIAL RISK FACTORS Investment in the Bonds involves risks which may not be appropriate for certain investors. The following is a discussion of certain risk factors, in no particular order of importance, all of which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of the Leasehold Owner or any future lessee of the land in the District to pay the Special Taxes levied in the District when due. Such failure to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition,the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. Concentration of Ownership As of the date of issuance of the Bonds, there is only one parcel of land in the District and the sole leasehold interest in that land that is subject to the levy of Special Taxes is that of the Leasehold Owner under the Ground Lease. It is expected that the leasehold interest of the Leasehold Owner will be the sole leasehold interest subject to the levy of Special Taxes for the term of the Bonds. The lack of diversity in the obligation to pay the Special Tax represents a significant risk to Bondowners in that the Leasehold Owner's ability to pay the Special Tax will be dependent in large measure on the success of the Hotel. Failure of the Leasehold Owner(or any future lessee, if any,of the property within the District)to pay the annual Special Tax when due could result in the rapid, total depletion of the Reserve Fund. In that event, there could be a default in payments of the principal of, and interest on, the Bonds. See"SPECIAL RISK FACTORS—Insufficiency of Special Taxes"below. Risks Associated with Ground Lease and the Dissolution Act The Special Taxes are dependent upon the existence of a leasehold interest in the single parcel of property in the District. Currently the Special Taxes are levied on the leasehold interest created by the Ground Lease between the Property Owner and the Successor Agency. If the leasehold interest were to be terminated and there were no replacement lease executed by the owner of fee simple title in the Taxable Property,then the District would be unable to levy and collect Special Taxes to pay debt service on the Bonds. The City, on behalf of the District, and the Successor Agency, the owner of the parcel of Taxable Property, entered into the Lease Remedy Forbearance Agreement, pursuant to which the Agency agreed it would not terminate the Ground Lease unless either the Special Taxes had been paid in full and the Bonds were no longer outstanding, or the Agency had prepared a new lease agreement with a subsequent lessee to maintain the leased premises and obtained the written consent of the City to such termination and new lease. The Dissolution Act also creates risks associated with the Ground Lease. The Dissolution Act provides, in part, that an oversight board may direct a successor agency to determine whether any agreement between a dissolved redevelopment and a private party should be terminated or renegotiated to reduce liabilities and increase net revenues to the taxing agencies. In the case of the Ground Lease and the DDA,the Successor Agency has confirmed that there are no executory obligations for the payment of any moneys to the Lessee from the Successor Agency or the City; accordingly,the City and the Successor Agency are of the view that it is very doubtful that the provision of the Dissolution Act providing for termination or renegotiation of agreements would be applicable. Further, because taxing agencies share in property taxes, at an increased 26 level upon the dissolution of redevelopment agencies, the motivation of a taxing agency to seek disruption regarding the Ground Lease or the DDA would not be apparent. In addition, the Lessee holds substantial property rights under the Ground Lease which could not be eliminated without significant compensation from revenues that would otherwise flow to taxing agencies. The Dissolution Act further provides that assets of a former redevelopment agency, such as the residuary rights of the Successor Agency under the Ground Lease, are to be deployed under a long range property management plan("LRPMP"). Any such LRPMP for the Successor Agency must be approved by the Oversight Board and is further subject to approval or non-action by the DOF. No LRPMP has been formulated or approved for the Successor Agency. The Dissolution Act provides that certain assets are to be retained by the host city and others are to be disposed of, all as to be further provided under the applicable LRPMP. As of the date of this Preliminary Official Statement, the Successor Agency does not know which entity will be the holder of the Successor Agency's property interests under the DDA or the Ground Lease following adoption and implementation of a LRPMP for the Successor Agency. It is possible that such interests will ultimately.be held by a private party having no connection to the Successor Agency,City or the Lessee. The provisions of the Dissolution Act are relatively new and have been subject to a variety of judicial challenges. The District can provide no assurances concerning the manner in which the Dissolution Act will be interpreted or which entity or entities will ultimately be determined to own the property assets related to the DDA and the Ground Lease as currently held by the Successor Agency. However, the District believes that any action by the oversight board or the Successor Agency to unilaterally amend or terminate the Ground Lease would be subject to challenge under the State and Federal Constitution if the amendment or termination would adversely affect the District's ability to levy Special Taxes and to pay debt service on the Bonds. Risks of Real Estate Secured Investments Generally The Bondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District,the supply of or demand for competitive properties in such area, and the market value of residential property or commercial buildings and/or sites in the event of sale or foreclosure; (ii)changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii)natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv)adverse changes in local market conditions; and(v)increased delinquencies due to rising mortgage costs and other factors. No assurance can be given that the Leasehold Owner or future lessee will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See"SPECIAL RISK FACTORS —Bankruptcy and Foreclosure"below, for a discussion of certain limitations on the District's ability to pursue judicial proceedings with respect to delinquent parcels. Limited Obligations The Bonds and interest thereon are not payable from the general funds of the City or the Successor Agency. Except with respect to the Special Taxes, neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City, Successor Agency or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City's or the District's property or upon any of the City's or the District's income, receipts or revenues, except the Special Taxes and other amounts pledged under the Indenture. 27 Insufficiency of Special Taxes In order to pay debt service on the Bonds,it is necessary that the Special Tax levied within the District be paid in a timely manner. Should the Special Tax not be paid on time,the District has established a Reserve Account in the initial amount specified under the heading "ESTIMATED SOURCES AND USES OF FUNDS" to pay debt service on the Bonds to the extent other funds are not available therefore. Under the Indenture, the District has covenanted to maintain in the Reserve Account an amount equal to the Reserve Requirement, with the sole source of monies to replenish the Reserve Account being Net Taxes collected that are in excess of Bond debt service and Administrative Expenses(up to the Administrative Expenses Cap). See Appendix D hereto. As a result, if the Leasehold Owner or any future lessee of the land in the District is delinquent in the payment of the Special Tax, the District most likely will be unable to replenish the Reserve Account to the Reserve Requirement. If such defaults were to continue in successive years, the Reserve Account would soon be depleted and a default on the Bonds would occur. The Law provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. The Bondowners will be dependent on the ability and/or willingness of the public entity to pay the Special Tax levied on such property when due. In addition,the Law provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Law have not been tested. If for any reason any portion of the leasehold interest subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, or another public agency, the Special Tax will be reallocated to the remaining portion, if any, of the leasehold interest in the non-tax-exempt land within the District,but in no case more than the maximum authorized Special Tax for such remaining acreage, if any. If a substantial portion of leasehold interest within the District became exempt from the Special Tax because of public ownership or otherwise, the maximum Special Tax which could be levied upon the remaining Taxable Property might not be sufficient to pay principal of and interest on the Bonds when due or the owner of the leasehold interest in the remaining taxable acreage may not have a viable operating development which provides revenues sufficient to pay the Special Taxes, and a default could occur with respect to the payment of such principal and interest on the Bonds. The District has covenanted to institute foreclosure proceedings to sell the leasehold interest with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds, subject to the limitations set forth in the Indenture. If foreclosure proceedings were ever instituted, any mortgage or deed of trust holder with respect to a deed of trust on the Leasehold Owner's leasehold interest could,but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SECURITY FOR THE BONDS—Proceeds of Foreclosure Sales" for provisions which apply in the event foreclosure is required and which the District is required to follow in the event of delinquency in the payment of Special Taxes. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in payments to Bondowners pending prosecution of the foreclosure sale, if the Reserve Account were depleted. No assurances can be given that the leasehold interest subject to foreclosure and sale at a judicial foreclosure sale will be sold, or, if sold,that the proceeds of such sale will be sufficient to pay any delinquent Special Tax. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Law does not specify the obligations of the District with regard to purchasing or otherwise acquiring any leasehold interest at the execution sale pursuant to the judgment in any such action if there is no other purchaser at such sale. The District has no obligation to be a bidder at a foreclosure sale and has no intention to do so. The District is not included within the "Teeter Plan." The Orange County Board of Supervisors utilizes the alternative method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the 28 "Teeter Plan"), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. Generally, the Teeter Plan provides for a tax distribution procedure in which secured roll taxes and assessments are distributed to taxing agencies within the County on the basis of the tax and assessment levy, rather than on the basis of actual tax and assessment collections. The County, rather than the respective levying agency, then receives all future delinquent tax and assessment payments and penalties. As stated above, the District is not included within the Teeter Plan. Natural Disasters Like other areas of Southern California, property in the District is subject to the risk of major earthquake damage. Although the Huntington Beach area has not experienced any major earthquakes in the past 50 years, the Newport-Inglewood fault, at its closest, is approximately one-half mile from the District. Additional faults within the City that may be geologically active are the North Branch, Bolsa-Fairview, and South Branch Faults, all of which are within the Newport-Inglewood Fault Zone. A significant earthquake along any of the foregoing faults is possible during the period the Bonds will be outstanding. The most recent major earthquake was in 1933, with a magnitude of 6.3 on the Richter scale and an epicenter in the Huntington Harbor area,approximately one mile from the boundary of the District. In the event of a severe earthquake,fire,flood,landslide,high winds,tsunami or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result,the Leasehold Owner(or any subsequent owner)may be unable or unwilling to pay the Special Taxes when due. In addition, the value of the Taxable Property in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. According to the Federal Emergency Management Agency(FEMA), the land in the District is located in an"A99"flood zone,as shown on the National Flood Insurance Program map 065034-0045F,dated January 3, 1997. An "A99" zone is identified as a special flood hazard area inundated by the 100-year flood to be protected from the 100-year flood by a Federal flood protection system under construction. Flood insurance is required by the Flood Disaster Protection Act of 1973. The Leasehold Owner has reported to the District that it maintains property and other insurance for the Hotel, including flood insurance, and it expects to obtain and maintain such insurance. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of such parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The value of the leasehold interest in the taxable property within the District, as set forth herein, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the property. The District has not independently verified,but is not aware, that the owner(or operator) of the Taxable Property has such a current liability with respect to the Taxable Property. However, it is possible that such liabilities do currently exist and that the District is not aware of them. 29 Further, it is possible that liabilities may arise in the future with respect to the Taxable Property resulting from the existence, currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of the leasehold interest in the property within the District and the willingness or ability of the Leasehold Owner or any successor thereto to pay the Special Tax installments. Payment of the Special Tax is not a Personal Obligation of the Leasehold Owner The Leasehold Owner and its successors in the Taxable Property, if any, are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the leasehold interest in the Taxable Property in the District. If the value of the Taxable Property is not sufficient, taking into account other liens imposed by public agencies,to secure fully the Special Tax, the District has no recourse against the Leasehold Owner and its successors in the Taxable Property, if any. Leasehold Value The value of the leasehold interest in the Taxable Property within the District is a critical factor in determining the investment quality of the Bonds. If the Leasehold Owner or its successor in interest in the leasehold interest in the Taxable Property is delinquent in the payment of Special Taxes, the District's only remedy is to commence foreclosure proceedings against the leasehold interest in the Taxable Property in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy,physical events such as earthquakes,fires,floods,tsunami, landslides or stricter land use regulations, or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT—Estimated Assessed Value-to-Lien Ratio." The assessed value set forth in this Official Statement does not represent market value arrived at through an appraisal process. No assurance can be given that the leasehold interest in the Taxable Property could actually be sold for its assessed value. Prospective purchasers of the Bonds should not assume that the leasehold interest in the Taxable Property could be sold for its assessed value at a foreclosure sale for delinquent Special Taxes. The District cannot foreclose against the fee simple interest in the Taxable Property; only the leasehold interest in the Taxable Property currently held by the Leasehold Owner may be foreclosed upon. No assurance can be given that any bid will be received for the leasehold interest in the Taxable Property with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received,that such bid will be sufficient to pay all delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales." Parity Taxes and Special Assessments The Taxable Property is subject to taxes and assessments imposed by public agencies also having jurisdiction over the property within the District. Under the Ground Lease,the Leasehold Owner is obligated to pay any such taxes and assessments. See "THE COMMUNITY FACILITIES DISTRICT — Estimated Direct and Overlapping Indebtedness." The Special Taxes and any penalties thereon will constitute a lien against the leasehold interest in the Taxable Property until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future 30 private liens imposed on the Taxable Property except,possibly,for liens or security interests held by an agency of the federal government. See "— FDIC/Federal Government Interests in Properties" and "— Bankruptcy and Foreclosure"below. Neither the District nor the City, however, has control over the ability of other entities and districts to issue indebtedness secured by special taxes,ad valorem taxes or assessments payable from all or a portion of the Taxable Property. Any such special taxes may have a lien on the leasehold interest in Taxable Property on a parity with the Special Taxes and could reduce the estimated value-to-lien ratios for the property within the District described herein. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" and "THE COMMUNITY FACILITIES DISTRICT — Estimated Direct and Overlapping Indebtedness." Disclosures to Future Purchasers The willingness or ability of an owner of the leasehold interest in Taxable Property to pay the Special Tax even if the value is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel,was informed of the maximum tax rate and the risk of such a levy and the ability of such owner to pay the Special Tax as well as pay other expenses and obligations. The City has caused a Notice of the Special Tax to be recorded in the Office of the Recorder for the County against the Taxable Property. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made,that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of the Taxable Property or lending of money thereon. FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation(the"FDIC"),the Drug Enforcement Agency,the Internal Revenue Service,or other federal agency has or obtains an interest. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof, and all Treaties made, or which shall be made,under the Authority of the United States, shall be the supreme Law of the Land;and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." This means that, unless Congress has otherwise provided, if a federal governmental entity owns the leasehold interest in the Taxable Property within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes),the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the leasehold interest in the Taxable Property and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes,the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson(9th Circuit; 1979) 597 F.2d 174,the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("FNMA") is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The District has not undertaken to determine whether any federal governmental entity currently has,or is likely to acquire, any interest(including a mortgage interest) in the leasehold interest in the Taxable Property 31 subject to the Special Taxes within the District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by the leasehold interest in the taxable parcel within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the leasehold interest in the taxable property in the District by the FDIC,then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax.formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on the leasehold interest in the Taxable Property in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Account and perhaps, ultimately, a default in payment on the Bonds. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors' rights could adversely impact the interests of owners of the Bonds in at least two ways. First,the payment of Leasehold Owner's taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales." In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Secondly,the Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against the owner of a leasehold interest in the Taxable Property in the District and if the court found that any 32 of such owners had an interest in such moneys within the meaning of Section 541(a)(1) of the Bankruptcy Code. Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of the Leasehold Owner could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on,the Bonds and the possibility of delinquent tax installments not being paid in full. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Funds Invested in the County Investment Pool On January 24, 1996, the United States Bankruptcy Court for the Central District of California held that a State statute providing for a priority of distribution of property held in trust conflicted with, and was preempted by, federal bankruptcy law. In that case, the court addressed the priority of the disposition of moneys held in a county investment pool upon bankruptcy of the county. Following payment of the Special Taxes to the District, such funds may be invested in the name of the City or the District for a period of time in the County investment pool. In the event of a petition of or the adjustment of County debts under Chapter 9 of the Federal Bankruptcy Code, a court might hold that the Bond Owners do not have a valid and/or prior lien on the Special Taxes or debt service payments where such amounts are deposited in the County investment pool and may not provide the Bond Owners with a priority interest in such amounts. In that circumstance, unless the Bond Owners could "trace" the funds that have been deposited in the County investment pool, the Bond Owners would be unsecured(rather than secured) creditors of the County. There can be no assurance that the Bond Owners could successfully so trace the Special Taxes or debt service payments. No Acceleration Provision The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture or in the event interest on the Bonds becomes included in gross income for federal income tax purposes. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" and "— Limitations on Remedies" herein. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain statutorily required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See "INTRODUCTION — Continuing Disclosure" and APPENDIX E — "FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER." Any failure to provide annual financial information, if required,does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information,the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. 33 Proposition 218 An initiative measure entitled the"Right to Vote on Taxes Act'(the"Initiative")was approved by the voters of the State at the November 5, 1996, general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the"Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." The provisions of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the Bonds as described below. Among other things, Section 3 of Article XIIIC states that "...the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854,which states that: Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. It may be possible, however, for voters or the District or the City acting as the legislative body of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds,but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so,the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on the leasehold interest in the Taxable Property to less than an amount projected to equal to 110% of annual debt service each year on the Outstanding Bonds plus the Administrative Expense Requirement. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also has covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See"--Limitations on Remedies." 34 Ballot Initiatives and Legislative Measures Articles XIIIC and XIIID were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown,the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State,the City,or local districts to increase revenues or to increase appropriations. Loss of Tax Exemption As discussed under the caption "TAX EXEMPTION," the interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of acts or omissions of the District or the City in violation of certain provisions of the Internal Revenue Code of 1986,as amended(the"Code")and the covenants of the Indenture. 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 Indenture 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 Code. Should such an event of taxability occur,the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the provisions of the Indenture relating to optional redemption or special mandatory redemption from Special Tax prepayments. See "THE BONDS — Redemption of Bonds." Future legislative proposals, if enacted into law,clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for,or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. It is possible that subsequent to the issuance of the Bonds there might be federal, State, or local statutory changes(or judicial or regulatory interpretations of federal, State, or local law)that affect the federal, State, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. See "TAX EXEMPTION"below. IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds(or by an audit of similar bonds). Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. 35 Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement (the "District Disclosure Agreement") with Willdan Financial Services, as disclosure dissemination agent, the District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at www.emma.msrb.org ("EMMA") on an annual basis certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events. Additionally, pursuant to a Continuing Disclosure Agreement (the "Leasehold Owner Disclosure Agreement," and, together with the District Disclosure Agreement, the "Disclosure Agreements") with U.S. Bank National Association, as disclosure dissemination agent, the Leasehold Owner has agreed to provide, or cause to be provided,to EMMA,on an annual basis certain information concerning the Leasehold Owner. The District and the Leasehold Owner have further agreed to provide notice to EMMA of certain listed events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission. See APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and the Leasehold Owner and notices of listed events to be provided by the District and the Leasehold Owner. Within the last five years, neither the City nor the District nor the Leasehold Owner has failed to timely comply with its prior continuing disclosure obligations under Rule 15c2-12(b)(5) in all material respects. Notwithstanding the foregoing, in 2009, the City filed annual reports for several of its community facilities districts, including the District, one week late. The full text of the forms of the Disclosure Agreements are set forth in APPENDIX E. TAX EXEMPTION In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount)on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable Bond. The amount of original issue discount that accrues to the Beneficial Owner of the Bonds is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal 36 alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest on the Bonds (including any original issue discount) is based upon certain representations of fact and certifications made by the District, the Underwriters and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code")that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds (including any original issue discount)will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds (including any original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District will covenant to comply with all such requirements. The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Beneficial Owner's basis in the applicable Bond(and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment,computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof)subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest(and original issue discount)on the Bonds or their market value. Bond Counsel's opinion may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson& Rauth, a Professional Corporation. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS OR THE MARKET VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS, SUCH CHANGES(OR OTHER CHANGES)WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE 37 STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS,AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Although Bond Counsel has rendered an opinion that interest on the Bonds (including any original issue discount) is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the accrual or receipt of interest on the Bonds (including any original issue discount) may otherwise affect the tax liability of the recipient. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the Bonds. Should interest on the Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture. The proposed form of Bond Counsel's opinion with respect to the Bonds is attached as APPENDIX B. LEGAL OPINION The legal opinions of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California,approving the validity of the Bonds in substantially the form set forth as APPENDIX B hereto, will be made available to purchasers at the time of original delivery. Certain legal matters will be passed upon for the City and the District by the City Attorney, Jennifer McGrath, Esq. and by Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. ABSENCE OF LITIGATION No litigation is pending or threatened concerning the validity of the Bonds and a certificate of the District to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. Neither the City nor the District is aware of any litigation pending or threatened which questions the existence of the District or the City or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Bonds. NO RATING The District has not made and does not contemplate making application to any rating agency for the assignment of a rating to the Bonds. UNDERWRITING The Bonds are being purchased by the Underwriter. The Underwriter has agreed to purchase the Bonds at a price of$ (being $ aggregate principal amount thereof, [less net original issue discount] [plus net original issue premium] of $ , and less underwriter's discount of $ ). The purchase contract relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase contract,the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering price stated on the inside cover page hereof. The offering price may be changed from time to time by the Underwriter. 38 FINANCIAL INTERESTS The fees being paid to the Underwriter,Bond Counsel,Disclosure Counsel,Jones Hall,A Professional Law Corporation, as counsel to the Underwriter, the Trustee and the Escrow Bank are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds. NEW LEGISLATION The District is not aware of any significant pending legislation which would have material adverse consequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds when due. ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated,are intended as such and not as representatives of fact. The execution and delivery of this Official Statement by the Finance Director of the City has been duly authorized by the City Council of the City of Huntington Beach acting in its capacity as the legislative body of the District. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 By: Finance Director of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 39 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) A Special Tax applicable to each Assessor's Parcel of Taxable Property in the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) (herein CFD No.2000-1) shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The leasehold interests in the real property in CFD No.2000-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. DEFINITIONS The capitalized terms hereinafter set forth have the following meanings when used in this Rate and Method of Apportionment: Acre or Acreage means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, or the other parcel map recorded with the County Recorder. If the Acreage of a particular Parcel is unclear after reference to available maps, the Administrator shall determine the appropriate Acreage for a Parcel. Act means Chapter 3.56(commencing with Section 3.56.010)of the Municipal Code of the City of Huntington Beach and, as applicable, the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311), Part 1, Division 2, of Title 5 of the Government Code of the State of California. Administrative Expenses means any or all of the following actual or reasonably estimated costs directly related to the administration of CFD No.2000-1: the fees and expenses of any Fiscal Agent or trustee (including any fees and expenses of its counsel)employed in connection with any Bonds; any costs associated with the marketing or remarketing of the Bonds;the expenses of the Administrator and the City in carrying out their duties under any Indenture or resolution with respect to the Bonds, including,but not limited to,the levy and collection of the Special Tax, the fees and expenses of legal counsel, charges levied by the County or any division or office thereof in connection with the levy and collection of Special Taxes, audits, continuing disclosure or other amounts needed to pay arbitrage rebate to the federal government with respect to Bonds; costs associated with complying with continuing disclosure requirements; costs associated with responding to public inquiries regarding Special Tax levies and appeals; attorneys' fees and other costs associated with commencement or pursuit of foreclosure for delinquent Special Taxes; and all other costs and expenses of City,the Administrator,the County, and any Fiscal Agent, escrow agent or trustee related to the administration of CFD No.2000-1. Administrator means the Director of Economic Development or such other person or entity designated by the City Administrative Officer or the City Council to administer the Special Tax according to this Rate and Method of Apportionment of Special Tax. Assessor's Parcel or Parcel means a lot,parcel or airspace parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. A-1 Assessor's Parcel Map means an official map of the Assessor of the County designating Parcels by Assessor's Parcel number. Bonds mean any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by the City for CFD No.2000-1 under the Act. City means the City of Huntington Beach. City Council means the City Council of the City of Huntington Beach, acting as the legislative body of CFD No. 2000-1. County means the County of Orange. Development Agreement means the Amended and Restated Disposition and Development Agreement between the City and the developer,Mayer Financial,Ltd. and its subsidiaries,successors and assigns, and any subsequent amendments thereto. Exempt Land means (1)any real property within the boundaries of CFD No. 2000-1 which generally serves the development subject to the Development Agreement and/ or Ground Lease and is owned by a governmental agency for public right-of-way purposes including, but not limited to, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator or(2) any Assessor's Parcel for which the Special Tax with respect to the leasehold interest has been paid in full. Fiscal Agent means the fiscal agent who is a party to the Indenture, if so approved. Fiscal Year means the period commencing on July 1 and ending on the following June 30, in any year in which the Bonds are outstanding. Ground Lease means the ground lease with respect to the land within CFD No. 2000-1 boundary covering a term exceeding the maturity date for the Bonds between the City and the tenant, Mayer Financial, Ltd. and its subsidiaries, successors and assigns,and any subsequent amendments thereto. Indenture means the indenture, fiscal agent agreement, resolution or other instrument approved pursuant to the Resolution of Issuance and pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. Maximum Special Tax means, with respect to the leasehold interest in any Parcel of Taxable Property, the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on the leasehold interest in such Parcel. Outstanding Bonds means all Bonds which are then outstanding under the Indenture. Reserve Fund means the fund of that name created under the Indenture. Resolution of Issuance means the resolution adopted by the City Council of the City, acting as the legislative body of CFD No. 2000-1,authorizing the issuance of the Bonds in accordance with the Act. Special Tax means the special tax to be levied pursuant to the Act and this Rate and Method of Apportionment of Special Tax in each Fiscal Year on the leasehold interests in Taxable Property within CFD No. 2000-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No. 2000-1 necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year,(ii)to pay any amounts required to establish or replenish the Reserve Fund for A-2 all Outstanding Bonds, (iii)to pay Administrative Expenses, and (iv)to pay costs of any credit enhancement (including fees and expenses related to any letter of credit)for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No.2000-1, which are not Exempt Land or exempt from the Special Tax pursuant to law. Trustee means the trustee who is a party to the Indenture,if so approved. B. IDENTIFYING TAXABLE PROPERTY Not less than fifteen business days prior to the beginning of each Fiscal Year, the Administrator shall determine which Parcels in CFD No.2000-1 are Taxable Property. The leasehold interest in the Taxable Property shall be subject to Special Taxes in accordance with the rate and method of apportionment described in Sections C and D below. C. MAXIMUM SPECIAL TAX The Maximum Special Tax for the leasehold interests in Taxable Property in CFD No.2000-1 shall be the greater of(1)$130,000 per Acre or(2)the amount determined pursuant to the following steps: Step 1: Determine the maximum annual debt service on all Outstanding Bonds; Step 2: Multiply the total debt service determined in Step I by 1.1 and add the Administrative Expenses; Step 3: Determine the Acreage of Taxable Property within the CFD No.2000-1; Step 4: Divide the amount from Step 2 by the Acreage from Step 3 to determine the Maximum Special Tax per Acre of Taxable Property. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter,the City Council shall levy the Special Tax proportionately on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax,as determined by reference to Section C, above,as needed to satisfy the Special Tax Requirement. E. LIMITATIONS No Special Taxes shall be levied on the leasehold interest in any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on the leasehold interests in Taxable Property commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter, and until the date on which principal and interest on all Outstanding Bonds have been paid in full (or provision for their payment has been made). Upon determination by the Administrator that this requirement has been met, the Special Tax lien shall be removed from the leasehold interests in all Parcels in CFD No.2000-1. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however,that CFD No.2000-1 may directly bill the special tax, may collect special taxes at a different time or in a manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on the leasehold interest in delinquent Assessor's Parcels as permitted by the Act. A-3 G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No.2000-1, a special three-member Review / Appeal Committee. The Review / Appeal Committee shall interpret this Rate and Method of Apportionment and make determinations relative to the annual administration of the Special Tax and any appeals, as herein specified. The owner of the leasehold interest in any Taxable Property within CFD No. 2000-1 claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Review/Appeal Committee not later than one calendar year after having paid the Special Tax that is disputed. The Review/Appeal Committee shall promptly review the appeal, and if necessary,meet with the owner of the leasehold interest, consider written and oral evidence regarding the amount of the Special Tax, and resolve the appeal. If the Review/Appeal Committee's decision requires the Special Tax to be modified or changed in favor of the owner of the leasehold interest, a cash refund shall not be made(except for the last year of the levy), but an adjustment shall be made to the next Special Tax levy. This procedure shall be exclusive and its exhaustion by any owner of a leasehold interest shall be a condition precedent to any legal action by such owner. H. PREPAYMENT OF SPECIAL TAX The following definitions apply solely to this Section H.: Outstanding Bonds means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. Previously Issued Bonds means all Bonds that have been issued by CFD No.2000-1 prior to the date of prepayment. 1. Prepayment in Full The Special Tax applicable to any leasehold interest in any Assessor's Parcel of Taxable Property may be prepaid. The Special Tax obligation applicable to the leasehold interest in such Assessor's Parcel in CFD No.2000-1 may be fully prepaid and the obligation of the leasehold interest in such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner of the leasehold interest intending to prepay the Special Tax obligation on one or a combination of Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. Following receipt of such notice,the Administrator shall notify the owner of the leasehold interest in such Assessor's Parcel or Parcels of the prepayment amount of such Assessor's Parcel(s). The Administrator may charge a reasonable fee for providing this figure. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Fiscal Agent pursuant to the Indenture. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Capitalized Interest Credit Total: Equals Prepayment Amount A-4 As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows: Paragrgh No. 1. For Assessor's Parcels of Taxable Property intending to prepay, compute the Maximum Special Tax for such Assessor's Parcels. 2. Divide the Maximum Special Tax computed pursuant to Paragraph I by the total Maximum Special Tax of all Assessor's Parcels of Taxable Property in CFD No. 2000-1, excluding any Assessor's Parcels which have prepaid their Special Taxes in full. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section H to compute the amount of Outstanding Bonds to be retired and prepaid,and round the result up to the nearest multiple of$5,000(the Bond Redemption Amount). 4. Multiply the Bond Redemption Amount computed pursuant to Paragraph 3 by the applicable redemption premium, if any,on the Outstanding Bonds to be redeemed(the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 6. Determine the Special Taxes levied on the Assessor's Parcel in the current and any previous Fiscal Year,which have not yet been paid. 7. Compute the amount the Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 8. Add the amounts computed pursuant to Paragraphs 5 and 6 and subtract the amount computed pursuant to Paragraph 7(the Defeasance Amount). 9. Determine the administrative fees and expenses of CFD No. 2000-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the Administrative Fees and Expenses). 10. Determine the reserve fund credit (the Reserve Fund Credit) which shall equal the lesser of: (a)the expected reduction in the reserve requirement(as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b)the amount derived by subtracting the new reserve requirement(as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date,but in no event shall such amount be less than zero. II. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/ or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to Paragraph 2 by the expected balance in the capitalized interest fund after such first interest and/ or principal payment (the Capitalized Interest Credit). 12. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3,4, 8 and 9,less the amounts computed pursuant to Paragraphs 10 and 11 (the Prepayment Amount). A-5 13. From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3, 45 85 10 and 11 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to Paragraph 9 shall be retained by the Administrator. As a result of the payment of the current Fiscal Year's Special Tax levy as determined under Paragraph 6 (above), the Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid,the City Council shall cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pry the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Taxes that may be levied on Taxable Property within CFD No.2000-1 both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 2. Prepayment in Part The Maximum Special Tax on an Assessor's Parcel of Taxable Property may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1, except that a partial prepayment shall be calculated according to the following formula: PP=(PH xF)+G Where these terms are defined as follows: PP = the partial prepayment PH = the Prepayment Amount calculated according to Section H.1, minus the amounts determined in Paragraph No.6 and 9 of Section H.1. F = the percent by which the owner of the leasehold interest in the Assessor's Parcel(s) is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No.6 and 9 of Section H.1. The owner of the leasehold interest in an Assessor's Parcel who desires to partially prepay the Maximum Special Tax shall notify the Administrator of(i)such owner's intent to partially prepay the Maximum Special Tax, (ii)the percentage by which the Maximum Special Tax shall be prepaid, and(iii)the company or agency that will be acting as the escrow agent, if applicable. The Administrator shall provide the owner of the leasehold interest with a statement of the amount required for the partial prepayment of the Maximum Special Tax for an Assessor's Parcel following receipt of the request. With respect to any Assessor's Parcel that is partially prepaid, CFD No. 2000-1 shall (i)distribute the funds remitted to it according to Paragraph 13 of Section H.1,and(ii)indicate in the records of CFD No. 2000-1 that there has been a partial prepayment of the Maximum Special Tax and that a portion of the Maximum Special Tax equal to the outstanding percentage (1.00- F) of the remaining Maximum Special Tax shall continue to be authorized to be levied on such Assessor's Parcel pursuant to Section D. A-6 APPENDIX B FORM OF OPINION OF BOND COUNSEL [Closing Date] City Council of the City of Huntington Beach Huntington Beach,California Re: $ City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Huntington Beach(the"City")taken in connection with the formation of the City of Huntington Beach Community Facilities District No. 2000-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$ (the "Bonds") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the initial purchasers of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), the Municipal Code of the City of Huntington Beach and Resolution No. (the "Resolution of Issuance"), adopted by the City Council (the "City Council") of the City on June 3, 2013, and by a Bond Indenture dated as of July 1, 2013 (the "Indenture"), by and between the District and U.S. Bank National Association, as trustee. All capitalized terms not defined herein shall have the meanings set forth in the Indenture. The Bonds are dated the date of delivery and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on each September 1 and March 1, commencing on March 1, 2014, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances,and upon consideration of applicable laws,we are of the opinion that: (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. B-1 (2) The Indenture has been duly executed and delivered by the City Council on behalf of the District. The Indenture creates a valid pledge of, and the Bonds are secured by the Net Taxes and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California;provided,however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification,penalty,contribution,choice of law,choice of forum or waiver provisions contained therein. (3) Under existing statutes,regulations, rulings and judicial decisions, interest(and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest(and original issue discount)on the Bonds is exempt from State of California personal income tax. (5) The difference between the issue price of a Bond(the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public)and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues for the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals or corporations(as described in paragraph(3)above)and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond(generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. The opinion expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount)will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest(and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5)and(6)above, we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in B-2 such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest(and original issue discount)on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson& Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. The opinions expressed herein are based upon an analysis of existing statutes,regulations,rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken)or events occurring(or not occurring)after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken(or not taken)or do occur(or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material. Respectfully submitted, B-3 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX C GENERAL ECONOMIC AND DEMOGRAPHIC DATA FOR THE CITY OF HUNTINGTON BEACH AND THE COUNTY OF ORANGE The following economic data for the City of Huntington Beach (the "City') and the County of Orange (the "County') is presented for information purposes only. The Bonds are not a debt or obligation of the City or the County. General The City of Huntington Beach is a seaside city located in the County. The City is famous for an 8.5 miles stretch of beach that is complemented by a mild climate and surf culture that has earned the Huntington Beach the title, "Surf City, USA." Incorporated in 1909, the City has a council/administrator form of government. The City Council is comprised of seven members elected biannually at large to four-year terms and the Mayor is selected by the Council Members to one-year term. The City Council appoints the City Administrator who is responsible for the day-to-day administration of Huntington Beach's business and the coordination of all departments. Orange County is third most populous county in California and is located adjacent to the Pacific Ocean and the Counties of Los Angeles, San Bernardino, Riverside and San Diego. The County is located in the most heavily populated region of California, necessitating easy access to road, rail, air and sea transportation. The County is also a major Southern California tourist center with a large number of amusement parks and recreational and entertainment activities. The County's Pacific Coast shoreline includes five state beaches and parks, five Municipal beaches and five County beaches. Orange County is a general law county and governed by a five-member Board of Supervisors, each of whom serves for four-year terms. The County provides a wide range of services to its residents, including police, medical and health services, senior citizen assistance, library services, judicial institutions (including support programs), airport service, roads, solid waste management, harbors, beaches and parks,life guard services and a variety of public assistance programs. Population The following table summarizes population estimates for the City, County and State from 2001 through 2013. C-1 POPULATION ESTIMATES The City of Huntington Beach,Orange County and the State of California 2001-2013"' Year Huntington Beach Orange County California 2001 190,860 2,871,926 34,430,970 2002 191,802 2,902,207 35,063,959 2003 192,650 2,927,118 35,652,700 2004 193,069 2,948,135 36,199,342 2005 192,581 2,956,847 36,676,931 2006 191,653 2,956,334 37,087,005 2007 190,813 2,960,659 37,463,609 2008 190,018 2,974,321 37,871,509 2009 190,079 2,990,805 38,255,508 2010 190,136 3,008,855 37,223,900 2011 190,355 3,028,846 37,427,946 2012 192,524 3,055,792 37,678,563 2013 193,616 3,081,804 37,966,471 January 1 data. Source: California State Department of Finance,Demographic Research Unit. March 2010 Benchmark. Income The following tables show the personal income and per capita personal income for the County, State of California and United States from 2005 through 2011. PERSONAL INCOME County of Orange,State of California,and United States 2005-2011 (Dollars in Thousands) Year County of Orange California United States 2005 $139,408,948 $1,387,661,013 $10,476,669,000 2006 150,598,354 1,495,533,388 11,256,516,000 2007 153,446,641 1,566,400,134 11,900,562,000 2008 155,925,156 1,610,697,843 12,380,225,000 2009 146,0 52,466 1,526,531,367 12,168,161,000 2010 150,467,328 1,587,403,857 12,353,577,000 2011 154,131,535 1,676,564,972 12,981,740,848 Source: U.S.Department of Commerce,Bureau of Economic Analysis. C-2 PER CAPITA PERSONAL INCOME"' County of Orange,State of California,and United States 2005-2011 County of Year Orange California United States 2005 $47,417 $38,767 $35,424 2006 51,359 41,567 37,698 2007 52,342 43,240 39,461 2008 52,720 43,853 40,674 2009 48,624 42,395 39,635 2010 48,760 42,514 39,937 2011 50,440 44,481 41,663 Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars(not adjusted for inflation). Source: U.S.Department of Commerce,Bureau of Economic Analysis. Employment The following table summarizes the labor force, employment and unemployment figures over the past five years for the City, County and State of California. CIVILIAN LABOR FORCE,EMPLOYMENT AND UNEMPLOYMENT City of Huntington Beach,Orange County,State of California and the United States 2008-2012(" Unemployment Area Labor Force EmploymenO Unemployment(3) Rate('') 2008 City of Huntington Beach 123,700 118,400 5,300 4.3% Orange County 1,618,100 1,532,800 85,300 5.3 State of California 18,191,000 16,883,400 1,313,200 7.2 2009 City of Huntington Beach 120,600 111,900 8,700 7.2% Orange County 1,588,800 1,448,200 140,600 8.9 State of California 18,204,200 16,141,500 2,086,200 11.3 2010 City of Huntington Beach 120,600 111,300 9,400 7.8% Orange County 1,591,000 1,440,400 150,700 9.5 State of California 18,176,200 15,916,300 2,264,900 12.4 2011 City of Huntington Beach 121,800 113,100 8,600 7.1% Orange County 1,603,700 1,464,400 139,300 8.7 State of California 18,172,000 16,185,100 2,158,300 10.9 2012 City of Huntington Beach 123,200 115,600 7,600 6.2% Orange County 1,618,700 1,496,00 122,700 7.6 State of California 18,494,900 16,560,300 1,934,500 10.5 (1) Data is based on annual averages,unless otherwise specified,and is not seasonally adjusted. (2) Includes persons involved in labor-management trade disputes. (3) Includes all persons without jobs who are actively seeking work. (4) The unemployment rate is computed from un-rounded data;therefore,it may differ from rates computed from rounded figures in this table. Source: U.S.Department of Labor-Bureau of Labor Statistics,California Employment Development Department. March 2012 Benchmark. C-3 Industry The following table summarizes employment figures by industry for the Santa-Ana-Anaheim- Irvine Metropolitan Division, which is located entirely within the County. INDUSTRY EMPLOYMENT& LABOR FORCE ANNUAL AVERAGES Santa Ana-Anaheim-Irvine MD (Orange County) 2008-2012 2008 2009 2010 2011 2012 Farming 4,600 3,800 3,700 3,200 2,700 Mining and Logging 600 500 500 500 500 Construction 91,200 74,200 68,000 68,300 71,300 Manufacturing 174,100 154,800 150,400 153,600 157,800 Wholesale Trade 86,700 79,400 77,600 77,900 76,700 Retail Trade 155,600 142,300 140,100 141,600 142,200 Transportation,Warehousing and Utilities 29,300 27,800 26,700 27,500 27,700 Information 30,100 27,300 24,800 23,800 24,200 Financial Activities 113,100 105,100 103,500 103,900 108,100 Professional and Business Services 266,600 240,200 243,500 246,700 255,900 Education and Health Services 150,700 152,100 155,500 158,700 163,400 Leisure and Hospitality 176,400 169,100 168,600 173,200 180,500 Other Services 46,500 42,600 42,200 42,800 44,300 Government 160,800 156,600 152,300 149,600 147,800 Total: 1,486,200 1,375,900 1,357,400 1,371,300 1,403,000 Note: Items may not add to total due to independent rounding. Source: California Employment Development Department,Labor Market Information Division.March 2012 Benchmark. Largest Employers The following table presents the largest employers in the City and the County during calendar year 2011. Name of Business No.Employed % of Total Boeing 4,609 4.17% Quiksilver 1,230 1.11 Cambro MFG Co. 951 0.86 Hyatt Regency Huntington Beach 641 0.58 C&D Aerospace 555 0.50 Huntington Beach Hospital 503 0.45 Rainbow Disposal 408 0.37 Huntington Beach Healthcare 381 0.34 Waterfront Hilton Beach Resort 343 0.31 Cleveland Golf/Srixon 280 0.25 Total of top 10 9,901 8.95 all others 100,699 91.05 Total employment(public and private) 110,600 100.00% Source: City of Huntington Beach,Comprehensive Annual Financial Report for Fiscal Year Ended September 30,2011. C-4 LARGEST EMPLOYERS Orange County 2013 Name of Business Location Type of Business Allergan Inc. Irvine Drug Millers(Mfrs) Anaheim City Hall Anaheim City Government-Executive Offices Blogtagon Social Media Fountain Valley Internet Service Boeing Co. Huntington Beach Aircraft Manufacturer Boeing Co. Seal Beach Aerospace Industries Broadcom Corp Irvine Semiconductors&Related Devices(Mfrs) California State-Fullerton Fullerton Schools-Universities&Colleges Academic Disneyland Resort Anaheim Anaheim Amusement&Theme Parks Emplicity Irvine Employment Contractors-Temporary Help First American Title Ins Co. Santa Ana Title Companies First Team San Clemente Real Estate San Clemente Real Estate Fountain Valley Regional Hospital Fountain Valley Hospitals Hoag Hospital Newport Beach Hospitals Jones Lang La Salle Brea Real Estate Management Pacifi Care Cypress Health Plans Puro Clean Anaheim Water Damage Restoration-Residential Quiksilver Eyeware USA Huntington Beach Optical Goods-Retail Saddleback Memorial Hospital Laguna Hills Hospitals St.John Knits Int'1 Inc. Irvine Women's Apparel-Retail St.Jude Medical Ctr. Fullerton Hospitals St.Jude Medical Ctr. Brea Hospitals Tenet Healthcare Fountain Valley Hospitals UC Irvine Healthcare Orange Hospitals University of CA-Irvine Irvine Schools-Universities&Colleges Academic Walt Disney Parks&Resorts Anaheim Amusement&Theme Parks Source: California Employment Development Department, Labor Market Information Division. Major Employers in Orange County. C-5 Building Activity The following tables summarize building permits and valuations for the City and the County during calendar years 2007 through 2011. BUILDING PERMITS AND VALUATIONS City of Huntington Beach 2007-2011 2007 2008 2009 2010 2011 Valuation(In$000's) Residential $ 61,640 $ 39,114 $26,788 $33,567 $44,375 Nonresidential 66,821 66,477 31,221 42,546 102,623 Total Valuation(') $128,461 $105,591 $58,009 $76,113 146,998 New Dwelling Units(#) Single-Family 50 20 9 4 24 Multi-Family 4 0 0 16 45 Total: 54 20 9 20 69 Total may not add up due to rounding. Source: Construction Industry Research Board. BUILDING PERMITS AND VALUATIONS Orange County 2007-2011 2007 2008 2009 2010 2011 Valuation(In$000's) Residential $1,792,269 $1,037,710 $ 855,193 $1,029,406 $1,236,970 Nonresidential 2,005,197 1,439,121 952,485 1,115,928 1,300,021 Total Valuation(') $3,797,466 $2,476,831 $1,807,678 $2,181,334 $2,536,992 New Dwelling Units(#) Single-Family 2,182 1,295 1,376 1,553 1,898 Multi-Family 4,890 1,864 824 1,538 2,909 Total: 7,072 3,159 2,200 3,091 4,807 (i) Total may not add up due to rounding. Source: Construction Industry Research Board. Taxable Sales The history of taxable transactions in the City and the County from 2007 through 2011 is shown in the following tables. C-6 TAXABLESALES Huntington Beach 2007-2011 Retail Retail and Food Total Outlets Year Permits Taxable Transactions Total Permits Taxable Transactions 2007 2,985 $2,096,249 7,177 $2,631,199 2008 3,105 1,916,823 7,127 2,563,546 2009 4,274 1,673,149 6,582 2,247,735 2010 4,563 1,723,952 6,847 2,366,485 2011 4,701 2,012,833 6,968 2,584,793 Source: "Taxable Sales in California(Sales&Use Tax),"California Board of Equalization. TAXABLE SALES Orange County 2007-2011 Retail Retail and Food Total Outlets Year Permits Taxable Transactions Total Permits Taxable Transactions 2007 44,093 $38,988,227 99,088 $57,293,471 2008 45,705 35,768,595 97,612 53,606,829 2009 56,259 31,162,619 90,231 45,712,784 2010 58,076 23,690,727 92,407 34,828,607 2011 ) 58,795 35,587,795 92,207 51,731,139 Source: `Taxable Sales in California(Sales&Use Tax),"California Board of Equalization. C-7 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a summary of certain definitions and provisions of the Indenture which are not described elsewhere in the Official Statement. This Summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of its provisions. DEFINITIONS "Act"means the Mello-Roos Community Facilities Act of 1982, as amended,being Sections 53311 et seq. of the California Government Code. "Administrative Expenses Cap" means $20,000 per Fiscal Year,escalating 2%annually, commencing with Fiscal Year 2015. "Administration Fund"means that certain fund by that name established pursuant to the Indenture. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Trustee and any Special Tax Consultant to the District, any costs related to the District's compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District under the Indenture. "Agency"means the former Redevelopment Agency of the City of Huntington Beach. "Alternative Penalty Account" means the account by that name created and established in the Rebate Fund pursuant to the Indenture. "Annual Debt Service"means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year,if the Bonds are retired as scheduled. "Authorized Investments"means any of the following investments,if and to the extent the same are at the time legal for investment of the District's funds (the Trustee is entitled to rely upon investment direction from the District as a certification such investment is an Authorized Investment): (a) Federal Securities; (b) Senior debt obligations, participations, or other instruments issued by a federal agency or United States government-sponsored enterprise, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises (stripped securities are only permitted if they have been stripped by the agency itself); (c) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933 and having a rating of AAA or better by a Nationally Recognized Statistical Rating Organization(NRSRO); (d) Certificates of deposit secured at all times by collateral described in (a) and (b) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings D-1 banks. The collateral must be held by a third party or the Trustee and the Trustee on behalf of the Bond Owners must have a perfected first security interest in the collateral; (e) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC; (f) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase that is rated at least A-1 or its equivalent by a NRSRO and maturing no more than 360 days after the date of purchase(i.e.,ratings on holding companies are not considered as the rating of the bank); (g) Commercial Paper rated, at the time of purchase, at least A-1 or its equivalent by a NRSRO and maturing no more than 270 days after the date of purchase; (h) Repurchase agreements with financial institutions insured by the FDIC; or any broker-dealer with "retail customers" which falls under the jurisdiction of the Securities Investors Protection Corporation (SIPC); or a bank or other financial institution rated in the top two rating categories by one or more Rating Agencies; provided that: (i) the over-col lateralization is at one hundred two percent (102%), computed weekly, consisting of such securities as described in this definition, items(a)through(c); (ii)a third party custodian, the Trustee or the Federal Reserve Bank shall have possession of such obligations; (iii) the Trustee shall have perfected a first priority security interest in such obligations; and(iv)failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral; (i) County or State-administered pooled investment funds in which the District is statutorily permitted or required to invest to the extent that any amounts are deposited by the Trustee into such funds and the Trustee shall have direct access to such fund; 0) California Asset Management Program(CAMP). "Bond Counsel" means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. "Bond Year" means the twelve (12) month period commencing on September 2 of each year and ending on September 1 of the following year, and for the first Bond Year commencing on the Delivery Date and ending on September 1,2013. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bonds"means the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds issued in the original principal amount of$ "Business Day"means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located,are not required or authorized to remain closed. "Certificate of an Authorized Officer" means a written certificate executed by one of the Mayor, City Manager, Director of Finance of the City, or their written designees. D-2 "City"means the City of Huntington Beach,California. "City Council"means the City Council of the City. "Code"means the Internal Revenue Code of 1986,together with any amendments thereto. "Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement, dated July 1, 2013, by and between the District and Willdan Financial Services, as dissemination agent under the Indenture. "Corporate Trust Office"means the Corporate Trust Office of the Trustee at 633 West 5th Street,24th Floor,Los Angeles, California 90071, Attention: Corporate Trust Services, or such other office designated by the Trustee from time to time. "Costs of Issuance"means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and final Official Statements, financial consultants, special tax consultants and other fees and expenses set forth in a Certificate of an Authorized Officer. "County"means the County of Orange, California. "Costs of Issuance Fund"means the fund by that name established pursuant to the Indenture. "Delivery Date" means the date on which the Bonds were issued and delivered to the initial purchasers thereof. "Depository"means the securities depository acting as Depository under the Indenture. "Director of Finance"means the Director of Finance of the City,or his or her designee. "Dissemination Agent"means Willdan Financial Services,and any successor thereto. "District" means City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)established pursuant to the Act and the Resolution of Formation. "Escrow Agreement"means the Escrow Agreement,by and between U.S. Bank National Association, as Escrow Bank,and the District,dated as of July 1,2013. "Escrow Bank"means U.S.Bank National Association. "Escrow Fund"means the Escrow Fund established under the Escrow Agreement. "Extraordinary Administrative Expenses" means Administrative Expenses required for extraordinary District events such as foreclosure actions against delinquent taxpayers within the District required to be prosecuted on an expedited basis pursuant to the Indenture, the approval and implementation of actions requiring Bondowner consent under the Indenture, or actual or threatened Bondowner or property owner litigation arising out of the Bonds or the District. "Federal Securities"means any of the following: (1) Cash(insured at all times by the Federal Deposit Insurance Corporation ("FDIC") or otherwise collateralized with obligations described in paragraph(2)below), D-3 (2) Direct obligations of(including obligations issued or held in book-entry form on the books of)the Department of the Treasury of the United States of America,or (3) Obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "Gross Taxes" means the amount of all Special Taxes received by the District, together with the net proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture, penalties and interest received by the District in connection with the delinquency of such Special Taxes and proceeds from any security for payment of Special Taxes taken in lieu of foreclosure after payment of administrative costs and attorneys' fees payable from such proceeds to the extent not previously paid as an Administrative Expense. "Indenture" means the Bond Indenture, by and between the District and the Trustee, dated as of July 1,2013,together with any Supplemental Indenture approved pursuant to the Indenture. "Independent Financial Consultant"means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District or the City, who,or each of whom: (a) is in fact independent and not under the domination of the District or the City; (b) does not have any substantial interest, direct or indirect, in the District or the City; and (c) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District or the City. "Interest Payment Date" means each March 1 and September 1, commencing March 1, 2014; provided, however,that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. "Lease Remedy Forbearance Agreement"means that certain agreement dated as of December 1,2001, by and between the City and the Agency. "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment;and (2) the interest payable on the aggregate principal amount of the Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Net Taxes" means Gross Taxes minus amounts, not in excess of the Administrative Expenses Cap, set aside to pay Administrative Expenses. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Indenture. D-4 "Ordinance" means the ordinance adopted by the legislative body of the District providing for the levying of the Special Tax. "Outstanding"or"Outstanding Bonds"means all Bonds theretofore issued by the District,except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with the Indenture; (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust(whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity in the Indenture, notice of such redemption shall have been given as provided in the Indenture;and (3) Bonds which have been surrendered to the Trustee for transfer or exchange or for which a replacement has been issued pursuant to the Indenture. "Participants"means those broker-dealers,banks and other financial institutions from time to time for which the Depository holds the Bonds as a securities depository. "Rating Agency" means Moody's Rating Service and Standard & Poor's or both, as the context requires. "Rate and Method of Apportionment" means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation as it may be amended from time to time in accordance with the Act and the Indenture. "Rebatable Arbitrage"means the amount(determinable as of the last day of each fifth Bond Year and upon retirement of the Bonds) of arbitrage profits payable to the United States at all times and in the amounts specified in Section 148(f)of the Code and any applicable Regulations. "Rebate Regulations" means any final, temporary or proposed Regulations promulgated under Section 148(f)of the Code. "Record Date"means the fifteenth day of the month preceding an Interest Payment Date,regardless of whether such day is a Business Day. "Regulations"means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Representation Letter" shall mean the Blanket Letter of Representations from the District to the Depository as described in the Indenture. "Reserve Account" means the account established within the Special Tax Fund pursuant to the Indenture. "Reserve Requirement"means that amount as of any date of calculation equal to the lesser of(i) 10% of the initial principal amount of the Bonds, if any, (ii)Maximum Annual Debt Service on the then Outstanding Bonds, if any;and(iii) 125%of average Annual Debt Service on the then Outstanding Bonds. "Resolution of Formation" means, Resolution No. 2000-35 adopted by the City Council on April 17, 2000,pursuant to which the City formed the District. D-5 "Resolution of Issuance" means Resolution No. 2013-19 duly adopted by the City Council, acting in its capacity as the legislative body of the District on June 3, 2013, approving the Indenture, and any supplemental bond indenture approved pursuant to the Indenture. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in the Indenture. "Special Tax Prepayments" means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method of Apportionment. "Special Taxes" means the taxes authorized to be levied by the District in accordance with the Ordinance,the Resolution of Formation,the Act and the Rate and Method of Apportionment. "Special Tax Fund"means the fund by that name established pursuant to the Indenture. "Successor Agency"means the City of Huntington Beach. "Supplemental Indenture" means any supplemental indenture amending or supplementing the Indenture. "Surplus Fund"means the fund by that name established pursuant to the Indenture. "Tax Certificate"means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Taxable Property" means the area within the boundaries of the District which is not exempt from application of the Special Tax by operation of law or the Rate and Method of Apportionment. "Term Bonds"means the Bonds maturing on September 1,20_ "Treasurer"means the Treasurer-Tax Collector of the County of Orange. "Trustee"means U.S. Bank National Association,and any successor thereto. "Underwriter"means Stifel,Nicolaus& Company, Incorporated. BOND TERMS Type and Nature of Bonds. Neither the faith and credit nor the taxing power of the City,the State of California,or any political subdivision in the Indenture other than the District is pledged to the payment of the Bonds. Except for the Special Taxes,no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City or general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund, as more fully described in the Indenture. The District's limited obligation to pay the principal of,premium, if any, and interest on the Bonds from amounts in the Special Tax Fund is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption in the Indenture, if any, are not a debt of the City,the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge,charge, lien,or encumbrance upon any of the District's property, or upon any of its D-6 income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund which are, under the terms of the Indenture and the Act, set aside for the payment of the Bonds and interest thereon and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds,are liable personally on the Bonds,by reason of their issuance. Notwithstanding anything to the contrary contained in the Indenture,the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or for the performance of any covenants contained in the Indenture. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Equality of Bonds and Pledge of Net Taxes. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein, in order to secure the payment of the principal of and interest on the Bonds in accordance with their terms,the provisions of the Indenture and the Act, the District pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Taxes and any other amounts held in the Special Tax Fund. Said pledge shall constitute a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the District, its successors, purchasers of any of such assets, creditors and all others asserting rights therein,to the extent set forth in,and in accordance with,the Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery,recordation,filing or further act. Pursuant to the Act and the Indenture, the Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund, without priority for number, date of the Bonds, date of sale, date of execution,or date of delivery, and the payment of the interest on and principal of the Bonds and any premiums upon the redemption in the Indenture, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund, which are set aside for the payment of the Bonds. Amounts in the Special Tax Fund shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by the Indenture or any Supplemental Indenture. Notwithstanding any provision contained in the Indenture to the contrary, Net Taxes deposited in the Rebate Fund or the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Rebate Fund,the Costs of Issuance Fund, the Surplus Fund or the Administration Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in the Indenture or any Supplemental Indenture shall preclude, subject to the limitations contained under the Indenture, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as amended after the issuance of the Bonds,or under any other law of the State of California. Bond Register. The Trustee will keep or cause to be kept, at the Corporate Trust Office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the District during all regular business hours upon reasonable prior notice, and,upon presentation for such purpose,the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register,Bonds as in the Indenture provided. The District and the Trustee may treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all purposes,and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner's address so that the Bond Register may be revised accordingly. D-7 Registration of Exchange or Transfer. Subject to the limitations of the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Corporate Trust Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of(i)Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed;or(ii) any Bonds chosen for redemption. Mutilated,Lost,Destroyed or Stolen Bonds. If any Bond shall become mutilated,the District, at the expense of the Bondowner, shall execute, and the Trustee shall authenticate and deliver, a new Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated,but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to the Indenture. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District, at the expense of the Bondowner, shall execute and the Trustee shall authenticate and deliver, a new Bond of like tenor,maturity and issue,numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits in the Indenture with all other Bonds issued under the Indenture. The Trustee shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered under the Indenture or for the purpose of determining any percentage of Bonds Outstanding under the Indenture,but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of the Indenture, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured,the Trustee may make payment with respect to such Bonds upon receipt of indemnification satisfactory to the Trustee. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any defect in any proceedings taken by the District and the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Creation of Funds. There is created and established and shall be maintained by the Trustee the following funds and accounts: (1) The Community Facilities District No. 2000-1 Special Tax Fund (the "Special Tax Fund") in which there shall be established and created, a Debt Service Account, a Redemption Account and a Reserve Account; (2) The Community Facilities District No. 2000-1 Rebate Fund (the "Rebate Fund")in which there shall be established a Rebate Account and an Alternative Penalty Account; and D-8 (3) The Community Facilities District No. 2000-1 Fund (the"Costs of Issuance Fund"). The amounts on deposit in the foregoing funds and accounts shall be held by the Trustee; and the Trustee shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of the Indenture and shall disburse investment earnings thereon in accordance with the provisions of the Indenture. Deposits to and Disbursements from Special Tax Fund The Director of Finance shall, no later than the last day of each month during which the Special Taxes are apportioned to the District,transfer the Special Taxes net of Special Tax Prepayments (which amounts shall immediately be transferred by the Director of Finance to the Trustee for deposit into the Redemption Account of the Special Tax Fund to be applied in accordance with the Indenture)to the Trustee for deposit in the Special Tax Fund for the Bonds,to be held in trust by the Trustee in the Special Tax Fund. The Trustee will then transfer the money on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following paragraphs, in the following order of priority,to: (1) The Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied in the current Fiscal Year up to the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses) levied for in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of(i) the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year,or(ii)March 2 of such Fiscal Year•, (2) The Debt Service Account of the Special Tax Fund; (3) The Reserve Account of the Special Tax Fund; (4) Administration Fund for Administrative Expenses not previously deposited to the Administration Fund pursuant to the Indenture; (5) Rebate Fund;and (6) Surplus Fund. At the maturity of all Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts tin the Indenture may be used by the District for any lawful purpose. Administration Fund. Pursuant to the Indenture, there is established as a separate fund to be held by the Director of Finance the Administration Fund. Moneys in the Administration Fund may be invested in any Authorized Investments,provided that the maturity or maturities thereof shall not exceed 30 days from the date of purchase. Moneys on deposit in the Administration Fund shall be withdrawn by the Director of Finance and paid to the City or its order upon receipt by the Director of Finance of a Certificate of Authorized Officer stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense and the nature of the Administrative Expense. Debt Service Account of the Special Tax Fund The principal or Sinking Fund Payment of, and interest on, the Bonds until maturity shall be paid by the Trustee from amounts transferred to the Debt Service Account of the Special Tax Fund. For the purpose of assuring that the payment of principal or Sinking Fund D-9 Payment of, and interest on,the Bonds will be made when due,at least one Business Day prior to each Interest Payment Date,the Trustee shall make the following transfers to the Debt Service Account;provided,however, that to the extent that deposits have been made in the Debt Service Account from the proceeds of the sale of the Bonds, or otherwise, or to the extent that a transfer will be made from the Reserve Account to the Debt Service Account in accordance with the last paragraph of the Indenture,the transfer from the Special Tax Fund need not be made: an amount such that the balance in the Debt Service Account one(1)Business Day prior to each Interest Payment Date shall be equal to the installments of interest, principal and Sinking Fund Payment due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest and principal of the Bonds as the same become due. Redemption Account of the Special Tax Fund (a) After making the deposit to the Debt Service Account of the Special Tax Fund above and in accordance with the District's election to call Bonds for optional redemption as set forth in the Indenture, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal of and interest on the Bonds called for redemption, and the premiums payable as provided in the Indenture on the Bonds called for optional redemption one(1) Business Day prior to the redemption date; provided, however, that Net Taxes may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (b) Special Tax Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to the Indenture for the use of such Special Tax Prepayments to the payment of the principal of, premium, if any, and interest on the Bonds to be redeemed with such Special Tax Prepayments. (c) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, in lieu or partially in lieu of such call and redemption, upon receipt by the Trustee of written direction of the District to purchase Bonds, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds in the manner provided in the Indenture. Purchases of Outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices(including brokerage or other expenses)not more than par plus accrued interest, or, in the case of purchases to be made from funds to be applied to a redemption pursuant to the Indenture, par plus accrued interest, plus premium, if any, in the case of moneys set aside for an optional redemption. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Special Tax Fund for the payment of interest on the next following Interest Payment Date. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments,and interest on the Bonds when due in the event that the moneys in the Debt Service Account of the Special Tax Fund are insufficient therefor and for the purpose of making any required transfer to the Rebate Fund pursuant to the Indenture upon written direction from the District; provided, however, amounts in the Reserve Account may be applied to pay the principal and interest due on any Bonds in the final Bond Year in which any Bonds are Outstanding. If the amounts in the Debt Service Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on the Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required,the Trustee shall withdraw from the Reserve Account for deposit in the Debt Service Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. Following any transfer to the Debt Service Account of the Special Tax Fund or to the Rebate Fund as described above, D-10 the District shall then take the steps necessary to cause to be deposited to the Reserve Account the amount needed to replenish the Reserve Account to the Reserve Requirement by transferring such amount from Special Taxes held by the Director of Finance or, if the District so elects,by including such amount in the next annual Special Tax levy to the extent of the permitted maximum Special Tax rates. Notwithstanding anything in the Indenture to the contrary,whenever moneys are withdrawn from the Reserve Account,after making the required transfers pursuant to the Indenture,the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund the amount needed to restore the amount of such account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Debt Service Account of the Special Tax Fund. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. In connection with a redemption of Bonds pursuant to the Indenture, or a defeasance of Bonds in accordance with the Indenture, amounts in the Reserve Account shall be applied to such redemption or defeasance so long as the amount on deposit in the Reserve Account following such redemption or any partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Officer the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to the Indenture to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date,subject to the limitation in the preceding sentence. Notwithstanding any provision in the Indenture to the contrary, moneys in the Reserve Account in excess of the Reserve Requirement shall be withdrawn from the Reserve Account on the Business Day before each Interest Payment Date and transferred to the Debt Service Account to be applied to the interest on the Bonds on the next Interest Payment Date. Rebate Fund (a) The Trustee shall establish and maintain a fund separate from any other fund established and maintained under the Indenture designated as the Rebate Fund and shall establish a separate Rebate Account and Alternative Penalty Account tin the Indenture. The District shall cause to be deposited in the Rebate Fund such amounts as required under the Tax Certificate. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by the Indenture and the Tax Certificate. Without limiting the generality of the foregoing, the District agrees that there shall be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any temporary,proposed or final treasury regulations as may be applicable to the Bonds from time to time, which the District covenants to pay or cause to be paid to the United States at the times and in the amounts determined under the Tax Certificate. The Trustee agrees to comply with all instructions given to it by the District in accordance with this covenant. The Trustee shall conclusively be deemed to have complied with the provisions of the Indenture if it follows the instructions of the District and shall not be required to take any actions under the Indenture in the absence of instructions from the District. (b) Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds after payment in full of such issue and after making the payments required to comply with the Indenture and the Tax Certificate may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in the Indenture to the contrary,the obligation to comply with the requirements of the Indenture shall survive the defeasance and final payment of the Bonds. D-11 (d) Amendment Without Consent of Owners. This section of the Indenture summarized under this caption may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax exempt basis. Notwithstanding any provision of the Indenture, if the District shall provide to the Trustee an opinion of a nationally recognized bond or tax counsel that any specified action required under the Indenture is no longer required or that some further or different action is required to maintain the tax-exempt status of interest on the Bonds, the Trustee and the District may conclusively rely on such opinion in complying with the requirements of this paragraph, and the covenants under the Indenture shall be deemed to be modified to that extent. Surplus Fund Pursuant to the Indenture, there is created and established the "Surplus Fund," to be held by the Director of Finance. After making the transfers required by the Indenture, as soon as practicable after each September 1,the Trustee shall transfer all remaining amounts in the Special Tax Fund to the District for deposit in the Surplus Fund. Moneys deposited in the Surplus Fund may be transferred by the District(i)to the Trustee for deposit in the Debt Service Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (ii)to the Trustee for deposit in the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iii) to the Administration Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administration Fund are insufficient to pay Administrative Expenses, or (iv) may be used by the District for any other lawful purpose of the District. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, the District shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a Yield not in excess of the Yield on the Bonds, unless, in the opinion of Bond Counsel, investment at a higher Yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds then Outstanding. Investments. Moneys held in any of the Funds and Accounts under the Indenture shall be invested by the Trustee at the written direction of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds and Accounts. Any loss resulting from such Authorized Investments shall be charged to the Fund or Account from which such investment was made, and any investment earnings on a Fund or Account shall be applied as follows: (i)investment earnings on all amounts deposited in the Costs of Issuance Fund shall be deposited in that Fund, (ii)investment earnings on all amounts in the Rebate Fund shall be deposited in that Fund, (iii)investment earnings on all amounts deposited in the Reserve Account of the Special Tax Fund shall be used to satisfy the Reserve Requirement and any investment earnings not needed to satisfy the Reserve Requirement shall be withdrawn from the Reserve Account one(1)Business Day before each Interest Payment Date and transferred to the Debt Service Account as provided in the Indenture; and (iv)all other investment earnings shall be deposited in the Debt Service Account of the Special Tax Fund. Moneys in the Funds and Accounts held under the Indenture may be invested by the Trustee, upon the written direction of the District, from time to time, in Authorized Investments which written direction shall be made in accordance with the following restrictions: (a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. D-12 (b) Moneys in the Debt Service Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature or are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. (c) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than six (6) months from their date of purchase by the Trustee, and one-half of such amount shall be invested in Authorized Investments which mature not more than two (2) years from the date of purchase by the Trustee; provided that such amounts may be invested in an investment or repurchase agreement so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with the Indenture; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the respective final maturity date of the Bonds to which such amounts relate. (d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (a) of the definition in the Indenture which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to the Indenture. The Trustee, at the written direction of the District, shall sell, or present for redemption, any Authorized Investments so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost,except that amounts in the Reserve Account shall be valued at the market value in the Indenture at least semiannually on or before each Interest Payment Date. In making any valuations under the Indenture, the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything in the Indenture to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of the Indenture. The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Trustee may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the Fund or Account to which such Authorized Investment is credited, and, subject to the provisions of the Indenture, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established under the Indenture, but shall account for each separately. In the absence of written investment direction the Trustee shall invest solely in Authorized Investments set forth in(d)of the definition in the Indenture. The District acknowledges that regulations of the Comptroller of the Currency grant the District the right to receive brokerage confirmations of security transactions to be effected by the Trustee under the Indenture as they occur. The District specifically waives the right to receive such confirmations to the extent permitted by applicable law and agrees that it will instead receive periodic cash transaction statements which include detail for the investment transactions effected by the Trustee under the Indenture; provided, however, that the District retains its right to receive brokerage confirmation on any investment transaction requested by the District. COVENANTS AND WARRANTY Warranty. The District shall preserve and protect the security pledged under the Indenture to the Bonds against all claims and demands of all persons. D-13 Covenants. So long as any of the Bonds issued under the Indenture are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and the Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: Punctual Payment,Against Encumbrances. The District covenants that it will receive all Gross Taxes in trust and will deposit the Gross Taxes with the Trustee, as provided in the Indenture, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by the Indenture. All such Gross Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth in the Indenture, and shall be accounted for separately and apart from all other money,funds,accounts or other resources of the District. Notwithstanding the provisions of this paragraph, as set forth in the Indenture,the District shall have the right to accept less than the minimum bid on any delinquent parcel,and is indemnified from legal claim for Owners of the Bonds, if the City Council determines that the acceptance of less than the minimum bid or another action as described in the Indenture is in the best interest of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued under the Indenture, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with the Indenture to the extent that Net Taxes are available therefor, and that the payments into the Funds and Accounts created under the Indenture will be made, all in strict conformity with the terms of the Bonds and the Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Indenture and of the Bonds issued under the Indenture. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Gross Taxes, except as provided in the Indenture, and (except as set forth in the Indenture) will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds.The District covenants not to issue any additional bonds secured by the Net Taxes on a parity with the Bonds, except for the purpose of defeasing and refunding Bonds in accordance with the Act. Nothing in the Indenture shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. Lew and Collection of Special Tax. Subject to the maximum Special Tax rates, the District will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation,the enforcement of delinquent Special Taxes. On or before each June 1, commencing June 1, 2014, the Trustee shall provide a written notice to the District stating the amounts then on deposit in the various Funds and Accounts established by the Indenture. The receipt of such notice by the District shall in no way affect the obligations of the District under the following paragraphs. Upon receipt of a copy of such notice, the District shall communicate with the Treasurer or other appropriate official of the County of Orange to ascertain the relevant parcels on which the Special Taxes are to be levied,taking into account any parcel splits during the preceding and then current year. The District shall retain an Independent Financial Consultant to assist in the levy of the Special Taxes each Fiscal Year, commencing Fiscal Year 2013-14, in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the Treasurer will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. Upon the completion of the computation of the amounts of the levy, and approval by the legislative body of the District,the District shall prepare or cause to be prepared, and shall transmit to the Treasurer, such data as the Treasurer requires to include the levy of the Special Taxes on the next secured tax roll. D-14 The District shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year including any necessary replenishment or expenditure of the Reserve Account for the Bonds, an amount equal to the estimated Administrative Expenses and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax for so long as the Bonds are Outstanding,including the initiation of proceedings under the Act to reduce the Maximum Special Tax rates (the "Maximum Rates") on Taxable Property in the District below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent(110%)of Maximum Annual Debt Service on the Outstanding Bonds.The District finds and determines that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also covenants that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the section of the Indenture summarized under this caption. The Special Taxes shall be payable and collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided, the legislative body of the District may provide for direct collection of the Special Taxes in certain circumstances. The fees and expenses of the Independent Financial Consultant retained by the District to assist in computing the levy of the Special Taxes under the Indenture and any reconciliation of amounts levied to amount received,as well as the costs and expenses of the District(including a charge for District staff time) in conducting its duties under the Indenture,shall be an Administrative Expense under the Indenture. Commence Foreclosure Proceedings. Pursuant to Section 53356.1 of the Act, the District covenants with and for the benefit of the Bondowners that, one Business Day after each Interest Payment Date, the Director of Finance or his or her designee will compare the amount of Special Taxes theretofore levied in the District to the amount of Net Taxes theretofore received by the District, and, if the amount collected is less than 100% of the amount of the Special Taxes so levied, the District will undertake and diligently prosecute foreclosure proceedings not later than thirty (30) days after Interest Payment Date (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due. Special Taxes collected as a result of a foreclosure proceeding shall be deposited in the Special Tax Fund and only inure to the benefit of the Bonds in the manner provided in Section 3.2. Payment of Claims. The District will pay and discharge any and all lawful claims for labor,materials or supplies which, if unpaid,might become a lien or charge upon the Net Taxes or any part in the Indenture,or upon any funds in the hands of the Trustee,or which might impair the security of the Bonds then Outstanding; provided however that nothing in the Indenture contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the improvements constructed with the proceeds of bonded indebtedness issued by the District, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Owners of not less than D-15 ten percent(10%) of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. Federal Tax Covenants. Notwithstanding any other provision of the Indenture, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis will not be adversely affected, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants,without limiting the generality of the foregoing,as follows: (1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other monies or property which would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be "private activity bonds" within the meaning of Section 141 of the Code. (2) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be "arbitrage bonds"within the meaning of Section 148 of the Code. (3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be"federally guaranteed"within the meaning of Section 149(b)of the Code. (4) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e)of the Code. (5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be considered "hedge bonds"within the meaning of Section 149(g)of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g)of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. (6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and will comply with the covenants and requirements stated tin the Indenture and incorporated by reference in the Indenture. (7) Other Tax Exempt Issues. The District will not use proceeds of other tax exempt securities to redeem any Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis. Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in the Indenture or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. Limitation on Right to Tender Bonds. The District covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds in full payment or partial payment of any Special Tax unless the District shall have first received a certificate from an Independent Financial D-16 Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds when due. Continuing Disclosure Covenant. The District covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement. Notwithstanding any other provision of the Indenture,failure of the District to comply with its obligations under the Continuing Disclosure Agreement shall not be considered an event of default under the Indenture,and the sole remedy, in the event of any failure of the District to comply with the Continuing Disclosure Agreement shall be an action to compel performance. Opinions. In the event that an opinion is rendered by Bond Counsel as provided in the Indenture from a firm other than the firm which rendered the Bond Counsel opinion at closing, such subsequent opinion by Bond Counsel shall also include the conclusions set forth in numbered paragraphs 1, 2, 3 and 4 of the original Bond Counsel opinion. Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Indenture. Prepayment of Special Taxes. In connection with prepayment of Special Taxes: (1) The District shall cause all applications of owners of leasehold interests in the District subject to the Rate and Method to prepay and satisfy the Special Tax obligation for their property to be reviewed by an Independent Financial Consultant and shall not accept any such prepayment by the District and the redemption of Bonds with such prepayment,unless the ratio of(i)the maximum amount of the Special Taxes that may be levied in the District following such prepayment to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption(e.g., 1.15 to 1.0) will not be less than such ratio as it existed prior to such prepayment. (2) The District will not include in any calculation of the amount necessary to prepay and permanently satisfy the Special Tax obligation of any parcel of taxable property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement; provided, however, that in such event the District may pay to the owner of any such property who prepays and permanently satisfies the Special Tax obligation for his or her property, under such circumstances, such a proportionate amount if the amount on deposit in the Reserve Fund is thereafter increased to the Reserve Requirement. Compliance with Lease Remedy Forbearance Agreement. The District covenants to cause the City to comply with and enforce its agreements and covenants in the Lease Remedy Forbearance Agreement (which the City entered into on behalf of the District),and to not allow the Successor Agency to enter into a new lease or leases(each,a"Replacement Lease")for substantially all of the real property subject to the Ground Lease or Replacement Lease then being terminated, unless (i) the Special Taxes that may be levied on the property so relet, in the opinion of an Independent Financial Consultant, are estimated to be not less than 110% of Maximum Annual Debt Service,and(ii) such lease or leases have a term at least as long as the remaining term to maturity of the outstanding Bonds. AMENDMENTS TO INDENTURE Supplemental Indentures or Orders Not Requiring Bondowner Consent. . The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes: D-17 (a) to cure any ambiguity,to correct or supplement any provisions in the Indenture which may be inconsistent with any other provision in the Indenture, or to make any other provision with respect to matters or questions arising under the Indenture or in any Supplemental Indenture, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in the Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with the Indenture as theretofore in effect or which further secure Bond payments; (c) to modify,amend or supplement the Indenture in such manner as to permit the qualification in the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the issuance of the Bonds, or to comply with the Code or regulations issued under the Indenture, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; (d) to modify, alter or amend the Rate and Method of Apportionment in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on Developed Property (as defined in the Rate and Method of Apportionment) below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent (110%)of Maximum Annual Debt Service on the Bonds Outstanding as of the date of such amendment;or (e) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Bondowners; provided that any amendment or supplement to the Indenture which will affect the Trustee's duties or protections set forth under the Indenture shall be effective only upon written consent of the Trustee. Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures set forth in the Indenture,the Owners of not less than a majority of in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture; provided, however, that nothing in the Indenture shall permit, or be construed as permitting, (a)an extension of the maturity date of the principal, or the payment date of interest on,any Bond; (b)a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon; (c)a preference or priority of any Bond over any other Bond; or (d)a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Indenture,without the consent of the Owners of all Bonds then Outstanding. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of the Indenture shall require the consent of the Bondowners,the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District,cause notice of the proposed Supplemental Indenture to be mailed,by first class mail,postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy in the Indenture is on file at the office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding as required by the Indenture. Whenever at any time within one year after the date of the first mailing of such notice,the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption in the Indenture by the District substantially in the form of the copy referred to in such notice as on file with the D-18 Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Indenture, Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds in instances where such consent is required pursuant to the provisions of the Indenture,the Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the District and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced under the Indenture, subject in all respects to such modifications and amendments. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as provided in the Indenture, the District may determine that the Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed,and in that case upon demand of the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. TRUSTEE Trustee. U.S. Bank National Association, having a corporate trust office in Los Angeles, California, is appointed Trustee for the District for the purpose of receiving all money which the District is required to deposit with the Trustee under the Indenture and to allocate, use and apply the same as provided in the Indenture. In the event that the District fails to deposit with the Trustee any amount due under the Indenture when due, the Trustee shall provide telephonic notice to the District and shall confirm the amount of such shortfall in writing to the extent such amount is known to the Trustee. The Trustee is authorized to and shall mail by first class mail,postage prepaid, or pay by wire transfer as provided in the Indenture, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Trustee is authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption,to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in the Indenture, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in the Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Trustee shall deliver to the District a monthly accounting of the Funds and Accounts it holds under the Indenture; provided, however, that the Trustee shall not be obligated to deliver such accounting for any Fund or Account that has a balance of zero. The Trustee may establish such Funds and Accounts as it deems necessary or appropriate to perform its obligations under the Indenture. The Trustee is authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment in the Indenture in accordance with the provisions of the Indenture. D-19 The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties under the Indenture, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless against costs, claims; expenses and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties under the Indenture. The obligations of the District under the heading"—Trustee"shall survive the discharge of the Bonds and the resignation or removal of the Trustee. Removal of Trustee. The District may at any time at its sole discretion remove the Trustee initially appointed,and any successor thereto,by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto;provided that any such successor shall be a bank or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this paragraph the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this paragraph within thirty (30)days after the Trustee shall have given to the District and the Owners written notice, the Trustee, at the expense of the District, or the District may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee, which successor shall be acceptable to the District. Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained in the Indenture and in the Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of the Indenture or the Bonds and shall incur no responsibility in respect in the Indenture, other than in connection with its duties or obligations specifically set forth in the Indenture, in the Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Trustee shall not be liable in connection with the performance of its duties under the Indenture, except for its own negligence or willful misconduct. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered under the Indenture in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required,and his title thereto satisfactorily established,if disputed. D-20 Whenever in the administration of its duties under the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter(unless other evidence in respect in the Indenture be in the Indenture specifically prescribed)may,in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District,and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of the Indenture upon the faith in the Indenture, but in its discretion the Trustee may, in lieu in the Indenture, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. No provision of the Indenture or any other document related to the Indenture shall require the Trustee to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights under the Indenture. The immunities extended to the Trustee also extend to its directors,officers,employees and agents. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger,conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act,anything in the Indenture to the contrary notwithstanding. EVENTS OF DEFAULT;REMEDIES Events of Default. Any one or more of the following events shall constitute an"Event of Default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as tin the Indenture expressed,by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable;or (c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in the Indenture, the Bonds, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%) in aggregate principal amount of the Outstanding Bonds. Remedies of Owners. Following the occurrence of an Event of Default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members,officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners;or D-21 (c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in the Indenture, the Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners in the Indenture at the respective dates of maturity, as in the Indenture provided, out of the Net Taxes pledged for such payment,or affect or impair the right of action,which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Indenture. The principal of the Bonds shall not be subject to acceleration under the Indenture. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence tin the Indenture, and every power and remedy conferred upon the Owners by the Act or by the Indenture may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit,action or proceeding had not been brought or taken. No remedy in the Indenture conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given under the Indenture or now or existing after the issuance of the Bonds,at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Trustee after an Event of Default pursuant to the Indenture shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then, after payment of all fees and expenses and amounts due to the Trustee under the Indenture,all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. DEFEASANCE Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal in the Indenture, at the times and in the manner stipulated in the Indenture or any Supplemental Indenture, then the Owner of such Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to the Indenture, upon payment of all amounts owed by the District to the Trustee under the Indenture, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall, after payment of amounts payable to the Trustee under the Indenture,pay over or deliver to the District's general fund all money or securities held by it pursuant to the Indenture which are not required for the payment of the interest due on and the principal of such Bonds. D-22 Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph above if such Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust,at or before maturity,money which,together with the amounts then on deposit in the Special Tax Fund are available for such purpose, is fully sufficient to pay the principal of,premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee, or another escrow bank appointed by the District, in trust, direct, noncallable Federal Securities, of the type defined in the definition in the Indenture set forth in the Indenture, in which the District may lawfully invest its money, in such amount as an Independent Financial Consultant shall determine will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund are available for such purpose,together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; If paid as provided above,then,at the election of the District,and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the District under the Indenture and any Supplemental Indenture with respect to such Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in the Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than thirty (30)days prior to the proposed defeasance date. In connection with a defeasance under(b)or(c)above,there shall be provided to the Trustee a certificate of a certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of and interest on all Outstanding Bonds to be defeased in accordance with the Indenture, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with the Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds which have been defeased under the Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance under the Indenture of all Outstanding Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds when due and any fees and expenses of the Trustee remaining unpaid. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased,in the form directed by the District,stating that the defeasance has occurred. MISCELLANEOUS Cancellation of Bonds. All Bonds surrendered to the Trustee for payment upon maturity or for redemption shall upon payment therefor and any Bond purchased by the District as authorized in the Indenture shall be cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds, as provided by law,and,upon written request from the District,furnish to the District a certificate of such destruction. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by the Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank,trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of D-23 any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of the Indenture(except as otherwise in the Indenture provided),if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner in the Indenture for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner in the Indenture or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in the Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters in the Indenture stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Trustee in pursuance of such request or consent. Unclaimed Moneys. Anything in the Indenture to the contrary notwithstanding and subject to the escheat laws of the State, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2)years after the date of deposit of such money if deposited with the Trustee after the said date when such Outstanding Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds; provided, however, that, before being required to make any such payment to the District or the Trustee shall, at the expense of the District, cause to be mailed to the registered Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Provisions Constitute Contract. The provisions of the Indenture shall constitute a contract between the District and the Bondowners and the provisions in the Indenture shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds the Indenture shall be irrepealable,but shall be subject to modifications to the extent and in the manner provided in the Indenture,but to no greater extent and in no other manner. Future Contracts. Nothing in the Indenture contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which are subordinate to the pledge under the Indenture, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes as defined in the Indenture. D-24 Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in the Indenture. Severability. If any covenant, agreement or provision, or any portion in the Indenture, contained in the Indenture, or the application in the Indenture to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of the Indenture and the application of any such covenant, agreement or provision, or portion in the Indenture, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and the Indenture, the Bonds issued pursuant to the Indenture shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Action on Next Business Day. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in the Indenture, is not a Business Day, such payment,with no interest accruing for the period from and after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefore in the Indenture. D-25 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX E FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER ------------------------------------ FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of July 1, 2013, is executed and delivered by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and Willdan Financial Services, Inc., as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to that certain Bond Indenture (the "Indenture"), dated as of July 1, 2013, by and between the Issuer and U.S. Bank National Association,as trustee(the"Trustee"). The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule(as defined below). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which (a)has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or(b) is treated as the owner of any Bonds for federal income purposes. "Disclosure Representative"shall mean the City Manager of the City,the Finance Director of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean, initially, Willdan Financial Services, Inc., or any successor Dissemination Agent designated in writing by the Issuer which has filed with the then current Dissemination Agent a written acceptance of such designation. "EMMA"shall mean the Electronic Municipal Market Access system of the MSRB. "Listed Events" shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Participating Underwriter"shall mean Stifel,Nicolaus& Company,Incorporated. "Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or E-1 the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB,currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. "Tax-exempt" shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax. SECTION 3. Provision of Annual Reports. (a) Not later than nine months after the end of the City's fiscal year (which shall be July 1 of each year, so long as the City's fiscal year ends on September 30), commencing with the report for the report for the 2012-13 fiscal year (which is due not later than July 1, 2014), the Issuer shall provide, or shall cause the Dissemination Agent to provide, to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement;provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Issuer's fiscal year is currently effective from October 1 to the immediately succeeding September 30 of the following year. The Issuer will promptly notify the Repository of a change in the fiscal year dates. (b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b)shall apply. Not later than fifteen(15)Business Days prior to the date specified in subsection(a)for providing the Annual Report to the Repository,the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to such date the Dissemination Agent has not received a copy of the Annual Report,the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report. (c) If the Issuer is the Dissemination Agent and the Issuer is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the Repository in substantially the form attached to this Disclosure Agreement as Exhibit A. If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository, in substantially the form attached as Exhibit A. E-2 (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB;and (ii) promptly after receipt of the Annual Report, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. (e) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or include by reference: (a) Financial Statements. The audited financial statements of the City for the most recent fiscal year of the Issuer then ended. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however,that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide a notice of such modification to the Repository, including a reference to the specific federal or State law or regulation specifically describing the legal requirements for the change in accounting basis. (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information: (i) the principal amount of Bonds outstanding as of September 30 of each year; (ii) the balance in each fund under the Indenture as of the September 30 preceding the filing of the Annual Report, including the Reserve Account and a statement of the Reserve Requirement; (iii) any changes to the Rate and Method approved or submitted to the electors for approval prior to the filing of the Annual Report; (iv) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes as of May 1 of each year; (v) the identity of any ground lessee whose delinquent special taxes represent more than 5% of the amount levied and the number of lots, assessed value, delinquency amount value-to-lien ratios,prior delinquencies and foreclosure status of the applicable properties as of May 1 of each year; (vi) information regarding the percentage of delinquency,if any,in the collection of special taxes levied on a leasehold interest in the District for the Fiscal Year preceding the Annual Report date in the form set forth in Table 4,the number of parcels delinquent,amount delinquent compared to the total levy and the assessed value of each delinquent leasehold interest as of May 1 of each year; E-3 (vii) a description of any ongoing defaults under the Ground Lease and any remedial action taken by the Successor Agency and any change in the leasehold interest that is subject to the Special Tax; and (viii) any information not already included under (i)through (vii)above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982, as amended. In addition to any of the information expressly required to be provided under paragraphs (a)or (b)of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements set forth in clauses(i)to(viii), in the light of the circumstances under which they were made,not misleading. (c) Any or all of the items listed in (a)or (b)above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities,which have been submitted to the Repository. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten(10)business days after the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers,or their failure to perform; 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701- TEB); 6. tender offers; 7. defeasances; 8. ratings changes; and 9. bankruptcy, insolvency,receivership or similar proceedings. Note: for the purposes of the event identified in subparagraph(9), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, E-4 arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds,if material: 1. unless described in paragraph 5(a)(5)above,notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person,other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions,other than pursuant to its terms; 3. appointment of a successor or additional trustee or the change of the name of a trustee; 4. nonpayment related defaults; 5. modifications to the rights of Owners of the Bonds; 6. notices of redemption;and 7. release, substitution or sale of property securing repayment of the Bonds. (c) Upon the occurrence of a Listed Event under Section 5(b) above, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the Issuer determines that knowledge of the occurrence of a Listed Event under Section 5(b)would be material under applicable federal securities laws,the Issuer shall file a notice of such occurrence with the Repository in a timely manner not more than 10 business days after the event. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and that the Dissemination Agent shall not be responsible for determining whether the Issuer's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services, Inc. The Dissemination Agent may resign by providing(i)thirty days written notice to the Issuer, and(ii)upon appointment of a new Dissemination Agent hereunder. E-5 SECTION 8. Amendment. (a) This Disclosure Agreement may be amended, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (1)such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (2) this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the Issuer shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer and the Participating Underwriter, to the same effect as set forth in clause (2) above, (4)the Issuer shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners, or such amendment shall have been approved by the Owners in the same manner as an amendment to the Indenture, and (5) the Issuer shall have delivered copies of such opinion and amendment to the Repository. (b) This Disclosure Agreement also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Indenture for amendments to the Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(1),(2)and(3)have been satisfied. (c) To the extent any amendment to this Disclosure Agreement results in a change in the type of financial information or operating data provided pursuant to this Disclosure Agreement, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (d) If an amendment is made to the basis on which financial statements are prepared,the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. The District acknowledges and understands that other state.and federal laws, including but not limited to the Securities Act of 1933 and Rule lOb-5 promulgated under the Securities Exchange Act of 1934, as amended may apply to the District, and that under some circumstances compliance with this Disclosure Agreement,without additional disclosures or other action,may not fully discharge all duties and obligations of the District under such laws. SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply with any provision of this Disclosure Agreement,any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations under E-6 this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder,including the costs and expenses(including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (i)compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to;and(ii)all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Agreement. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds,and shall create no rights in any other person or entity. SECTION 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 14. Goveminiz Law. This Disclosure Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION 15. Notices. Any notice or communications to be among any of the parties to this Disclosure Agreement may be given as follows: To the Issuer: City of Huntington Beach Community Facilities District No. 2000-1 c/o City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance Telephone: (714)536-5630 To the Trustee: U.S.Bank National Association 633 West 5th Street,24th Floor Los Angeles,California 90071 Attention: Corporate Trust Services Telephone: (213)615-6024 To the Dissemination Agent: Willdan Financial Services,Inc. 27368 Via Industria, Suite 110 Temecula,California 92590 Telephone: (800)755-6864 E-7 To the Participating Underwriter: Stifel,Nicolaus& Company,Incorporated One Ferry Building San Francisco,California 94111 Attention: Municipal Research Department Telephone: (415)445-2602 Any person may,by written notice to the other persons listed above, designate a different address or telephone number(s)to which subsequent notices or communications should be sent. SECTION 16. Future Determination of Obligated Persons. In the event the Securities Exchange Commission amends, clarifies or supplements the Rule in such a manner that requires any landowner within the District to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the District to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the District to disclose information concerning any owner of property within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof. The validity, interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California. SECTION 17. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. SECTION 18. Memer. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 By: Its: Finance Director of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 WILLDAN FINANCIAL SERVICES,as Dissemination Agent By: Its: Authorized Officer E-8 EXHIBIT A NOTICE TO THE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) Name of Bond Issue: $ CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2000-1 (the "Issuer") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, dated as of , 2013. [The Issuer anticipates that the Annual Report will be filed by ] Dated: WILLDAN FINANCIAL SERVICES, as Dissemination Agent cc: City of Huntington Beach E-9 CONTINUING DISCLOSURE AGREEMENT-LESSEE This Continuing Disclosure Agreement-Lessee (the "Disclosure Agreement") is executed and delivered by PCH Beach Resort, LLC, a California limited liability company (the "Lessee") and U.S. Bank National Association, as Dissemination Agent(the"Dissemination Agent")in connection with the issuance of $ City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to a Bond Indenture, dated as of July 1, 2013 (the "Bond Indenture"), between the City of Huntington Beach Community Facilities District No. 2001-1 (Grand Coast Resort)(the"District") and U.S. Bank National Association, as trustee(the "Trustee"). The Lessee covenants and agrees as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Lessee and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C. Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Affiliate" of another Person means (a)a Person directly or indirectly owning, controlling, or holding with power to vote, 5%or more of the outstanding voting securities of such other Person,(b)any Person 5%or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, (c)any Person directly or indirectly controlling such other Person, and (d)with respect to any general partner of a partnership or member of a limited liability company for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. "Annual Report" shall mean any Annual Report provided by the Lessee pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a leasehold interest in the land located in the District, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Agreement, whereby such entity or Affiliate agrees to provide annual reports and notices of significant events to the Dissemination Agent of the character described in Sections 3 and 4 hereof, with respect to the portion of the Property owned by such entity and its Affiliates and which contains an assumption provision of the character set forth in Section 6 hereof. "City"means the City of Huntington Beach. "Disclosure Representative" means the Chief Financial Officer of Mayer Financial Ltd., or his designee, or such other officer,employee or agent as the Lessee shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent" shall mean U.S. Bank National Association, acting in the capacity as Dissemination Agent under this Disclosure Agreement, or any successor Dissemination Agent designated in writing by the City and which has filed with the Lessee, the City and the Trustee a written acceptance of such designation. "Emma"shall mean the Electronic Municipal Market Access system of the MSRB. "Event of Bankruptcy"means, with respect to a Person,that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, E-10 or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt,or is to be discharged from any or all of such Person's debts or obligations, or offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or asks, seeks or prays for reorganization or to effect a plan of reorganization,or for a readjustment of such Person's debts,or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person,or if a receiver of the business or of the property or assets of such Person is appointed by any court,or if such Person makes a general assignment for the benefit of such Person's creditors. "Fiscal Year"shall mean the Lessee's fiscal year for its financial accounting purposes. "Listed Events"shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filing made pursuant to the Rule. "Participating Underwriter"shall mean Stifel,Nicolaus& Company,Incorporated. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. "Property" means the leasehold interest in the real property within the boundaries of the District on which special taxes are authorized to be levied by the District. "Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB,currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) Until this Disclosure Agreement terminates in accordance with Section 7 below, the Lessee shall, or upon written request shall cause the Dissemination Agent to, not later than three months after the end of the Fiscal Year,commencing with the report for the 2013/2014 Fiscal Year,provide or cause to be provided to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the Lessee shall provide the Annual Report to the Dissemination Agent. The Lessee shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Lessee hereunder. The Dissemination Agent may conclusively rely upon such certification of the Lessee, and shall have no duty or obligation to review such Annual Report. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4(a) of this Disclosure Agreement. If the Lessee's fiscal year changes,it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the Lessee is unable to provide to the Repository an Annual Report by the date required in subsection(a),the Lessee shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: E-11 (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB;and (ii) to the extent the Annual Report has been provided to the Dissemination Agent, file a report with the Lessee,the City and the Trustee(if the Dissemination Agent is other than the Trustee) certifying that the Annual Report has been provided pursuant to this Disclosure Agreement,stating the date it was provided and listing the Repository to which it was provided if other than the MSRB. Section 4. Content of Annual Reports. The Lessee's Annual Report shall contain or incorporate by reference the following: (a) Any delinquency in the payment of Special Taxes by the Lessee or any Affiliate thereof (b) Any pending litigation which would adversely affect the ability of the Lessee to pay Special Taxes levied on the Property. (c) Any material change in the ownership of the Lessee. (d) The average occupancy rate for the hotel constructed on the Property during the Fiscal Year for which the Annual Report is provided. (e) The assumption of any obligations of the Lessee pursuant to Section 6. In addition to any of the information expressly required to be provided as described above,the Lessee shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Lessee or related public entities,which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from EMMA. The Lessee shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5,the Lessee shall give, or cause to be given,notice of the occurrence of any of the following events: (i) failure by the Lessee or any Affiliate thereof to pay any real property taxes(including any Mello-Roos special taxes)levied within the District, (ii) material damage to or destruction of any of the Property, (iii) default by the Lessee or any Affiliate thereof on any loan with respect to the construction or permanent financing of the Property,and (iv) The occurrence of an Event of Bankruptcy with respect to the Lessee, or any Affiliate of the Lessee. Section 6. Assumption of Obligations. If the Property owned by the Lessee, or any Affiliate of the Lessee, is to be conveyed to a Person,the Lessee shall include a provision in the conveyance agreement for such Person to agree to execute an Assumption Agreement following the closing of escrow for the conveyance. E-12 The Lessee shall enter into an Assumption Agreement with any Person described in the preceding paragraph, which Assumption Agreement shall be in form and substance satisfactory to the City, or the acquiring entity shall otherwise enter into an agreement with Dissemination Agent in form substantially identical to this Disclosure Agreement (except for the identity of the "Lessee" therein). From and after the date on which an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement)is executed with respect to the Property,the Lessee shall no longer be required to comply with the requirements of this Disclosure Agreement;provided however that if,following a conveyance by the Lessee of the character described in the first sentence of this Section 6, an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement)is not executed(other than by reason of the willful misconduct of the Dissemination Agent), the Lessee shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term "Lessee" shall include, in addition to Lessee, the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Lessee's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of. (a)the legal defeasance, prior redemption or payment in full of all the Bonds, (b)the date on which the Lessee and all Affiliates of the Lessee no longer have a leasehold interest in the land in the District(subject,however,to the last paragraph of Section 6 above),(c)the date on which all Special Taxes on the Property are paid or prepaid in full (as evidenced by the recording of a Notice of Cancellation of Special Tax Lien by the City with respect to such property), and (d)the date on which the Lessee delivers to the City and the Dissemination Agent an opinion of bond counsel acceptable to the City to the effect that the continuing disclosure provided for in this continuing Disclosure Agreement is no longer required under the Rule to allow the Participating Underwriter to deal in the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Lessee shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to act as such under this Disclosure Agreement, and may discharge any such Dissemination Agent,with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Trustee. The Dissemination Agent may at any time resign by providing thirty days written notice to the City, the Lessee and the Trustee, such resignation to become effective upon acceptance of appointment by a successor Dissemination Agent. Upon receiving notice of such resignation, the City shall promptly appoint a successor Dissemination Agent by an instrument in writing, delivered to the Trustee and the Lessee. If no appointment of a successor Dissemination Agent shall be made pursuant to the foregoing provisions of this Section within forty-five(45) days after the Dissemination Agent shall have given to the City, the Lessee and the Trustee written notice of its resignation, the Dissemination Agent may apply to any court of competent jurisdiction to appoint a successor Dissemination Agent. Said court may thereupon after such notice, if any,as such court may deem proper, appoint a successor Dissemination Agent. The City shall provide the Lessee and the Trustee with written notice of the identity of any successor Dissemination Agent appointed or engaged by the City. Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Lessee may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived,provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3, 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the E-13 primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) the proposed amendment or waiver either (i)is approved by owners of the Bonds in the manner provided in the Bond Indenture for amendments to the Bond Indenture with the consent of owners, or (ii)does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the Bonds;and (d) no amendment increasing or affecting the obligations or duties of the District, the City, the Dissemination Agent or the Trustee shall be made without the consent of such party. If any annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements,the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Lessee to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repository in the same manner as for a Listed Event under Section 5(c). Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Lessee from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Lessee chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Lessee shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Lessee to comply with any provision of this Disclosure Agreement any Participating Underwriter or any owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Lessee to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Bond Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Lessee to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Lessee agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, promptly following receipt by the City of a written invoice therefor. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Lessee E-14 and shall not be deemed to be acting in any fiduciary capacity for the Lessee, the Bondholders, or any other party. The obligations of the District and the Lessee under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Lessee (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and the owners and beneficial owners from time to time of the Bonds,and shall create no rights in any other person or entity. Dated: 2013 "LESSEE" PCH BEACH RESORT,LLC,a California limited liability company By: GRAND RESORT,LLC, a California limited liability company,Managing Member By: RLM MANAGEMENT, INC.,a California corporation,Manager By: Its: "DISSEMINATION AGENT" U.S.BANK NATIONAL ASSOCIATION By: Its: E-15 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Huntington Beach Name of Bond Issue: City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that PCH Beach Resort, LLC (the "Lessee") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement-Lessee dated , 2013 executed by the Lessee for the benefit of the owners and beneficial owners of the above-referenced bonds. The Lessee anticipates that the Annual Report will be filed by Dated: ,2013 PCH BEACH RESORT,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance U.S.Bank National Association, as Trustee 633 West 51h Street,24th Floor Los Angeles,California 90071 E-16 APPENDIX F BOOK-ENTRY-ONLY SYSTEM The information in this section concerning DTC and DTC's book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal,premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. The Depository Trust Company ("DTC"),New York,New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee)or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each annual maturity of the Bonds,each in the aggregate principal amount of such maturity,and will be deposited through the facilities of DTC. DTC,the world's largest securities depository,is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System,a"clearing corporation"within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries)that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation,all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks,trust companies,and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of"AA+." The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. F-1 To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede& Co. (nor any other DTC nominee)will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the District,subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions,and dividend payments to Cede& Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant,to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained,physical certificates are required to be printed and delivered. F-2 The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event,Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. F-3 NEW ISSUE—BOOK-ENTRY-ONLY NO RATING In the opinion of Stradling Yocca Carlson&Routh,a Professional Corporation,Newport Beach,California("Bond Counsel'),under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest(and original issue discount)on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest(and original issue discount) on the Bonds is exempt from State of California personal income tax. See "TAX EXEMPTION"herein with respect to other tax consequences with respect to the Bonds. $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Dated: Delivery Date Due: September 1,as shown on the inside cover The City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds (the "Bonds")are being issued by the City of Huntington Beach Community Facilities District No.2000-1 (the"District")to refund the District's outstanding 2001 Special Tax Bonds(the"Refunded Bonds"),to fund a deposit to the Reserve Account securing the Bonds and to pay the costs of issuance of the Bonds. See"THE REFUNDING PLAN"herein. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982,as amended(Sections 53311 et seq.of the Government Code of the State of California),the Municipal Code of the City of Huntington Beach(the"City") and a Bond Indenture (the "Indenture"), dated as of July 1, 2013, by and between the District and U.S. Bank National Association, as trustee (the "Trustee"). The Bonds are special obligations of the District and are payable from Net Taxes(as defined herein)derived from a certain annual Special Tax (as defined herein)to be levied on the leasehold interest in the property within the District and from certain other funds pledged under the Indenture,all as further described herein. The Special Tax is to be levied according to the rate and method of apportionment approved by City Council of the City and the qualified electors within the District. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS"and APPENDIX A—"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"herein. The Bonds are issuable in fully-registered form and when issued will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York("DTC"). Individual purchases of the Bonds may be made in principal amounts of$5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable commencing March 1,2014 and semiannually thereafter on each September 1 and March 1. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds. See"THE BONDS—General Provisions"herein. NEITHER THE FAITH AND CREDIT NOR T14E TAXING POWER OF THE CITY, THE SUCCESSOR AGENCY,THE COUNTY OF ORANGE,THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES,NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments, and mandatory sinking fund redemption as set forth herein. See"THE BONDS—Redemption of the Bonds"herein. Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled "SPECIAL RISK FACTORS"for a discussion of certain risk factors that should be considered,in addition to the other matters set forth herein,in evaluating the investment quality of the Bonds. This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. MATURITY SCHEDULE (See Inside Cover Page) The Bonds are offered when, as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca Carlson&Rauth,a Professional Corporation,Newport Beach,California,Bond Counsel,and subject to certain other conditions. Stradling Yocca Carlson &Rauth,a Professional Corporation,is serving as Disclosure Counsel to the District with respect to the Bonds. Certain legal matters will be passed on for the City and the District by Jennifer McGrath, Esq., City Attorney. Certain legal matters will be passed on by Jones Hall, A Professional Law Corporation,San Francisco,California,as counsel to the Underwriter. It is anticipated that the Bonds in book-entry form will be available for delivery on or about July 31,2013. STIFEL Dated: July 10,2013 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS MATURITY SCHEDULE (Base CUSW: 446188) Maturity Date (September 1) Principal Amount Interest Rate Yield CuSIPt 2014 $475,000 2.000% 0.950% DG6 2015 535,000 2.000 1.700 D114 2016 545,000 3.000 2.500 DJO 2017 560,000 3.000 3.080 DK7 2018 575,000 4.000 3.400 DL5 2019 600,000 4.000 3.750 DM3 2020 625,000 4.000 4.000 DNI 2021 645,000 4.000 4.250 DP6 2022 675,000 4.250 4.500 DQ4 2023 705,000 5.000 4.625 DR2 2024 740,000 4.500 4.750 DSO 2027 850,000 5.000 5.050 DV3 $1,585,000 5.000%Term Bonds due September 1,2026 Yield: 5.000% CUSIP No.'DU5 $1,830,000 5.000%Term Bonds due September 1,2029 Yield: 5.150% CUSIP No!DWI $2,020,000 5.125%Term Bonds due September 1,2031 Yield: 5.220% CUSIP No.*DX9 t Copyright 2013, American Bankers Association. CUSIP data herein is provided by Standard and Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies,Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. Neither the District nor the Underwriter make any representations as to the accuracy of CUSIP data herein. CITY OF HUNTINGTON BEACH CITY COUNCIL Connie Boardman, Mayor Matthew Harper,Mayor Pro Tern Joe Carchio,Council Member Jill Hardy,Council Member Jim Katapodis, Council Member Joe Shaw,Council Member Dave Sullivan,Council Member CITY OFFICIALS Fred Wilson,City Manager Robert Hall,Assistant City Manager Alisa Cutchen,City Treasurer Joyce Zacks,Deputy City Treasurer Lori Ann Farrell,Director of Finance Joan L.Flynn, City Clerk Jennifer McGrath,Esq.,City Attorney Kellee Fritzal,Deputy Director of Economic Development Sunny Han, Senior Administrative Analyst,Finance Department BOND COUNSEL AND DISCLOSURE COUNSEL Stradling Yocca Carlson&Rauth, a Professional Corporation Newport Beach,California SPECIAL TAX CONSULTANT Willdan Financial.Services Temecula,California FINANCIAL ADVISOR Public Financial Management,Inc. Los Angeles,California TRUSTEE/ESCROW BANK U.S. Bank National Association Los Angeles,California VERIFICATION AGENT Grant Thornton LLP Minneapolis,Minnesota Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District,the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer,solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion,whether or not expressly so described herein,are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction,but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. Certain statements included or incorporated by reference in this Official Statement constitute "forward- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933,as amended. Such statements are generally identifiable by the terminology used such as a"plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT"and"LEASEHOLD OWNERSHIP AND THE HOTEL." The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results,performance or achievements expressed or implied by such forward-looking statements. Except as set forth in the District's Continuing Disclosure Agreement and the Leasehold Owner's Continuing Disclosure Agreement forms of which are attached hereto as Exhibit E, neither the District nor the City plans to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. A wide variety of other information,including financial information,concerning the City,is available from publications and websites of the City and others. No such information is a part of or incorporated into this Official Statement. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. TABLE OF CONTENTS Page INTRODUCTION................................................................................................................................................1 TheDistrict.......................................................................................................................................................1 TheSuccessor Agency......................................................................................................................................2 DistrictFormation.............................................................................................................................................2 ForwardLooking Statements............................................................................................................................3 Sourcesof Payment for the Bonds....................................................................................................................4 Descriptionof the Bonds..................................................................................................................................4 TaxExemption..................................................................................................................................................5 Professionals Involved in the Offering.............................................................................................................5 ContinuingDisclosure......................................................................................................................................5 BondOwners' Risks.........................................................................................................................................6 OtherInformation.............................................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS............................................................................................6 THEREFUNDING PLAN...................................................................................................................................7 THEBONDS........................................................................................................................................................7 Authorityfor Issuance......................................................................................................................................7 Purposeof the Bonds........................................................................................................................................7 GeneralProvisions............................................................................................................................................7 DebtService Schedule......................................................................................................................................8 Redemptionof the Bonds .................................................................................................................................8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS..................................................................10 SpecialTaxes..................................................................................................................................................I I Lease Remedy Forbearance Agreement.........................................................................................................13 Proceeds of Foreclosure Sales........................................................................................................................14 Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met...........................................15 ExistingLiens.................................................................................................................................................15 No Obligation of the City Upon Delinquency................................................................................................15 Special Taxes Are Not Within Teeter Plan.....................................................................................................16 ReserveAccount.............................................................................................................................................16 Priority of Bonds and Pledge of Net Taxes.....................................................................................................16 NoAdditional Bonds......................................................................................................................................17 THE COMMUNITY FACILITIES DISTRICT.................................................................................................17 Location..........................................................................................................................................................17 Authorization..................................................................................................................................................17 Rate and Method of Apportionment of Special Tax.......................................................................................18 PublicFacilities...............................................................................................................................................19 Estimated Direct and Overlapping Indebtedness............................................................................................ 19 Estimated Assessed Value-to-Lien Ratio........................................................................................................20 DelinquencyHistory.......................................................................................................................................21 LEASEHOLD OWNERSHIP AND THE HOTEL............................................................................................22 The Property Owner-***....­..............***'**.......**....**...**...­........ wner.................................................................. 22 TheHotel........................................................................................................................................................22 Summaryof the Ground Lease.......................................................................................................................24 TransientOccupancy Tax...............................................................................................................................26 THE CITY OF HUNTINGTON BEACH..........................................................................................................27 SPECIALRISK FACTORS...............................................................................................................................27 Concentrationof Ownership...........................................................................................................................27 Risks Associated with Ground Lease and the Dissolution Act.......................................................................27 i TABLE OF CONTENTS (continued) Page Risks of Real Estate Secured Investments Generally.....................................................................................28 LimitedObligations........................................................................................................................................28 Insufficiency of Special Taxes........................................................................................................................29 NaturalDisasters.............................................................................................................................................30 HazardousSubstances.....................................................................................................................................30 Payment of the Special Tax is not a Personal Obligation of the Leasehold Owner........................................31 LeaseholdValue.............................................................................................................................................31 Parity Taxes and Special Assessments............................................................................................................31 Disclosures to Future Purchasers........................................................................................:...........................32 FDIC/Federal Government Interests in Properties..........................................................................................32 Bankruptcy and Foreclosure...........................................................................................................................33 Funds Invested in the County Investment Pool ..............................................................................................34 No Acceleration Provision..............................................................................................................................34 LimitedSecondary Market.............................................................................................................................34 Proposition218...............................................................................................................................................35 Ballot Initiatives and Legislative Measures....................................................................................................36 Lossof Tax Exemption...................................................................................................................................36 IRS Audit of Tax-Exempt Bond Issues...........................................................................................................36 Limitationson Remedies................................................................................................................................37 CONTINUING DISCLOSURE..........................................................................................................................37 TAXEXEMPTION............................................................................................................................................37 LEGALOPINION..............................................................................................................................................39 ABSENCE OF LITIGATION............................................................................................................................39 NORATING......................................................................................................................................................39 UNDERWRITING.............................................................................................................................................40 FINANCIALINTERESTS.................................................................................................................................40 NEWLEGISLATION........................................................................................................................................40 ADDITIONAL INFORMATION.......................................................................................................................40 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1 APPENDIX B FORM OF OPINION OF BOND COUNSEL.......................................................................B-1 APPENDIX C GENERAL ECONOMIC AND DEMOGRAPHIC DATA FOR THE CITY OF HUNTINGTON BEACH AND THE COUNTY OF ORANGE..................CA APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE...................................D-I APPENDIX E FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER......................................................................E-1 APPENDIX F BOOK-ENTRY-ONLY SYSTEM.........................................................................................F-1 ii City of Huntington Beach Community Facilities District No. 2000-1 Grand Coast Resort �,�� 'n,: Iqw,'«�,,� ��'„r: � �' I: I� 11'„� �° pal:• Ills rvl ""��"'°'�Y a=.�"r�•i' � ` ' .�✓o II _-� .� fell 110.,'s�iY� >< fT r, c .,a��^-,z a s `a'r .'; ,q• �: + _,�, C> ,,Ivy 5*c. ,:�r� -- YL Z k ''� � � 3 � .u,.0 I I I u: 'w,� - I II a '' ''�'�dk I ..,� •� � `�r._ RT �h I,i� �',Gn�..�r�'rrv'� s 4"""..'�.._ , » mow~•,,, _ _:, , ,. � ,,... rA u _r., i L� _.v'�d" 3",� �,'�%;� iwl, w ,,e"� - �'+�". „.'� � ...e• -:�, :..-_ ".. ,d.,..,� � '. � � y°[w „e;.�•^. �..�1J�`»""`,.'.� z` I��x"` k�"'""rM"rr�^�" � u �r�rr""�yy.''� ,"''>�—��'""" .:�s,�.. �agmR]c n '� .' R '•',: ,;.,k I , �r W w ,' e r - .5't ,uv_, ym tpyly, :".,: :,r:. Hall II,�I'^u IIIII�IuiV,: h1 ,.::,.y '''r ,. 'r> I „': Y. �.r : �.r ,:�ir:Efi �.: .:` - ,L.�^ G.r, ,.�JI,:xf ;� z •.vX. .kv L"z� *,� rrs ac", ,r>n, v•,. -- .: .,�P'A d+'":':: •' r' ':Vr ,v� .M•+—'?fir :,: >:.r�`� --- .. iY"..;:„1 .�.''`:a r,;a , �.� �'•,a rm .�I:' .•''t +. �1':"'+ 1.., •,1'a wadi:,:: . - ,-.,:.. a., ,s'.'.;, '-'i"e,�,,;"°'-�.. ._'c,. ,.•,:.r:� ,:r."Yc._ III�,i711 li upli J.,,i, tI,IN''+ .a>II,,Yrrl'•'" IV:"V s�':: •.,r,. ,ICI : � r ':`-.r r't -•�t"` p e .- "w•"''``"R ,'„;+"uy.:.,�::wg.+w: "' �:--'a's"-� a' ^'�.'^,'ri'� v'�-:,wr µl �re rW ul:���+'. 5 -wE:L. -:�".•>�. 1~�-- .,.....rw ,I ,,,,a,r� „,,,, ✓:E:: ,a::, :'�' ',G,�,: �-- �. :- •-.t� ,«G h,.LL,-; I uln,.__.�r{Y... _,., .��, :",_ ;,a - _"h ---1',:•..,ta.,.R �. a9ll r^I. ti flNa !:u,�., o .'+uu:rl,v�l,I. ::�� '... ,.a. •. : ".,. .,, ,, ,•-': � '-. �',�.''�`"'-.cam '.^ _,E .z .,_._ , - ^- :a I!"^ uILI q! , 4rf'IBC'°1„.,�"'�,. .,, •�f,� , �. 11 V•4ti - rglV ,:�:- ,:n r°, r.:1' Y •: -:.E, ' ', :.�y."",qn .... , � aV..F y,lE 1„z -.lm,- q�•�II u.l n,^. : �, ,.r� d E, -. a n,r � „ ,„ : .., , a a-°`• L., i ,.. F„ ,- ii• r::,:,w,o ... ,.. .,, e_ ..�-,. «.. ., -. -. .r` , it nIIINII. Ilgl I II III, �I:., ,a:.k.,_ ,w.. i J. �,:•w - ., .,.E rdh .n: I h iVi III II ,. w: VV„Ih, .. -. • �_..- .. ��'. � . .�. �T� e �-r�= - +3• a,� �_ �d�u � VIII I,fllllyf(�.IuV:•r.,. :W� I ^" '-',: _ '� ,,,:v.�m. •d... -.±�u - r,. �,.„' ,. ,d q.�' .. -. I I -e:V ,: - :, ,,: '. , , 'R:`..i -,r .: .- Y ,,,� :r�'S„ ., i -.::, .::.:`i -"''. •:-�. � �, '.:?s-.� .f, r..- ,;rti:- .. :':r r,�l,�, I, - ,.•,. a - um :, ', E Ilh. � II - d:�c .� �,:: .,_ �, rv: xw°__ya, �. ''�'. .. . r", - r .�' .i ,.NI �' .�+.,19 .L ,�'`._, ,ua,.,�11!II lu i El 'q N:,,I:Vlllll_ -- i. o:hVll �i:.... VI .�u.:„�E:: ._.3:, w II -N„Y ., ,. � :. ,. ,..-- ,>« ----*•L ':�„ �. .- :�,_.�,ca ' :-�� .,.+° _ •;f rvu��`}�tu. A��.ti, , �II um����r:,hbah�1 _ .' I �€�I, Ir,r -pl„: � fill ifll!I�V���lll�,phlf�l�! '.. a,_..:... L, d,:.. �. _-,«rr, -�:a.�=_-, '� .'.„�'x�-,,._ ,':ror* m°',. #Yx '�"-�M;'.�� r [y .. , .,� w""`�.,nE,:;IpQlll hull I� fff.•�•',�- ,, - ''il r,:, IN-,.-::'"�"rwr., •,: ,III:,„I �4»L'' '� ,w�w�mhw. w' .,..,:.ip w � , tyr:- � � r_-.t• �.�,- IIII.�:��6 i ,::!.x L,-_ �,",c °' r ^s„ ti ,I'r', �i*,'. _'„ -r v Ifi x»�I'�� IIIIII"<a:VNm ,;,; r of rr a ur::' E',': -,` ?,fir N>r J m Ij,;-.,� ..:,, ':?k. , =""ham ''� w.- r.r,.. '• i` ,3--. .a:-` _ '"- _wx - - _ _y I�,II II�I�� . ,f!.•I-....,�. ml �:p;,' vx...I_ ,'„R, �q:,.,_. fJmm�I:IQgf�,..:, _ �-•..-_.., s--, a a, ,.-- � -r:';, ��:rr a all!II i, u,": ., � � �,,,...., ,'� ;t„a,,, . +. _ >r � ,�:; ,� w '�. „ ,.�Y.-h."„ .---..,I" .�h _.-.: "� ��,. � �-=_-•,,� t� .fi�"i ��.6, .. .,,,::, ° �*',- s i avfi -i� .p:: "�i, '`.• .�"::r" 6� I�:--�";� �„w,. ,«a-�,-�2�-' .�IPI �I"�i _..ITM,,,uIIJ,s xa � '� �- Tluq y VV�� '+P � r-.,,.;,,,-- t r-:•.^ .-_'.'..:..,�^, -� �,, �„,: y ,,, ,��� �. -_,, �,=- � 4 _ a•k_ ..''tom"§> '.�.w�= - �' -_ I�..:r� i III IIII l .» °'� r ',. .. •:« I •a :�u Ih r f^":^.,u x ..'+ .,,"' a nf� i'> -�.,.,:,. ,w m r ,.:?a '�„.'' :•.� ,];r - rL+r "= _.Y, -`ram." '_;- ' ,..,,, wVlY�i ,;,_ -z:_ � E:!If,r `�°,°dv„•e' -� jl�G�mr„�� a .•:, --' p =, ::,",. -. E, ,„ - � �.n,, -rh�-.iN.» �., -�' ;�".„ __ ._. =_'�e •� �_II-,�i i•� _ "• 3'� �t '�- u��� r,.a•�,::._•.: '"�=.y,�I w III9 rv':'ll IIII-' III ld ,+b'? I w - 1I I GY1 �hr „I w I �,1,,. rvl -...,;y+�l ._ ad ,"` f-,11nr�.">* .P� • -.."�� r _ !`- -._.z,�- .-- � s`;.. �=^:_ .,- ^t �'. �".� � _ .�. pp- ,,, .�_ � ,,,. : _�.._ y �, �� �,, �,d ;� ' _ '� .•y.�ra��,- ,.i�r^�'-a,t w .t M�ltil r ml l IIWVIQ 11��w�I I•I,_: I Iqx ii I�� -�� " .,,z�ul..�w:d''_ '�w^,, ,ra:'- ,:� .a - ••^:�- �- `'--., :�� r.'- :r-"=u .,- _--,rr _ - -_ ,�s I n." y!:VIIP :��I.'�, �. �GJ u� I�III ' '��IVNI° � �"�NfN °Isl�p:.,: w l '� 9 „"^rf:,� ry _a ''1 �' ,• m� ; I r--- „ '.4-2 .E �'�_�,�_�^" ..r+:-� -: IB--_ill I�t>�w�"' i?;�!I�-� �.�� ..�_:,du a ,k :���,.� r� �,v ,;Wv'� ulVl ��"q„-I=�I,Iw I _ +� •�[-;avr ;r,w�`,„off°'� .__,�� .I: .-- I�-d�a:, Ifhll+,I IIII �� III ulldn i IVIa � I r� , II Y �'r +rvt.� i-r;�'� �' n ry _ puii r �, li IVIVI �uQ llll� - dIV VI_ WI� fil w (THIS PAGE IS INTENTIONALLY LEFT BLANK) $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS INTRODUCTION The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)(the "District") of its City of Huntington Beach Community Facilities District No. 2000-1 2013 Special Tax Refunding Bonds in the aggregate principal amount of $12,965,000 (the "Bonds"). The proceeds of the Bonds, together with certain existing funds of the District, will be used to defease all of the District's outstanding 2001 Special Tax Bonds, originally issued in the aggregate principal amount of$16,000,000 and now outstanding in the principal amount of$13,330,000(the"Refunded Bonds"). A portion of the Bonds will be used to fund a deposit to the Reserve Account and to pay costs of issuance of the Bonds. See "THE REFUNDING PLAN"and`ESTIMATED SOURCES AND USES OF FUNDS"herein. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Act"), the provisions of Chapter 3.56 (commencing with 3.56.010) of the Municipal Code of the City of Huntington Beach(the"City") and that certain Bond Indenture dated, as of July 1, 2013 (the"Indenture"), by and between the District and U.S. Bank National Association, as trustee (the "Trustee"). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as defined herein) to be levied within the District and all moneys in the Special Tax Fund as described in the Indenture. This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in "APPENDIX D — SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." The District The District consists of a single parcel of 15.103 acres located on Pacific Coast Highway directly across from the beach and the Pacific Ocean at the northwest corner of the intersection of Beach Boulevard and Pacific Coast Highway in the City. The District is fully developed with a 517 guest room hotel generally known as the"Hyatt Regency Huntington Beach Resort and Spa" (the"Hotel") owned by PCH Beach Resort, LLC, a California limited liability company (the"Leasehold Owner" or"Lessee"). See"THE COMMUNITY FACILITIES DISTRICT"and"LEASEHOLD OWNERSHIP AND THE HOTEL." The fee simple interest in the land in the District is owned by the City as Successor Agency (the "Successor Agency") to the Redevelopment Agency of the City of Huntington Beach (the "Agency"). The Leasehold Owner has entered into a ground lease, dated April 4, 2001, with the Agency (the "Ground Lease"), with a term of 99 years (the "Term"), whereby the Leasehold Owner has leased all of the land in the District. The Ground Lease provides that throughout the Term, all improvements constructed pursuant to the Ground Lease are the property of the Lessee; at the expiration or termination of the Ground Lease,the improvements become the property of the fee owner. The Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Ground Lease. See "— The Successor Agency," "LEASEHOLD OWNERSHIP AND THE HOTEL — Summary of the Ground Lease"and"SPECIAL RISK FACTORS—Risks Associated with Ground Lease and the Dissolution Act." 1 The leasehold interest created by the Ground Lease constitutes the taxable property in the District. In the event the Special Taxes are not paid, the District will foreclose on the leasehold interest, not on the fee simple interest which is owned by the Successor Agency. The City and the Agency entered into an agreement, dated as of December 11 2001 (the "Lease Remedy Forbearance Agreement"), whereby the Agency agreed that, in the event of the occurrence of an uncured default by the Leasehold Owner or any successor thereto under the Ground Lease,the Agency will not exercise a remedy under the Ground Lease that would allow the Agency to terminate the Ground Lease unless either the Special Taxes have been paid in full and the Bonds are no longer outstanding,or the Agency has prepared a new lease agreement with a subsequent lessee to maintain the leased premises and has obtained the written consent of the City to such termination and new lease. The Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Lease Remedy Forbearance Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS— Lease Remedy Forbearance Agreement." The Successor Agency On June 29, 2011, Assembly Bill No. 26 ("AB 1X 26") was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27("AB 1X 27"). A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 29, 2011) (the "California Redevelopment Association case"), challenging the constitutionality of AB 1X 26 and AB 1X 27. The California Supreme Court largely upheld AB 1X 26, invalidated AB 1X 27,and held that AB 1X 26 may be severed from AB 1X 27 and enforced independently. As a result of AB 1X 26 and the decision of the California Supreme Court in the California Redevelopment Association case,as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies. The primary provisions enacted by AB 1X 26 relating to the dissolution and wind down of former redevelopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484("AB 1484"),enacted as Chapter 26, Statutes of 2012 (as amended from time to time, the"Dissolution Act"). On January 10, 2012, pursuant to Sections 341710) and 34173 of the Dissolution Act, the City Council elected for the City to serve as successor agency to the Agency. Pursuant to legislation enacted by the California Legislature in 2011 (AB 1X 26)and 2012(AB 1484),the Successor Agency continues to collect the ground rent and all other payments from the Lessee; however, under the Dissolution Act, such payments are allocable among the County of Orange, the City and other taxing agencies having jurisdiction within the Huntington Beach Redevelopment Project (per Ordinance No. 3343 of the City as adopted December 16, 1996). Under the Dissolution Act,the administration by the Successor Agency of assets of the former Agency is subject to an oversight board consisting of representatives of the City, the County of Orange and other taxing agencies(the"Oversight Board")and the California Department of Finance("DOF"). District Formation The District was formed on April 17, 2000. The Bonds are being issued pursuant to the Act, the Municipal Code of the City, and the Indenture. The Act was enacted by the State of California (the "State") legislature to provide an alternative method of financing certain public capital facilities and services,especially in developing areas of the State. Any local agency(as defined in the Act)may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. 2 On May 3, 1999,the City Council of the City adopted Ordinance No. 3417 which added Chapter 3.56 to the Huntington Beach Municipal Code entitled "City of Huntington Beach Special Tax Financing Improvement Code."On March 18, 2002,the City Council of the City adopted Ordinance No. 3546 amending Chapter 3.56 of the City's Municipal Code to allow for the levy of special taxes to pay for the maintenance of facilities financed under said section of the City's Municipal Code. The proceedings to form the District have been conducted under said section of the City's Municipal Code and, where applicable by reason of the provisions of the Municipal Code,the Act,as amended(collectively,the"Law"). Pursuant to the Law, on January 18, 2000,the City Council of the City(the"City Council"),adopted a resolution stating its intention to form the District and to authorize the levy of a special tax on the taxable property within the District,which consisted of the leasehold interest in the only parcel in the District. The fee simple interest in such parcel was owned by the Agency. Additionally, on January 18, 2000, the City Council adopted a resolution stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $16,000,000 within the District for the purpose of financing the costs of certain public facilities consisting of the acquisition of land for and construction of certain roadway, pedestrian bridge and other improvements generally related to the development of the Hotel within the District (collectively, the "Public Facilities"). Subsequent to a noticed public hearing on April 17, 2000, the City Council adopted Resolution No. 2000-35 (the "Resolution of Formation") which established the District and authorized the levy of a special tax within the District in accordance with the rate and method of apportionment for the District (the "Rate and Method"). The City Council also adopted on April 17, 2000, Resolution No. 2000-36("Resolution to Incur Bonded Indebtedness") which determined the necessity to incur bonded indebtedness in an amount not to exceed $16,000,000 within the District, called an election within the District on the propositions of forming the District, incurring bonded indebtedness not to exceed$16,000,000 as set forth in the Resolution to Incur Bonded Indebtedness, levying a special tax within the District in accordance with the Rate and Method and setting an appropriations limit. All propositions were approved by the Agency as the sole qualified elector within the District, which was the sole record landowner within the District at the time of the election,at an election held on April 17,2000. On April 24, 2000, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No. 20000210584 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by Resolution No. 2001-90 adopted by the City Council on November 19,2001. The Bonds are being issued and delivered pursuant to the provisions of the Law and the Indenture. The Bonds are being sold pursuant to a Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter") and the District. For more complete information, see "THE BONDS—General Provisions"herein. Forward Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements"within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21 E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" and "LEASEHOLD OWNERSHIP AND THE HOTEL." THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY 3 FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. Sources of Payment for the Bonds As used in this Official Statement, the term"Special Tax" is that tax which has been authorized to be levied against the leasehold interest in the property within the District pursuant to the Act and in accordance with the Rate and Method. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF. SPECIAL TAX"herein. Under the Indenture,the principal of and interest on the Bonds are payable from Net Taxes and all amounts in the Special Tax Fund (including the Debt Service Account, the Principal Account and the Reserve Account) established under the Indenture. The "Net Taxes" are the Special Tax proceeds, including all proceeds from foreclosure sales for delinquent Special Taxes, remaining after payment of the Administrative Expenses in an amount not exceeding the Administrative Expenses Cap (as defined below). The Bonds are secured only by the Net Taxes collected within the District and amounts in the Special Tax Fund. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES LEVIED WITHIN THE DISTRICT AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Net Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in certain funds under the Indenture, including amounts held in the Reserve Account of the Special Tax Fund. The District has covenanted for the benefit of the owners of the Bonds that it will, under certain circumstances described herein, commence, or cause to be commenced, and diligently prosecute to judgment(unless the delinquency is brought current),judicial foreclosure proceedings against the leasehold interest within the District for the collection of delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales"herein." The District has covenanted not to issue additional indebtedness secured by the Special Taxes on a parity basis to the lien of the Bonds, except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied on the property within the District. See"SPECIAL RISK FACTORS— Parity Taxes and Special Assessments"herein. EXCEPT FOR THE NET TAXES,NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. Description of the Bonds The Bonds will be issued and delivered as fully-registered Bonds, registered in the name of Cede& Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds (the "Beneficial Owners") in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry-only system described herein is no longer used with 4 respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX F—"BOOK-ENTRY-ONLY SYSTEM." Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC Participants. See APPENDIX F—`BOOK- ENTRY-ONLY SYSTEM." The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments, and mandatory sinking fund redemption as described herein. For a more complete descriptions of the Bonds and the basic documentation pursuant to which the Bonds are being sold and delivered,see"THE BONDS"and APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE"herein. Tax Exemption In the opinion of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. See"TAX EXEMPTION"herein. Set forth in APPENDIX B is the opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain other tax consequences incidental to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, see "TAX EXEMPTION"herein. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles,California,will act as Trustee under the Indenture and as Escrow Bank under the Escrow Agreement (each as defined herein). Stifel, Nicolaus & Company, Incorporated, is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California,Bond Counsel and Disclosure Counsel. Certain legal matters will be passed on for the City and the District by the City Attorney, Jennifer McGrath, Esq. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. Other professional services have been performed by Public Financial Management, Inc., Los Angeles, California, as Financial Advisor, Willdan Financial Services, Temecula, California, as Special Tax Consultant and Grant Thornton LLP,Minneapolis,Minnesota,as verification agent. For information concerning whether certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see "FINANCIAL INTERESTS"herein. Continuing Disclosure The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system available on the Internet at http://emma.msrb.org ("EMMA") certain annual financial information and operating data. The District will further agree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5)(the"Rule"). In addition,the Leasehold Owner will agree to provide or cause to be provided, to EMMA certain annual information with respect to the 5 Leasehold Owner and the Hotel and notice of certain listed events to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" herein and APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and the Leasehold Owner and notices of listed events to be provided by the District and the Leasehold Owner. See"CONTINUING DISCLOSURE." Bond Owners'Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled"SPECIAL RISK FACTORS"for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. See"SPECIAL RISK FACTORS"herein. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Indenture,the Bonds and the constitution and laws of the State as well as the proceedings of the City, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture. Copies of the Indenture and other documents and information are available for inspection and (upon request and payment to the District of a charge for copying,mailing and handling)for delivery from the City at 2000 Main Street,Huntington Beach,California 92648,Attention: Director of Finance. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of Bond proceeds, together with prior funds on hand. Sources of Funds Principal Amount of Bonds $12,965,000.00 Less: Net Original Issue Discount (35,759.20) Less: Underwriter's Discount (78,087.50) Plus: Prior Funds(l) 2,091,880.48 Total Sources 14.943,03338 Uses of Funds: Escrow Fund $13,757,328.75 Administrative Expense Fund 10,000.00 Reserve Account of the Special Tax Fund 1,091,775.00 Costs of Issuance Fund(2) 83,930.03 Total Uses S 14,943,033.78 Includes Special Tax collections and prior reserve,debt service and administrative expense funds. (2) Includes legal,financial advisory,Special Tax Consultant and Trustee fees and costs. 6 THE REFUNDING PLAN A portion of the proceeds from the sale of the Bonds will be used along with other funds held by the District to defease the Refunded Bonds. The District will enter into an Escrow Agreement with regard to the Refunded Bonds (the "Escrow Agreement"), dated as of July 1, 2013, by and between the District and U.S. Bank National Association, as prior trustee and as escrow bank (the "Escrow Bank"). An irrevocable escrow fund will be established under the Escrow Agreement (the "Escrow Fund"). The moneys deposited with the Escrow Bank will be sufficient to pay the principal and interest due on September 1, 2013 on the Refunded Bonds and to redeem the Refunded Bonds maturing on and after September 1, 2014, on September 1, 2013 (the"Redemption Date"). Moneys on deposit in the Escrow Fund will be held uninvested as cash or invested in non-callable federal securities. Upon the establishment of the Escrow Fund as described above, the Refunded Bonds will be discharged under the Indenture and the owners of the Refunded Bonds will have no rights thereunder except to be paid the principal and interest due on the Refunded Bonds from amounts in the Escrow Fund. Grant Thornton LLP, Minneapolis, Minnesota, upon delivery of the Bonds, will deliver a verification report relating to the sufficiency of moneys deposited into the Escrow Fund to pay the principal of, interest on and the redemption price with respect to the Refunded Bonds on the Redemption Date. THE BONDS Authority for Issuance The Bonds in the aggregate principal amount of $12,965,000 are authorized to be issued by the District under and subject to the terms of the Indenture, the Law and other applicable laws of the State of California and the City. Purpose of the Bonds The Bonds are being issued to provide funds to (i)redeem the Refunded Bonds, (ii)fund a deposit to the reserve account securing the Bonds, and (iii)pay the costs of issuance of the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS"and"THE REFUNDING PLAN"herein. General Provisions The Bonds will be issued and delivered initially in book-entry form and will bear interest at the rates per annum and will mature on the dates set forth on the inside cover page hereof. Individual purchases of the Bonds may be made in principal amounts of$5,000 and any integral multiple thereof. The Bonds will be dated the Delivery Date and interest will be payable thereon on September 1 and March 1 of each year, commencing March 1, 2014 (individually, an "Interest Payment Date"). Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i)the date of authentication is an Interest Payment Date, in which event it shall bear interest from such date, (ii)the date of authentication is after the 15th day of the month, regardless of whether such day is a Business Day but prior to the immediately succeeding Interest Payment Date(a"Record Date"), in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or (iii)the date of authentication is prior to the close of business on the first Record Date, in which event interest shall be payable from the Delivery Date; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment, or if no interest has been paid or made available for payment on that Bond, interest on that Bond shall be payable from the Delivery Date. 7 The Bonds are issued as fully-registered bonds and will be registered in the name of Cede& Co., as nominee DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. See APPENDIX F—"BOOK-ENTRY-ONLY SYSTEM." Debt Service Schedule The Special Tax is to be levied against the leasehold interest in the property within the District and collected according to the Rate and Method. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The District has covenanted to levy the Special Tax each year in time to have it placed on the property tax roll of the County of Orange (the"County"). Actual collections of the Special Tax will depend on the Special Tax delinquencies. See "THE COMMUNITY FACILITIES DISTRICT—Delinquency History." The following table sets forth the debt service schedule for the Bonds assuming no optional or special mandatory redemption. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS DEBT SERVICE SCHEDULE Period Ending Total September I Principal Interest Debt Service 2014 $ 475,000.00 $ 613,829.27 $ 1,088,829.27 2015 535,000.00 555,662.50 1,090,662.50 2016 545,000.00 544,962.50 1,089,962.50 2017 560,000.00 528,612.50 1,088,612.50 2018 575,000.00 511,812.50 1,086,812.50 2019 600,000.00 488,812.50 1,088,812.50 2020 625,000.00 464,812.50 1,089,812.50 2021 645,000.00 439,812.50 1,084,812.50 2022 675,000.00 414,012.50 1,089,012.50 2023 705,000.00 385,325.00 1,090,325.00 2024 740,000.00 350,075.00 1,090,075.00 2025 775,000.00 316,775.00 1,091,775.00 2026 810,000.00 278,025.00 1,088,025.00 2027 850,000.00 237,525.00 1,087,525.00 2028 890,000.00 195,025.00 1,085,025.00 2029 940,000.00 150,525.00 1,090,525.00 2030 985,000.00 103,525.00 1,088,525.00 2031 1,035,000.00 53,043.76 1,088,043.76 Totals: S12,965,000.00 56,632,173.03 S19,597,173.03 Source: The Underwriter. Redemption of the Bonds Optional Redemption. The Bonds maturing on or after September 1,2024 are subject,at the option of the District,to call and redemption, as a whole or in part as selected by the District, from any available source of funds prior to their stated maturity on any date on or after September 1,2023 at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium. 8 Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments as a whole, or in part on a pro rata basis among maturities,on any Interest Payment Date,and shall be redeemed by the Trustee, from Special Tax Prepayments deposited to the Redemption Account, plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed,together with accrued interest to the date of redemption: Redemption Dates Redemption Price Any Interest Payment Date through March 1,2021 103% September 1,2021 and March 1,2022 102 September 1,2022 and March 1,2023 101 September 1,2023 and any Interest Payment Date thereafter 100 Mandatory Sinking Fund Redemption. The Bonds maturing on September 1, 2026, September 1, 2029 and September 1, 2031 are hereinafter referred to as "Term Bonds." The Term Bonds maturing on September 1, 2026 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2025, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof,plus accrued interest to the redemption date, without premium,as follows: Term Bonds Due on September 1,2026 Year (September 1) Principal Amount 2025 $775,000 2026(Maturity) 8105000 The Term Bonds maturing on September 1, 2029 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account,on September 1,2028,and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date,without premium,as follows: Term Bonds Due on September 1,2029 Year (September 1) Principal Amount 2028 $8905000 2029(Maturity) 9405000 The Term Bonds maturing on September 1, 2031 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account,on September 1,2030,and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof, plus accrued interest to the redemption date,without premium,as follows: 9 Term Bonds Due on September 1,2031 Year (September 1) Principal Amount 2030 $ 985,000 2031 (Maturity) 1,035,000 In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed (except with respect to mandatory sinking fund redemption in which case selection shall be by lot),the Trustee shall select Bonds pro rata among maturities and by lot within a maturity. The portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of$5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Trustee shall promptly notify the District in writing of the Bonds,or portions thereof,selected for redemption. Notice of Redemption. At least 30 days but no more than 60 days prior to the redemption date, the Trustee shall mail a copy of such notice,by first class mail, postage prepaid,to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and neither the failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. Any notice of redemption may condition such redemption upon the receipt of sufficient available funds on the date of redemption. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS As described below, the principal of and interest on the Bonds are payable from Net Taxes and all amounts in the Special Tax Fund (including the Debt Service Account and the Reserve Account) established under the Indenture. Amounts in the Administration Fund, the Surplus Fund and the Rebate Fund are not pledged to the repayment of the Bonds. The Net Taxes are the Special Tax proceeds, including all proceeds from foreclosure sales for delinquent Special Taxes,remaining after payment of the Administrative Expense in an amount not to exceed the Administrative Expenses Cap of$20,000, escalating 2% annually commencing with Fiscal Year 2014-15. The Bonds are secured only by the Net Taxes collected within the District. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. 10 Special Taxes In accordance with provisions of the Law, the District was established by the City Council on April 17,2000. The Agency, as the sole owner of the land within the District,voted to authorize the District to incur bonded indebtedness to finance costs related to the Public Facilities, said indebtedness to be secured by the Special Tax to be levied upon the leasehold interest of the Leasehold Owner to be created under the Ground Lease. See "LEASEHOLD OWNERSHIP AND THE HOTEL — Summary of the Ground Lease" herein. At the same time, the Agency approved the levy of the Special Tax as provided in the Rate and Method to pay the principal and interest on the Bonds, to pay the administrative expenses of the District, and to replenish the Reserve Account to the amount of the Reserve Requirement, all consistent with the Rate and Method, the Law and the Indenture. See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Tax" herein for a description of the Rate and Method, and APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" attached hereto for the complete text of the Rate and Method. In the Indenture, the District has agreed to effect the levy of the Special Taxes each Fiscal Year in accordance with the Law by August I of each year(or such later date as may be authorized by the Law or any amendment thereof) that the Bonds are outstanding, such that the computation of the levy is complete before the final date on which the County Auditor will accept the transmission of the Special Tax amounts for the leasehold interest created by the Ground Lease, for inclusion on the tax roll for the Fiscal Year then beginning. Upon the completion of the computation of the amounts of the levy of the Special Taxes, the District is obligated under the Indenture to prepare or cause to be prepared, and to transmit to the County Auditor, such data as the County Auditor requires to include the levy of the Special Taxes on the tax roll. The City Treasurer or his or her designee is directed to fix and levy the amount of Special Taxes within the District required for the payment of principal and of interest on the Bonds becoming due and payable on the next Interest Payment Date, including any necessary replenishment or expenditure of the Reserve Account and an amount estimated to be sufficient to pay the Administrative Expenses during such year, taking into account the balances in the funds, and any transfer or expected transfers expected to occur for such purpose, under the Indenture. The Special Taxes may not exceed the authorized maximum amount in the Rate and Method. See "THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Taxes"herein. The Indenture provides that the Special Tax shall be collected in the same manner as ordinary ad valorem property taxes are collected and, except as otherwise provided in the foreclosure covenant in the Indenture and in the Law, the Special Tax shall be subject to the same penalties and the same collection procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. Notwithstanding the foregoing, the Indenture provides that the City Council may elect, as permitted by the Law, to collect the Special Taxes to be levied for any Fiscal Year directly from the lessee of the parcel of taxable property upon which the Special Taxes are levied rather than by transmitting the Special Taxes to the Auditor for collection on the tax roll. The Finance Director will, no later than the last day of each month during which the Special Taxes are apportioned to the District, transfer Special Taxes to the Trustee to be deposited in the Special Tax Fund. Special Tax Prepayments will immediately be transferred by the Finance Director to the Trustee for deposit to the Redemption Account of the Special Tax Fund to redeem Bonds in accordance with the Indenture. See "THE BONDS — Redemption of the Bonds — Special Mandatory Redemption for Special Tax Prepayments." On the dates specified in the Indenture and if there are sufficient amounts available in the Special Tax Fund for such purposes, the Trustee shall make the following transfers and in the priority as follows: First: To the Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied for in the current Fiscal Year up to the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of Administrative Expenses up to half of the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary 11 Administrative Expenses) levied for in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of (i) the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year,or(ii)March 2 of such Fiscal Year; Second: To the Debt Service Account, an amount such that the balance in the Debt Service Account one Business Day prior to each Interest Payment Date shall be equal to the principal of, and interest on the Bonds, on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest and principal of the Bonds as the same become due; Third: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement; Fourth: To the Administrative Expense Fund for Administrative Expenses not previously deposited to the Administrative Expense Fund; Fifth: To the Rebate Fund established by the Indenture for payment to the United States pursuant to the Indenture;and Sixth: To the Surplus Fund. See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." Although the Special Tax will constitute a lien on the leasehold interest in the Taxable Property, it does not constitute a personal indebtedness of the Leasehold Owner or any future owner of such leasehold interest. There is no assurance that the Leasehold Owner or any future owner of the leasehold interest in the Taxable Property within the District will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. The risk of the Leasehold Owner,or subsequent owner of the Hotel, if any, not paying the annual Special Tax is more fully described under the heading "SPECIAL RISK FACTORS—Insufficiency of Special Taxes." The Successor Agency's fee interest in the land in the District is not subject to the levy of Special Taxes, and may not be foreclosed upon to pay delinquent Special Taxes. For further information regarding the Rate and Method, see "THE COMMUNITY FACILITIES DISTRICT — Rate and Method of Apportionment of Special Taxes"herein and Appendix A hereto. 12 The following Table sets forth the debt service coverage from the Maximum Special Taxes. TABLE 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 MAXIMUM TAXING CAPACITY Year Ending Maximum Administrative Bonds Debt Service September l st Special Tax") Expenses(2) Debt Service(3) Coverage(3) 2014 $1,963,000.00 $20,000.00 $1,088,829.27 1.78 2015 1,963,000.00 20,400.00 1,090,662.50 1.78 2016 1,963,000.00 20,808.00 1,089,962.50 1.78 2017 1,963,000.00 21,224.16 1,088,612.50 1.78 2018 1,963,000.00 21,648.64 1,086,812.50 1.79 2019 1,963,000.00 22,081.62 1,088,812.50 1.78 2020 1,963,000.00 22,523.25 1,089,812.50 1.78 2021 1,963,000.00 22,973.71 1,084,812.50 1.79 2022 1,963,000.00 23,433.19 1,089,012.50 1.78 2023 1,963,000.00 23,901.85 1,090,325.00 1.78 2024 1,963,000.00 24,379.89 1,090,075.00 1.78 2025 1,963,000.00 24,867.49 1,091,775.00 1.78 2026 1,963,000.00 25,364.84 1,088,025.00 1.78 2027 1,963,000.00 25,872.13 1,087,525.00 1.78 2028 1,963,000.00 26,389.58 1,085,025.00 1.78 2029 1,963,000.00 26,917.37 1,090,525.00 1.78 2030 1,963,000.00 27,455.71 1,088,525.00 1.78 2031 1,963,000.00 28,004.83 1,088,043.76 1.78 (1) As determined pursuant to the steps listed in Section C of the Rate and Method,the Maximum Special Tax is calculated to be$130,000 per acre and totals$1,963,000. (z) Based on the Administrative Expenses Cap of$20,000 for Fiscal Year 2013-14 and escalating 2%annually thereafter. (3) Maximum Special Tax,less Administrative Expenses Cap,divided by Bonds Debt Service. Source: Bonds Debt Service provided by the Underwriter; Maximum Special Taxes and Debt Service Coverage provided by Willdan Financial Services. Lease Remedy Forbearance Agreement The City and the Agency entered into an agreement, dated as of December 1, 2001 (the "Lease Remedy Forbearance Agreement"), whereby the Agency agreed that, in the event of the occurrence of a default by the Leasehold Owner or any successor thereto under the Ground Lease,the Agency will not exercise a remedy under the Ground Lease that would allow the Agency to terminate the Ground Lease unless either the Special Taxes have been paid in full and the Bonds are no longer outstanding, or the Agency has prepared a new lease agreement with a subsequent lessee to maintain the leased premises and has obtained the written consent of the City to such termination and new lease. Pursuant to the Dissolution Act and actions taken by the City, the Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Lease. Certain actions and the exercising of certain rights by the Successor Agency are subject to review and approval by the Huntington Beach Oversight Board (the "Oversight Board") and the State of California Department of Finance(the"Department of Finance"). 13 In the Indenture, the District has covenanted to cause the City to comply with and enforce its agreements and covenants in the Lease Remedy Forbearance Agreement(which the City entered into on behalf of the District), and to not allow the Successor Agency to enter into a new lease or leases (each, a "Replacement Lease") for substantially all of the real property subject to the Ground Lease or Replacement Lease then being terminated, unless (i)the Special Taxes that may be levied on the property so relet, in the opinion of an Independent Financial Consultant, are estimated to be not less than 110% of Maximum Annual Debt Service, and(ii)such lease or leases have a term at least as long as the remaining term to maturity of the outstanding Bonds. However, nothing in the Lease Remedy Forbearance Agreement or the Indenture in any way restricts the Successor Agency from enforcing any provision of the Ground Lease or any Replacement Lease, or from pursuing any remedy available under the Ground Lease or any Replacement Lease following a default by a tenant thereunder, other than a termination thereof that is not in accordance with the requirements of the Indenture described in the preceding sentence. Proceeds of Foreclosure Sales Pursuant to the Law, in the event any Special Tax or installment thereof or any interest thereon is not paid when due,the District may order the institution of a court action to foreclose the lien therefore. In such an action, the leasehold interest subject to the unpaid amount may be sold at judicial foreclosure sale. The purchase at a foreclosure sale is of the leasehold interest of the Leasehold Owner under the Ground Lease and not of the fee interest in the parcel. This foreclosure sale procedure is not mandatory under the Law. However, in the Indenture,the District covenants with and for the benefit of the owners of the Bonds that, one Business Day after each Interest Payment Date for the Bonds, the City Treasurer or the Treasurer's designee will compare the amount of Special Taxes theretofore levied in the District to the amount of Net Taxes theretofore received by the District, and if the amount collected is less than 100% of the amount of the Special Taxes so levied, the District will undertake and diligently prosecute foreclosure proceedings not later than thirty (30)days after each Interest Payment Date in the manner prescribed in the Act to collect the amount of any delinquent Special Tax. Under the Indenture, the City's Director of Finance is directed to notify the City Attorney of any such delinquency of which it is aware, and the City Attorney is directed to commence, or cause to be commenced,such proceedings. In the event such superior court foreclosure or foreclosures are necessary, after the Reserve Account has been depleted, there could be a delay in principal or interest payments being made to the Bondowners pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. No assurances can be given that a judgment ordering foreclosure will be granted or that the leasehold interest subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Procedural delays, bankruptcy filings and necessary court and administrative actions incident to any foreclosure proceeding can result in an extended period of time(in some circumstances, more than two years)to complete any foreclosure sale. See "SPECIAL RISK FACTORS — Bankruptcy and Foreclosure," and "— FDIC/Federal Government Interests in Properties" herein. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion,the District is not obligated to purchase or otherwise acquire the leasehold interest sold at the execution sale if there is no other purchaser at such sale. Effective July 1, 1983 a judgment debtor (property owner) has at least 140 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 6 months of the date of sale. If, as a result of such an action a foreclosure sale is set aside,the judgment is revived and the judgment creditor (i.e., the District) is entitled to interest on the revived judgment as.if the sale had not been made. 14 The Special Taxes are to be levied on the leasehold interest in the land located in the District, initially being that leasehold interest created by the Ground Lease between the Leasehold Owner and the Successor Agency. The Successor Agency's fee interest in the property within the District is not subject to the levy of Special Taxes and will not be subject to any foreclosure or sale in the event of a delinquency in payment of the Special Taxes. The Ground Lease contains certain remedies that may be available to the Successor Agency in the event of a default by the Leasehold Owner of its obligations under the Ground Lease, including termination of the Ground Lease. However, as described under the heading "SECURITY FOR THE BONDS — Agreement Not to Terminate Lease,"the Successor Agency and the City have entered into the Lease Remedy Forbearance Agreement whereby the Agency agreed to forbear in the exercise of any such termination unless, so long as the Bonds are outstanding, the Successor Agency enters into a replacement ground lease. In such event, the leasehold interest under such replacement ground lease would be subject to the levy of Special Taxes. As discussed above under the caption"Agreement Not to Terminate Lease," certain actions taken by the Successor Agency may be subject to Oversight Board and Department of Finance approval. See "SPECIAL RISK FACTORS—Risks Associated with Ground Lease and the Dissolution Act." Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met The District has covenanted in the Indenture that it will not take any actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax so long as the Bonds are Outstanding, including the initiation of proceedings under the Act to reduce the maximum Special Tax rates on then existing Taxable Property below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to 110% of annual debt service on the Outstanding Bonds. The District has further covenanted that in the event an initiative is adopted which purports to reduce maximum Special Tax rates or to limit the power of the District to levy Special Taxes for the purposes set forth above,it will commence and pursue legal action seeking to preserve its ability to comply with its covenants. There are no California court cases interpreting the enforceability of the foregoing covenants in light of Article XIIIC. See"SPECIAL RISK FACTORS—Proposition 218." Existing Liens The property within the District is subject to additional public indebtedness as set forth under the heading "THE COMMUNITY FACILITIES DISTRICT— Estimated Direct and Overlapping Indebtedness" herein. The lien for the Special Taxes is co-equal to the lien for the overlapping assessments and special taxes and the lien for general property taxes. Except as disclosed in this Official Statement, the District is unaware of any present or contemplated assessment district or community facilities district that includes property within the District. The District has no control, and the City has only limited control, over the amount of additional indebtedness that may be issued in the future by other public agencies,the payment of which,through the levy of a tax or an assessment, will be on a parity with the Special Taxes. No Obligation of the City Upon Delinquency The City is under no obligation to transfer any funds of the City into the Special Tax Fund for payment of the principal of or interest on the Bonds if a delinquency occurs in the payment of any Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales"for a discussion of the District's obligation to foreclose Special Tax liens upon delinquencies. 15 Special Taxes Are Not Within Teeter Plan The Special Taxes are not encompassed within the alternate procedure for the distribution of certain property tax levies on the secured roll pursuant to Chapter 3, Part 8,Division 1 of the California Revenue and Taxation Code(Section 4701 et seq.), commonly referred to as the"Teeter Plan." The County of Orange has adopted a Teeter Plan under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies with the County on the basis of the tax levy,rather than on the basis of actual tax collections. However,the City has not elected to have the District participate in the County's Teeter Plan. Reserve Account In order to further secure the payment of principal of and interest on the Bonds, upon delivery of the Bonds, the District will deposit in the Reserve Account on amount equal to the Reserve Requirement with respect to the Bonds. Thereafter,the District is required, subject to the limits on the levy of the Special Tax,to deposit and to maintain the Reserve Requirement in the Reserve Account at all times while any of the Bonds are outstanding. The Reserve Requirement for the Bonds is defined as the amount equal to the lowest of (i) 10% of the initial principal amount of the Bonds; (ii)Maximum Annual Debt Service on then Outstanding Bonds or (iii) 125% of the average Annual Debt Service on then Outstanding Bonds. See APPENDIX D— "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein. Subject to the limits on the maximum annual Special Tax which may be levied within the District, as described in APPENDIX A, the District has covenanted to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax proceeds,to maintain the balance in the Reserve Account at the Reserve Requirement while any Bonds are outstanding. Amounts in the Reserve Account are to be applied to the payment of(i)redemption of the Bonds in whole or in part, (ii)debt service on the Bonds to the extent other moneys are not available therefor, and(iii)the principal and interest due on the final maturity of the Bonds. In addition, moneys in the Reserve Account may be used to make any required transfer to the Rebate Fund. In the event of a prepayment of Special Taxes,under certain circumstances,a portion of the Reserve Account will be added to the amount being prepaid and be applied to redeem Bonds; provided, however, that no such transfer shall be made if it would result in the amount in the Reserve Account being less than the Reserve Requirement. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein for a description of additional requirements. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. Priority of Bonds and Pledge of Net Taxes The District has pledged and assigned to the Trustee all Net Taxes (Special Taxes remaining after setting aside and depositing amounts sufficient to pay the Administrative Expenses in an amount that does not exceed the Administrative Expenses Cap of $20,000, escalating 2% annually commencing in Fiscal Year 2014-15) for the payment of principal of,premium, if any, and interest on the Bonds. Pursuant to the Act and the Indenture, the Bonds shall be and are equally secured by a pledge of and lien upon the Net Taxes, and certain other amounts on deposit in the Special Tax Fund and the Reserve Account of the Special Tax Fund. So long as any of such Bonds are Outstanding and unpaid,the Net Taxes and the interest thereon may be used only as provided in the Indenture unless the Bondowners authorize other uses of such Net Taxes pursuant to the provisions of the Indenture. Nothing in the Indenture or in any Supplemental Indenture shall preclude the redemption prior to maturity of any Bonds subject to call and redemption or the payment of the Bonds from proceeds of refunding bonds issued under the Act or under any other law of the State. Amounts in the Administration Fund, the Surplus Fund and the Rebate Fund are not pledged to the repayment of the Bonds. 16 No Additional Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Net Taxes on a parity within the Bonds, except for the purpose of defeasing and refunding Bonds in accordance with the Act. THE COMMUNITY FACILITIES DISTRICT Location The property within the District (Orange County Assessor's Parcel No. 024-251-01) consists of a single parcel of 15.103 acres in a roughly trapezoidal shape, located on Pacific Coast Highway directly across from the beach and the Pacific Ocean in the City. The property within the District is on the northwest corner of the intersection of Beach Boulevard and Pacific Coast Highway,a couple of blocks south of Main Street and the Huntington Beach Pier. Beach Boulevard (State Highway 39) is a major north- south artery, which provides access to Interstate 405 (the San Diego Freeway)one of the major freeways in Southern California. The District is fully developed with a 517 guest room hotel generally known as the "Hyatt Regency Huntington Beach Resort and Spa" which opened on January 19, 2002 and is owned by PCH Beach Resort, LLC, a California limited liability. See "LEASEHOLD OWNERSHIP AND THE HOTEL" for a more complete description of the Hotel. On the other side of a 3.5 acre parcel on the northwest side of the District is the Hilton Waterfront Beach Resort, a twelve story, 290 room hotel tower with accompanying conference facilities and restaurants, which opened for business in July, 1990. The 3.5 acre site between the District and the Hilton Waterfront Beach Resort development has been improved with a pavilion, a wedding gazebo, a tennis court and parking. The 3.5 acre site is not within the District or part of the Taxable Property. As a component of the Public Facilities financed with the proceeds of the Refunded Bonds, a pedestrian bridge was constructed from the District site across Pacific Coast Highway to the beach so that guests and visitors of the Hotel are able to cross the heavily traveled Pacific Coast Highway in order to reach the beach. All of the land within the District is owned by the Successor Agency and is leased by the Successor Agency to the Leasehold Owner under the terms of the Ground Lease. See "LEASEHOLD OWNERSHIP AND THE HOTEL— Summary of the Ground Lease" for a description of some of the primary terms of the Ground Lease. The Ground Lease was entered into in implementation of an Amended and Restated Disposition and Development Agreement dated as of September 14, 1998 between the Agency and Mayer Financial, L.P., as thereafter amended and as assigned by Mayer Financial, L.P. to the Lessee(as so amended, the"DDA"). It is expected that at all times the Bonds are Outstanding there will always be a single owner of the leasehold interest in the District which is subject to the levy of the Special Tax. Authorization On May 3, 1999, the City Council of the City adopted Ordinance No. 3417 which added Chapter 3.56 to the Huntington Beach Municipal Code entitled "City of Huntington Beach Special Tax Financing Improvement Code." The proceedings to form the District were conducted under said section of the City's Municipal Code and, where applicable by reason of the provisions of the Municipal Code, the Mello-Roos Community Facilities Act of 1982,as amended(collectively,the"Law"). Pursuant to the Law,the City Council adopted Resolution No.2000-5 on January 18, 2000, stating its intention to establish the District and Resolution No.2000-6 on January 18, 2000 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos.2000-35,2000-36 and 2000-37 adopted by the City Council on April 17, 2000,the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $16,000,000 was determined necessary for the District and an election was called 17 pursuant to the Law. The Agency, as the sole owner of the property within the District,voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $16,000,000 to finance the Public Facilities and the levy of a special tax consistent with the Rate and Method on leasehold interests in the property within the District to pay the principal and interest on the Bonds, to pay administrative expenses of the District,and to make any replenishments to the Reserve Account. See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Tax." The Refunded Bonds were authorized to be issued by the Resolution of Issuance adopted by the City Council on November 19,2001. The Bonds were authorized to be issued to refund the Refunded Bonds by the Resolution of Issuance adopted by the City Council, acting as the legislative body of the District, on June 3, 2013. Rate and Method of Apportionment of Special Tax The Special Tax will be levied on and collected from the leasehold interest in the land in the District as set forth in the Rate and Method,the complete text of which is contained in APPENDIX A—"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." There is only one County Assessor's parcel of land in the District,and it is expected that there will always be a single lessee of all of the land in the District,which currently is the Leasehold Owner. Under the Rate and Method, not less than fifteen business days prior to the beginning of each Fiscal Year (as defined in the Rate and Method), a representative of the City will determine the parcel(s) in the District the leasehold interest in which are subject to the Special Tax (the "Taxable Property"). The City Council will levy the Special Tax proportionately on the leasehold interest in each parcel of Taxable Property in the District up to 100%of the Maximum Special Tax,as needed to satisfy the Special Tax Requirement. Under the Rate and Method, the Maximum Special Tax for the leasehold interests in the land in the District constituting "Taxable Property" is the greater of(i)$130,000 per acre or (ii)the amount determined pursuant to the following steps: Step 1: determine the maximum annual debt service on all Outstanding Bonds; Step 2: multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: determine the Acreage of Taxable Property within the District; and Step 4: divide the amount from Step 2 by the acreage from Step 3 to determine the Maximum Special Tax per acre of Taxable Property. As there are slightly in excess of 15 acres of Taxable Property in the District,the Maximum Special Tax is roughly $1,963,000, which amount is approximately 1.78 times the maximum annual debt service on the Bonds after payment of Administrative Expenses. The Special Tax Requirement is defined in the Rate and Method as the amount required in any Fiscal Year for the District necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Fund for all Outstanding Bonds, (iii)to pay Administrative Expenses, and (iv)to pay costs of any credit enhancement(including fees and expenses related to any letter of credit)for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property includes all Assessor's Parcels in the District, except real property owned by a governmental agency for public right-of-way purposes including, but not limited to, streets, public walkway corridors, and slopes, as determined in each Fiscal Year by a representative of the City or any otherwise Taxable Property for which the Special Tax with respect to the leasehold interest has been paid in full, or any property which is otherwise exempt from the Special Tax pursuant to law. Under the Rate and Method, the Special Taxes applicable to any leasehold interest in any parcel of property within the District may be prepaid in whole or in part. See Appendix D for the detailed methodology related to any such prepayment. The Indenture contains covenants related to the prepayment of Special Taxes including the following: 18 • The District shall cause all applications of owners of leasehold interests in the District subject to the Rate and Method to prepay and satisfy the Special Tax obligation for their property to be reviewed by an Independent Financial Consultant and shall not accept any such prepayment by the District and the redemption of Bonds with such prepayment, unless the ratio of (i)the maximum amount of the Special Taxes that may be levied in the District following such prepayment to (ii)Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption(e.g., 1.15 to 1.0)will not be less than such ratio as it existed prior to such prepayment. • The District will not include in any calculation of the amount necessary to prepay and permanently satisfy the Special Tax obligation of any parcel of taxable property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement; provided, however,that in such event the District may pay to the owner of any such property who prepays and permanently satisfies the Special Tax obligation for his or her property, under such circumstances, such a proportionate amount if the amount on deposit in the Reserve Fund is thereafter increased to the Reserve Requirement. Public Facilities The proceeds of the Refunded Bonds were used to finance the construction of certain Public Facilities integral to the development of the Hotel. The"Public Facilities" included the land acquisition, clearance and roadway construction within or adjacent to the District, construction of a pedestrian bridge over Pacific Coast Highway connecting the Hotel with the beach, and a contribution to the construction of a City beach maintenance yard. All construction with respect to the Hotel has been completed and all of the Public Facilities were completed by December,2002. Estimated Direct and Overlapping Indebtedness Within the boundaries of the District are numerous overlapping local agencies providing public services. Some of these local agencies have outstanding bonds which are secured by taxes and assessments on the parcels within the District and others have authorized but have not yet issued bonds which, if issued, will be secured by taxes and assessments levied on the property within the District. Table 2 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied on the leasehold interest within the District, prepared by California Municipal Statistics, Inc., and dated March 1, 2013 (the "Debt Report"). The Debt Report is included for general information purposes only. The District and the Underwriter believe the information is current as of its date, but make no representation as to its completeness or accuracy. Other public agencies may issue additional indebtedness at any time, without the consent or approval of the District. See"SPECIAL RISK FACTORS—Parity Taxes and Special Assessments." The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. In many cases long term obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. Additional indebtedness could be authorized by other public agencies at any time. 19 TABLE 2 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 DIRECT AND OVERLAPPING DEBT AS OF MARCH 1,2013 2012-13 Assessed Valuation: $190,194,724 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 3/1/13 Metropolitan Water District General Obligation Bonds 0.010% $ 15,862 Coast Community College District General Obligation Bonds 0.197 606,507 Huntington Beach Union High School District General Obligation Bonds 0.491 1,091,655 Huntington Beach City School District General Obligation Bonds 1.314 311,431 City of Huntington Beach Community Facilities District No.2000-1 100. 13,330,000(1) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $15,355,455 OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 0.047% $ 101,120 Orange County Pension Obligations 0.047 166,310 Orange County Office of Education Certificates of Participation 0.047 7,556 Coast Community College District General Fund Obligations 0.197 39,893 Huntington Beach Union High School District Certificates of Participation 0.491 295,034 Huntington Beach School District Certificates of Participation 1.314 219,382 City of Huntington Beach General Fund Obligations 0.671 313,371 City of Huntington Beach Judgment Obligations 0.671 23,302 Municipal Water District of Orange County Water Facilities Corporation 0.057 5.680 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,171,648 Less: MWDOC Water Facilities Corporation(100%supported by revenues) 5,680 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,165,968 OVERLAPPING TAX INCREMENT DEBT: $1,908,712 GROSS COMBINED TOTAL DEBT $18,435,815 12) NET COMBINED TOTAL DEBT $18,430,135 Ratios to 2012-13 Assessed Valuation: Direct Debt($13,330,000)...............................................................7.01% Total Direct and Overlapping Tax and Assessment Debt..................8.07% Gross Combined Total Debt..............................................................9.69% Net Combined Total Debt.................................................................9.69% Ratios to Redevelopment Incremental Valuation($180.096.172): Total Overlapping Tax Increment Debt............................................. 1.06% (1) Represents the outstanding par amount of the Refunded Bonds. (2) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics,Inc. Assessed Value-to-Lien Ratio The assessed value of the leasehold interest in the Taxable Property within the District for Fiscal Year 2012-13 is $190,194,724. The assessed value-to-lien ratio of the leasehold interest in the Taxable Property within the District based upon the principal amount of the Bonds, overlapping debt payable from other taxes and assessments levied on the property within the District, and the assessed values included on the 2012-13 Assessor's roll is approximately 14.67-to-1. Because a parcel's assessed value generally represents the lower of its acquisition cost and adjustments for inflation (but not more than 2% per year) and the value of any subsequent improvements, it may not be indicative of the parcel's market value. No assurance can be given 20 that the assessed value-to-lien ratio for the District will be maintained during the period of time that the Bonds are outstanding. The District does not have any control over future property values or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which is made through the levy of a tax or an assessment with a lien on a parity with the Special Taxes. See "SPECIAL RISK FACTORS—Leasehold Values." The following Table 3 summarizes the assessed value of the leasehold interests in the Taxable Property within the District for Fiscal Years 2006-07 through 2012-13. TABLE 3 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 ASSESSED VALUES OF LEASEHOLD INTEREST IN TAXABLE PROPERTY FISCAL YEAR 2006-07 THROUGH 2O12-13 Assessed Value of Tax Year Leasehold Interesto) 2006-07 $174,397,317 2007-08 177,885,263 2008-09 181,442,968 2009-10 185,056,129 2010-11 185,071,826"' 2011-12 186,465,416121 2012-13 190,194,724(3) (1) Assessed value successfully appealed by Leasehold Owner to$147,000,000. (2) Assessed value successfully appealed by Leasehold Owner to$152.000,000. (3) Assessed value successfully appealed by Leasehold Owner to$165,600,000. (4) Excludes personal property. Source: Orange County Secured Rolls,as compiled by Willdan Financial. Delinquency History Table 4 below summarizes the Special Tax levies and delinquencies for the leasehold interest in the taxable property within the District for Fiscal Years 2008-09 through Fiscal Year 2012-13. The Leasehold Owner has not been delinquent in the payment of Special Taxes. 21 TABLE 4 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 SPECIAL TAX LEVIES AND DELINQUENCIES FISCAL YEAR 2008-09 THROUGH 2O12-13 Delinquencies as of September 30 of Fiscal Year Delinquencies as of May 7,2013 Remaining Remaining Remaining Fiscal Amount Parcels Parcels Amount Percent Parcels Amount Percent Year Levied Levied Delinquent DelinquenO Delinquent Delinquent Delinquent Delinquent 2008-09 $1,213,082.00 1 0 $0.00 0.00% 0 $0.00 0.00% 2009-10(21 1,227,014.00 1 0 0.00 0.00 0 0.00 0.00 2010-11 1,224,300.50 1 0 0.00 0.00 0 0.00 0.00 2011-12 1,265,074.37 1 0 0.00 0.00 0 0.00 0.00 2012-13 1,249,569.75 1 N/A N/A N/A 0 0.00 0.00 (D Amount does not include any penalties,interest or fees. (2) Delinquency information as of October 5 for this Fiscal Year only. Source: Orange County Tax Collector,as compiled by Willdan Financial Services. LEASEHOLD OWNERSHIP AND THE HOTEL Information set forth below regarding the Leasehold Owner and the Hotel was provided by the Leasehold Owner and has not, in most instances, been verified by the District or the Underwriter, and the District and the Underwriter make no representation as to its accuracy or completeness. The Property Owner The Property Owner is PCH Beach Resort, LLC, a California limited liability company formed on April 11, 2001 for the primary purpose of being the lessee under the Ground Lease, constructing and owning the Hotel leased to the Property Owner under the Ground Lease. The managing member of the Property Owner is Grand Resort, LLC, a California limited liability company, which has a 59.99996% interest in the Property Owner, which, in turn, is controlled by Mayer Financial L.P., Lizard Thicket, L.P. and the Bone Family Trust, all of which entities are comprised of various trusts or other entities controlled by Robert L. Mayer, Jr. and Stephen K. Bone. The other members of the Property Owner are Coast Beach, LLC, with a 39.99994% interest in the Property Owner, which is an entity related to the Pritzker Trusts, and SPE PCH Beach Resort,with a 0.000 1%interest in the Property Owner. The Robert Mayer Corporation and related entities,headquartered in Irvine,California,developed The Hilton Waterfront Beach Resort, a 290 room hotel with conference facilities and two restaurants and lounges located on a parcel along Pacific Coast Highway in the City adjacent to the parcel leased to the Property Owner under the Ground Lease, and manages that property through a related entity, Mayer Hospitality Group, LLC. The Robert Mayer Corporation previously assisted in the development of the Quality Inn Hotel and Casino, a 324-suite hotel and casino in Las Vegas, Nevada and through Ambassador Gaming, Inc. managed the casino; Villa Capri Apartments, a I I0-unit residential apartment complex located in La Habra,California; and Merano, a 30 acre,gate-guarded development with 126 home sites in Palm Desert, California. In addition to the properties listed above in which it previously had interests,The Robert Mayer Corporation maintains an active development program to identify and develop new commercial and residential opportunities. The Hotel The Hotel is generally known as the Hyatt Regency Huntington Beach Resort and Spa. The focus of the Hotel is oriented toward ocean views that are available throughout the Hotel, four ocean view courtyards, and two pool areas. 22 The following is a description of the principal features of the Hyatt Regency Huntington Beach Resort and Spa: • Main lobby • 517 guest rooms • 990 covered parking spaces in a two story subterranean garage. • 52,000 square feet of conference center at west end of the Hotel • 9,090 square feet of net retail space • 20,000 square foot spa with state of the art facilities including 18 indoor treatment rooms, some with private patios and six outdoor semi-private treatment stations. • Seven restaurants/lounges • Beach access via pedestrian overpass of Pacific Coast Highway. The public areas consist of the main lobby and a number of courtyards. The Lighthouse Courtyard is the access point to the pedestrian overpass to the beach. The courtyard is approximately 34,650 square feet and provides a lawn area with panoramic ocean views. The California Courtyard is adjacent to the main lobby and is surrounded by patios and palm trees. The approximately 22,190 square foot courtyard facility has a large fountain and small grass knoll. The conference center is located at the west end of the Hotel and has a separate lobby/entrance area. That facility consists of a total of 52,000 square feet that can be divided into a number of event spaces. This conference center is adjacent to the Grand Ballroom and the approximately 10,700 square foot exhibition hall. Ocean views are available from the Grand Ballroom. An outdoor-event area is also available with 15,000 square feet of lawn area and ocean views. The 517 hotel guest rooms are considered upscale in appointments, design and quality. The room sizes range from 465 to 3,100 square feet(presidential suites). Custom king bedrooms range from 651 to 854 square feet. A state of the art spa facility known as Pacific Waters Spa is an integral part of the Hotel. The design of this 20,000 square foot facility is an early California luxury estate theme. Spa facilities include the following: (i)eighteen indoor treatment rooms, (ii)weight training room with weight/ exercise machines and free weights, (iii)a cardiovascular exercise room with exercise equipment and a water station, (iv)a full service beauty salon with manicure/pedicure stations and custom tile foot baths, (v)a separate reception area, (vi)a steam room with eucalyptus oil mist, (vii)a dry sauna, (viii)a cool down lounge, (ix)private showers, (x)Kohler"body spa" custom waterfall shower, (xi)an eight-person hydrotherapy whirlpool, (xii)lockers and private toilets,and(xiii)a relaxation lounge. The outdoor recreation areas include a water playground featuring three water slides, two splash pools, a ribbon shaped main pool, a shallow children's wading pool and a poolside cafe and a lagoon style pool that dominates the pool courtyard and the surrounding decks. A panoramic view is available from the pool area,which has a number of ocean view terraces and decks. Hotel Construction. Construction of the Hotel commenced in April of 2001 and was completed in December of 2002 at a cost of approximately $164,000,000. The Hotel opened January 19, 2002 (the "Opening Date"). In 2009,the Leasehold Owner spent an additional approximately$4,000,000 on a new pool for the Hotel. Hotel Operation. The Leasehold Owner has entered into a Hotel Management Agreement, dated as of April 11, 2001 (the "Hotel Management Agreement"), with Hyatt Hotels Corporation, formerly known as Hyatt Corporation ("Hyatt Hotels Corporation"), with respect to the management and operation of the Hotel. The Hotel Management Agreement has a stated term of twenty years, which commences with the Opening Date of the Hotel and ends on December 31 of the year in which the 20th anniversary of the Opening Date occurs. Hyatt Corporation has the right and option, in its discretion, to extend the term of the Hotel 23 Management Agreement for two renewal terms of five years each. No assurance can be given that the Hotel Management Agreement will remain in effect for the term of the Bonds. The Hotel Operator. Hyatt was founded by Jay Pritzker in 1957. Over the following decade, Jay Pritzker and his brother Donald Pritzker, working together with other Pritzker family business interests, grew the company into a North American management and hotel ownership company, which became a public company in 1962. In 1968, Hyatt International was formed and subsequently became a separate public company. Hyatt Corporation and Hyatt International Corporation were taken private by the Pritzker family business interests in 1979 and 1982, respectively. On December 31, 2004, substantially all of the hospitality assets owned by Pritzker family business interests, including Hyatt Corporation and Hyatt International Corporation, were consolidated under a single entity, now named "Hyatt Hotels Corporation." Hyatt Hotels Corporation manages, franchises, owns and develops Hyatt branded hotels,resorts and residential and vacation ownership properties around the world. As of June 30, 2012, the company's worldwide portfolio consisted of 492 properties. Average Occupancy Rates. The following table sets forth the average occupancy rates for the Hotel in each of the calendar years ending December 31,2003 through December 31,2012. TABLE 5 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 AVERAGE HOTEL OCCUPANCY CALENDAR YEARS 2003 THROUGH 2O12 Calendar Year Average Hotel Occupancy Ending December 31 Rate(by percentage) 2003 55.2%(l) 2004 66.2 2005 71.1 2006 70.0 2007 71.7 2008 67.7 2009 59.2 2010 67.7 2011 73.4 2012 75.9 (i) Partial year. Source:Leasehold Owner. Summary of the Ground Lease Pursuant to the DDA, the Successor Agency (as successor-in-interest to the Agency), as lessor, and the Leasehold Owner, as lessee entered into the Ground Lease pursuant to which the Agency leased all of the property within the District to the Leasehold Owner. In order to facilitate the Redevelopment Plan for the Huntington Beach Redevelopment Project, the Agency, which owned the parcel in fee simple, agreed to lease Parcel A,consisting of the 15.103 acres of land in the District to the Leasehold Owner for a term of 99 years as part of a variety of documents culminating in the Ground Lease executed on April 4, 2001. The Leasehold Owner did not obtain any mineral or water rights to the land and took the site in an"as is" condition, thereby assuming responsibility for hazardous substance removal, remediation, and indemnification to the Agency in accordance with applicable law. 24 As a financial incentive to the Leasehold Owner for entering into the DDA, the Agency agreed to repay the Leasehold Owner for $16 million of costs plus interest thereon advanced by the Leasehold Owner toward the construction of offsite infrastructure and other costs of the Hotel. As of July 1, 2013, approximately $5.3 million in costs remain to be paid. See"Transient Occupancy Tax"below. The Successor Agency's obligations under the Ground Lease and DDA have been approved by DOF on each of the Successor Agency's Recognized Obligation Payment Schedules submitted to date. The effective date of the lease is April 4,2001, and the term of the lease is 99 years from that date. As consideration for obtaining the lease,the Successor Agency is to receive the following payments. • During the first year of hotel operations, a base rent of$25,000 per year prorated over the fraction of the year the hotel is open. During the second year, a base rent of$75,000;during the third year a base rent of$150,000; from the fourth year onward, a base rent of$150,000 per year plus an amount equal to the annual increase in the CPI (lagged by three months for computational purposes) with an annual cap of no more than 5 percent and a five-year cumulative cap of no more than 20 percent. • Starting in the third year, the Successor Agency is also to receive participation rent equal to 3 percent of"Adjusted Room Revenue." Adjusted Room Revenue takes Gross Room Revenue not counting any food, beverage, parking, telephone, health club, or other ancillary revenue and subtracts off a threshold amount equal to $25 million. The resulting remainder is what is used to calculate the 3 percent participation rent (as described below). This $25 million threshold amount, however, escalates in year four and thereafter by an amount equal to the increase in the CPI index with an annual cap of no more than 5 percent and a five-year cumulative cap of no more than 20 percent. Section 507 of the Ground Lease provides that for each Lease Year commencing with 2001 through 2013,an additional payment is required to be made by Lessee to the Successor Agency of$8,333.34. For each subsequent Lease Year during the Term, the foregoing amount is to be payable as adjusted upward each year based upon the consumer price index. The amounts payable pursuant to Section 507 are not included in Table 6, below. It is expressly stated that the Ground Lease is an absolute net lease. The terms of the Ground Lease may be amended by the Leasehold Owner and the Successor Agency (subject to the approval of the Oversight Board)at any time without notice to or the consent of the Bondowners. The following table sets forth the Base Rent, Gross Room Revenue and Adjusted Room Revenue under the Ground Lease for Fiscal Years 2006-07 through 2012-13. The rental payments received by the Successor Agency are not pledged to or available to pay debt service on the Bonds. 25 TABLE 6 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 BASE RENT,GROSS ROOM REVENUE,ADJUSTED ROOM REVENUE FISCAL YEAR 2006-07 THROUGH 2O12-13 Participation Gross Room Rent Received Fiscal Year Base Rent Revenue by Agency") 2006-07 $157,700 $30,142,981 $121,055 2007-08 162,855 34,181,076 215,819 2008-09 166,600 31,831,207 111,319 2009-10 174,098 25,151,223 -0- 2010-11 174,098 28,016,844 -0- 2011-12 174,167 30,815,679 53,633 2012-13 179,567 33,208,940 106,273 (1) Successor Agency receives these revenues. Source: The Leasehold Owner. Transient Occupancy Tax Even though the Successor Agency still owns the fee simple interest in the property, it is a triple net lease;therefore,the Leasehold Owner is responsible for paying property taxes on the Hotel and the land to the County. However, an additional source of revenue from the Successor Agency to repay the Leasehold Owner for its $16 million advance consists of a defined portion of the "property tax increment" as well as a defined portion of the Available Site Generated Transient Occupancy Tax (the "TOT"). This special hotel tax is currently 12%, 10% of which is allocated 60 percent to the Agency and 40 percent to the City, and 2% of which is allocated to the Marketing and Visitors Bureau. Five-sixths of the Agency's portion of the TOT is also a dedicated source of revenue to repay the Leasehold Owner the Agency's $16 million plus interest obligation. The following table sets forth the TOT collected in each of the last five Fiscal Years. The TOT is not pledged to or available to pay debt service on the Bonds. TABLE 7 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 TRANSIENT OCCUPANCY TAXES FISCAL YEARS 2007-08 THROUGH 2O11-12 Fiscal Year Total Transient Occupancy Tax 2007-08 $3,352,079 2008-09 2,755,409 2009-10 2,684,695 2010-11 3,010,115 2011-12 3,249,408 Source: District. 26 THE CITY OF HUNTINGTON BEACH Under the Law, the City Council of the City is authorized to establish and act as the legislative body for community facilities districts. However, the City has no obligations in connection with the District or the Bonds, other than with respect to the Lease Remedy Forbearance Agreement. See Appendix C hereto for general information regarding the City and the County. SPECIAL RISK FACTORS Investment in the Bonds involves risks which may not be appropriate for certain investors. The following is a discussion of certain risk factors, in no particular order of importance, all of which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of the Leasehold Owner or any future lessee of the land in the District to pay the Special Taxes levied in the District when due. Such failure to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition, the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. Concentration of Ownership As of the date of issuance of the Bonds, there is only one parcel of land in the District and the sole leasehold interest in that land that is subject to the levy of Special Taxes is that of the Leasehold Owner under the Ground Lease. It is expected that the leasehold interest of the Leasehold Owner will be the sole leasehold interest subject to the levy of Special Taxes for the term of the Bonds. The lack of diversity in the obligation to pay the Special Tax represents a significant risk to Bondowners in that the Leasehold Owner's ability to pay the Special Tax will be dependent in large measure on the success of the Hotel. Failure of the Leasehold Owner(or any future lessee,if any, of the property within the District)to pay the annual Special Tax when due could result in the rapid, total depletion of the Reserve Fund. In that event, there could be a default in payments of the principal of, and interest on, the Bonds. See"SPECIAL RISK FACTORS—Insufficiency of Special Taxes"below. Risks Associated with Ground Lease and the Dissolution Act The Special Taxes are dependent upon the existence of a leasehold interest in the single parcel of property in the District. Currently the Special Taxes are levied on the leasehold interest created by the Ground Lease between the Property Owner and the Successor Agency. If the leasehold interest were to be terminated and there were no replacement lease executed by the owner of fee simple title in the Taxable Property,then the District would be unable to levy and collect Special Taxes to pay debt service on the Bonds. The City, on behalf of the District, and the Successor Agency,the owner of the parcel of Taxable Property, entered into the Lease Remedy Forbearance Agreement, pursuant to which the Agency agreed it would not terminate the Ground Lease unless either the Special Taxes had been paid in full and the Bonds were no longer outstanding, or the Agency had prepared a new lease agreement with a subsequent lessee to maintain the leased premises and obtained the written consent of the City to such termination and new lease. The Dissolution Act also creates risks associated with the Ground Lease. The Dissolution Act provides, in part, that an oversight board may direct a successor agency to determine whether any agreement between a dissolved redevelopment and a private party should be terminated or renegotiated to reduce liabilities and increase net revenues to the taxing agencies. In the case of the Ground Lease and the DDA,the Successor Agency has confirmed that there are no executory obligations for the payment of any moneys to the Lessee from the Successor Agency or the City;accordingly,the City and the Successor Agency are of the view that it is very doubtful that the provision of the Dissolution Act providing for termination or renegotiation of agreements would be applicable. Further, because taxing agencies share in property taxes, at an increased 27 level upon the dissolution of redevelopment agencies, the motivation of a taxing agency to seek disruption regarding the Ground Lease or the DDA would not be apparent. In addition, the Lessee holds substantial property rights under the Ground Lease which could not be eliminated without significant compensation from revenues that would otherwise flow to taxing agencies. The Dissolution Act further provides that assets of a former redevelopment agency, such as the residuary rights of the Successor Agency under the Ground Lease, are to be deployed under a long range property management plan("LRPMP"). Any such LRPMP for the Successor Agency must be approved by the Oversight Board and is further subject to approval or non-action by the DOF. No LRPMP has been formulated or approved for the Successor Agency. The Dissolution Act provides that certain assets are to be retained by the host city and others are to be disposed of, all as to be further provided under the applicable LRPMP. As of the date of this Official Statement,the Successor Agency does not know which entity will be the holder of the Successor Agency's property interests under the DDA or the Ground Lease following adoption and implementation of a LRPMP for the Successor Agency. It is possible that such interests will ultimately be held by a private party having no connection to the Successor Agency,City or the Lessee. The provisions of the Dissolution Act are relatively new and have been subject to a variety of judicial challenges. The District can provide no assurances concerning the manner in which the Dissolution Act will be interpreted or which entity or entities will ultimately be determined to own the property assets related to the DDA and the Ground Lease as currently held by the Successor Agency. However, the District believes that any action by the oversight board or the Successor Agency to unilaterally amend or terminate the Ground Lease would be subject to challenge under the State and Federal Constitution if the amendment or termination would adversely affect the District's ability to levy Special Taxes and to pay debt service on the Bonds. Risks of Real Estate Secured Investments Generally The Bondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i) adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District,the supply of or demand for competitive properties in such area, and the market value of residential property or commercial buildings and/or sites in the event of sale or foreclosure; (ii)changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii)natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv) adverse changes in local market conditions;and(v)increased delinquencies due to rising mortgage costs and other factors. No assurance can be given that the Leasehold Owner or future lessee will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See"SPECIAL RISK FACTORS —Bankruptcy and Foreclosure"below,for a discussion of certain limitations on the District's ability to pursue judicial proceedings with respect to delinquent parcels. Limited Obligations The Bonds and interest thereon are not payable from the general funds of the City or the Successor Agency. Except with respect to the Special Taxes,neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City, Successor Agency or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge, charge, lien or encumbrance upon any of the City's or the District's property or upon any of the City's or the District's income, receipts or revenues, except the Special Taxes and other amounts pledged under the Indenture. 28 Insufficiency of Special Taxes In order to pay debt service on the Bonds,it is necessary that the Special Tax levied within the District be paid in a timely manner. Should the Special Tax not be paid on time,the District has established a Reserve Account in the initial amount specified under the heading "ESTIMATED SOURCES AND USES OF FUNDS" to pay debt service on the Bonds to the extent other funds are not available therefore. Under the Indenture, the District has covenanted to maintain in the Reserve Account an amount equal to the Reserve Requirement, with the sole source of monies to replenish the Reserve Account being Net Taxes collected that are in excess of Bond debt service and Administrative Expenses(up to the Administrative Expenses Cap). See Appendix D hereto. As a result, if the Leasehold Owner or any future lessee of the land in the District is delinquent in the payment of the Special Tax, the District most likely will be unable to replenish the Reserve Account to the Reserve Requirement. If such defaults were to continue in successive years, the Reserve Account would soon be depleted and a default on the Bonds would occur. The Law provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. The Bondowners will be dependent on the ability and/ or willingness of the public entity to pay the Special Tax levied on such property when due. In addition,the Law provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Law have not been tested. If for any reason any portion of the leasehold interest subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, or another public agency, the Special Tax will be reallocated to the remaining portion, if any, of the leasehold interest in the non-tax-exempt land within the District,but in no case more than the maximum authorized Special Tax for such remaining acreage, if any. If a substantial portion of leasehold interest within the District became exempt from the Special Tax because of public ownership or otherwise, the maximum Special Tax which could be levied upon the remaining Taxable Property might not be sufficient to pay principal of and interest on the Bonds when due or the owner of the leasehold interest in the remaining taxable acreage may not have a viable operating development which provides revenues sufficient to pay the Special Taxes, and a default could occur with respect to the payment of such principal and interest on the Bonds. The District has covenanted to institute foreclosure proceedings to sell the leasehold interest with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds, subject to the limitations set forth in the Indenture. If foreclosure proceedings were ever instituted,any mortgage or deed of trust holder with respect to a deed of trust on the Leasehold Owner's leasehold interest could,but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SECURITY FOR THE BONDS—Proceeds of Foreclosure Sales" for provisions which apply in the event foreclosure is required and which the District is required to follow in the event of delinquency in the payment of Special Taxes. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in payments to Bondowners pending prosecution of the foreclosure sale, if the Reserve Account were depleted. No assurances can be given that the leasehold interest subject to foreclosure and sale at a judicial foreclosure sale will be sold, or, if sold,that the proceeds of such sale will be sufficient to pay any delinquent Special Tax. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Law does not specify the obligations of the District with regard to purchasing or otherwise acquiring any leasehold interest at the execution sale pursuant to the judgment in any such action if there is no other purchaser at such sale. The District has no obligation to be a bidder at a foreclosure sale and has no intention to do so. 29 The District is not included within the "Teeter Plan." The Orange County Board of Supervisors utilizes the alternative method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. Generally, the Teeter Plan provides for a tax distribution procedure in which secured roll taxes and assessments are distributed to taxing agencies within the County on the basis of the tax and assessment levy, rather than on the basis of actual tax and assessment collections. The County, rather than the respective levying agency, then receives all future delinquent tax and assessment payments and penalties. As stated above, the District is not included within the Teeter Plan. Natural Disasters Like other areas of Southern California, property in the District is subject to the risk of major earthquake damage. Although the Huntington Beach area has not experienced any major earthquakes in the past 50 years, the Newport-Inglewood fault, at its closest, is approximately one-half mile from the District. Additional faults within the City that may be geologically active are the North Branch, Bolsa-Fairview, and South Branch Faults, all of which are within the Newport-Inglewood Fault Zone. A significant earthquake along any of the foregoing faults is possible during the period the Bonds will be outstanding. The most recent major earthquake was in 1933,with a magnitude of 6.3 on the Richter scale and an epicenter in the Huntington Harbor area,approximately one mile from the boundary of the District. In the event of a severe earthquake,fire,flood,landslide,high winds,tsunami or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result,the Leasehold Owner(or any subsequent owner)may be unable or unwilling to pay the Special Taxes when due. In addition, the value of the Taxable Property in the District could be diminished in the aftermath of such a natural disaster, reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. According to the Federal Emergency Management Agency (FEMA),the land in the District is located in an"A99"flood zone, as shown on the National Flood Insurance Program map 065034-0045F,dated January 3, 1997. An "A99" zone is identified as a special flood hazard area inundated by the 100-year flood to be protected from the 100-year flood by a Federal flood protection system under construction. Flood insurance is required by the Flood Disaster Protection Act of 1973. The Leasehold Owner has reported to the District that it maintains property and other insurance for the Hotel, including flood insurance, and it expects to obtain and maintain such insurance. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of such parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The value of the leasehold interest in the taxable property within the District, as set forth herein, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the property. The District has not independently verified,but is not aware,that the owner (or operator) of the Taxable Property has such a current liability with respect to the 30 Taxable Property. However, it is possible that such liabilities do currently exist and that the District is not aware of them. Further, it is possible that liabilities may arise in the future with respect to the Taxable Property resulting from the existence, currently,on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of the leasehold interest in the property within the District and the willingness or ability of the Leasehold Owner or any successor thereto to pay the Special Tax installments. Payment of the Special Tax is not a Personal Obligation of the Leasehold Owner The Leasehold Owner and its successors in the Taxable Property, if any, are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the leasehold interest in the Taxable Property in the District. If the value of the Taxable Property is not sufficient, taking into account other liens imposed by public agencies,to secure fully the Special Tax, the District has no recourse against the Leasehold Owner and its successors in the Taxable Property,if any. Leasehold Value The value of the leasehold interest in the Taxable Property within the District is a critical factor in determining the investment quality of the Bonds. If the Leasehold Owner or its successor in interest in the leasehold interest in the Taxable Property is delinquent in the payment of Special Taxes, the District's only remedy is to commence foreclosure proceedings against the leasehold interest in the Taxable Property in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy,physical events such as earthquakes,fires,floods,tsunami,landslides or stricter land use regulations, or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT—Assessed Value-to-Lien Ratio." The assessed value set forth in this Official Statement does not represent market value arrived at through an appraisal process. No assurance can be given that the leasehold interest in the Taxable Property could actually be sold for its assessed value. Prospective purchasers of the Bonds should not assume that the leasehold interest in the Taxable Property could be sold for its assessed value at a foreclosure sale for delinquent Special Taxes. The District cannot foreclose against the fee simple interest in the Taxable Property; only the leasehold interest in the Taxable Property currently held by the Leasehold Owner may be foreclosed upon. No assurance can be given that any bid will be received for the leasehold interest in the Taxable Property with delinquent Special Taxes offered for sale at foreclosure or, if a bid is received,that such bid will be sufficient to pay all delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales." Parity Taxes and Special Assessments The Taxable Property is subject to taxes and assessments imposed by public agencies also having jurisdiction over the property within the District. Under the Ground Lease, the Leasehold Owner is obligated to pay any such taxes and assessments. See "THE COMMUNITY FACILITIES DISTRICT — Estimated Direct and Overlapping Indebtedness." 31 The Special Taxes and any penalties thereon will constitute a lien against the leasehold interest in the Taxable Property until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the Taxable Property except,possibly,for liens or security interests held by an agency of the federal government. See"— FDIC/Federal Government Interests in Properties" and "— Bankruptcy and Foreclosure"below. Neither the District nor the City, however, has control over the ability of other entities and districts to issue indebtedness secured by special taxes,ad valorem taxes or assessments payable from all or a portion of the Taxable Property. Any such special taxes may have a lien on the leasehold interest in Taxable Property on a parity with the Special Taxes and could reduce the value-to-lien ratios for the property within the District described herein. See `°SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" and "THE COMMUNITY FACILITIES DISTRICT — Estimated Direct and Overlapping Indebtedness." Disclosures to Future Purchasers The willingness or ability of an owner of the leasehold interest in Taxable Property to pay the Special _ Tax even if the value is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel, was informed of the amount of the Special Tax on the parcel,was informed of the maximum tax rate and the risk of such a levy and the ability of such owner to pay the Special Tax as well as pay other expenses and obligations. The City has caused a Notice of the Special Tax to be recorded in the Office of the Recorder for the County against the Taxable Property. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made,that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of the Taxable Property or lending of money thereon. FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation(the"FDIC"),the Drug Enforcement Agency,the Internal Revenue Service, or other federal agency has or obtains an interest. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made,under the Authority of the United States, shall be the supreme Law of the Land;and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." This means that, unless Congress has otherwise provided, if a federal governmental entity owns the leasehold interest in the Taxable Property within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes),the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the leasehold interest in the Taxable Property and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes,the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson(9th Circuit; 1979) 597 F.2d 174,the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("FNMA") is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state 32 power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The District has not undertaken to determine whether any federal governmental entity currently has,or is likely to acquire,any interest(including a mortgage interest)in the leasehold interest in the Taxable Property subject to the Special Taxes within the District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by the leasehold interest in the taxable parcel within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the leasehold interest in the taxable property in the District by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property_ owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on the leasehold interest in the Taxable Property in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome;could cause a draw on the Reserve Account and perhaps, ultimately, a default in payment on the Bonds. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors' rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of Leasehold Owner's taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may he limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales." In addition, the prosecution of a 33 foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Secondly,the Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or against the owner of a leasehold interest in the Taxable Property in the District and if the court found that any of such owners had an interest in such moneys within the meaning of Section 541(a)(1) of the Bankruptcy Code. Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition, bankruptcy of the Leasehold Owner could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax installments not being paid in full. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Funds Invested in the County Investment Pool On January 24, 1996, the United States Bankruptcy Court for the Central District of California held that a State statute providing for a priority of distribution of property held in trust conflicted with, and was preempted by, federal bankruptcy law. In that case, the court addressed the priority of the disposition of moneys held in a county investment pool upon bankruptcy of the county. Following payment of the Special Taxes to the District, such funds may be invested in the name of the City or the District for a period of time in the County investment pool. In the event of a petition of or the adjustment of County debts under Chapter 9 of the Federal Bankruptcy Code, a court might hold that the Bond Owners do not have a valid and/or prior lien on the Special Taxes or debt service payments where such amounts are deposited in the County investment pool and may not provide the Bond Owners with a priority interest in such amounts. In that circumstance, unless the Bond Owners could "trace" the funds that have been deposited in the County investment pool, the Bond Owners would be unsecured(rather than secured) creditors of the County. There can be no assurance that the Bond Owners could successfully so trace the Special Taxes or debt service payments. No Acceleration Provision The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture or in the event interest on the Bonds becomes included in gross income for federal income tax purposes. See APPENDIX D "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" and "— Limitations on Remedies" herein. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain statutorily required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See "INTRODUCTION — Continuing Disclosure" and APPENDIX E — "FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER." Any failure to provide annual financial information, if 34 required, does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information,the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. Proposition 218 An initiative measure entitled the"Right to Vote on Taxes Act"(the"Initiative")was approved by the voters of the State at the November 5, 1996, general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the "Title and Summary"of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." The provisions of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the Bonds as described below. Among other things, Section 3 of Article XIIIC states that "...the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854,which states that: Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly,although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. It may be possible, however, for voters or the District or the City acting as the legislative body of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds,but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so,the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on the leasehold interest in the Taxable Property to less than an amount projected to equal to 110% of annual debt service each year on the Outstanding Bonds plus the Administrative Expense Requirement. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also has covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants. 35 The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See"—Limitations on Remedies." Ballot Initiatives and Legislative Measures Articles XIIIC and XIIID were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State,the City,or local districts to increase revenues or to increase appropriations. Loss of Tax Exemption As discussed under the caption "TAX EXEMPTION," the interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of acts or omissions of the District or the City in violation of certain provisions of the Internal Revenue Code of 1986,as amended(the"Code")and the covenants of the Indenture. 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 Indenture 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 Code. Should such an event of taxability occur,the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the provisions of the Indenture relating to optional redemption or special mandatory redemption from Special Tax prepayments. See "THE BONDS — Redemption of Bonds." Future legislative proposals,if enacted into law,clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. It is possible that subsequent to the issuance of the Bonds there might be federal, State, or local statutory changes(or judicial or regulatory interpretations of federal, State, or local law)that affect the federal, State, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. See "TAX EXEMPTION"below. IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues,including both random and targeted audits. It is possible that the Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds(or by an audit of similar bonds). 36 Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement (the "District Disclosure Agreement") with Willdan Financial Services, as disclosure dissemination agent, the District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at www.emma.msrb.org ("EMMA") on an annual basis certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events. Additionally, pursuant to a Continuing Disclosure Agreement (the "Leasehold Owner Disclosure Agreement," and, together with the District Disclosure Agreement, the "Disclosure Agreements") with U.S. Bank National Association, as disclosure dissemination agent, the Leasehold Owner has agreed to provide, or cause to be provided,to EMMA, on an annual basis certain information concerning the Leasehold Owner. The District and the Leasehold Owner have further agreed to provide notice to EMMA of certain listed events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission. See APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and the Leasehold Owner and notices of listed events to be provided by the District and the Leasehold Owner. Within the last five years,neither the City nor the District nor the Leasehold Owner has failed to timely comply with its prior continuing disclosure obligations under Rule 15c2-12(b)(5) in all material respects. Notwithstanding the foregoing, in 2009, the City filed annual reports for several of its community facilities districts, including the District, one week late. The full text of the forms of the Disclosure Agreements are set forth in APPENDIX E. TAX EXEMPTION In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount)on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. 37 In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable Bond. The amount of original issue discount that accrues to the Beneficial Owner of the Bonds is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest on the Bonds (including any original issue discount) is based upon certain representations of fact and certifications made by the District, the Underwriters and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended(the "Code") that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds (including any original issue discount)will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds (including any original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District will covenant to comply with all such requirements. The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Beneficial Owner's basis in the applicable Bond(and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment,computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the"IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof)subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest(and original issue discount)on the Bonds or their market value. Bond Counsel's opinion may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson& Rauth,a Professional Corporation. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS OR THE MARKET VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN 38 ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Although Bond Counsel has rendered an opinion that interest on the Bonds (including any original issue discount) is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the accrual or receipt of interest on the Bonds (including any original issue discount) may otherwise affect the tax liability of the recipient. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the Bonds. Should interest on the Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture. The proposed form of Bond Counsel's opinion with respect to the Bonds is attached as APPENDIX B. LEGAL OPINION The legal opinions of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, approving the validity of the Bonds in substantially the form set forth as APPENDIX B hereto,will be made available to purchasers at the time of original delivery. Certain legal matters will be passed upon for the City and the District by the City Attorney, Jennifer McGrath, Esq. and by Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. ABSENCE OF LITIGATION No litigation is pending or threatened concerning the validity of the Bonds and a certificate of the District to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. Neither the City nor the District is aware of any litigation pending or threatened which questions the existence of the District or the City or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Bonds. NO RATING The District has not made and does not contemplate making application to any rating agency for the assignment of a rating to the Bonds. 39 UNDERWRITING The Bonds are being purchased by the Underwriter. The Underwriter has agreed to purchase the. Bonds at a price of$12,851,153.30(being$12,965,000.00 aggregate principal amount thereof,.less net original issue discount of$35,759,20,and less underwriter's discount of$78,087.50). The purchase contract relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase contract,the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering price stated on the inside cover page hereof. The offering price may be changed from time to time by the Underwriter. FINANCIAL INTERESTS The fees being paid to the Underwriter, Bond Counsel,Disclosure Counsel,Jones Hall,A Professional. Law Corporation, as counsel to the Underwriter, the Trustee and the Escrow Bank are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds.. i NEW LEGISLATION The District is not aware of any significant pending legislation which would have material adverse i consequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds when due. a ADDITIONAL INFORMATION The purpose of this Official. Statement is to supply information to prospective buyers of the Bonds. Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for frill and complete statements and their provisions. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated,are intended as such and not s;representatives of fact. The execution and delivery of this Official Statement by the Finance Director of the City has been I duly authorized by the City Council of the City of Huntington Beach acting in its capacity as the legislative body of the District. CITY OF HUNTINGTON BEACH COMMUNITY i FACILITIES DIS_ . iCT NO.2 00-1 By: /s/Lori Ann Farrell Director of Finance of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 i 40 j APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) A Special Tax applicable to each Assessor's Parcel of Taxable Property in the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) (herein CFD No.2000-1) shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The leasehold interests in the real property in CFD No.2000-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. DEFINITIONS The capitalized terms hereinafter set forth have the following meanings when used in this Rate and Method of Apportionment: Acre or Acreage means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, or the other parcel map recorded with the County Recorder. If the Acreage of a particular Parcel is unclear after reference to available maps, the Administrator shall determine the appropriate Acreage for a Parcel. Act means Chapter 3.56(commencing with Section 3.56.010)of the Municipal Code of the City of Huntington Beach and, as applicable, the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311), Part 1, Division 2, of Title 5 of the Government Code of the State of California. Administrative Expenses means any or all of the following actual or reasonably estimated costs directly related to the administration of CFD No.2000-1: the fees and expenses of any Fiscal Agent or trustee (including any fees and expenses of its counsel) employed in connection with any Bonds;any costs associated with the marketing or remarketing of the Bonds;the expenses of the Administrator and the City in carrying out their duties under any Indenture or resolution with respect to the Bonds, including,but not limited to,the levy and collection of the Special Tax, the fees and expenses of legal counsel, charges levied by the County or any division or office thereof in connection with the levy and collection of Special Taxes, audits, continuing disclosure or other amounts needed to pay arbitrage rebate to the federal government with respect to Bonds; costs associated with complying with continuing disclosure requirements; costs associated with responding to public inquiries regarding Special Tax levies and appeals; attorneys' fees and other costs associated with commencement or pursuit of foreclosure for delinquent Special Taxes; and all other costs and expenses of City,the Administrator,the County, and any Fiscal Agent, escrow agent or trustee related to the administration of CFD No.2000-1. Administrator means the Director of Economic Development or such other person or entity designated by the City Administrative Officer or the City Council to administer the Special Tax according to this Rate and Method of Apportionment of Special Tax. Assessor's Parcel or Parcel means a lot, parcel or airspace parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. A-1 Assessor's Parcel Map means an official map of the Assessor of the County designating Parcels by Assessor's Parcel number. Bonds mean any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series,issued by the City for CFD No. 2000-1 under the Act. City means the City of Huntington Beach. City Council means the City Council of the City of Huntington Beach, acting as the legislative body of CFD No. 2000-1. County means the County of Orange.. Development Agreement means the Amended and Restated Disposition and Development Agreement between the City and the developer,Mayer Financial,Ltd. and its subsidiaries,successors and assigns,and any subsequent amendments thereto. Exempt Land means (1)any real property within the boundaries of CFD No. 2000-1 which generally serves the development subject to the Development Agreement and/ or Ground Lease and is owned by a governmental agency for public right-of-way purposes including, but not limited to, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator or (2) any Assessor's Parcel for which the Special Tax with respect to the leasehold interest has been paid in full. Fiscal Agent means the fiscal agent who is a party to the Indenture,if so approved. Fiscal Year means the period commencing on July 1 and ending on the following June 30, in any year in which the Bonds are outstanding. Ground Lease means the ground lease with respect to the land within CFD No.2000-1 boundary covering a term exceeding the maturity date for the Bonds between the City and the tenant,Mayer Financial,Ltd. and its subsidiaries,successors and assigns, and any subsequent amendments thereto. Indenture means the indenture, fiscal agent agreement, resolution or other instrument approved pursuant to the Resolution of Issuance and pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time, and any instrument replacing or supplementing the same. Maximum Special Tax means, with respect to the leasehold interest in any Parcel of Taxable Property, the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on the leasehold interest in such Parcel. Outstanding Bonds means all Bonds which are then outstanding under the Indenture. Reserve Fund means the fund of that name created under the Indenture. Resolution of Issuance means the resolution adopted by the City Council of the City, acting as the legislative body of CFD No. 2000-1,authorizing the issuance of the Bonds in accordance with the Act. Special Tax means the special tax to be levied pursuant to the Act and this Rate and Method of Apportionment of Special Tax in each Fiscal Year on the leasehold interests in Taxable Property within CFD No.2000-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No.2000-1 necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Fund for A-2 all Outstanding Bonds, (iii)to pay Administrative Expenses, and (iv)to pay costs of any credit enhancement (including fees and expenses related to any letter of credit) for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No.2000-1, which are not Exempt Land or exempt from the Special Tax pursuant to law. Trustee means the trustee who is a party to the Indenture,if so approved. B. IDENTIFYING TAXABLE PROPERTY Not less than fifteen business days prior to the beginning of each Fiscal Year, the Administrator shall determine which Parcels in CFD No.2000-1 are Taxable Property. The leasehold interest in the Taxable Property shall be subject to Special Taxes in accordance with the rate and method of apportionment described in Sections C and D below. C. MAXIMUM SPECIAL TAX The Maximum Special Tax for the leasehold interests in Taxable Property in CFD No. 2000-1 shall be the greater of(1)$130,000 per Acre or(2)the amount determined pursuant to the following steps: Step 1: Determine the maximum annual debt service on all Outstanding Bonds; Step 2: Multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: Determine the Acreage of Taxable Property within the CFD No. 2000-1; Step 4: Divide the amount from Step 2 by the Acreage from Step 3 to determine the Maximum Special Tax per Acre of Taxable Property. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter, the City Council shall levy the Special Tax proportionately on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax,as determined by reference to Section C, above,as needed to satisfy the Special Tax Requirement. E. LIMITATIONS No Special Taxes shall be levied on the leasehold interest in any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on the leasehold interests in Taxable Property commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter, and until the date on which principal and interest on all Outstanding Bonds have been paid in full (or provision for their payment has been made). Upon determination by the Administrator that this requirement has been met, the Special Tax lien shall be removed from the leasehold interests in all Parcels in CFD No.2000-1. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however, that CFD No.2000-1 may directly bill the special tax, may collect special taxes at a different time or in a manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on the leasehold interest in delinquent Assessor's Parcels as permitted by the Act. A-3 G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No.2000-1, a special three-member Review / Appeal Committee. The Review / Appeal Committee shall interpret this Rate and Method of Apportionment and make determinations relative to the annual administration of the Special Tax and any appeals,as herein specified. The owner of the leasehold interest in any Taxable Property within CFD No.2000-1 claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Review/Appeal Committee not later than one calendar year after having paid the Special Tax that is disputed. The Review/Appeal Committee shall promptly review the appeal,and if necessary,meet with the owner of the leasehold interest, consider written and oral evidence regarding the amount of the Special Tax, and resolve the appeal. If the Review/Appeal Committee's decision requires the Special Tax to be modified or changed in favor of the owner of the leasehold interest, a cash refund shall not be made(except for the last year of the levy), but an adjustment shall be made to the next Special Tax levy. This procedure shall be exclusive and its exhaustion by any owner of a leasehold interest shall be a condition precedent to any legal action by such owner. H. PREPAYMENT OF SPECIAL TAX The following definitions apply solely to this Section H.: Outstanding Bonds means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. Previously Issued Bonds means all Bonds that have been issued by CFD No.2000-1 prior to the date of prepayment. 1. Prepayment in Full The Special Tax applicable to any leasehold interest in any Assessor's Parcel of Taxable Property may be prepaid. The Special Tax obligation applicable to the leasehold interest in such Assessor's Parcel in CFD No.2000-1 may be fully prepaid and the obligation of the leasehold interest in such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner of the leasehold interest intending to prepay the Special Tax obligation on one or a combination of Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. Following receipt of such notice,the Administrator shall notify the owner of the leasehold interest in such Assessor's Parcel or Parcels of the prepayment amount of such Assessor's Parcel(s). The Administrator may charge a reasonable fee for providing this figure. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Fiscal Agent pursuant to the Indenture. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Capitalized Interest Credit Total: Equals Prepayment Amount A-4 As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows: Paragraph No. 1. For Assessor's Parcels of Taxable Property intending to prepay, compute the Maximum Special Tax for such Assessor's Parcels. 2. Divide the Maximum Special Tax computed pursuant to Paragraph 1 by the total Maximum Special Tax of all Assessor's Parcels of Taxable Property in CFD No.2000-1, excluding any Assessor's Parcels which have prepaid their Special Taxes in full. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section H to compute the amount of Outstanding Bonds to be retired and prepaid,and round the result up to the nearest multiple of$5,000(the Bond Redemption Amount). 4. Multiply the Bond Redemption Amount computed pursuant to Paragraph 3 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed(the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 6. Determine the Special Taxes levied on the Assessor's Parcel in the current and any previous Fiscal Year,which have not yet been paid. 7. Compute the amount the Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 8. Add the amounts computed pursuant to Paragraphs 5 and 6 and subtract the amount computed pursuant to Paragraph 7(the Defeasance Amount). 9. Determine the administrative fees and expenses of CFD No.2000-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the Administrative Fees and Expenses). 10. Determine the reserve fund credit (the Reserve Fund Credit) which shall equal the lesser of: (a)the expected reduction in the reserve requirement(as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b)the amount derived by subtracting the new reserve requirement (as defined in the Indenture) in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date,but in no event shall such amount be less than zero. 11. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to Paragraph 2 by the expected balance in the capitalized interest fund after such first interest and/ or principal payment (the Capitalized Interest Credit). A-5 12. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3,4, 8 and 9,less the amounts computed pursuant to Paragraphs 10 and 11 (the Prepayment Amount). 13. From the Prepayment Amount,the amounts computed pursuant to Paragraphs 3, 4, 8, 10 and 11 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to Paragraph 9 shall be retained by the Administrator. As a result of the payment of the current Fiscal Year's Special Tax levy as determined under Paragraph 6 (above), the Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid,the City Council shall cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pry the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Taxes that may be levied on Taxable Property within CFD No.2000-1 both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 2. Prepayment in Part The Maximum Special Tax on an Assessor's Parcel of Taxable Property may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1, except that a partial prepayment shall be calculated according to the following formula: PP=(PH xF)+G Where these terms are defined as follows: PP = the partial prepayment PH = the Prepayment Amount calculated according to Section 11.1, minus the amounts determined in Paragraph No.6 and 9 of Section H.1. F = the percent by which the owner of the leasehold interest in the Assessor's Parcel(s) is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No.6 and 9 of Section H.1. The owner of the leasehold interest in an Assessor's Parcel who desires to partially prepay the Maximum Special Tax shall notify the Administrator of(i)such owner's intent to partially prepay the Maximum Special Tax, (ii)the percentage by which the Maximum Special Tax shall be prepaid, and(iii)the company or agency that will be acting as the escrow agent, if applicable. The Administrator shall provide the owner of the leasehold interest with a statement of the amount required for the partial prepayment of the Maximum Special Tax for an Assessor's Parcel following receipt of the request. With respect to any Assessor's Parcel that is partially prepaid, CFD No.2000-1 shall (i)distribute the funds remitted to it according to Paragraph 13 of Section H.1,and(ii)indicate in the records of CFD No.2000-1 that there has been a partial prepayment of the Maximum Special Tax and that a portion of the Maximum Special Tax equal to the outstanding percentage(1.00-F) of the remaining Maximum Special Tax shall continue to be authorized to be levied on such Assessor's Parcel pursuant to Section D. A-6 APPENDIX B FORM OF OPINION OF BOND COUNSEL July 31,2013 City Council of the City of Huntington Beach Huntington Beach, California Re: $12,965,000 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Huntington Beach(the"City")taken in connection with the formation of the City of Huntington Beach Community Facilities District No. 2000-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$12,965,000 (the "Bonds") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the initial purchasers of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California),the Municipal Code of the City of Huntington Beach and Resolution No.2013-19(the"Resolution of Issuance"), adopted by the City Council (the "City Council") of the City on June 3, 2013, and by a Bond Indenture dated as of July 1, 2013 (the "Indenture"), by and between the District and U.S. Bank National Association, as trustee. All capitalized terms not defined herein shall have the meanings set forth in the Indenture. The Bonds are dated the date of delivery and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on each September 1 and March 1, commencing on March 1, 2014, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances,and upon consideration of applicable laws,we are of the opinion that: (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation,and, except for the Special Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. B-1 (2) The Indenture has been duly executed and delivered by the City Council on behalf of the District. The Indenture creates a valid pledge of,and the Bonds are secured by the Net Taxes and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California; provided,however,we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification,penalty,contribution,choice of law,choice of forum or waiver provisions contained therein. (3) Under existing statutes,regulations,rulings and judicial decisions, interest(and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest(and original issue discount)on the Bonds is exempt from State of California personal income tax. (5) The difference between the issue price of a Bond(the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public)and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues for the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals or corporations(as described in paragraph(3)above)and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond(generally the purchase price)exceeds the amount payable on maturity(or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the owner. The opinion expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended.(the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount)will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest(and original issue discount)on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5)and(6)above,we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in B-2 such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest(and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken)or events occurring(or not occurring)after the date hereof We have not undertaken to determine,or to inform any person, whether such actions or events are taken (or not taken) or do occur(or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material. Respectfully submitted, B-3 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX C GENERAL ECONOMIC AND DEMOGRAPHIC DATA FOR THE CITY OF HUNTINGTON BEACH AND THE COUNTY OF ORANGE The following economic data for the City of Huntington Beach (the "City') and the County of Orange (the "County') is presented for information purposes only. The Bonds are not a debt or obligation of the City or the County. General The City of Huntington Beach is a seaside city located in the County. The City is famous for an 8.5 miles stretch of beach that is complemented by a mild climate and surf culture that has earned the Huntington Beach the title, "Surf City, USA." Incorporated in 1909, the City has a council/administrator form of government. The City Council is comprised of seven members elected biannually at large to four-year terms and the Mayor is selected by the Council Members to one-year term. The City Council appoints the City Administrator who is responsible for the day-to-day administration of Huntington Beach's business and the coordination of all departments. Orange County is third most populous county in California and is located adjacent to the Pacific Ocean and the Counties of Los Angeles, San Bernardino, Riverside and San Diego. The County is located in the most heavily populated region of California, necessitating easy access to road, rail, air and sea transportation. The County is also a major Southern California tourist center with a large number of amusement parks and recreational and entertainment activities. The County's Pacific Coast shoreline includes five state beaches and parks, five Municipal beaches and five County beaches. Orange County is a general law county and governed by a five-member Board of Supervisors, each of whom serves for four-year terms. The County provides a wide range of services to its residents, including police, medical and health services, senior citizen assistance, library services, judicial institutions (including support programs), airport service, roads, solid waste management, harbors, beaches and parks, life guard services and a variety of public assistance programs. C-1 Population The following table summarizes population estimates for the City, County and State from 2001 through 2013. POPULATION ESTIMATES The City of Huntington Beach,Orange County and the State of California 2001-2013(') Year Huntington Beach Orange County California 2001 190,860 2,871,926 34,430,970 2002 191,802 2,902,207 35,063,959 2003 192,650 2,927,118 35,652,700 2004 193,069 2,948,135 36,199,342 2005 192,581 2,956,847 36,676,931 2006 191,653 2,956,334 37,087,005 2007 190,813 2,960,659 37,463,609 2008 190,018 2,974,321 37,871,509 2009 190,079 2,990,805 38,255,508 2010 190,136 3,008,855 37,223,900 2011 190,355 3,028,846 37,427,946 2012 192,524 3,055,792 37,678,563 2013 193,616 3,081,804 37,966,471 January 1 data. Source: California State Department of Finance,Demographic Research Unit. March 2010 Benchmark.. Income The following tables show the personal income and per capita personal income for the County, State of California and United States from 2005 through 2011. PERSONAL INCOME County of Orange,State of California,and United States 2005-2011 (Dollars in Thousands) Year County of Orange California United States 2005 $139,408,948 $1,387,661,013 $10,476,669,000 2006 150,598,354 1,495,533,388 11,256,516,000 2007 153,446,641 1,566,400,134 11,900,562,000 2008 155,925,156 1,610,697,843 12,380,225,000 2009 146,052,466 1,526,531,367 12,168,161,000 2010 150,467,328 1,5 87,403,857 12,353,577,000 2011 154,131,535 1,676,564,972 12,981,740,848 Source: U.S.Department of Commerce,Bureau of Economic Analysis. C-2 PER CAPITA PERSONAL INCOME(') County of Orange,State of California,and United States 2005-2011 County of Year Orange California United States 2005 $47,417 $38,767 $35,424 2006 51,359 41,567 37,698 2007 52,342 43,240 39,461 2008 52,720 43,853 40,674 2009 48,624 42,395 39,635 2010 48,760 42,514 39,937 2011 50,440 44,481 41,663 Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars(not adjusted for inflation). Source: U.S.Department of Commerce,Bureau of Economic Analysis. Employment The following table summarizes the labor force, employment and unemployment figures over the past five years for the City, County and State of California. CIVILIAN LABOR FORCE,EMPLOYMENT AND UNEMPLOYMENT City of Huntington Beach,Orange County,State of California and the United States 2008-2012(') Unemployment Area Labor Force Employmen& Unemployment(') Rate(4) 2008 City of Huntington Beach 123,700 118,400 5,300 4.3% Orange County 1,618,100 1,532,800 85,300 5.3 State of California 18,191,000 16,883,400 1,313,200 7.2 2009 City of Huntington Beach 120,600 111,900 8,700 7.2% Orange County 1,588,800 1,448,200 140,600 8.9 State of California 18,204,200 16,141,500 2,086,200 11.3 2010 City of Huntington Beach 120,600 111,300 9,400 7.8% Orange County 1,591,000 1,440,400 150,700 9.5 State of California 18,176,200 15,916,300 2,264,900 12.4 2011 City of Huntington Beach 121,800 113,100 8,600 7.1% Orange County 1,603,700 1,464,400 139,300 8.7 State of California 18,172,000 16,185,100 2,158,300 10.9 2012 City of Huntington Beach 123,200 115,600 7,600 6.2% Orange County 1,618,700 1,496,00 122,700 7.6 State of California 18,494,900 16,560,300 1,934,500 10.5 (1) Data is based on annual averages,unless otherwise specified,and is not seasonally adjusted. () 4) 3 Includes persons involved in labor-management trade disputes. ( Includes all persons without jobs who are actively seeking work. � The unemployment rate is computed from un-rounded data.therefore,it may differ from rates computed from rounded figures in this table. Source: U.S.Department of Labor-Bureau of Labor Statistics,California Employment Development Department. March 2012 Benchmark. C-3 Industry The following table summarizes employment figures by industry for the Santa-Ana-Anaheim- Irvine Metropolitan Division,which is located entirely within the County. INDUSTRY EMPLOYMENT& LABOR FORCE ANNUAL AVERAGES Santa Ana-Anaheim-Irvine MD (Orange County) 2008-2012 2008 2009 2010 2011 2012 Farming 4,600 3,800 3,700 3,200 2,700 Mining and Logging 600 500 500 500 500 Construction 91,200 74,200 68,000 68,300 71,300 Manufacturing 174,100 154,800 150,400 153,600 157,800 Wholesale Trade 86,700 79,400 77,600 77,900 76,700 Retail Trade 155,600 142,300 140,100 141,600 142,200 Transportation,Warehousing and Utilities 29,300 27,800 26,700 27,500 27,700 Information 30,100 27,300 24,800 23,800 24,200 Financial Activities 113,100 105,100 103,500 103,900- 108,100 Professional and Business Services 266,600 240,200 243,500 246,700 255,900 Education and Health Services 150,700 152,100 155,500 158,700 163,400 Leisure and Hospitality 176,400 169,100 168,600 173,200 180,500 Other Services 46,500 42,600 42,200 42,800 44,300 Government 160,800 156,600 152,300 149,600 147,800 Total: 1,486,200 1,375,900 1,357,400 1,371,300 1,403,000 Note: Items may not add to total due to independent rounding. Source: California Employment Development Department,Labor Market Information Division.March 2012 Benchmark. Largest Employers The following tables present the largest employers in the City and the County during calendar years 2011 and 2013,respectively. Name of Business No.Employed %of Total Boeing 4,609 4.17% Quiksilver 1,230 1.11 Cambro MFG Co. 951 0.86 Hyatt Regency Huntington Beach 641 0.58 C&D Aerospace 555 0.50 Huntington Beach Hospital 503 0.45 Rainbow Disposal 408 0.37 Huntington Beach Healthcare 381 0.34 Waterfront Hilton Beach Resort 343 0.31 Cleveland Golf/Srixon 280 0.25 Total of top 10 9,901 8.95 all others 100,699 91.05 Total employment(public and private) 110,600 100.00% Source: City of Huntington Beach,Comprehensive Annual Financial Report for Fiscal Year Ended September 30,2011. C-4 LARGEST EMPLOYERS Orange County 2013 Name of Business Location Type of Business Allergan Inc. Irvine Drug Millers(Mfrs) Anaheim City Hall Anaheim City Government-Executive Offices Blogtagon Social Media Fountain Valley Internet Service Boeing Co. Huntington Beach Aircraft Manufacturer Boeing Co. Seal Beach Aerospace Industries Broadcom Corp Irvine Semiconductors&Related Devices(Mfrs) California State-Fullerton Fullerton Schools-Universities&Colleges Academic Disneyland Resort Anaheim Anaheim Amusement&Theme Parks Emplicity Irvine Employment Contractors-Temporary Help First American Title Ins Co. Santa Ana Title Companies First Team San Clemente Real Estate San Clemente Real Estate Fountain Valley Regional Hospital Fountain Valley Hospitals Hoag Hospital Newport Beach Hospitals Jones Lang La Salle Brea Real Estate Management Pacifi Care Cypress Health Plans Puro Clean Anaheim Water Damage Restoration-Residential Quiksilver Eyeware USA Huntington Beach Optical Goods-Retail Saddleback Memorial Hospital Laguna Hills Hospitals St.John Knits Int'1 Inc. Irvine Women's Apparel-Retail St.Jude Medical Ctr. Fullerton Hospitals St.Jude Medical Ctr. Brea Hospitals Tenet Healthcare Fountain Valley Hospitals UC Irvine Healthcare Orange Hospitals University of CA-Irvine Irvine Schools-Universities&Colleges Academic Walt Disney Parks&Resorts Anaheim Amusement&Theme Parks Source: California Employment Development Department, Labor Market Information Division. Major Employers in Orange County. C-5 Building Activity The following tables summarize building permits and valuations for the City and the County during calendar years 2007 through 2011. BUILDING PERMITS AND VALUATIONS City of Huntington Beach 2007-2011 2007 2008 2009 2010 2011 Valuation(In$000's) Residential $ 61,640 $ 39,114 $26,788 $33,567 $44,375 Nonresidential 66,821 66,477 31,221 42,546 102,623 Total Valuation(') $128,461 $105,591 $58,009 $76,113 146,998 New Dwelling Units(#) Single-Family 50 20 9 4 24 Multi-Family 4 0 0 16 45 Total: 54 20 9 20 69 (1> Total may not add up due to rounding. Source: Construction Industry Research Board. BUILDING PERMITS AND VALUATIONS Orange County 2007-2011 2007 2008 2009 2010 2011 Valuation(In$000's) Residential $1,792,269 $1,037,710 $ 855,193 $1,029,406 $1,236,970 Nonresidential 2,005,197 1,439,121 952,485 1,115,928 1,300,021 Total Valuation(') $3,797,466 $2,476,831 $1,807,678 $2,181,334 $2,536,992 New Dwelling Units(#) Single-Family 2,182 1,295 1,376 1,553 1,898 Multi-Family 4,890 1,864 824 1,538 2,909 Total: 7,072 3,159 2,200 3,091 4,807 Total may not add up due to rounding. Source: Construction Industry Research Board. C-6 Taxable Sales The history of taxable transactions in the City and the County from 2007 through 2011 (the most recent data available)is shown in the following tables. TAXABLE SALES Huntington Beach 2007-2011 Retail Retail and Food Total Outlets Year Permits Taxable Transactions Total Permits Taxable Transactions 2007 2,985 $2,096,249 7,177 $2,631,199 2008 3,105 1,916,823 7,127 2,563,546 2009 4,274 1,673,149 6,582 2,247,735 2010 4,563 1,723,952 6,847 2,366,485 2011 4,701 2,012,833 6,968 2,584,793 Source: "Taxable Sales in California(Sales&Use Tax),"California Board of Equalization. TAXABLESALES Orange County 2007-2011 Retail Retail and Food Total Outlets Year Permits Taxable Transactions Total Permits Taxable Transactions 2007 44,093 $38,988,227 99,088 $57,293,471 2008 45,705 35,768,595 97,612 53,606,829 2009 56,259 31,162,619 90,231 45,712,784 2010 58,076 23,690,727 92,407 34,828,607 2011 58,795 35,587,795 92,207 51,731,139 Source: "Taxable Sales in California(Sales&Use Tax),"California Board of Equalization. C-7 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a summary of certain definitions and provisions of the Indenture which are not described elsewhere in the Official Statement. This Summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of its provisions. DEFINITIONS "Act"means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. "Administrative Expenses Cap"means$20,000 per Fiscal Year, escalating 2%annually, commencing with Fiscal Year 2015. "Administration Fund"means that certain fund by that name established pursuant to the Indenture. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Trustee and any Special Tax Consultant to the District, any costs related to the District's compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District under the Indenture. "Agency"means the former Redevelopment Agency of the City of Huntington Beach. "Alternative Penalty Account" means the account by that name created and established in the Rebate Fund pursuant to the Indenture. "Annual Debt Service"means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized Investments"means any of the following investments, if and to the extent the same are at the time legal for investment of the District's funds (the Trustee is entitled to rely upon investment direction from the District as a certification such investment is an Authorized Investment): (a) Federal Securities; (b) Senior debt obligations, participations, or other instruments issued by a federal agency or United States government-sponsored enterprise, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises (stripped securities are only permitted if they have been stripped by the agency itself); (c) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933 and having a rating of AAA or better by a Nationally Recognized Statistical Rating Organization(NRSRO); (d) Certificates of deposit issued by commercial banks, savings and loan associations or mutual savings banks with ratings in the top 2 rating categories; D-I (e) Certificates of deposit, savings accounts, deposit accounts or money market deposits where the banks rating's fall within the top 2 ratings categories; (f) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase that is rated at least A-1 or its equivalent by a NRSRO and maturing no more than 360 days after the date of purchase(i.e.,ratings on holding companies are not considered as the rating of the bank); (g) Commercial Paper rated, at the time of purchase, at least A-1 or its equivalent by a NRSRO and maturing no more than 270 days after the date of purchase; (h) Repurchase agreements with financial institutions insured by the FDIC; or any broker-dealer with "retail customers" which falls under the jurisdiction of the Securities Investors Protection Corporation (SIPC); or a bank or other financial institution rated in the top two rating categories by one or more Rating Agencies; provided that: (i) the over-collateral izati on is at one hundred two percent (102%), computed weekly, consisting of such securities as described in this definition, items (a)through(c); (ii)a third party custodian, the Trustee or the Federal Reserve Bank shall have possession of such obligations; (iii) the Trustee shall have perfected a first priority security interest in such obligations;and(iv) failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral; (i) County or State-administered pooled investment funds in which the District is. statutorily permitted or required to invest to the extent that any amounts are deposited by the Trustee into such funds and the Trustee shall have direct access to such fund; 0) California Asset Management Program(CAMP). "Bond Counsel" means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. "Bond Year" means the twelve (12) month period commencing on September 2 of each year and ending on September 1 of the following year, and for the first Bond Year commencing on the Delivery Date and ending on September 1,2013. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bonds"means the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds issued in the original principal amount of$12,965,000. "Business Day"means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located,are not required or authorized to remain closed. "Certificate of an Authorized Officer" means a written certificate executed by one of the Mayor, City Manager,Director of Finance of the City, or their written designees. "City"means the City of Huntington Beach,California. D-2 "City Council"means the City Council of the City. "Code"means the Internal Revenue Code of 1986,together with any amendments thereto. "Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement, dated July 1, 2013, by and between the District and Willdan Financial Services, as dissemination agent under the Indenture. "Corporate Trust Office"means the Corporate Trust Office of the Trustee at 633 West 5th Street,24th Floor,Los Angeles, California 90071, Attention: Corporate Trust Services, or such other office designated by the Trustee from time to time. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and final Official Statements, financial consultants, special tax consultants and other fees and expenses set forth in a Certificate of an Authorized Officer. "County"means the County of Orange, California. "Costs of Issuance Fund"means the fund by that name established pursuant to the Indenture. "Delivery Date" means the date on which the Bonds were issued and delivered to the initial purchasers thereof. "Depository"means the securities depository acting as Depository under the Indenture. "Director of Finance"means the Director of Finance of the City,or his or her designee. "Dissemination Agent"means Willdan Financial Services,and any successor thereto. "District" means City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)established pursuant to the Act and the Resolution of Formation. "Escrow Agreement" means the Escrow Agreement, by and between U.S.Bank National Association, as Escrow Bank, and the District,dated as of July 1,2013. "Escrow Bank"means U.S.Bank National Association. "Escrow Fund"means the Escrow Fund established under the Escrow Agreement. "Extraordinary Administrative Expenses" means Administrative Expenses required for extraordinary District events such as foreclosure actions against delinquent taxpayers within the District required to be prosecuted on an expedited basis pursuant to the Indenture, the approval and implementation of actions requiring Bondowner consent under the Indenture, or actual or threatened Bondowner or property owner litigation arising out of the Bonds or the District. "Federal Securities"means any of the following: (1) Cash(insured at all times by the Federal Deposit Insurance Corporation ("FDIC")or otherwise collateralized with obligations described in paragraph(2)below), (2) Direct obligations of(including obligations issued or held in book-entry form on the books of)the Department of the Treasury of the United States of America,or D-3 (3) Obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "Gross Taxes" means the amount of all Special Taxes received by the District, together with the net proceeds collected from the sale of property pursuant to the foreclosure provisions of the Indenture, penalties and interest received by the District in connection with the delinquency of such Special Taxes and proceeds from any security for payment of Special Taxes taken in lieu of foreclosure after payment of administrative costs and attorneys' fees payable from such proceeds to the extent not previously paid as an Administrative . Expense. "Indenture" means the Bond Indenture, by and between the District and the Trustee, dated as of July 1,2013,together with any Supplemental Indenture approved pursuant to the Indenture. "Independent Financial Consultant"means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District or the City, who,or each of whom: (a) is in fact independent and not under the domination of the District or the City; (b) does not have any substantial interest, direct or indirect, in the District or the City; and (c) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District or the City. "Interest Payment Date" means each March 1 and September 1, commencing March 1, 2014; provided, however,that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. "Lease Remedy Forbearance Agreement"means that certain agreement dated as of December 1, 2001, by and between the City and the Agency. "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of the Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Net Taxes" means Gross Taxes minus amounts, not in excess of the Administrative Expenses Cap, set aside to pay Administrative Expenses. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Indenture. D-4 "Ordinance" means the ordinance adopted by the legislative body of the District providing for the levying of the Special Tax. "Outstanding"or"Outstanding Bonds"means all Bonds theretofore issued by the District,except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with the Indenture; (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust(whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity in the Indenture, notice of such redemption shall have been given as provided in the Indenture;and (3) Bonds which have been surrendered to the Trustee for transfer or exchange or for which a replacement has been issued pursuant to the Indenture. "Participants"means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds the Bonds as a securities depository. "Rating Agency" means Moody's Rating Service and Standard & Poor's or both, as the context requires. "Rate and Method of Apportionment" means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation as it may be amended from time to time in accordance with the Act and the Indenture. "Rebatable Arbitrage"means the amount(determinable as of the last day of each fifth Bond Year and upon retirement of the Bonds) of arbitrage profits payable to the United States at all times and in the amounts specified in Section 148(f)of the Code and any applicable Regulations. "Rebate Regulations" means any final, temporary or proposed Regulations promulgated under Section 148(f)of the Code. "Record Date"means the fifteenth day of the month preceding an Interest Payment Date,regardless of whether such day is a Business Day. "Regulations"means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Representation Letter" shall mean the Blanket Letter of Representations from the District to the Depository as described in the Indenture. "Reserve Account" means the account established within the Special Tax Fund pursuant to the Indenture. "Reserve Requirement" means that amount as of any date of calculation equal to the lesser of(i) 10% of the initial principal amount of the Bonds, if any, (ii)Maximum Annual Debt Service on the then Outstanding Bonds, if any;and(iii) 125%of average Annual Debt Service on the then Outstanding Bonds. "Resolution of Formation" means, Resolution No. 2000-35 adopted by the City Council on April 17, 2000,pursuant to which the City formed the District. D-5 "Resolution of Issuance" means Resolution No. 2013-19 duly adopted by the City Council, acting in its capacity as the legislative body of the District on June 3, 2013, approving the Indenture, and any supplemental bond indenture approved pursuant to the Indenture. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in the Indenture. "Special Tax Prepayments" means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method of Apportionment. "Special Taxes" means the taxes authorized to be levied by the District in accordance with the Ordinance,the Resolution of Formation,the Act and the Rate and Method of Apportionment. "Special Tax Fund"means the fund by that name established pursuant to the Indenture. "Successor Agency"means the City of Huntington Beach. "Supplemental Indenture" means any supplemental indenture amending or supplementing the Indenture. "Surplus Fund"means the fund by that name established pursuant to the Indenture. "Tax Certificate"means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Taxable Property" means the area within the boundaries of the District which is not exempt from application of the Special Tax by operation of law or the Rate and Method of Apportionment. "Term Bonds"means the Bonds maturing on September 1,2026, September 1,2029 and September 1, 2031. "Treasurer"means the Treasurer-Tax Collector of the County of Orange. "Trustee"means U.S. Bank National Association,and any successor thereto. "Underwriter"means Stifel,Nicolaus& Company,Incorporated. BOND TERMS Type and Nature of Bonds. Neither the faith and credit nor the taxing power of the City,the State of California, or any political subdivision in the Indenture other than the District is pledged to the payment of the Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City or general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund, as more fully described in the Indenture. The District's limited obligation to pay the principal of,premium, if any, and interest on the Bonds from amounts in the Special Tax Fund is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption in the Indenture, if any, are not a debt of the City,the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not D-6 a legal or equitable pledge,charge, lien, or encumbrance upon any of the District's property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund which are, under the terms of the Indenture and the Act, set aside for the payment of the Bonds and interest thereon and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds,are liable personally on the Bonds,by reason of their issuance. Notwithstanding anything to the contrary contained in the Indenture,the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the payment of the interest on or the principal of the Bonds or for the performance of any covenants contained in the Indenture. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Equality of Bonds and Pledge of Net Taxes. Subject only to the provisions of the Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein,in order to secure the payment of the principal of and interest on the Bonds in accordance with their terms, the provisions of the Indenture and the Act, the District pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Taxes and any other amounts held in the Special Tax Fund. Said pledge shall constitute a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the District, its successors, purchasers of any of such assets, creditors and all others asserting rights therein,to the extent set forth in,and in accordance with,the Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery, recordation,filing or further act. Pursuant to the Act and the Indenture, the Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund, without priority for number, date of the Bonds, date of sale, date of execution,or date of delivery, and the payment of the interest on and principal of the Bonds and any premiums upon the redemption in the Indenture, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund, which are set aside for the payment of the Bonds. Amounts in the Special Tax Fund shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by the Indenture or any Supplemental Indenture. Notwithstanding any provision contained in the Indenture to the contrary, Net Taxes deposited in the Rebate Fund or the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Rebate Fund,the Costs of Issuance Fund, the Surplus Fund or the Administration Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in the Indenture or any Supplemental Indenture shall preclude, subject to the limitations contained under the Indenture, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as amended after the issuance of the Bonds,or under any other law of the State of California. Bond Register. The Trustee will keep or cause to be kept, at the Corporate Trust Office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the District during all regular business hours upon reasonable prior notice,and,upon presentation for such purpose,the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as in the Indenture provided. The District and the Trustee may treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all purposes,and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner's address so that the Bond Register may be revised accordingly. D-7 Registration of Exchange or Transfer. Subject to the limitations of the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Corporate Trust Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee and duly executed by the Bondowner or his or her duly authorized attorney: Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of(i)Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or(ii) any Bonds chosen for redemption. Mutilated,Lost,Destroyed or Stolen Bonds. If any Bond shall become mutilated,the District, at the expense of the Bondowner, shall execute, and the Trustee shall authenticate and deliver, a new Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated,but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to the Indenture. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District, at the expense of the Bondowner, shall execute and the Trustee shall authenticate and deliver, a new Bond of like tenor,maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutilated, lost, destroyed or stolen; shall be equally and proportionately entitled to the benefits in the Indenture with all other"Bonds issued under the Indenture. The Trustee shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered under the Indenture or for the purpose of determining any percentage of Bonds Outstanding under the Indenture,but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of the Indenture, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured,the Trustee may make payment with respect to such Bonds upon receipt of indemnification satisfactory to the Trustee. Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any defect in any proceedings taken by the District and the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Creation of Funds. There is created and established and shall be maintained by the Trustee the following funds and accounts: (1) The Community Facilities District No. 2000-1 Special Tax Fund (the "Special Tax Fund") in which there shall be established and created, a Debt Service Account, a Redemption Account and a Reserve Account; (2) The Community Facilities District No. 2000-1 Rebate Fund (the "Rebate Fund")in which there shall be established a Rebate Account and an Alternative Penalty Account; and D-8 (3) The Community Facilities District No. 2000-1 Fund (the"Costs of Issuance Fund"). The amounts on deposit in the foregoing funds and accounts shall be held by the Trustee; and the Trustee shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of the Indenture and shall disburse investment earnings thereon in accordance with the provisions of the Indenture. Deposits to and Disbursements from Special Tax Fund. The Director of Finance shall, no later than the last day of each month during which the Special Taxes are apportioned to the District,transfer the Special Taxes net of Special Tax Prepayments (which amounts shall immediately be transferred by the Director of Finance to the Trustee for deposit into the Redemption Account of the Special Tax Fund to be applied in accordance with the Indenture)to the Trustee for deposit in the Special Tax Fund for the Bonds,to be held in trust by the Trustee in the Special Tax Fund. The Trustee will then transfer the money on deposit in the Special Tax Fund on the dates and in the amounts set forth in the following paragraphs, in the following order of priority,to: (1) The Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied in the current Fiscal Year up to the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of the Administrative Expenses Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses) levied for in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of(i) the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year,or(ii)March 2 of such Fiscal Year; (2) The Debt Service Account of the Special Tax Fund; (3) The Reserve Account of the Special Tax Fund; (4) Administration Fund for Administrative Expenses not previously deposited to the Administration Fund pursuant to the Indenture; (5) Rebate Fund; and (6) Surplus Fund. At the maturity of all Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts tin the Indenture may be used by the District for any lawful purpose. Administration Fund Pursuant to the Indenture,there is established as a separate fund to be held by the Director of Finance the Administration Fund. Moneys in the Administration Fund may be invested in any Authorized Investments,provided that the maturity or maturities thereof shall not exceed 30 days from the date of purchase. Moneys on deposit in the Administration Fund shall be withdrawn by the Director of Finance and paid to the City or its order upon receipt by the Director of Finance of a Certificate of Authorized Officer stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense and the nature of the Administrative Expense. Debt Service Account of the Special Tax Fund The principal or Sinking Fund Payment of, and interest on, the Bonds until maturity shall be paid by the Trustee from amounts transferred to the Debt Service Account of the Special Tax Fund. For the purpose of assuring that the payment of principal or Sinking Fund D-9 Payment of, and interest on,the Bonds will be made when due,at least one Business Day prior to each Interest Payment Date,the Trustee shall make the following transfers to the Debt Service Account;provided,however, that to the extent that deposits have been made in the Debt Service Account from the proceeds of the sale of the Bonds, or otherwise, or to the extent that a transfer will be made from the Reserve Account to the Debt Service Account in accordance with the last paragraph of the Indenture,the transfer from the Special Tax Fund need not be made: an amount such that the balance in the Debt Service Account one(1)Business Day prior to each Interest Payment Date shall be equal to the installments of interest, principal and Sinking Fund Payment due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest and principal of the Bonds as the same become due. Redemption Account of the Special Tax Fund (a) After making the deposit to the Debt Service Account of the Special Tax Fund above and in accordance with the District's election to call Bonds for optional redemption as set forth in the Indenture, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal of and interest on the Bonds called for redemption, and the premiums payable as provided in the Indenture on the Bonds called for optional redemption one (1) Business Day prior to the redemption date; provided, however, that Net Taxes may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (b) Special Tax Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to the Indenture for the use of such Special Tax Prepayments to the payment of the principal of, premium, if any, and interest on the Bonds to be redeemed with such Special Tax Prepayments. (c) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, in lieu or partially in lieu of such call and redemption, upon receipt by the Trustee of written direction of the District to purchase Bonds, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds in the manner provided in the Indenture. Purchases of Outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices(including brokerage or other expenses)not more than par plus accrued interest, or, in the case of purchases to be made from funds to be applied to a redemption pursuant to the Indenture, par plus accrued interest, plus premium, if any, in the case of moneys set aside for an optional redemption. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Special Tax Fund for the payment of interest on the next following Interest Payment Date. Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments,and interest on the Bonds when due in the event that the moneys in the Debt Service Account of the Special Tax Fund are insufficient therefor and for the purpose of making any required transfer to the Rebate Fund pursuant to the Indenture upon written direction from the District; provided, however, amounts in the Reserve Account may be applied to pay the principal and interest due on any Bonds in the final Bond Year in which any Bonds are Outstanding. If the amounts in the Debt Service Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on the Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required,the Trustee shall withdraw from the Reserve Account for deposit in the Debt Service Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. Following any transfer to the Debt Service Account of the Special Tax Fund or to the Rebate Fund as described above, D-10 the District shall then take the steps necessary to cause to be deposited to the Reserve Account the amount needed to replenish the Reserve Account to the Reserve Requirement by transferring such amount from Special Taxes held by the Director of Finance or, if the District so elects,by including such amount in the next annual Special Tax levy to the extent of the permitted maximum Special Tax rates. Notwithstanding anything in the Indenture to the contrary, whenever moneys are withdrawn from the Reserve Account,after making the required transfers pursuant to the Indenture,the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund the amount needed to restore the amount of such account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Debt Service Account of the Special Tax Fund. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. In connection with a redemption of Bonds pursuant to the Indenture, or a defeasance of Bonds in accordance with the Indenture, amounts in the Reserve Account shall be applied to such redemption or defeasance so long as the amount on deposit in the Reserve Account following such redemption or any partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Officer the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to the Indenture to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date,subject to the limitation in the preceding sentence. Notwithstanding any provision in the Indenture to the contrary, moneys in the Reserve Account in excess of the Reserve Requirement shall be withdrawn from the Reserve Account on the Business Day before each Interest Payment Date and transferred to the Debt Service Account to be applied to the interest on the Bonds on the next Interest Payment Date. Rebate Fund (a) The Trustee shall establish and maintain a fund separate from any other fund established and maintained under the Indenture designated as the Rebate Fund and shall establish a separate Rebate Account and Alternative Penalty Account tin the Indenture. The District shall cause to be deposited in the Rebate Fund such amounts as required under the Tax Certificate. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by the Indenture and the Tax Certificate. Without limiting the generality of the foregoing, the District agrees that there shall be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any temporary,proposed or final treasury regulations as may be applicable to the Bonds from time to time, which the District covenants to pay or cause to be paid to the United States at the times and in the amounts determined under the Tax Certificate. The Trustee agrees to comply with all instructions given to it by the District in accordance with this covenant. The Trustee shall conclusively be deemed to have complied with the provisions of the Indenture if it follows the instructions of the District and shall not be required to take any actions under the Indenture in the absence of instructions from the District. (b) Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds after payment in full of such issue and after making the payments required to comply with the Indenture and the Tax Certificate may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District. (c) Survival of Defeasance and Final Payment. Notwithstanding anything in the Indenture to the contrary,the obligation to comply with the requirements of the Indenture shall survive the defeasance and final payment of the Bonds. D-11 (d) Amendment Without Consent of Owners. This section of the Indenture summarized under this caption may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax exempt basis. Notwithstanding any provision of the Indenture, if the District shall provide to the Trustee an opinion of a nationally recognized bond or tax counsel that any specified action required under the Indenture is no longer required or that some further or different action is required to maintain the tax-exempt status of interest on the Bonds, the Trustee and the District may conclusively rely on such opinion in complying with the requirements of this paragraph, and the covenants under the Indenture shall be deemed to be modified to that extent. Surplus Fund Pursuant to the Indenture, there is created and established the "Surplus Fund," to be held by the Director of Finance. After making the transfers required by the Indenture, as soon as practicable after each September 1,the Trustee shall transfer all remaining amounts in the Special Tax Fund to the District for deposit in the Surplus Fund. Moneys deposited in the Surplus Fund may be transferred by the District(i)to the Trustee for deposit in the Debt Service Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (ii)to the Trustee for deposit in the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iii) to the Administration Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administration Fund are insufficient to pay Administrative Expenses, or (iv) may be used by the District for any other lawful purpose of the District. The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, the District shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code (other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a Yield not in excess of the Yield on the Bonds, unless, in the opinion of Bond Counsel, investment at a higher Yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds then Outstanding. Investments. Moneys held in any of the Funds and Accounts under the Indenture shall be invested by the Trustee at the written direction of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds and Accounts. Any loss resulting from such Authorized Investments shall be charged to the Fund or Account from which such investment was made, and any investment earnings on a Fund or Account shall be applied as follows: (i)investment earnings on all amounts deposited in the Costs of Issuance Fund shall be deposited in that Fund, (ii) investment earnings on all amounts in the Rebate Fund shall be deposited in that Fund, (iii)investment. earnings on all amounts deposited in the Reserve Account of the Special Tax Fund shall be used to satisfy the Reserve Requirement and any investment earnings not needed to satisfy the Reserve Requirement shall be withdrawn from the Reserve Account one(1)Business Day before each Interest Payment Date and transferred to the Debt Service Account as provided in the Indenture; and (iv)all other investment earnings shall be deposited in the Debt Service Account of the Special Tax Fund. Moneys in the Funds and Accounts held under the Indenture may be invested by the Trustee, upon the written direction of the District, from time to time, in Authorized Investments which written direction shall be made in accordance with the following restrictions: (a) Moneys in the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. D-12 (b) Moneys in the Debt Service Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature or are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of,premium, if any, and interest on the Bonds as the same become due. (c) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than six (6) months from their date of purchase by the Trustee, and one-half of such amount shall be invested in Authorized Investments which mature not more than two (2) years from the date of purchase by the Trustee; provided that such amounts may be invested in an investment or repurchase agreement so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with the Indenture; and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the respective final maturity date of the Bonds to which such amounts relate. (d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (a) of the definition in the Indenture which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to the Indenture. The Trustee, at the written direction of the District, shall sell, or present for redemption, any Authorized Investments so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost,except that amounts in the Reserve Account shall be valued at the market value in the Indenture at least semiannually on or before each Interest Payment Date. In making any valuations under the Indenture, the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything in the Indenture to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of the Indenture. The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Trustee may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the Fund or Account to which such Authorized Investment is credited, and, subject to the provisions of the Indenture, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established under the Indenture, but shall account for each separately. In the absence of written investment direction the Trustee shall invest solely in Authorized Investments set forth in(d)of the definition in the Indenture. The District acknowledges that regulations of the Comptroller of the Currency grant the District the right to receive brokerage confirmations of security transactions to be effected by the Trustee under the Indenture as they occur. The District specifically waives the right to receive such confirmations to the extent permitted by applicable law and agrees that it will instead receive periodic cash transaction statements which include detail for the investment transactions effected by the Trustee under the Indenture; provided, however, that the District retains its right to receive brokerage confirmation on any investment transaction requested by the District. D-13 COVENANTS AND WARRANTY Warranty. The District shall preserve and protect the security pledged under the Indenture to the Bonds against all claims and demands of all persons. Covenants. So long as any of the Bonds issued under the Indenture are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and the Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: Punctual Payment; Against Encumbrances. The District covenants that it will receive all Gross Taxes in trust and will deposit the Gross Taxes with the Trustee, as provided in the Indenture, and the District shall have no beneficial right or interest in the amounts so deposited except as provided by the Indenture. All such Gross Taxes shall be disbursed,allocated and applied solely to the uses and purposes set forth in the Indenture, and shall be accounted for separately and apart from all other money,funds, accounts or other resources of the District. Notwithstanding the provisions of this paragraph, as set forth in the Indenture,the District shall have the right to accept less than the minimum bid on any delinquent parcel, and is indemnified from legal claim for Owners of the Bonds, if the City Council determines that the acceptance of less than the minimum bid or another action as described in the Indenture is in the best interest of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued under the Indenture, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with the Indenture to the extent that Net Taxes are available therefor, and that the payments into the Funds and Accounts created under the Indenture will be made, all in strict conformity with the terms of the Bonds and the Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of the Indenture and of the Bonds issued under the Indenture. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Gross Taxes, except as provided in the Indenture, and(except as set forth in the Indenture) will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds.The District covenants not to issue any additional bonds secured by the Net Taxes on a parity with the Bonds, except for the purpose of defeasing and refunding Bonds in accordance with the Act. Nothing in the Indenture shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. Lew and Collection of Special Tax. Subject to the maximum Special Tax rates, the District will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation,the enforcement of delinquent Special Taxes. On or before each June 1, commencing June 1, 20149 the Trustee shall provide a written notice to the District stating the amounts then on deposit in the various Funds and Accounts established by the Indenture. The receipt of such notice by the District shall in no way affect the obligations of the District under the following paragraphs. Upon receipt of a copy of such notice, the District shall communicate with the Treasurer or other appropriate official of the County of Orange to ascertain the relevant parcels on which the Special Taxes are to be levied,taking into account any parcel splits during the preceding and then current year. The District shall retain an Independent Financial Consultant to assist in the levy of the Special Taxes each Fiscal Year, commencing Fiscal Year 2013-14, in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the Treasurer will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. Upon D-14 the completion of the computation of the amounts of the levy, and approval by the legislative body of the District, the District shall prepare or cause to be prepared, and shall transmit to the Treasurer, such data as the Treasurer requires to include the levy of the Special Taxes on the next secured tax roll. The District shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year including any necessary replenishment or expenditure of the Reserve Account for the Bonds, an amount equal to the estimated Administrative Expenses and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax for so long as the Bonds are Outstanding, including the initiation of proceedings under the Act to reduce the Maximum Special Tax rates (the "Maximum Rates") on Taxable Property in the District below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent(110%)of Maximum Annual Debt Service on the Outstanding Bonds.The District finds and determines that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also covenants that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the section of the Indenture summarized under this caption. The Special Taxes shall be payable and collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided, the legislative body of the District may provide for direct collection of the Special Taxes in certain circumstances. The fees and expenses of the Independent Financial Consultant retained by the District to assist in computing the levy of the Special Taxes under the Indenture and any reconciliation of amounts levied to amount received,as well as the costs and expenses of the District(including a charge for District staff time) in conducting its duties under the Indenture,shall be an Administrative Expense under the Indenture. Commence Foreclosure Proceedings. Pursuant to Section 53356.1 of the Act, the District covenants with and for the benefit of the Bondowners that, one Business Day after each Interest Payment Date, the Director of Finance or his or her designee will compare the amount of Special Taxes theretofore levied in the District to the amount of Net Taxes theretofore received by the District, and, if the amount collected is less than 100% of the amount of the Special Taxes so levied, the District will undertake and diligently prosecute foreclosure proceedings not later than thirty (30) days after Interest Payment Date(unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due. Special Taxes collected as a result of a foreclosure proceeding shall be deposited in the Special Tax Fund and only inure to the benefit of the Bonds in the manner provided in Section 3.2. Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or any part in the Indenture,or upon any funds in the hands of the Trustee, or which might impair the security of the Bonds then Outstanding; provided however that nothing in the Indenture contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the improvements constructed with the proceeds of bonded indebtedness issued by the District, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and D-15 accounts shall at all times during business hours be subject to the inspection of the Owners of not less than ten percent(10%)of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. Federal Tax Covenants. Notwithstanding any other provision of the Indenture, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis will not be adversely affected, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants,without limiting the generality of the foregoing,as follows: (1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other monies or property which would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be"private activity bonds" within the meaning of Section 141 of the Code. (2) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be "arbitrage bonds"within the meaning of Section 148 of the Code. (3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be"federally guaranteed"within the meaning of Section 149(b)of the Code. (4) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e)of the Code. (5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be considered "hedge bonds"within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g)of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. (6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and will comply with the covenants and requirements stated tin the Indenture and incorporated by reference in the Indenture. (7) Other Tax Exempt Issues. The District will not use proceeds of other tax exempt securities to redeem any Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis. Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District which purports to reduce the maximum Special Tax below the levels specified in the Indenture or to limit the power of the District to levy the Special Taxes for the purposes set forth in the Indenture, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. Limitation on Right to Tender Bonds. The District covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds in full payment or partial payment of any Special Tax unless the District shall have first received a certificate from an Independent Financial D-16 Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds when due. Continuing Disclosure Covenant. The District covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement. Notwithstanding any other provision of the Indenture,failure of the District to comply with its obligations under the Continuing Disclosure Agreement shall not be considered an event of default under the Indenture, and the sole remedy,in the event of any failure of the District to comply with the Continuing Disclosure Agreement shall be an action to compel performance. Opinions. In the event that an opinion is rendered by Bond Counsel as provided in the Indenture from a firm other than the firm which rendered the Bond Counsel opinion at closing, such subsequent opinion by Bond Counsel shall also include the conclusions set forth in numbered paragraphs 1,2, 3 and 4 of the original Bond Counsel opinion. Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in the Indenture. Prepayment of Special Taxes. In connection with prepayment of Special Taxes: (1) The District shall cause all applications of owners of leasehold interests in the District subject to the Rate and Method to prepay and satisfy the Special Tax obligation for their property to be reviewed by an Independent Financial Consultant and shall not accept any such prepayment by the District and the redemption of Bonds with such prepayment, unless the ratio of(i)the maximum amount of the Special Taxes that may be levied in the District following such prepayment to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption(e.g., 1.15 to 1.0) will not be less than such ratio as it existed prior to such prepayment. (2) The District will not include in any calculation of the amount necessary to prepay and permanently satisfy the Special Tax obligation of any parcel of taxable property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement; provided, however, that in such event the District may pay to the owner of any such property who prepays and permanently satisfies the Special Tax obligation for his or her property, under such circumstances, such a proportionate amount if the amount on deposit in the Reserve Fund is thereafter increased to the Reserve Requirement. Compliance with Lease Remedy Forbearance Agreement. The District covenants to cause the City to comply with and enforce its agreements and covenants in the Lease Remedy Forbearance Agreement (which the City entered into on behalf of the District),and to not allow the Successor Agency to enter into a new lease or leases(each, a"Replacement Lease")for substantially all of the real property subject to the Ground Lease or Replacement Lease then being terminated, unless (i) the Special Taxes that may be levied on the property so relet, in the opinion of an Independent Financial Consultant, are estimated to be not less than 110% of Maximum Annual Debt Service, and(ii)such lease or leases have a term at least as long as the remaining term to maturity of the outstanding Bonds. D-17 AMENDMENTS TO INDENTURE Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes: (a) to cure any ambiguity,to correct or supplement any provisions in the Indenture which may be inconsistent with any other provision in the Indenture, or to make any other provision with respect to matters or questions arising under the Indenture or in any Supplemental Indenture, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in the Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with the Indenture as theretofore in effect or which further secure Bond payments; (c) to modify,amend or supplement the Indenture in such manner as to permit the qualification in the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the issuance of the Bonds, or to comply with the Code or regulations issued under the Indenture, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; (d) to modify, alter or amend the Rate and Method of Apportionment in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on Developed Property (as defined in the Rate and Method of Apportionment) below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent (110%)of Maximum Annual Debt Service on the Bonds Outstanding as of the date of such amendment; or (e) to modify, alter, amend or supplement the Indenture in any other respect which is not materially adverse to the Bondowners; provided that any amendment or supplement to the Indenture which will affect the Trustee's duties or protections set forth under the Indenture shall be effective only upon written consent of the Trustee. Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures set forth in the Indenture,the Owners of not less than a majority of in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in the Indenture; provided, however, that nothing in the Indenture shall permit, or be construed as permitting, (a)an extension of the maturity date of the principal, or the payment date of interest on, any Bond; (b)a reduction in the principal amount of,or redemption premium on,any Bond or the rate of interest thereon; (c)a preference or priority of any Bond over any other Bond; or (d)a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Indenture,without the consent of the Owners of all Bonds then Outstanding. If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of the Indenture shall require the consent of the Bondowners,the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District,cause notice of the proposed Supplemental Indenture to be mailed,by first class mail,postage prepaid, to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy in the Indenture is on file at the office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of D-18 not less than a majority in aggregate principal amount of the Bonds Outstanding as required by the Indenture. Whenever at any time within one year after the date of the first mailing of such notice,the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption in the Indenture by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Indenture, Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds in instances where such consent is required pursuant to the provisions of the Indenture, the Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the District and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced under the Indenture, subject in all respects to such modifications and amendments. Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as provided in the Indenture, the District may determine that the Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed,and in that case upon demand of the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. TRUSTEE Trustee. U.S. Bank National Association, having a corporate trust office in Los Angeles, California, is appointed Trustee for the District for the purpose of receiving all money which the District is required to deposit with the Trustee under the Indenture and to allocate, use and apply the same as provided in the Indenture. In the event that the District fails to deposit with the Trustee any amount due under the Indenture when due, the Trustee shall provide telephonic notice to the District and shall confirm the amount of such shortfall in writing to the extent such amount is known to the Trustee. The Trustee is authorized to and shall mail by first class mail, postage prepaid,or pay by wire transfer as provided in the Indenture, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Trustee is authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption,to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in the Indenture, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in the Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Trustee shall deliver to the District a monthly accounting of the Funds and Accounts it holds under the Indenture; provided, however, that the Trustee shall not be obligated to deliver such accounting for any Fund D-19 or Account that has a balance of zero. The Trustee may establish such Funds and Accounts as it deems necessary or appropriate to perform its obligations under the Indenture. The Trustee is authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment in the Indenture in accordance with the provisions of the Indenture. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties under the Indenture, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless against costs, claims, expenses and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties under the Indenture. The obligations of the District under the heading"—Trustee"shall survive the discharge of the Bonds and the resignation or removal of the Trustee. Removal of Trustee. The District may at any time at its sole discretion remove the Trustee initially appointed,and any successor thereto,by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto;provided that any such successor shall be a bank or trust company having a combined capital (exclusive of borrowed capital) and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually,.pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this paragraph the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this paragraph within thirty (30)days after the Trustee shall have given to the District and the Owners written notice, the Trustee, at the expense of the District, or the District may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee, which successor shall be acceptable to the District. Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained in the Indenture and in the Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of the Indenture or the Bonds and shall incur no responsibility in respect in the Indenture, other than in connection with its duties or obligations specifically set forth in the Indenture, in the Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Trustee shall not be liable in connection with the performance of its duties under the Indenture; except for its own negligence or willful misconduct. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete D-20 authorization and protection in respect of any action taken or suffered under the Indenture in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection,if required,and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter(unless other evidence in respect in the Indenture be in the Indenture specifically prescribed)may,in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of the Indenture upon the faith in the Indenture, but in its discretion the Trustee may, in lieu in the Indenture, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. No provision of the Indenture or any other document related to the Indenture shall require the Trustee to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights under the Indenture. The immunities extended to the Trustee also extend to its directors,officers, employees and agents. Merger or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything in the Indenture to the contrary notwithstanding. EVENTS OF DEFAULT; REMEDIES Events of Default. Any one or more of the following events shall constitute an"Event of Default': (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as tin the Indenture expressed,by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable;or (c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in the Indenture, the Bonds, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent (25%) in aggregate principal amount of the Outstanding Bonds. Remedies of Owners. Following the occurrence of an Event of Default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such D-21 members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in the Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. Nothing in the Indenture, the Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners in the Indenture at the respective dates of maturity, as in the Indenture provided, out of the Net Taxes pledged for such payment,or affect or impair the right of action,which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in the Indenture. The principal of the Bonds shall not be subject to acceleration under the Indenture. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence tin the Indenture, and every power and remedy conferred upon the Owners by the Act or by the Indenture may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit,action or proceeding had not been brought or taken. No remedy in the Indenture conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given under the Indenture or now or existing after the issuance of the Bonds, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Trustee after an Event of Default pursuant to the Indenture shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then, after payment of all fees and expenses and amounts due to the Trustee under the Indenture,all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. DEFEASANCE Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal in the Indenture, at the times and in the manner stipulated in the Indenture or any Supplemental Indenture, then the Owner of such Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to the Indenture, upon payment of all amounts owed by the District to the Trustee under the Indenture, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall, after payment of amounts payable to the Trustee under the Indenture, pay over or deliver to the District's general fund all money or securities held by it D-22 pursuant to the Indenture which are not required for the payment of the interest due on and the principal of such Bonds. Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph above if such Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which,together with the amounts then on deposit in the Special Tax Fund are available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee, or another escrow bank appointed by the District, in trust, direct, noncallable Federal Securities, of the type defined in the definition in the Indenture set forth in the Indenture, in which the District may lawfully invest its money, in such amount as an Independent Financial Consultant shall determine will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund are available for such purpose,together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; If paid as provided above,then,at the election of the District, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the District under the Indenture and any Supplemental Indenture with respect to such Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in the Indenture relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than thirty(30)days prior to the proposed defeasance date. In connection with a defeasance under(b)or(c)above,there shall be provided to the Trustee a certificate of a certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of and interest on all Outstanding Bonds to be defeased in accordance with the Indenture, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with the Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds which have been defeased under the Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance under the Indenture of all Outstanding Bonds,the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds when due and any fees and expenses of the Trustee remaining unpaid. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the District,stating that the defeasance has occurred. D-23 MISCELLANEOUS Cancellation of Bonds. All Bonds surrendered to the Trustee for payment upon maturity or for redemption shall upon payment therefor and any Bond purchased by the District as authorized in the Indenture shall be cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds, as provided by law,and,upon written request from the District,furnish to the District a certificate of such destruction. Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by the Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of the Indenture(except as otherwise in the Indenture provided),if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership,such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond,the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner in the Indenture for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner in the Indenture or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in the Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters in the Indenture stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Trustee in pursuance of such request or consent. Unclaimed Moneys. Anything in the Indenture to the contrary notwithstanding and subject to the escheat laws of the State, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the said date when such Outstanding Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds; provided, however, that, before being required to make any such payment to the District or the Trustee shall, at the expense of the District, cause to be mailed to the registered Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Provisions Constitute Contract. The provisions of the Indenture shall constitute a contract between the District and the Bondowners and the provisions in the Indenture shall be construed in accordance with the laws of the State of California. D-24 In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds the Indenture shall be irrepealable,but shall be subject to modifications to the extent and in the manner provided in the Indenture,but to no greater extent and in no other manner. Future Contracts. Nothing in the Indenture contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which are subordinate to the pledge under the Indenture, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes as defined in the Indenture. Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in the Indenture. Severability. If any covenant, agreement or provision, or any portion in the Indenture, contained in the Indenture, or the application in the Indenture to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of the Indenture and the application of any such covenant, agreement or provision, or portion in the Indenture, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and the Indenture, the Bonds issued pursuant to the Indenture shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Action on Next Business Day. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in the Indenture, is not a Business Day, such payment,with no interest accruing for the period from and after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefore in the Indenture. D-25 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX E FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER ------------------------------------ FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of July 1, 2013, is executed and delivered by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and Willdan Financial Services, Inc., as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to that certain Bond Indenture (the "Indenture"), dated as of July 1, 2013, by and between the Issuer and U.S. Bank National Association,as trustee(the"Trustee"). The Issuer covenants as follows: SECTION 1. PgMose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule(as defined below). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which (a)has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or(b)is treated as the owner of any Bonds for federal income purposes. "Disclosure Representative"shall mean the City Manager of the City,the Finance Director of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean, initially, Willdan Financial Services, Inc., or any successor Dissemination Agent designated in writing by the Issuer which has filed with the then current Dissemination Agent a written acceptance of such designation. "EMMA"shall mean the Electronic Municipal Market Access system of the MSRB. "Listed Events"shall mean any of the events listed in Section 5(a) of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Participating Underwriter" shall mean Stifel,Nicolaus& Company, Incorporated. "Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or E-1 the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB,currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5)adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. "Tax-exempt'shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax. SECTION 3. Provision of Annual Reports. (a) Not later than nine months after the end of the City's fiscal year (which shall be July 1 of each year, so long as the City's fiscal year ends on September 30), commencing with the report for the report for the 2012-13 fiscal year (which is due not later than July 1, 2014), the Issuer shall provide, or shall cause the Dissemination Agent to provide, to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement;provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Issuer's fiscal year is currently effective from October 1 to the immediately succeeding September 30 of the following year. The Issuer will promptly notify the Repository of a change in the fiscal year dates. (b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b)shall apply. Not later than fifteen(15)Business Days prior to the date specified in subsection(a)for providing the Annual Report to the Repository,the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen (15) Business Days prior to such date the Dissemination Agent has not received a copy of the Annual Report,the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report. (c) If the Issuer is the Dissemination Agent and the Issuer is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the Repository in substantially the form attached to this Disclosure Agreement as Exhibit A. If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository, in substantially the form attached as Exhibit A. E-2 (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB; and (ii) promptly after receipt of the Annual Report, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. (e) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or include by reference: (a) Financial Statements. The audited financial statements of the City for the most recent fiscal year of the Issuer then ended. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide a notice of such modification to the Repository, including a reference to the specific federal or State law or regulation specifically describing the legal requirements for the change in accounting basis. (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information: (i) the principal amount of Bonds outstanding as of September 30 of each year; (ii) the balance in each fund under the Indenture as of the September 30 preceding the filing of the Annual Report, including the Reserve Account and a statement of the Reserve Requirement; (iii) any changes to the Rate and Method approved or submitted to the electors for approval prior to the filing of the Annual Report; (iv) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes as of May 1 of each year; (v) the identity of any ground lessee whose delinquent special taxes represent more than 5% of the amount levied and the number of lots, assessed value, delinquency amount value-to-lien ratios,prior delinquencies and foreclosure status of the applicable properties as of May 1 of each year; (vi) information regarding the percentage of delinquency,if any, in the collection of special taxes levied on a leasehold interest in the District for the Fiscal Year preceding the Annual Report date in the form set forth in Table 4,the number of parcels delinquent,amount delinquent compared to the total levy and the assessed value of each delinquent leasehold interest as of May 1 of each year; E-3 (vii) a description of any ongoing defaults under the Ground Lease and any remedial action taken by the Successor Agency and any change in the leasehold interest that is subject to the Special Tax;and (viii) any information not already included under (i)through (vii)above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982,as amended. In addition to any of the information expressly required to be provided under paragraphs (a)or (b)of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements set forth in clauses(i)to(viii), in the light of the circumstances under which they were made,not misleading. (c) Any or all of the items listed in (a)or (b)above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities,which have been submitted to the Repository. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5,the Issuer shall give, or cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten(10)business days after the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers,or their failure to perform; 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701- TEB); 6. tender offers; 7. defeasances; 8. ratings changes;and 9. bankruptcy,insolvency,receivership or similar proceedings. Note: for the purposes of the event identified in subparagraph(9), the event is considered to occur when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, E-4 arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds,if material: 1. unless described in paragraph 5(a)(5)above,notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person,other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions,other than pursuant to its terms; 3. appointment of a successor or additional trustee or the change of the name of a trustee; 4. nonpayment related defaults; 5. modifications to the rights of Owners of the Bonds; 6. notices of redemption;and 7. release, substitution or sale of property securing repayment of the Bonds. (c) Upon the occurrence of a Listed Event under Section 5(b) above, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the Issuer determines that knowledge of the occurrence of a Listed Event under Section 5(b)would be material under applicable federal securities laws,the Issuer shall file a notice of such occurrence with the Repository in a timely manner not more than 10 business days after the event. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and that the Dissemination Agent shall not be responsible for determining whether the Issuer's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be Willdan Financial Services, Inc. The Dissemination Agent may resign by providing(i)thirty days written notice to the Issuer, and(ii)upon appointment of a new Dissemination Agent hereunder. E-5 SECTION 8. Amendment. (a) This Disclosure Agreement may be amended, by written agreement of the parties, without the consent of the Owners,if all of the following conditions are satisfied: (1)such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity,nature or status of the Issuer or the type of business conducted thereby, (2) this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3) the Issuer shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer and the Participating Underwriter, to the same effect as set forth in clause (2) above,(4)the Issuer shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners, or such amendment shall have been approved by the Owners in the same manner as an amendment to the Indenture, and (5) the Issuer shall have delivered copies of such opinion and amendment to the Repository. (b) This Disclosure Agreement also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Indenture for amendments to the Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(1),(2)and(3)have been satisfied. (c) To the extent any amendment to this Disclosure Agreement results in a change in the type of financial information or operating data provided pursuant to this Disclosure Agreement, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (d) If an amendment is made to the basis on which financial statements are prepared,the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. The District acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule lOb-5 promulgated under the Securities Exchange Act of 1934, as amended may apply to the District, and that under some circumstances compliance with this Disclosure Agreement,without additional disclosures or other action,may not fully discharge all duties and obligations of the District under such laws. E-6 SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply with any provision of this Disclosure Agreement, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties. Immunities and Liabilities of Dissemination AQent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses(including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (1)compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to;and(ii)all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Agreement. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds,and shall create no rights in any other person or entity. SECTION 13, Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 14. Governing Law. This Disclosure Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION 15. Notices. Any notice or communications to be among any of the parties to this Disclosure Agreement may be given as follows: To the Issuer: City of Huntington Beach Community Facilities District No. 2000-1 c/o City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance Telephone: (714)536-5630 To the Trustee: U.S. Bank National Association 633 West 5th Street,24th Floor Los Angeles,California 90071 Attention: Corporate Trust Services Telephone: (213)615-6024 E-7 To the Dissemination Agent: Willdan Financial Services,Inc. 27368 Via Industria, Suite 110 Temecula,California 92590 Telephone: (800)755-6864 To the Participating Underwriter: Stifel,Nicolaus&Company,Incorporated One Ferry Building San Francisco,California 94111 Attention: Municipal Research Department Telephone: (415)445-2602 Any person may,by written notice to the other persons listed above,designate a different address or telephone number(s)to which subsequent notices or communications should be sent. SECTION 16. Future Determination of Obligated Persons. In the event the Securities Exchange Commission amends, clarifies or supplements the Rule in such a manner that requires any landowner within the District to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the District to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the District to disclose information concerning any owner of property within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof. The validity, interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California. SECTION 17. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof SECTION 18. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 By: Its: Finance Director of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 WILLDAN FINANCIAL SERVICES,as Dissemination Agent By: Its: Authorized Officer E-8 EXHIBIT A NOTICE TO THE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) Name of Bond Issue: $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: July 31,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2000-1 (the "Issuer") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, dated as of July 1,2013. [The Issuer anticipates that the Annual Report will be filed by ] Dated: WILLDAN FINANCIAL SERVICES,as Dissemination Agent cc: City of Huntington Beach E-9 CONTINUING DISCLOSURE AGREEMENT-LESSEE This Continuing Disclosure Agreement-Lessee (the "Disclosure Agreement') is executed and delivered by PCH Beach Resort, LLC, a California limited liability company (the "Lessee") and U.S. Bank National Association, as Dissemination Agent(the"Dissemination Agent') in connection with the issuance of $12,965,000 City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds (the"Bonds"). The Bonds are being issued pursuant to a Bond Indenture, dated as of July 1, 2013 (the "Bond Indenture"), between the City of Huntington Beach Community Facilities District No. 2001-1 (Grand Coast Resort) (the "District') and U.S. Bank National Association, as trustee (the "Trustee"). The Lessee covenants and agrees as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Lessee and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C.Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Affiliate" of another Person means (a)a Person directly or indirectly owning, controlling, or holding with power to vote, 5%or more of the outstanding voting securities of such other Person,(b)any Person 5%or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, (c)any Person directly or indirectly controlling such other Person, and (d)with respect to any general partner of a partnership or member of a limited liability company for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. "Annual Report" shall mean any Annual Report provided by the Lessee pursuant to, and as described in,Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a leasehold interest in the land located in the District, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Agreement, whereby such entity or Affiliate agrees to provide annual reports and notices of significant events to the Dissemination Agent of the character described in Sections 3 and 4 hereof, with respect to the portion of the Property owned by such entity and its Affiliates and which contains an assumption provision of the character set forth in Section 6 hereof. "City"means the City of Huntington Beach. "Disclosure Representative" means the Chief Financial Officer of Mayer Financial Ltd., or his designee,or such other officer,employee or agent as the Lessee shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent" shall mean U.S. Bank National Association, acting in the capacity as Dissemination Agent under this Disclosure Agreement, or any successor Dissemination Agent designated in writing by the City and which has filed with the Lessee, the City and the Trustee a written acceptance of such designation. "Emma"shall mean the Electronic Municipal Market Access system of the MSRB. "Event of Bankruptcy"means, with respect to a Person,that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, E-10 or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt,or is to be discharged from any or all of such Person's debts or obligations, or offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or asks, seeks or prays for reorganization or to effect a plan of reorganization,or for a readjustment of such Person's debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person, or if a receiver of the business or of the property or assets of such Person is appointed by any court,or if such Person makes a general assignment for the benefit of such Person's creditors. "Fiscal Year"shall mean the Lessee's fiscal year for its financial accounting purposes. "Listed Events" shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filing made pursuant to the Rule. "Participating Underwrite?' shall mean Stifel,Nicolaus& Company,Incorporated. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. "Property" means the leasehold interest in the real property within the boundaries of the District on which special taxes are authorized to be levied by the District. "Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB, currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) Until this Disclosure Agreement terminates in accordance with Section 7 below, the Lessee shall, or upon written request shall cause the Dissemination Agent to, not later than three months after the end of the Fiscal Year,commencing with the report for the 2013/2014 Fiscal Year,provide or cause to be provided to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the Lessee shall provide the Annual Report to the Dissemination Agent. The Lessee shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Lessee hereunder. The Dissemination Agent may conclusively rely upon such certification of the Lessee, and shall have no duty or obligation to review such Annual Report. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4(a) of this Disclosure Agreement. If the Lessee's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the Lessee is unable to provide to the Repository an Annual Report by the date required in subsection(a),the Lessee shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: E-11 (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB;and (ii) to the extent the Annual Report has been provided to the Dissemination Agent, file a report with the Lessee, the City and the Trustee(if the Dissemination Agent is other than the Trustee) certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing the Repository to which it was provided if other than the MSRB. Section 4. Content of Annual Reports. The Lessee's Annual Report shall contain or incorporate by reference the following: (a) Any delinquency in the payment of Special Taxes by the Lessee or any Affiliate thereof. (b) Any pending litigation which would adversely affect the ability of the Lessee to pay Special Taxes levied on the Property. (c) Any material change in the ownership of the Lessee. (d) The average occupancy rate for the hotel constructed on the Property during the Fiscal Year for which the Annual Report is provided. (e) The assumption of any obligations of the Lessee pursuant to Section 6. In addition to any of the information expressly required to be provided as described above,the Lessee shall provide such further information, if any, as may be necessary to make the specifically required statements,in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Lessee or related public entities,which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from EMMA. The Lessee shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5,the Lessee shall give, or cause to be given,notice of the occurrence of any of the following events: (i) failure by the Lessee or any Affiliate thereof to pay any real property taxes(including any Mello-Roos special taxes) levied within the District, (ii) material damage to or destruction of any of the Property, (iii) default by the Lessee or any Affiliate thereof on any loan with respect to the construction or permanent financing of the Property,and (iv) The occurrence of an Event of Bankruptcy with respect to the Lessee, or any Affiliate of the Lessee. E-12 Section 6. Assumption of Obligations. If the Property owned by the Lessee, or any Affiliate of the Lessee, is to be conveyed to a Person,the Lessee shall include a provision in the conveyance agreement for such Person to agree to execute an Assumption Agreement following the closing of escrow for the conveyance. The Lessee shall enter into an Assumption Agreement with any Person described in the preceding paragraph, which Assumption Agreement shall be in form and substance satisfactory to the City, or the acquiring entity shall otherwise enter into an agreement with Dissemination Agent in form substantially identical to this Disclosure Agreement (except for the identity of the "Lessee" therein). From and after the date on which an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement) is executed with respect to the Property,the Lessee shall no longer be required to comply with the requirements of this Disclosure Agreement;provided however that if,following a conveyance by the Lessee of the character described in the first sentence of this Section 6, an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement)is not executed(other than by reason of the willful misconduct of the Dissemination Agent), the Lessee shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term "Lessee" shall include, in addition to Lessee, the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Lessee's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of: (a)the legal defeasance,prior redemption or payment in full of all the Bonds, (b)the date on which the Lessee and all Affiliates of the Lessee no longer have a leasehold interest in the land in the District(subject,however,to the last paragraph of Section 6 above), (c)the date on which all Special Taxes on the Property are paid or prepaid in full (as evidenced by the recording of a Notice of Cancellation of Special Tax Lien by the City with respect to such property), and (d)the date on which the Lessee delivers to the City and the Dissemination Agent an opinion of bond counsel acceptable to the City to the effect that the continuing disclosure provided for in this continuing Disclosure Agreement is no longer required under the Rule to allow the Participating Underwriter to deal in the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Lessee shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to act as such under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Trustee. The Dissemination Agent may at any time resign by providing thirty days written notice to the City, the Lessee and the Trustee, such resignation to become effective upon acceptance of appointment by a successor Dissemination Agent. Upon receiving notice of such resignation, the City shall promptly appoint a successor Dissemination Agent by an instrument in writing, delivered to the Trustee and the Lessee. If no appointment of a successor Dissemination Agent shall be made pursuant to the foregoing provisions of this Section within forty-five (45) days after the Dissemination Agent shall have given to the City, the Lessee and the Trustee written notice of its resignation, the Dissemination Agent may apply to any court of competent jurisdiction to appoint a successor Dissemination Agent. Said court may thereupon after such notice, if any, as such court may deem proper, appoint a successor Dissemination Agent. The City shall provide the Lessee and the Trustee with written notice of the identity of any successor Dissemination Agent appointed or engaged by the City. Section 9. _Amendment. Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Lessee may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived,provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3, 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in E-13 law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds,after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) the proposed amendment or waiver either (i)is approved by owners of the Bonds in the manner provided in the Bond Indenture for amendments to the Bond Indenture with the consent of owners, or (ii)does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the Bonds;and (d) no amendment increasing or affecting the obligations or duties of the District, the City, the Dissemination Agent or the Trustee shall be made without the consent of such party. If any annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements,the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Lessee to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repository in the same manner as for a Listed Event under Section 5(c). Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Lessee from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Lessee chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Lessee shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Lessee to comply with any provision of this Disclosure Agreement any Participating Underwriter or any owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Lessee to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Bond Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Lessee to comply with this Disclosure Agreement shall be an action to compel performance. E-14 Section 12. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Lessee agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, promptly following receipt by the City of a written invoice therefor. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Lessee and shall not be deemed to be acting in any fiduciary capacity for the Lessee, the Bondholders, or any other party. The obligations of the District and the Lessee under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Lessee (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and the owners and beneficial owners from time to time of the Bonds,and shall create no rights in any other person or entity. Dated: July 31,2013 "LESSEE" PCH BEACH RESORT,LLC, a California limited liability company By: GRAND RESORT,LLC, a California limited liability company,Managing Member By: RLM MANAGEMENT,INC.,a California corporation,Manager By: Its: "DISSEMINATION AGENT" U.S.BANK NATIONAL ASSOCIATION By: Its: E-15 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Huntington Beach Name of Bond Issue: City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Date of Issuance: July 31,2013 NOTICE IS HEREBY GIVEN that PCH Beach Resort, LLC (the "Lessee") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement-Lessee dated July 31, 2013 executed by the Lessee for the benefit of the owners and beneficial owners of the above-referenced bonds. The Lessee anticipates that the Annual Report will be filed by Dated: 2013 PCH BEACH RESORT, LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance U.S.Bank National Association, as Trustee 633 West 51h Street,24th Floor Los Angeles,California 90071 E-16 APPENDIX F BOOK-ENTRY-ONLY SYSTEM The information in this section concerning DTC and DTC's book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds, pavment of principal, premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make any independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof. Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee)or such other name as may be requested by an authorized representative of DTC. One fully-registered Bond will be issued for each annual maturity of the Bonds,each in the aggregate principal amount of such maturity,and will be deposited through the facilities of DTC. DTC,the world's largest securities depository,is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System,a"clearing corporation"within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries)that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation,all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks,trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of"AA+." The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. F-1 To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments,tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede&Co. (nor any other DTC nominee)will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer. form or registered in "street name," and will be the responsibility of such Participant and not of DTC,the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds,distributions, and dividend payments to Cede& Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant,to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances,in the event that a successor depository is not obtained,physical certificates are required to be printed and delivered. F-2 The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event,Bonds will be printed and delivered to DTC. THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. F-3 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT.NO..2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS UNDERWRITER'S RECEIPT FOR THE BONDS The undersigned,on behalf of Stifel,Nicolaus&Company,Incorporated,as Underwriter(the "Underwriter"), Hereby certifies that; on the date of this receipt, the Underwriter received from the City of Huntington Beach Community Facilities District No 2000-1 (Grand Coast Resort) (the "District") the District's 2013 Special Tax Refiinding Bonds in definitive form, in the aggregate principal amount of$12,965,000. I The Underwriter hereby further acknowledges the receipt of, or otherwise has waived:the requirement for, each opinion, document and certificate required by Section 8(c) of the Bond Purchase Agreement dated July 10, 2013, by and between the -District and. the Underwriter, and ; agrees that each such opinion, document and certificate, to the extent received, is satisfactory to the Underwriter as to form and substance. Dated`. July 31,2013 STIFEL,NICOLAUS&COMPANY, INCORPORATED I By: ut 4w--O- rize4epresentativ' 1 i I I ,II i DOCSOC/1633116/022273-0006 j i i U.S.BANK NATIONAL ASSOCIATION AUTHORIZED SIGNERS) I hereby certify that the following is a true and exact extract of Article VI of the Bylaws presently in effect for U.S. Bank National Association, an association organized and existing under the laws of the United States: ARTICLE VI. CONVEYANCES,CONTRACTS,ETC. All transfers and conveyances of real estate, mortgages, and transfers, endorsements or assignments of stock, bonds, notes, debentures or other negotiable instruments, securities or personal property shall be signed by any elected or appointed officer. All checks, drafts, certificates of deposit and all funds of the Association held in its own or in a fiduciary capacity may be paid out by an order, draft or check bearing the manual or facsimile signature of any elected or appointed officer of the Association. All mortgage satisfactions, releases, all types of loan agreements, all routine transactional documents of the Association, and all other instruments not specifically provided for, whether to be executed in a fiduciary capacity or otherwise, may be signed on behalf of the Association by any elected or appointed officer thereof. The Secretary or any Assistant Secretary of the Association or other proper officer may execute and certify that required action or authority has been given or has taken place by resolution of the Board tinder this Bylaw without the necessity of further action by the Board. I further certify that Fonda Hall of U.S. Bank National Association, has been duly elected and i qualified and now holds the office listed herein, and that the signature of such officer is authentic: Fonda Hall, Vice President WILL SIGN: i IN WITNESS WHEREOF, I have hereunto set my hand to be affixed hereto this 31st day of July,2013 U.S.Banlc National Association By: John Axt i Vice Presic ent I i I $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF TRUSTEE/ESCROW BANK The undersigned hereby states and certifies that the undersigned is an authorized officer of U.S. Bann.National Association, (the "Bank"), which is acting (A) as trustee (the "Trustee") under that certain Bond Indenture, dated as of July 1, 2013 (the `Bond Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand. Coast Resort) (the "Issuer")and the Bank, and(B)as escrow bank (the "Escrow,Bank")under the Escrow Agreement,. dated as of July 1, 2013 (the"Escrow Agreement'), between the Issuer and the Bank, and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Bank: (1) The Bank is duly organized and existing as a national banking association under the laws of the United States of America, having the full power and authority to enter into and perform its duties under the Bond Indenture and the Escrow Agreement. j i (2) The Bond Indenture and the Escrow Agreement have been duly authorized, executed and delivered by the Batik. (3) The Bonds have been authenticated by a duly authorized representative of the Bank in accordance with the Bond Indenture. (4) To the best knowledge of the Bank, after due inquiry,there is no action, suit,proceeding or investigation, at law or in equity„before or by any court or governmental agency, public board or body pending against the Bank or threatened'against the Bank which in the reasonable judgment of the Bank would affect the existence of the Bank or in any way contesting or affecting the validity or enforceability of the Bond hndenture, or the Escrow Agreement or contesting the powers.of the Bank or its authority to enter into and perform its obligations under the Bond Indenture and the Escrow Agreement. Dated: July 31,2013 U.S.BANK NATIONAL ASSOCIATION 1 � 1 By ' Authorized Officer I i i s i $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS TRUSTEE'S RECEIPT FOR PROCEEDS AND OTHER MONIES U.S. Bank National Association, as trustee(the"Trustee")under the Bond Indenture dated as of July 1, 2013, by and between the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) and the Trustee, for the above-captioned bonds (the "Bonds"), acknowledges receipt from Stifel, Nicolaus & Company, Incorporated, as Underwriter (the "Underwriter") of $12,851,153.30, representing the "Purchase Price" of the Bonds, which the Underwriter has represented to be computed as follows: Principal Amount $12,965,000.00: Less Net Original Issue Discount (35,759.20) Less Underwriter's Discount (78,087.50) TOTAL PURCHASE PRICE $12,851,153.30 The Trustee agrees to deposit and transfer the aforesaid amounts in accordance with the Instructions to Trustee, executed by the City Manager of the City of Huntington Beach, dated the date hereof Dated: July 31, 2013 U.S.BANK NATIONAL ASSOCIATION,as Trustee By ,S L't Authorized.Officer I I i I l $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS I ESCROW.BANK'S RECEIPT j I i The undersigned, on behalf of U.S. Bank National Association, as escrow bank(the"Escrow j Bank")under that certain Escrow.Agreement dated as of July 1, 2013 (the"Escrow Agreement"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) and the Escrow Bank, acknowledges receipt of the cash deposit to the Escrow Fund { referenced in the Escrow Agreement. Dated: Jul 31 2013 U.S. BANK NATIONAL ASSOCIATION,as.Escrow , _ y Bank By: Authorized Officer i i i I i I� I i I �i i I i i i i CONTINUING DISCLOSURE AGREEMENT-LESSEE This Continuing Disclosure Agreement-Lessee (the "Disclosure Agreement') is executed and delivered by PCH Beach Resort, LLC, a California limited liability company (the "Lessee") and U.S. Bank National Association, as Dissemination Agent(the"Dissemination Agent') in connection with the issuance of $12,965,000 City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to a Bond Indenture,dated as of July 1, 2013 (the "Bond Indenture"), between the City of Huntington Beach Community Facilities District No. 200 1-1 (Grand Coast Resort)(the"District')and U.S. Bank National Association,as trustee(the "Trustee"). The Lessee covenants and agrees as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Lessee and the Dissemination Agent for the benefit of the owners and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C.Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Affiliate" of another Person means (a)a Person directly or indirectly owning, controlling, or holding with power to vote,5%or more of the outstanding voting securities of such other Person,(b)any Person 5%or more of whose outstanding voting securities are directly or indirectly owned,controlled,or held with power to vote, by such other Person, (c)any Person directly or indirectly controlling such other Person, and (d)with respect to any general partner of a partnership or member of a limited Iiability company for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. "Annual Report" shall mean any Annual Report provided by the Lessee pursuant to, and as described in,Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a leasehold interest in the land located in the District, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Agreement, whereby such entity or Affiliate agrees to provide annual reports and notices of significant events to the Dissemination Agent of the character described in Sections 3 and 4 hereof, with respect to the portion of the Property owned by such entity and its Affiliates and which contains an assumption provision of the character set forth in Section 6 hereof. "City"means the City of Huntington Beach. "Disclosure Representative" means the Chief Financial Officer of Mayer Financial Ltd., or his designee,or such other officer,employee or agent as the Lessee shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent" shall mean U.S. Bank National Association, acting in the capacity as Dissemination Agent under this Disclosure Agreement, or any successor Dissemination Agent designated in writing by the City and which has filed with the Lessee, the City and the Trustee a written acceptance of such designation. "Emma"shall mean the Electronic Municipal Market Access system of the MSRB. "Event of Bankruptcy" means,with respect to a Person,that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency,or under any amendment of such act or acts,either as a bankrupt or as an insolvent, DOCSOC/1634686v 1/022273-0006 or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt,or is to be discharged from any or all of such Person's debts or obligations,or offers to such Person's creditors to effect a composition or extension of time to pay such Person's debts or asks,seeks or prays for reorganization or to effect a plan of reorganization,or for a readjustment of such Person's debts,or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or . character is filed or instituted or taken against such Person,or if a receiver of the business or of the property or assets of such Person is appointed by any court,or if such Person makes a general assignment for the benefit of such Person's creditors. "Fiscal Yeai"shall mean the Lessee's fiscal year for its financial accounting purposes. "Listed Events"shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filing made pursuant to the Rule. "Participating Undenvriter"shall mean Stifel,Nicolaus&Company,Incorporated. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof. "Property" means the leasehold interest in the real property within the boundaries of the District on which special taxes are authorized to be levied by the District. "Repository"shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB, currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5)adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) Until this Disclosure Agreement terminates in accordance with Section 7 below, the Lessee shall,or upon written request shall cause the Dissemination Agent to,not later than three months after the end of the Fiscal Year,commencing with the report for the 2013/2014 Fiscal Year,provide or cause to be provided to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15)Business Days prior to said date, the Lessee shall provide the Annual Report to the Dissemination Agent. The Lessee shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Lessee hereunder. The Dissemination Agent may conclusively rely upon such certification of the Lessee, and shall have no duty or obligation to review such Annual Report. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4(a) of this Disclosure Agreement. If the Lessee's fiscal year changes,it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the Lessee is unable to provide to the Repository an Annual Report by the date required in subsection(a),the Lessee shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: 2 DOCSOC/1634686/022273-0006 W determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB; and (ii) to the extent the Annual Report has been provided to the Dissemination Agent,file a report with the Lessee, the City and the Trustee(if the Dissemination Agent is other than the Trustee) certifying that the Annual Report has been provided pursuant to this Disclosure Agreement,stating the date it was provided and listing the Repository to which it was provided if other than the MSRB. Section 4. Content of Annual Reports. The Lessee's Annual Report shall contain or incorporate by reference the following: (a) Any delinquency in the payment of Special Taxes by the Lessee or any Affiliate thereof. (b) Any pending litigation which would adversely affect the ability of the Lessee to pay Special Taxes levied on the Property. (c) Any material change in the ownership of the Lessee. (d) The average occupancy rate for the hotel constructed on the Property during the Fiscal Year for which the Annual Report is provided. (e) The assumption of any obligations of the Lessee pursuant to Section 6. In addition to any of the information expressly required to be provided as described above,the Lessee shall provide such further information, if any, as may be necessary to make the specifically required statements,in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Lessee or related public entities,which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from EMMA. The Lessee shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5,the Lessee shall give,or cause to be given,notice of the occurrence of any of the following events: W failure by the Lessee or any Affiliate thereof to pay any real property taxes(including any Mello-Roos special taxes)levied within the District, (ii) material damage to or destruction of any of the Property, (iii) default by the Lessee or any Affiliate thereof on any loan with respect to the construction or permanent financing of the Property,and (iv) The occurrence of an Event of Bankruptcy with respect to the Lessee, or any Affiliate of the Lessee. 3 DOCS OC/1634686/022273-0006 Section 6. Assumption of Obligations. If the Property owned by the Lessee,or any Affiliate of the Lessee,is to be conveyed to a Person,the Lessee shall include a provision in the conveyance agreement for such Person to agree to execute an Assumption Agreement following the closing of escrow for the conveyance. The Lessee shall enter into an Assumption Agreement with any Person described in the preceding paragraph, which Assumption Agreement shall be in form and substance satisfactory to the City, or the acquiring entity shall otherwise enter into an agreement with Dissemination Agent in form substantially identical to this Disclosure Agreement (except for the identity of the "Lessee" therein). From and after the date on which an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement)is executed with respect to the Property,the Lessee shall no longer be required to comply with the requirements of this Disclosure Agreement;provided however that if,following a conveyance by the Lessee of the character described in the first sentence of this Section 6, an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement)is not executed(other than by reason of the willful misconduct of the Dissemination Agent), the Lessee shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term"Lessee" shall include, in addition to Lessee, j the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Lessee's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of: (a)the legal defeasance,prior redemption or payment { in full of all the Bonds, (b)the date on which the Lessee and all Affiliates of the Lessee no longer have a leasehold interest in the land in the District(subject,however,to the last paragraph of Section 6 above),(c)the date on which all Special Taxes on the Property are paid or prepaid in full (as evidenced by the recording of a Notice of Cancellation of Special Tax Lien by the City with respect to such property), and (d)the date on which the Lessee delivers to the City and the Dissemination Agent an opinion of bond counsel acceptable to the City to the effect that the continuing disclosure provided for in this continuing Disclosure Agreement is no longer required under the Rule to allow the Participating Underwriter to deal in the Bonds. If such termination j occurs prior to the final maturity of the Bonds, the Lessee shall give notice of such.termination in the same manner as for a Listed Event under Section 5(c). l Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to act as such under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Trustee. The Dissemination Agent may at any time resign by providing thirty days written notice to the City, 1 the Lessee and the Trustee, such resignation to become effective upon acceptance of appointment by a successor Dissemination Agent. Upon receiving notice of such resignation;the City shall promptly appoint a successor Dissemination Agent by an instrument in writing, delivered to the Trustee and the Lessee. If no appointment of a successor Dissemination Agent shall be made pursuant to the foregoing provisions of this Section within forty-five(45)days after the Dissemination Agent shall have given to the City,the Lessee and j the Trustee written notice of its resignation, the Dissemination Agent may apply to any court of competent i jurisdiction to appoint a successor Dissemination Agent. Said court may thereupon after such notice,if any,as such court may deem proper,appoint a successor Dissemination Agent. The City shall provide the Lessee and the Trustee with written notice of the identity of any successor Dissemination Agent appointed or engaged by the City. � i Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Lessee may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived,provided that the following conditions are satisfied: 1 (a) if the amendment or waiver relates to the provisions of Sections 3, 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in i 4 DOCSOCl1634686l022273-0006 �I 1 law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) the proposed amendment or waiver either (i)is approved by owners of the Bonds in the manner provided in the Bond Indenture for amendments to the Bond Indenture with the consent of owners, or (ii)does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the Bonds;and (d) no amendment increasing or affecting the obligations or duties of the District, the City, the Dissemination Agent or the Trustee shall be made without the consent of such party. If any annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements,the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Lessee to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repository in the same manner as for a Listed Event under Section 5(c). Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Lessee from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Lessee chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Lessee shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event, Section 1 l. Default. In the event of a failure of the Lessee to comply with any provision of this Disclosure Agreement any Participating Underwriter or any owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate,including seeking mandate or specific performance by court order, to cause the Lessee to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Bond Indenture,and the sole remedy under this Disclosure Agreement in the event of any failure of the Lessee to comply with this Disclosure Agreement shall be an action to compel performance. 5 DOCSO C/1634686/022273-0006 1 Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as ate specifically set forth in this Disclosure Agreement, and the Lessee agrees to indemnify and save the Dissemination Agent,its officers, directors,employees and agents;harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the,District for its services provided hereunder and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder,promptly following receipt by the City of a written invoice therefor. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Lessee and shall not,be deemed to be acting in any fiduciary capacity for the Lessee,the Bondholders,or any other party. The obligations of the District and the Lessee under this Section shall survive resignation.or removal of the Dissemination Agent and payment of the Bonds. Section.13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Lessee (its successors and assigns); the Trustee, the Dissemination Agent, the Participating Underwriter and the owners and beneficial owners from time to time of the Bonds,and shall create no rights in any other person or entity. Dated: July 31,2013 "LESSEE" PCH BEACH RESORT,LLC, a California limited liability company By: GRAND RESORT,LLC,,a California`limited liability company,Managing Member By: RLM MANAGEMENT,INC., a Californian corporation,Manager j � I By:V RobeL.M yr, r.,President (CEO,Pr —Went, "DISSEMINATION AGENT" i U.S. BANK NATIONAL ASSOCIATION By: Its: I 6 DOCSOC71634686/022273-0006 +` r Section 12. Duties. Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Lessee agrees to indemnify and save the Dissemination Agent, its officers,directors, employees and agents,harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder,promptly following receipt by the City of a written invoice therefor. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Lessee and shall not be deemed to be acting in any fiduciary capacity for the Lessee, the.Bondholders, or any other party. The obligations of the District and the Lessee under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Lessee (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and the owners and beneficial owners from time to time of the Bonds,and shall create no rights in any other person or entity. Dated: July 31,2013 "LESSEE" i i PCH BEACH RESORT,LLC,a California limited liability company By: GRAND RESORT,LLC,.a California lnnited liability company,Managing Member By: RLM MANAGEMENT,INC.,a California corporation,Manager I By: Robert L.Mayer,Jr.,President (CEO,President,Secretary) i "DISSEMINATION AGENT" { U.S.BANK NATIONAL ASSOCIATION By: �_Pu Its: r C-,,;�?tz0-,S. � 6 DOCSOC/1634686/022273-0006 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Huntington Beach Name of Bond Issue: City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Date of Issuance: July 31,2013 NOTICE IS HEREBY GIVEN that PCH Beach Resort, LLC (the "Lessee") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement-Lessee dated July 31, 2013 executed by the Lessee for the benefit of the owners and beneficial owners of the above-referenced bonds. The Lessee anticipates that the Annual Report will be filed by Dated: 12013 PCH BEACH RESORT,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance U.S.Bank National Association,as Trustee 633 West 5'1'Street,24"'Floor Los Angeles,California 90071 7 DOCSOC/1634686/022273-0006 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS 1016-5 CERTIFICATE OF LESSEE The undersigned (the "Lessee"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer" or the "District") of the bonds captioned above (the "Bonds"), hereby certifies as follows as of the date hereof: (1) The undersigned is duly authorized to execute this Certificate on behalf of the Lessee. (2) This Certificate is delivered in connection with the offering and sale of the Bonds. (3) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement (the "Preliminary Official Statement"), setting forth certain information concerning, among other things, the Bonds, the Lessee, the Lessee's organization, activities, properties and financial condition, and the Lessee's development within the District. (4) The section in the Preliminary Official Statement entitled "LEASEHOLD OWNERSHIP AND THE HOTEL" contains no untrue statement of a material fact and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (5) The Lessee has never failed in any material respect to comply with previous undertakings to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. (6) The Lessee and its affiliates have never defaulted to any material extent in the payment of special taxes or assessments in connection with the District or any other community facilities districts or assessment districts in California within the past five years. (7) The Lessee and its affiliates are not currently in default on any loans, lines of credit or other obligation, the result of which could materially adversely affect the property leased by the Lessee in the District. (8) The Lessee and its affiliates are solvent and no proceedings are pending or threatened in which they may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of their debts or obligations, or granted an extension of time to pay their debts or a reorganization or readjustment of their debts. i i i (9) There is no litigation or administrative proceeding of any nature in which the Lessee has been served, or is pending or threatened which, if successful, would materially adversely affect the Lessee's ability to own :and operate the property leased by the Lessee within the District, or to pay the Special Taxes, the special benefit assessments or ordinary ad valorem property tax obligations when due on its property within the District, or which challenges j or questions the validity or enforceability of the Bonds or the Continuing j Disclosure Agreement- Lessee executed by the Lessee. Capitalized terms not defined herein have the same meaning as is set forth in the Bond i Purchase Agreement between Stifel, Nicolaus & Company, Incorporated and the Issuer relating. to the Bonds. 1 Dated: to, 2013 PCH BEACH RESORT, LLC, a California limited liability company By: GRAND RESORT, LLC, a California limited liability company, its managing member By: RLM MANAGEMENT, INC., a California corporation, its manager By:_ � Rob rt li. Ma`xer, Jr.,.President. (CEO,re'lic�ent, Secretary) 1 1 l i i $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF LESSEE The undersigned (the "Lessee"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer" or the "District") of the bonds captioned above(the"Bonds"),hereby certifies as follows as of the date hereof I. The undersigned is duly authorized to execute this Certificate on behalf of the Lessee. 2. The Lessee is duly authorized to execute and deliver to perform its obligations under the Lessee Continuing Disclosure Agreement. 3. The Lessee has duly executed and delivered the Lessee Continuing Disclosure Agreement, 4. The Lessee has full power and authority to lease the property located within the District and to carry on its business as presently conducted and as described in the Final Official Statement. 5. Except as disclosed in the Official Statement, no event has occurred since the date of the Preliminary Official Statement which has materially and adversely affected or is reasonably expected to materially and adversely affect the business,properties, operations or financial condition of the Lessee. 6. The representations and warranties made by the Lessee in the lOb-5 Certificate of Lessee are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date. If at any time subsequent hereto and within 25 days after the Closing Date any such statements in the Official Statement become untrue, the Developer agrees to notify the County and the Underwriter immediately. DOC SOC/1633116l022273-0006 i Capitalized terms not defined herein have the same meaning as is set forth in the Bond.Purchase Agreement between Stifel,Nicolaus&Company,Incorporated and the Issuer relating to the Bonds. 'I Dated: July 31,2013 PCH BEACH RESORT, LLC, a California limited liability company By: GRAND RESORT, LLC, a California limited liability company, its managing member By: RLM MANAGEMENT,INC.,a California corporation,its manager By. Rob'ertl�Laye , resident (CEO,'P sident Se etary). i i { I i i I i 2 DOCSOC/16331]6i022273-0006 i i i i STRADLING YOCCA CARLSON & RAUTH ORANGE COUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO ATTORNEYS AT LAW (775)393.1950 SAN DIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (858)926-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISOO (415)283-2240 TELEPHONE(949)725-4000 SANTA BARBARA FACSIMILE(949)725-4100 (805)730-6800 SANTA MONICA (424)214-7000 SACRAMENTO (916)449-2350 July 31,2013 I City Council of the City of Huntington Beach Huntington Beach, California Re: $12,965,000 Cit}7 of Huntington Beach Community Facilities District No, 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Huntington Beach (the "City") taken in connection with the formation of the City of Huntington Beach Community Facilities District No. 2000-1 (the"District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$12,965,000 (the "Bonds") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District,the initial purchasers of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended(comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California), the Municipal Code of the City of Huntington Beach and Resolution No. 2013- 19 (the "Resolution of Issuance"), adopted by the City Council (the "City Council") of the City on June 3, 2013, and by a Bond Indenture dated as of July 1, 2013 (the "Indenture"), by and between the District and U.S. Bank National Association, as trustee. All capitalized terms not defined herein shall have the meanings set forth in the Indenture. The Bonds are dated the date of delivery and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on each September I and March 1, commencing on March 1, 2014, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion that: DOCSO C/1634877v 1/022273-0006 City Council of the City of Huntington Beach July 31,2013 Page 2 (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit nor the taxing power of the City,the State of California, or any of its political subdivisions is pledged for the payment thereof. (2) The Indenture has been duly executed and delivered by the City Council on behalf of the District. The Indenture creates a valid pledge of, and the Bonds are secured by the Net Taxes and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the. extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California; provided, however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification,penalty, contribution, choice of law, choice of forum or waiver provisions contained therein. (3) Under existing statutes, regulations, rulings and judicial decisions, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest(and original issue discount) on the Bonds is exempt from State of California personal income tax. (5) The difference between the issue price of a Bond(the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public) and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues for the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating DOCS OC/1634877v 1/022273-0006 City Council of the City of Huntington Beach July 31,2013 Page 3 the federal alternative minimum tax imposed on individuals or corporations (as described in paragraph(3) above)and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond (generally the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances)than the original cost of the Bond to the owner. The opinion expressed in paragraphs (3) and (5)above as to the exclusion from gross income for federal income tax purposes of interest(and original issue discount) on the Bonds is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount) will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5) and (6) above, we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson &Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. The opinions expressed herein are based upon an analysis of existing statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or do occur (or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. DOCSOC/1634877v 1/022273-0006 City Council of the City of Huntington Beach July 31, 2013 Page 4 i We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material, i Respectfully submitted, i. ! i 1 DOCSOC/1634377v 1/022273-0006. li STRADLING YOCCA CARLSON & RAUTH ORANGECOUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO (775)393-1950 ATTORNEYS AT LAW SAN OIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 1(858)92a-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)283-2240 TELEPHONE(949)725-4000 SANTA BARBARA FACSIMILE(949)725-4100 (805)730-EB00 SANTA MONICA (424)-214-7000 SACRAMENTO (916)449-2350 July 31,2013 U.S. Bank National Association Los Angeles, California Re: S12,9631000 City of Huntington Bench Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding,Bonds Ladies and Gentlemen: In our capacity as Bond Counsel relative to the sale and issuance of the above-referenced bonds (the "Bonds,"), we have this day rendered to the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort), our opinion (the "Approving Opinion") as to certain matters relating to the issuance of the Bonds. You are authorized to rely on the Approving Opinion as if it were addressed to you. We have not been engaged by you and are not acting as your counsel in connection with the issuance of the Bonds. Our engagement with respect to the Bonds terminates as of the date hereof and we expressly disclaim any obligation to update our Approving Opinion or this letter. This letter may be relied upon only by you, and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person to whom it is not specifically addressed without our prior written consent. Respectfully submitted, i I i 1 I DOCSOC11635199v 1/022273-0006 STRADLING YOCCA CARLSON & RAUTH ORANGECOUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO (775)393-1950 ATTORNEYS AT LAW SAN DIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (858)926-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)283-2240 TELEPHONE(949)7254000 SANTA BARBARA FACSIMILE(949)725-4100 (805)730-6800 SANTA MONICA (424)214-7000 SACRAMENTO (916)449.2350 July 31, 2013 Stifel,Nicolaus, &Company, Incorporated San Francisco, California Re: ,$12,965,000 City of Huntington Beach Conn unity Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: Acting in our capacity as Bond Counsel and Disclosure Counsel for the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District"), we have examined certified copies of proceedings taken for the sale and issuance of the above-referenced bonds (the "Bonds") in the aggregate principal amount of$12,965,000, and we have rendered our opinion to the legislative body of the District this day regarding the validity and enforceability of the Bonds (the "Approving Opinion"). The Bonds have been issued pursuant to the Mello-Roos. Community Facilities Act of 1982, as amended, Sections 53311 et seq. of the Government Code of the State of California (the "Act") and the Municipal Code of the City of Huntington Beach (the "City"). You may rely upon our Approving Opinion as if it were addressed to you. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Bond Purchase Agreement dated July 10, 2013 (the "Purchase Agreement"), between the District and Stifel,Nicolaus, & Company, Incorporated, as Underwriter. In connection with the preparation of this opinion, we have examined originals or copies certified or otherwise identified to our satisfaction of (i) the Purchase Agreement, (ii) the Bond Indenture dated as of July 1, 2013, (the "Bond Indenture"), by and between U.S. Bank National Association, as Trustee, and the District, (iii) the Official Statement dated July 10, 2013 relating to the Bonds (the "Official Statement"), (iv) the Continuing Disclosure Agreement dated as of July 1, 2013, by and between the District and Willdan Financial Services, as Dissemination Agent, (v) the letters, certificates and opinions delivered to you pursuant to the provisions of Section 8(c) of the Purchase Agreement, and (vi) such other documents, certificates, instructions and records as we have considered necessary or appropriate as a basis for our opinion. We have assumed the authenticity of all documents submitted to us as originals, the conformity with originals of all documents submitted to us as copies and the genuineness of all DOCSOC/1634897v i/022273-0006 Stifel,Nicolaus & Company, Incorporated July 31, 2013 Page 2 signatures. As to questions of fact material to our opinion, we have relied upon the representations of each party made in the aforesaid documents, and we have made no independent investigation of such matters. Based upon the foregoing and such other information and documents as we consider necessary to render this opinion, we are of the opinion that: 1. The Issuer Documents have been duly authorized, executed and delivered by the District and, assuming due authorization, execution and delivery of the other parties thereto, constitute the legally valid and binding agreements of the District enforceable in accordance with their terms, except as enforcement may be limited by bankruptcy, insolvency or other laws relating to or affecting generally the enforcement of creditors' rights, by equitable principles, by the exercise of judicial discretion in appropriate cases and by the limitations on remedies against public agencies in the State of California. 2. The information contained in the Official Statement on the cover and under the captions"INTRODUCTION," "THE BONDS" (other than information relating to DTC and its book- entry only system, as to which no opinion need be expressed), "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS,""TAX EXEMPTION"and Appendices B and D thereto, insofar as such information purports to summarize certain provisions of the Bonds, the Bond Indenture and our Approving Opinion present a fair and accurate summary of such provisions; provided that no opinion is expressed with respect to any financial or statistical data contained therein. 3. The Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Indenture is exempt fi•om qualification under the Trust Indenture Act of 1939, as amended. We are not passing upon and have not undertaken to determine independently or to verify the accuracy or completeness of the statements contained in the Official Statement and are, therefore, unable to make any representation to you in that regard. Based on our participation in conferences with you and representatives of the City, the City Attorney, the Special Tax Consultant and others, during which conferences the content of the Official Statement and related matters were discussed and in reliance thereon and on certain documents reviewed by us and on the documents, letters, certificates and opinions described above and our understanding of applicable law, we advise you as a matter of fact but not opinion that no information has come to the attention of the attorneys in the firm representing the District which caused us to believe that the Official Statement as of its date contained, or as of the date hereof contains, any untrue statement of a material fact or as of its date omitted, or as of the date hereof omits, to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading(except that we express no view with respect to any financial, statistical or economic data or forecasts, numbers, charts, graphs, estimates,assessed values, projections, assumptions or expressions of opinion therein, any information about the book-entry system or The Depository Trust Company or CUSIP numbers therein, or any of the Appendices thereto). We advise you that, other than reviewing the various certificates and opinions required by Section 8(c) of the Purchase Agreement regarding the Official DOCSOC/1634897v 1/022273-0006 Stifel,Nicolaus & Company,Incorporated July 31,2013 Page 3 Statement,we have not taken any steps since the date of the Official Statement to verify the accuracy of the statements contained in the Official Statement as of the date hereof. The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. This'letter is limited to matters governed by the laws of the State of California and federal securities laws, and we assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction. No opinion is expressed herein with respect to the compliance with, or applicability of, any"blue sky" laws of any state as they relate to the offer or sale of the Bonds. Except as expressly set forth in the Approving Opinion, we express no opinion regarding any tax consequences with respect to the Bonds. We call attention to the fact that the foregoing opinions may be affected by actions taken.(or not taken) or events occurring (or not.occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether such actions or events are taken (or not taken) or occur (or do not occur). Our engagement with respect to the Bonds terminates as of the date hereof and we have not undertaken any duty and we expressly disclaim any responsibility, to advise you as to events occurring after the date hereof with respect to the Bonds or other matters discussed in the Official Statement. This opinion is furnished by us to you solely in our capacity as Bond Counsel and Disclosure Counsel with respect to the execution and delivery of the Bonds. No attorney-client relationship has existed or exists between our firm and you in connection with the Bonds or by virtue of this letter. This letter is delivered to you as the Underwriter of the Bonds, is solely for your benefit as the Underwriter and is not to be used, circulated, quoted or otherwise referred to or relied upon for any other purpose or by any other person without our prior written consent. This letter is not intended to be relied upon by holders of or owners of beneficial interests in the Bonds other than you. Respectfully submitted, _ � I DOCSOC1634397v 1/022273-0006 STRADLING YOCCA CARLSON & RAUTH ORANGECOUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO (775)393-1950 ATTORNEYS AT LAW SANDIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (868)926-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)283-2240 TELEPHONE(949)725-4000 SANTA BARBARA FACSIMILE(949)7254100 (806)730-6800 SANTA MONICA (424)214-70M SACRAMENTO (916)449-2350 July 31,2013 U.S. Bank National Association Los Angeles, California Stifel,Nicolaus& Company, Incorporated San Francisco, California Re: City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)Special Tax Bonds Series 2001 Ladies and Gentlemen: Acting in our capacity as Bond Counsel for the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District"), we have examined the proceedings for the issuance by the District of$12,965,000 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds which are being issued on the date hereof pursuant to that certain Bond Indenture dated as of July 1, 2013, (the "Bond Indenture"), between the District and U.S. Bank National Association, as Trustee, for the purpose of refunding the above-referenced bonds(the"Refunded Bonds"). In rendering this opinion, we have reviewed the (i) Indenture, (ii) the Escrow Agreement dated as of July 1, 2013 (the "Escrow Agreement"), by and between the District and U.S. Bank National Association, as Escrow Agent, (iii) the Fiscal Agent Agreement dated as of December 1, 2001 (the "Prior Fiscal Agent Agreement"), (iv)the Verification Report of Grant Thornton LLP dated July 31, 2013, to the effect that amounts on deposit in the Escrow Fund established under the Escrow Agreement will be sufficient to pay the principal, redemption premium and all accrued interest due on the Refunded Bonds on September 1, 2013, and (v) the District's irrevocable election to cause the Refunded Bonds to be called for redemption in full on September 1,2013. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications. Based upon and subject to the foregoing, it is our opinion that, assuming that the Escrow Agent has received the deposit of moneys specified in the Escrow Agreement, the Refunded Bonds have been legally defeased in accordance with the Prior Fiscal Agent Agreement. The opinions expressed herein are solely for your benefit in connection with the defeasance of the Refunded Bonds and may not be relied on in any manner or for any purpose by any other DOCS OC/1635079v 1/022273-0006 U.S. Bank National Association. Stifel,Nicolaus&Company, Incorporated July 31,2013 Page 2 pet-son or entity, nor may copies be delivered or furnished to any other party, nor may all or portions of this opinion be quoted, circulated, or referred to in any other document without our prior written consent.. The rendering of this opinion to you is undertaken in our capacity as Bond Counsel with respect to the defeasance of the Refiinded Bonds and does not create an attorney-client relationship between us and any party other than the District with respect to.the matters stated herein. We have not undertaken to advise you or any other person as to matters occurring after the date hereof or as to their effect, if any, on the matters stated herein, and we expressly disclaim any.responsibility to do so. Our engagement with respect to the matters described herein terminates on the date hereof. Respectfully submitted, IT I I Doc SOG I635079v 11022273-0006 i 1 I OFFICE OF ��HSINGTON CITY ATTORNEY Mike Vigliotta,ChiefAssls ant City Attorney f��q Paul D'Alessandro,Assistant City Attorney 9t�-- --12 P.O.Box 190 Scott Field,Assistant City Attorney 9 Q, yc oouNry tPp��� 2000 Main Street Neal Moore,Sr.Deputy City Attorney Huntington Beach,California 92648 John Fujii,Deputy City Attorney Telephone: (714)536-5555 Daniel K.Ohl,Deputy City-Attorney Jennifer McGrath Facsimile: (714)374-1590 City Attorney July 31,2013 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) Huntington Beach, California Stifel,Nicolaus& Company,Incorporated San Francisco, California Stradling Yocca Carlson&Rauth Newport Beach, California Re: $12,965,000 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: As City Attorney to the City of Huntington Beach (the "City"), acting on behalf of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District"), I have examined certain actions taken by the City Council of the City, the City and the District with respect to certain pertinent aspects of the proceedings for the sale and issuance of the above-referenced bonds (the "Bonds") to Stifel, Nicolaus & Company, Incorporated, as Underwriter (the "Underwriter"). Capitalized terms used herein and not defined shall have the meanings given to such terms in the Bond Purchase Agreement dated July 10, 2013 (the "Purchase Agreement"), by and between the District and the Underwriter. From such examination, I am of the opinion, as of the date hereof, which is the date of delivery of the Bonds to the Underwriter,that: (A) the Issuer is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State, with full legal right, power and authority to adopt the Resolutions and the Ordinance; I (B) the Resolutions and the Ordinance were each duly adopted at a meeting of the City Council, acting as legislative body of the Issuer, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and the Ordinance are in full force and effect and have not been amended or repealed, except as set forth therein; (C) the Escrow Agreement and the Issuer Continuing Disclosure Agreement were duly authorized, executed and delivered by the Issuer, and constitute the legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; (D) no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the Issuer has been served with process or to the knowledge of the City Attorney, is threatened, in any way affecting the existence of the Issuer or the titles of the Issuer's officials to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Bond Indenture, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents or any action of the Issuer contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Final Official Statement or the powers of the Issuer or its authority with respect to the Bonds, the Issuer Documents or any action on the part of the Issuer contemplated by any of said documents, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (E) the execution and delivery of the Bonds and the Issuer Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Issuer is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Issuer to perform its obligations under the Bonds or the Issuer Documents; (F) all approvals, consents, authorization, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the ability of the Issuer, to perform its obligations under the Bonds or the Issuer Documents, have been obtained or made, as the case may be, and are in full force and effect; (G) based upon the information made available to the City Attorney in the course of its participation in the transaction and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of i I i i the statements contained in the Final Official Statement, nothing has come to the attention of the City Attorney which has led the City Attorney to believe that the Final Official Statement (excluding therefrom the section entitled "LEASEHOLD OWNERSHIP AND THE HOTEL", information relating to The Depository Trust Company and its book-entry only system and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading in any material respect; i (H) the Ground Lease and the Forbearance Agreement were duly authorized, executed and delivered by the Redevelopment Agency, and constitute the legal, valid and binding obligations of the Successor Agency, as the successor agency to the Redevelopment Agency, enforceable against the Successor.Agency in accordance with their terns, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; and (I) the Forbearance Agreement was duly authorized, executed and delivered by the City on behalf of the Issuer, and constitutes the legal, valid and binding obligation of the City, enforceable against the City in accordance with its terms, subject to bankruptcy, insolvency,reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. Respectfully submitted, i Jennifer McGrath City Attorney I I i I i I i I i i I I JONES HALL 650 California Street 181h Floor San Francisco,CA 94108 t.415.391.5780 f.415.391.5784 July 31, 2013 Stifel; Nicolaus& Company, Incorporated One Ferry Building, Suite 275 San Francisco, CA 94111 Re: $12,965,000 City of Huntington Beach Community Facilities No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have acted as your counsel in connection with your purchase of the referenced bonds (the "Bonds") pursuant to that certain Bond Purchase Agreement, dated July 10, 2013. (the "Purchase Contract"), between City of Huntington Beach Community Facilities No. 2000-1 (Grand Coast Resort) (the "Issuer") and you. Capitalized terms not otherwise defined herein shall have the meanings assigned to them in the Purchase Contract. The Bonds are being issued pursuant to a Bond Indenture, dated as of July 1, 2013, between. the Issuer and U.S. ; Bank National Association,.as trustee. We are of the opinion that the Bonds are exempt from registration under the Securities Act of 1933, as amended, and that the Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended. We are not passing upon and do not assume any responsibility 'for the accuracy; completeness or fairness of the statements contained in the Official. Statement and make no representation that we have independently verified the accuracy, completeness or fairness of any such statements. However, to assist you in your investigation concerning the Official Statement, we have reviewed certain documents and have participated in conferences in which the contents of the Official Statement and related matters were discussed. During the course of our work on this matter, no facts have come to our attention that have caused us to believe that the Official Statement (except for the following items, which we expressly exclude from the scope of this sentence: any financial and statistical data, forecasts, numbers, estimates, assumptions, expressions of opinion, and information concerning the Depository Trust Company and the book-entry system for the Bonds, that is contained or incorporated by reference in the Official Statement, and the appendices to the Official Statement) as of the date of the Official Statement or the date hereof contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. A PROFESSIONAL LAY! CORPORATION a vwmioneshall.corn Stifel, Nicolaus & Company, Incorporated -_ _- July 31, 2013 Page 2 The preceding paragraph is not an opinion, but is in the nature of negative observations based on certain limited activities performed by specific lawyers in our firm in our role as special counsel to you. The scope of the activities we performed for purposes of delivering this letter was inherently limited and does not purport to encompass all activities necessary for compliance with applicable securities laws. In addition, in performing, those activities, we relied on third party representations, warranties, certifications and opinions, including and primarily, representations, warranties and certifications made by the Issuer. The preceding paragraph is otherwise subject to the conditions set forth herein. This letter is furnished by us solely for your benefit and may not be relied upon by any other person or entity. We disclaim any obligation to supplement this letter to reflect any facts or circumstances that may hereafter come to our attention or any changes in the law that may hereafter occur, and our engagement with respect to this matter has terminated as of the date hereof. Respectfully submitted, A Professional Law Corporation I a I i i I i II A PROFESSIONAL LAM CORP'ORAFIC'N i l4" -9ua rub 1{ - C F N.Y. U P Y L==(.� .,-11.7_i" Y 1_1 191P E 2.12 July 31, 2013 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) Huntington Beach, California City of Huntington Beach Huntington Beach, California Stifel,Nicolaus & Company,Incorporated San.Francisco, California Re City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have acted as counsel for U.S. Bank National Association,a national banking association(the "Trustee"), in connection with the execution by the Trustee of the Bond Indenture, dated as of July 1,2013 (the "Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) and the Trustee, as trustee, and the Escrow Agreement, referred to below, each related t0 the above-referenced bonds (the"Bonds"), and are generally familiar with the Articles of Association and the Bylaws of the Trustee and are also familiar with the corporate proceedings of the Trustee with regard t0 its authorization, execution and delivery of the Indenture and the Escrow Agreement(as defined in the Indenture). The Indenture and the Escrow Agreement are referred to herein, collectively,. as the"Trustee Documents." Capitalized terms used herein shall have the respective meanings ascribed to them in the Indenture, except as otherwise defined.herein. We have examined such documents and have reviewed such questions of law as we have considered necessary and appropriate for purposes of this Opinion. ,In such review, we have assumed the genuineness of all signatures,the authenticity Of all documents submitted to us as originals, and the conformity with Originals of all documents submitted to us as copies. Where questions of fact material to our opinions expressed below were not established independently,we have relied upon statements of officers of the Trustee as contained in certificates of officers of the Trustee. I Based upon the foregoing, we are of the opinion that: 1. The Trustee is a national banking association duly organized,validly existing and in good standing,under the laws of the United States of America and is authorized.to exercise trust powers. i DORSEY & WHITNEY LLP • WWW.DORSEY.COM • T 714.800.1400 - F 714.800.1499 600. ANTON BOULEVARD • SUITE 2000 • COSTA MESA; CALWORNIA 92626-7655 U GA. CANP:G)A E:URC::1PE ASIA-—ACIFIC I O RSEY" 2. The Trustee has all requisite corporate power, authority and legal right to execute and deliver the Trustee Documents and has taken all necessary corporate action to authorize the execution and delivery of the Trustee Documents and the performance of its obligations under the Trustee Documents. 3. The.Trustee has duly authorized, executed and delivered the Trustee Documents. Assuming the due authorization, execution and delivery thereof by the other parties thereto, the Trustee Documents are the legal, valid and binding agreements of the Trustee, enforceable in accordance with their terms against the Trustee. 4. The Trustee has duly authenticated the Bonds in its capacity as Trustee under the Indenture. 5. To our knowledge, there is no litigation pending against the Trustee to restrain the Trustee's participation in, or in any way contesting the powers of the Trustee with. respect to the transactions contemplated by the.Trustee Documents. The opinions set forth above are subject to the following qualifications and exceptions: (a) the opinions are subject to the effect of any applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws of j general application affecting creditors' rights; and (b) the opinions are subject to the effect of general principles of equity, including (without limitation) concepts of materiality,reasonableness, good faith and fair dealing, and other similar doctrines affecting the enforceability of agreements generally (regardless of whether considered in a proceeding in equity or at law). Our opinions expressed above are limited to the laws of the State of California and the federal laws of the United States of America. The foregoing opinions are being furnished to you solely for your benefit and may not be relied upon by, nor may copies be delivered to, any other person without our prior written consent. j Very truly yours, (tip� �•w.. t j 06RSEY 8 14'MMEY LLP i - i I I $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS I CERTIFICATE OF SPECIAL TAX CONSULTANT I Willdan Financial Services (the "Special.Tax Consultant") has been retained.as.Special Tax administrator for the City of Huntington Beach Community Facilities District No. 2000-1. (Grand Coast Resort) (the"Issuer•") and has reviewed the Rate and Method of Apportioranent of Special Tax for the Issuer (the "Rate and.Method"), a copy of which is set forth in Appendix A to the Official Statement, dated July 10, 2013 (the "Official Statement") relating to the above-captioned bonds (the "Bonds"). i l Based upon such review, the Special Tax Consultant hereby certifies that the Special Tax, if j collected in the maximum amounts permitted pursuant to the Rate and'Method on the date hereof, would generate at least 110% debt service coverage on the Bonds, provided.that the annual debt service figures on the attached debt service schedule, which were relied upon by Special Tax Consultant, are substantially true and correct. I Although the Special Tax if collected in the maximum amounts pursuant to the Rate and Method, would generate the debt service coverage described in the previous paragraph, no representation is made herein as to actual amounts that will be collected in future years. All information with respect to the Rate and Method in the Official Statement and all other I information sourced.to the Special Tax Consultant is true and correct as of the date of the Official Statement and as of the date hereof, and a true and correct copy of the Rate and Method is attached to the Official Statement as Appendix A. Dated: July 31,2013 WILLDAN FINANCIAL SERVICES Authorized Officer i I i I I I i DOCSOC/16331.16/022273-0006 i I $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF DISSEMINATION AGENT The undersigned hereby states and certifies that the undersigned is an authorized officer of Willdan Financial Services, as dissemination agent (the "Dissemination Agent") pursuant to (i) a Continuing Disclosure Agreement dated as of July 1, 2013, by and between the Issuer and the Dissemination Agent and (ii) a Continuing Disclosure Agreement — Lessee (the "Continuing Disclosure Agreements"), by and between the Lessee and the Dissemination Agent, and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Dissemination Agent: I 1. The Dissemination Agent has the full power and authority to enter into and perform its duties under the Continuing Disclosure Agreements. 2. The Continuing Disclosure Agreements have been duly authorized, executed and delivered by the Dissemination Agent, and are legal, valid and binding agreement of the Dissemination Agent enforceable upon the Dissemination Agent in accordance with their terms. I 3. To the best knowledge of the Dissemination Agent, after due inquiry, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Dissemination Agent or threatened against the Dissemination Agent which in the reasonable judgment of the Dissemination Agent would affect the existence of the Dissemination Agent or in any way contesting or affecting the validity or enforceability of the Continuing Disclosure Agreements or contesting the powers of the Dissemination Agent or its authority to enter into and perform its obligations under the Continuing Disclosure Agreements. DOCSOC/1 63 3 1 1 6/022273-0006 I I I I All capitalized terms used herein without definition shalt have the meanings assigned to such terms in the Purchase Agreement. i Dated: July 31,2013 WILLDAN FINANCIAL SERVICES Authorized Officer I 1 i i i I I i i 1 i 2 DOCS OC/1633116/022273-0006 $12,965,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE REGARDING CONTINUING DISCLOSURE The undersigned hereby states and certifies that: (i) I am an authorized representative of Willdan Financial Services, which acts as dissemination agent (the "Dissemination Agent") in connection with the continuing disclosure undertakings (the _"Previous Undertakings") of the issuer (the "Issuer") of the bonds listed on Schedule 1 (the "Listed Bonds") pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule"), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; and I (ii) in our capacity as Dissemination Agent, we have reviewed the Previous I Undertakings, and all annual filings and other event filings (if any) made pursuant thereto, and conclude that in the previous five years, the Issuer has filed each annual report in a complete and timely manner, and all event filings required to be made pursuant to the Rule have also been made in a timely manner pursuant to the Rule. Dated: July 31, 2013 WILLDAN FINANCIAL SERVICES Authorized Officer I 1 I I 1 i i i 1 ' DOCSOC/16331'16/022273-0006 4 II Schedule 1 Issuer Name of Bonds $2,155,000 City of Huntington Beach Community Facilities District No. 1990-1 (Goldenwest/Ellis Area) 2001 Special Tax Refunding Bonds $16,000,000 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2001 Special Tax Bonds $4,900,000 Improvement Area A of the City of Huntington Beach City of Huntington Beach Community Facilities District No.2002-1 (McDonnell Centre Business Park) Special Tax Bonds, Series 2002-A $25,000,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2004 Special Tax Bonds 2 DOCSOC/1633116/022273-0006 CERTIFICATE OF HARRELL & COMPANY ADVISORS REGARDING CONTINUING DISCLOSURE The undersigned hereby states and certifies that: (i) I am an authorized representative of Harrell & Company Advisors, LLC ("Harrell"). (ii) Harrell is familiar with the facts herein certified and is authorized and qualified to certify the same. (iii) Harrell has been retained to provide services for the following entities (collectively, the "Issuer") with respect to continuing disclosure undertakings (the "Undertakings") executed by the Issuer pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule") for the securities listed on the attached Exhibit A: City of Huntington Beach, Huntington Beach Public Financing Authority and Redevelopment Agency of the City of Huntington Beach/Successor Agency. (iv) In this capacity, Harrell has reviewed the Undertakings and all annual filings made pursuant thereto, and concludes that in the previous five years, the Issuer has filed each annual report in a complete and timely manner pursuant to the Rule. (v) In this capacity, Harrell has reviewed the Undertakings, and all event filings (if any) made pursuant thereto, and concludes that in the previous five years, to the knowledge of Harrell after reasonable inquiry, all event filings required to be made pursuant to the Rule have also been made in a timely manner pursuant to the Rule. (vi) Stifel, Nicolaus & Company, Incorporated is entitled to rely on this certificate. Dated: July 31, 2013 HARRELL & COMPANY ADVISORS, LLC By: thorized Officer i i EXHIBIT A LIST OF SECURITIES RELATED TO THE UNDERTAKINGS Issuer: Issue: City of Huntington Beach 2004 Judgment Obligation Bonds Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2010 Series A Lease Revenue Refunding Bonds, 2011 Series A Lease Revenue Bonds, 2000 Series A(defeased) Lease Revenue Bonds, 2001 Series A(defeased) Lease Revenue Bonds, 2001 Series B (defeased) Lease Revenue Bonds, 1997 Series A(defeased) Redevelopment Agency of the City of Huntington 1999 Tax Allocation Refunding Bonds Beach/Successor Agency 2002 Tax Allocation Refunding Bonds Cash Flow Verification Report City of Huntington Beach Community Facilities District No. 2000-1, California i July 31, 2013 l Ja l i 1 I i i i i I i i a i i i I I Contents i Letter I Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow i Exhibit B-1 Debt Service Payment on the Refunded Bonds Appendix I Applicable schedules provided by Stifel, Nicolaus &Company, Inc. I I I I i { 1 I GrantThornton Grant Thornton LLP 200 S 6th Street,Suite 1400 Minneapolis,MN 55402.1434 Report of Independent Certified Public Accountants T612.332.0001 F 612.332.8361 On Applying Agreed-Upon Procedures GrantThomton.com linkd.in/GrantThorntonUS City of Huntington Beach twitter.com/GrantThorntonUS Community Facilities District No. 2000-1 2000 Main Street Huntington Beach,California Stradling Yocca Carlson&Rauth, a Professional Corporation 660 North Center Drive,Suite 1600 Newport Beach,California Stifel,Nicolaus&Company,Inc. U.S. Bank National Association One Ferry Building 633 West Fifth Street,24th Floor San Francisco, California Los Angeles,California $12,965,000 City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds Dated July 31,2013 We have performed the procedures described in this report,which were agreed to by the City of Huntington Beach Conununity Facilities District No.2000-1,California(the"District") and Stifel,Nicolaus&Company,Inc. (the"Underwriter',to verify the mathematical accuracy of certain computations contained in the schedules attached in Appendix I provided by the Underwriter. The District is responsible for these schedules. These procedures were performed solely to assist you in the issuance of the above-captioned bond issue(the`Bonds") for the purpose of current refunding the District's outstanding 2001 Special Tax Bonds (the "Refunded Bonds")as sununarized on the next page. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of the addressees of this report who are the specified parties. Consequently,we make no representation regarding the sufficiency of the procedures described in this report either for the purpose for which this report has been requested or for any other purpose. I I I Grant Thornton LLP U.S.member firm of Grant Thornton International Ltd Page 2 Principal Principal Maturities Redemption Redemption Issue Issued Dated Refunded Refunded Date Price 9-1-13 to 9-1-17 and 2001 $16,000,000 December 19,2001 313,330,000 9-1-31 9-1-13 1000/0 VERIFICATION OF ESCROW ACCOUNT CASH FLOW SUFFICIENCY The Underwriter provided us with schedules (Appendix I)summarizing the future escrow account cash deposit and disbursement. These schedules indicate that there will be sufficient cash available in the escrow account to pay the principal and interest on the Refunded Bonds assuming the Refunded Bonds maturing on and after September 1,2014 will be redeemed on September 1,2013 at 100 percent of par plus accrued interest. The attached Exhibit A(Schedule of Sources and Uses of Funds)was compiled based upon information provided by the Underwriter. As part of our engagement to recalculate the schedules attached as Appendix I we prepared schedules attached hereto as Exhibits B and B-1 independently calculating the future escrow account cash deposit and disbursement and compared the information used in our calculations to the information listed below contained in applicable pages of the following document: • Official Statement for the Refunded Bonds provided by the Underwriter insofar as the Refunded Bonds are described as to the maturity and interest payment dates,principal amounts,interest rates and optional redemption date and price. Our procedures,as summarized in Exhibits B and B-1,prove the mathematical accuracy of the schedules provided by the Underwriter summarizing the future escrow account cash deposit and disbursement. The schedules provided by the Underwriter and those prepared by us reflect that the cash deposit of$13,757,328.75 to be deposited into the escrow account on July 31, 2013,will be sufficient to pay,when due,the principal and interest related to the Refunded Bonds assuming the Refunded Bonds maturing on and after September 1,2014 will be redeemed on September 1,2013 at 100 percent of par plus accrued interest. We were not engaged to,and did not, conduct an examination or a review in accordance with attestation standards established by the American Institute of Certified Public Accountants,the objective of which would be the expression of an examination opinion or limited assurance on the items referred to above. Accordingly we do not express such an opinion or limited assurance. Had the performed additional procedures,other matters might have come to our attention that would have been reported to you. it Page 3 This report is intended solely for the information and use of those to whom this letter is addressed and is not intended to be and should not be used by anyone other than these specified parties. T Minneapolis,Minnesota July 31,2013 i I I 1 I I 1 I I Exhibit A City of Huntington Beach Community Facilities District No. 2000-1 SCHEDULE OF SOURCES AND USES OF FUNDS 1 i July 31,2013 SOURCES: Principal amount of the Bonds $12,965,000.00 Net original issue discount (35,759.20) Debt Service Reserve Fund 1,238,231.95 Debt Service Fund 807,328.75 Cash On-Hand at City 36,304.83 Admin Expense Fund 10,014.95 $15,021,121.28 USES: Cash deposit to escrow account $13,757,328.75 Deposit to Admin Expense Fund 10,000.00 Deposit to Debt Service Reserve Fund 1,091,775.00 Costs of issuance 82,500.00 Undenvriter's discount 78,087.50 Contingency 1,430.03 $15,021,121.28 Exhibit B City of Huntington Beach Community Facilities District No. 2000-1 ESCROW ACCOUNT CASH FLOW Debt service payment on Refunded Bonds Cash Dates (Exhibit B-1) balance Cash deposit on July 31, 2013 $13,757,328.75 09-01-13 $13,757,328.75 0.00 $13,757,328.75 I Exhibit B-1 City of Huntington Beach Community Facilities District No. 2000-1 DEBT SERVICE PAYMENT ON THE REFUNDED BONDS Interest Debt service Date Principal rate Interest payment 09-01-13 $13,330,000 (1) $427,328.75 $13,757,328.75 (1) Actual maturity dates,principal amounts and interest rates are as follows: i Maturity Principal Interest date amount rate 09-01-13 $380,000 6.000% 09-01-14 405,000 6.100% 09-01-15 430,000 6.200% 09-01-16 455,000 6.300% 09-01-17 485,000 6.400% 09-01-31 11,175,000 6.450% $13,330,000 i i i i i i i APPENDIX I i 1 Applicable schedules provided by Stifel, Nicolaus & Company, Inc. i �I i SOURCFS AND USES OF FUNDS City of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.2000-1(Grand Coast Resort) Refunding of the 2001 Special Tax Bonds FINAL CASIIFLOWS Dated Date 07/3 112 0 1 3 Delivery Date 07/3 112 01 3 Sources: Bond Proceeds: Par Amount 12,965,000.00 Net Original Issue Discount -35,759.20 j 12,929,240.80 Other Sources of Funds; Debt Service Reserve Fund 1,238,231.95 Debt Service Fund 807,328.75 Cash On-Hand at City 36,304.83 Admin Expense Fund 10,014.95 2,091,880.48 15,021,121.28 Uses: Project Fund Deposits: Deposit to Admin Expense Fund 10,000.00 I Refunding Escrow Deposits: Cash Deposit 13,757,328.75 Other Fund Deposits: Debt Service Reserve Fund 1,091,775.00 Delivery Date Expenses: Cost of Issuance 82,500.00 Underwriter's Discount 78,087.50 160,587.50 Other Uses of Funds: Additional Proceeds 1,430.03 15,021,121.28 l Jul 10,2013 10:39 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page I ESCROW REQUIREMENTS City of Huntington Beach Special Tax Refunding Bonds,Series 2033 Community Facilities District No.2000-1(Grand Coast Resort) Refunding of the 2001 Special Tax Bonds •###+###i###t#t#t####4#r###!4#r4r###+##i#l+++ki#4kiiiliii4+i+riii#k#ki+#+######ii##i!##t###ti#+##i#i FINAL CASHFLOWS #+##k#####r####!#k#rr!#r4##!i####!4r#r#####iiii#♦kit#!+*+iiiit+i4+#i#4#tr#!###+i+##!##*++++#!i+##### Dated Date 07/31/2013 Delivery Date 07/31/2013 Period Principal Ending Principal Interest Redeemed Total 09/01/2013 380,000.00 427,328,75 12,950,000,00 13,757,328.75 380,000.00 427,328.75 12,950,000.00 13,757,328.75 Jul 10,2013 10:39 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 8 I i 1 SUMMARY OF BONDS REFUNDED City of Huntington Beach Special Tax RcRinding Bonds,Series 2013 Conummity Facilities District No.2000-1(Grand Coast Resort) Reflmding of the 2001 Special Tax Bonds FINAL CASHFLOWS 7 Maturity interest Par Call Call Bond Date Rate Amount Date Price Community Facilities District No.2000-1,2000 1: SERIAL 09/O1/2013 6.000% 380,000.00 09/O1/2014 6.100% 405,000.00 09/O1/2013 100,000 09/01/2015 6,200% 430,000.00 09/01/2013 100.000 09/01/2016 6.300% 455,000.00 09/01/2013 100.000 09/O1/2017 6,400% 485,000.00 09/01/2013 100.000 TERM2031 09/01/2018 6.450% 515,000.00 09/01/2013 100.000 09/O1/2019 6.450% 550,000.00 09/01/2013 100.000 09/O1/2020 6.450% 585,000.00 09/O1/2013 100.000 09/01/2021 6.450% 620,000.00 09/O1/2013 100.000 09/01/2022 6.4501/o 660,000.00 09/01/2013 100.000 09/O1/2023 6.4501/. 705,000.00 09/01/2013 100.000 09/O1/2024 6.450% 750,000.00 09/01/2013 100.000 09/01/2025 6,450% 800,000.00 09/01/2013 100.000 09/01/2026 6.450% 850,000.00 09/01/2013 100.000 09/01/2027 6,450% 905,000.00 09/01/2013 100.000 09/01/2028 6.450% 960,000.00 09/01/2013 100.000 09/01/2029 6.450% 1,025,000.00 09/01/2013 100.000 09/O1/2030 6.450% 1,090,000.00 09/01/2013 100.000 09/01/2031 6.450% 1,160,000.00 09/O1/2013 100.000 13,330,000.00 I I I 1 I 1 l i i i Jul 10,2013 10:39 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 7 j City of Huntington Beach Refunding of Community Facilities Districts DISTRIBUTION LIST February 7,2013 ISSUER CITY OF HUNTINGTON BEACH 2000 Main Street, Huntington Beach,California 92648 Lori Ann Farrell,Director of Finance (714)536-5225 Loriann.farrellnasurfcit;T-hb.org Fax: (714)374-1571 Joyce Zacks,Deputy City Tizasurer (714) 536-5990 jzacksna�surfci,-hb.org Kellee Fritzal,Dep q*Director (714)374-1519 kfritzal@surfcity-hb.org Dahle Bulosan,Accounting Manager (714)536-5648 dbulosan ctsurfcity-hb.org Sunny Han,SeniorAdministrativeAnalyst (714) 536-5907 Sunny.Han&surfci ,T-hb.org CITY ATTORNEY City of Huntington Beach 2000 Main Street P.O.Box 190 Huntington Beach,CA 92648 Mike Vigliotta,Deputy City Aiton D, (714) 536-5555 mvigliottanisurfcit -hb.org Fax: (714)374-1590 i I BOND COUNSEL STRADLING YOCCA CARLSON&RAUTH 660 North Center Drive Suite 1600 Newport Beach,CA 92660 Brian Forbath (949) 725-4193 bforbathnasycr.com Fax: (949) 725-4100 Bradley R_Neal (949) 725-4164 bi-ieal(@sycr.com Fax: (949) 823-5164 i DO CSOC/1608792v 1/022273-0006 FINANCIAL ADVISOR PUBLIC FINANCIAL MANAGEMENT,INC. 601 S.Figueroa Street,Suite 4500 Los Angeles,CA 90017 Craig Hoshijima (213) 489-4075 hosE.rmac(@12fin.com Fax: (213)489-4085 Usama Mahmud (213) 489-4075 mahmudu CQ12ftn.com Fax: (213)489-4085 UNDERWRITER STIFEL,NICOLAUS&COMPANY,INC. One Ferry Building San Francisco,CA 94111 Sara Oberlies Brown,Mgagging Dd�zctot (213) 443-5004 sbro-,vn@stifel.com Fax: (415)445-2395 STIFEL,NICOLAUS&COMPANY,INC. 120 South San Pedro Street,Suite 400 Los Angeles,CA 90012 Tom Jacob (213)443-5010 tiacob9—syllc.com UNDERWRITER'S COUNSEL JONES HALL, 650 California Street, 18th Floor San Francisco,CA 94108 Chris Lynch (415)391-5780 cllvnclig.j oneshall.com TRUSTEE COMMUNITY FACILITY DISTRICTS 1990-1(Goldenwest/Ellis),2001-1(Grand Coast Resort),2003-1(Huntington Center) US BANK TRUST NATIONAL ASSOCIATION 633 Nest 5,h Street, 24,h Floor Los Angeles,CA 90071 j I June Borjo (213) 670-6009 Martin Meza (213) 650-6062 Martin.Meza@usbank.co TRUSTEE'S COUNSEL DORSEY & WHITNEY LLP 600 Anton Boulevard i Suite 2000 Costa Mesa, CA 92626-7655 P: 714-800-1457 F: 714-800-1499 I won .dennisgdorse_}�com DOCSOC/1608792v 1/022273-0006 I TRUSTEE COMMUNITY FACILITY DISTRICTS 2002-1(McDonnell Center Business Park) BNY MELLON TRUST COMPANY 400 South Hope Street,Suite 400 Los Angeles, CA 90017 Gonzalo Urey,Vice President Phone: (213)630-6237 Transaction Manager:(Primary Contact through closing only) E Mail: .,onzalo.ureyQbnymellon.com Fax: (213)630-6215 Valere,Jones-Shaw,Associate (213) 630-6247 Client Service Manager:(Primary Client Contact post-closing) Valere.jones-sha-,v@bnymeHon.com Fanny Chen,Vice President Phone:(213)630-6407 Relationship Manager: E-Mail:fanny.chen crbnymellon.com F 213-630-6179 Trustee Counsel: Rhea L.Ricard,Senior Counsel Phone:(213)630-6476 The Bank of New York Mellon Trust Company,N.A. Fax:(213)630-6285 400 S.Hope Street,Suite 400 Los Angeles,CA 90071 E-mail:rhea.ricard@bnymellon.com SPECIAL TAX ADMINISTRATOR WILLDAN FINANCIAL SERVICES 27368 Via Industria,Suite 110 Temecula, CA 92590 Beatrice Medina bmedinag_-%villdan.com (951)587-3500 Candace Heiser,Anajhst (951) 587-3561 cheisergivilldan.com Fax: (951) 587-3510 TRUSTEE'S COUNSEL TBA RATING AGENCIES TBA PRINTER TBA DOCSOC/1608792v l/022273-0006 Resolution No. 2013-19 BOND DOCUMENTS PRESENTED TO, AND APPROVED BY CITY COUNCIL AT THE DUNE 31 2013 MEETING Resolution No. 2013-19 Exhibits Community Facilities District No. 2000-1 (Grand Coast Resort) • Bond Indenture • Escrow Agreement • Preliminary Official Statement • Bond Purchase Agreement Stradling Yocca Carlson &Rauth Draft Dated May 20, 2013 BOND INDENTURE Between CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) and U.S. BANK NATIONAL ASSOCIATION, as Trustee Relating To CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Dated as of 1,2013 DOCSOC/1616590v3/022273-0006 Table of Contents Page ARTICLE I DEFINITIONS Section1.1 Definitions.....................................................................................................................2 ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1 Amount, Issuance, Purpose and Nature of Bonds.........................................................8 Section 2.2 Type and Nature of Bonds............................................................................................8 Section 2.3 Equality of Bonds and Pledge of Net Taxes.................................................................9 Section 2.4 Description of Bonds; Interest Rates ............................................................................9 Section 2.5 Place and Form of Payment........................................................................................ 10 Section2.6 Form of Bonds ............................................................................................................ 10 Section 2.7 Execution and Authentication..................................................................................... I I Section2.8 Bond Register.............................................................................................................. I I Section 2.9 Registration of Exchange or Transfer.........................................................................I I Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds...............................................................12 Section2.11 Validity of Bonds........................................................................................................ 12 Section 2.12 Book-Entry System..................................................................................................... 12 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Section 3.1 Creation of Funds........................................................................................................ 14 Section 3.2 Disposition of Bond Proceeds.....................................................................................14 Section 3.3 Deposits to and Disbursements from Special Tax Fund.............................................14 Section 3.4 Administration Fund...................................................................................................15 Section 3.5 Debt Service Account of the Special Tax Fund.......................................................... 15 Section 3.6 Redemption Account of the Special Tax Fund........................................................... 16 Section 3.7 Reserve Account of the Special Tax Fund.................................................................. 16 Section3.8 Rebate Fund................................................................................................................ 17 Section 3.9 Costs of Issuance Fund ...............................................................................................18 Section3.10 Surplus Fund...............................................................................................................18 Section3.11 Investments.................................................................................................................19 ARTICLE IV REDEMPTION OF BONDS Section4.1 Redemption of Bonds .................................................................................................20 Section 4.2 Selection of Bonds for Redemption............................................................................22 Section 4.3 Notice of Redemption.................................................................................................22 Section 4.4 Partial Redemption of Bonds Section 4.5 Effect of Notice and Availability of Redemption Money...........................................23 i DOC S OC/16165900/022273-0006 Table of Contents (continued) Page ARTICLE V COVENANTS AND WARRANTY Section5.1 Warranty .....................................................................................................................24 Section5.2 Covenants....................................................................................................................24 ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent...................28 Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent..........................28 Section 6.3 Notation of Bonds; Delivery of Amended Bonds.......................................................29 ARTICLE VII TRUSTEE Section7.1 Trustee.........................................................................................................................30 Section 7.2 Removal of Trustee.....................................................................................................30 Section 7.3 Resignation of Trustee................................................................................................31 Section 7.4 Liability of Trustee .....................................................................................................31 Section 7.5 Merger or Consolidation.............................................................................................32 ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section8.1 Events of Default........................................................................................................32 Section 8.2 Remedies of Owners...................................................................................................32 ARTICLE IX DEFEASANCE Section9.1 Defeasance..................................................................................................................33 ARTICLE X MISCELLANEOUS Section 10.1 Cancellation of Bonds.................................................................................................35 Section 10.2 Execution of Documents and Proof of Ownership.....................................................35 Section 10.3 Unclaimed Moneys.....................................................................................................35 Section 10.4 Provisions Constitute Contract....................................................................................36 Section 10.5 Future Contracts..........................................................................................................36 Section 10.6 Further Assurances......................................................................................................36 Section10.7 Severability.................................................................................................................36 Section10.8 Notices........................................................................................................................36 H DOC SOC/16165900/022273-0006 Table of Contents (continued) Page Section 10.9 Action on Next Business Day.....................................................................................36 EXHIBIT A FORM OF BOND.....................................................................................................A-1 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE...............................................................................................................B-1 DOC SOC/1616590v3/022273-0006 BONDINDENTURE THIS BOND INDENTURE ("Indenture") dated as of 1, 2013, by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "District") and U.S. Bank National Association, as Trustee (the "Trustee"), governs the terms of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds(the"Bonds") issued in accordance herewith. RECITALS: WHEREAS, the City Council of the City of Huntington Beach, California (hereinafter sometimes referred to as the "legislative body of the District"), has heretofore undertaken proceedings and declared the necessity to issue bonds on behalf of the District pursuant to the terms and pursuant to the provisions of Chapter 3.56 (commencing with Section 3.56.010) of the Municipal Code of the City (the"Municipal Code") and the provisions of the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 (commencing with Section 53311) of Part 1 of Division 2 of Title 5 of the California Government Code (the"Act"); and WHEREAS, the District has previously issued its City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2001 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$16,000,000 pursuant to that certain Fiscal Agent Agreement by and between the District and U.S. Bank National Association, as fiscal agent (the "Prior Fiscal Agent"), dated as of December 1, 2001 (the "Prior Fiscal Agent Agreement"), and the Refunded Bonds are the only bonds of the District outstanding; and WHEREAS, the Refunded Bonds were issued by the District to finance certain infrastructure improvements within the District; and WHEREAS, the legislative body of the District intends to accomplish the refunding of the Refunded Bonds through the issuance of bonds in an aggregate principal amount of $ designated as the "the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds" (the "Bonds") and to fund a deposit to the Reserve Account and pay certain costs related to the issuance of the Bonds; and WHEREAS, the District has determined that the issuance of the Bonds will provide significant public benefits by reducing the total amount of Special Taxes to be levied for debt service on indebtedness of the District; and WHEREAS, the Bonds are to be issued and sold in accordance with Resolution No. of the City Council of the City of Huntington Beach (the "City"), acting in its capacity as the legislative body of the District, and with this Indenture; and WHEREAS, the District has determined that all requirements of the Act for the issuance of the Bonds have been satisfied; and WHEREAS, upon their issuance, the Bonds will be the only outstanding bonds of the District, and the District is covenanting herein not to issue any future obligation or security having a DOCSOC/I 6165900/022273-0006 lien, charge, pledge or encumbrance on a parity with the Bonds upon the Special Taxes, except to defease the Bonds; NOW, THEREFORE, in order to establish the terms and conditions upon and subject to which the Bonds are to be issued, and in consideration of the premises and of the mutual covenants contained herein and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby acknowledged, the District does hereby covenant and agree, for the benefit of the Owners of the Bonds which may be issued hereunder from time to time, as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. Unless the context otherwise requires, the following terms shall have the following meanings: "Act" means the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311 et seq. of the California Government Code. "Administrative Expenses Cap"means $ per Fiscal Year. "Administration Fund" means that certain fund by that name established pursuant to Section 3.4 hereof. "Administrative Expenses" means the administrative costs with respect to the calculation and collection of the Special Taxes, including all attorneys' fees and other costs related thereto, the fees and expenses of the Trustee and any Special Tax Consultant to the District, any costs related to the District's compliance with state and federal laws requiring continuing disclosure of information concerning the Bonds and the District, and any other costs otherwise incurred by the City staff on behalf of the District in order to carry out the purposes of the District as set forth in the Resolution of Formation and any obligation of the District hereunder. "Alternative Penalty Account" means the account by that name created and established in the Rebate Fund pursuant to Section 3.1 hereof. "Annual Debt Service" means the principal amount of any Outstanding Bonds payable in a Bond Year either at maturity or pursuant to a Sinking Fund Payment and any interest payable on any Outstanding Bonds in such Bond Year, if the Bonds are retired as scheduled. "Authorized Investments" means any of the following investments, if and to the extent the same are at the time legal for investment of the District's funds (the Trustee is entitled to rely upon investment direction from the District as a certification such investment is an Authorized Investment): (a) Federal Securities; (b) Senior debt obligations, participations, or other instruments issued by a federal agency or United States government-sponsored enterprise, including those issued by or fully 2 D O C S O C/16165 90v 3/02227 3-0006 guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises(stripped securities are only permitted if they have been stripped by the agency itself); (c) Money market funds registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933 and having a rating of AAA or better by a Nationally Recognized Statistical Rating Organization(NRSRO); (d) Certificates of deposit secured at all times by collateral described in (a) and (b) above. Such certificates must be issued by commercial banks, savings and loan associations or mutual savings banks. The collateral must be held by a third party or the Trustee and the Trustee on behalf of the Bond Owners must have a perfected first security interest in the collateral; (e) Certificates of deposit, savings accounts, deposit accounts or money market deposits which are fully insured by FDIC; (f) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase that is rated at least A-1 or its equivalent by a NRSRO and maturing no more than 360 days after the date of purchase (i.e., ratings on holding companies are not considered as the rating of the bank); (g) Commercial Paper rated, at the time of purchase, at least A-1 or its equivalent by a NRSRO and maturing no more than 270 days after the date of purchase; (h) Repurchase agreements with financial institutions insured by the FDIC; or any broker-dealer with "retail customers" which falls under the jurisdiction of the Securities Investors Protection Corporation (SIPC); or a bank or other financial institution rated in the top two rating categories by one or more Rating Agencies; provided that: (i) the over-collateralization is at one hundred two percent(102%), computed weekly, consisting of such securities as described in this section, items (a) through (c); (ii) a third party custodian, the Trustee or the Federal Reserve Bank shall have possession of such obligations; (iii)the Trustee shall have perfected a first priority security interest in such obligations; and(iv)failure to maintain the requisite collateral percentage will require the Trustee to liquidate the collateral; (i) County or State-administered pooled investment funds in which the District is statutorily permitted or required to invest to the extent that any amounts are deposited by the Trustee into such funds and the Trustee shall have direct access to such fund; 0) California Asset Management Program (CAMP). "Bond Counsel" means an attorney at law or a firm of attorneys selected by the District of nationally recognized standing in matters pertaining to the tax-exempt nature of interest on bonds issued by states and their political subdivisions duly admitted to the practice of law before the highest court of any state of the United States of America or the District of Columbia. "Bond Register" means the books which the Trustee shall keep or cause to be kept on which the registration and transfer of the Bonds shall be recorded. 3 DOCSOC/1616590v3/022273-0006 "Bond Year" means the twelve (12) month period commencing on September 2 of each year and ending on September 1 of the following year, and for the first Bond Year commencing on the Delivery Date and ending on September 1, 2013. "Bondowner" or "Owner" means the person or persons in whose name or names any Bond is registered. "Bonds" means the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds issued in the original principal amount of "Business Day" means a day which is not a Saturday or Sunday or a day of the year on which banks in New York, New York, Los Angeles, California, or the city where the corporate trust office of the Trustee is located, are not required or authorized to remain closed. "Certificate of an Authorized Officer" means a written certificate executed by one of the Mayor, City Manager, Director of Finance of the City, or their written designees. "City" means the City of Huntington Beach, California. "City Council"means the City Council of the City. "Code" means the Internal Revenue Code of 1986,together with any amendments thereto. "Continuing Disclosure Agreement" means that certain Continuing Disclosure Agreement, dated 11 2013, by and between the District and Willdan Financial Services, as dissemination agent thereunder. "Corporate Trust Office" means the Corporate Trust Office of the Trustee at 633 West 5th Street, 24th Floor, Los Angeles, California 90071, Attention: , or such other office designated by the Trustee from time to time. "Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds, including the acceptance and initial annual fees and expenses of the Trustee, legal fees and expenses, costs of printing the Bonds and the preliminary and final Official Statements, financial consultants, special tax consultants and other fees and expenses set forth in a Certificate of an Authorized Officer. "County" means the County of Orange, California. "Costs of Issuance Fund" means the fund by that name established pursuant to Section 3.1 hereof. "Delivery Date" means the date on which the Bonds were issued and delivered to the initial purchasers thereof. "Depository" means the securities depository acting as Depository under Section 2.12 hereof. "Director of Finance" means the Director of Finance of the City, or his or her designee. 4 DOCSOC/16165900/022273-0006 "Dissemination Agent"means Willdan Financial Services, and any successor thereto. "District"means City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)established pursuant to the Act and the Resolution of Formation. "Escrow Agreement" means the Escrow Agreement, by and between U.S. Bank National Association, as Escrow Bank, and the District, dated as of 1, 2013. "Escrow Bank"means U.S. Bank National Association. "Escrow Fund"means the Escrow Fund established under the Escrow Agreement. "Extraordinary Administrative Expenses" means Administrative Expenses required for extraordinary District events such as foreclosure actions against delinquent taxpayers within the District required to be prosecuted on an expedited basis pursuant to this Indenture, the approval and implementation of actions requiring Bondowner consent under this Indenture, or actual or threatened Bondowner or property owner litigation arising out of the Bonds or the District. "Federal Securities"means any of the following: (1) Cash (insured at all times by the Federal Deposit Insurance Corporation ("FDIC") or otherwise collateralized with obligations described in paragraph (2)below), (2) Direct obligations of(including obligations issued or held in book-entry form on the books of)the Department of the Treasury of the United States of America, or (3) Obligations of any agency, department or instrumentality of the United States of America the timely payment of principal of and interest on which are fully guaranteed by the United States of America. "Fiscal Year" means the period beginning on July 1 of each year and ending on the next following June 30. "Gross Taxes" means the amount of all Special Taxes received by the District from the Treasurer, together with the net proceeds collected from the sale of property pursuant to the foreclosure provisions of this Indenture, penalties and interest received by the District in connection with the delinquency of such Special Taxes and proceeds from any security for payment of Special Taxes taken in lieu of foreclosure after payment of administrative costs and attorneys' fees payable from such proceeds to the extent not previously paid as an Administrative Expense. "Indenture" means this Bond Indenture, together with any Supplemental Indenture approved pursuant to Article 6 hereof. "Independent Financial Consultant" means a financial consultant or firm of such consultants generally recognized to be well qualified in the financial consulting field, appointed and paid by the District or the City, who, or each of whom: (a) is in fact independent and not under the domination of the District or the,City; 5 D OC S OC/1616590v3/022273-0006 (b) does not have any substantial interest, direct or indirect, in the District or the City; and (c) is not connected with the District as a member, officer or employee of the District, but who may be regularly retained to make annual or other reports to the District or the City. "Interest Payment Date" means each March 1 and September 1, commencing March 1, 2014; provided, however, that, if any such day is not a Business Day, interest up to the Interest Payment Date will be paid on the Business Day next succeeding such date. "Maximum Annual Debt Service" means the maximum sum obtained for any Bond Year prior to the final maturity of the Bonds by adding the following for each Bond Year: (1) the principal amount of all Outstanding Bonds payable in such Bond Year either at maturity or pursuant to a Sinking Fund Payment; and (2) the interest payable on the aggregate principal amount of the Bonds Outstanding in such Bond Year if the Bonds are retired as scheduled. "Net Taxes" means Gross Taxes minus amounts, not in excess of the Administrative Expenses Cap, set aside to pay Administrative Expenses. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.12 hereof. "Ordinance" means Ordinance No. adopted by the legislative body of the District on providing for the levying of the Special Tax. "Outstanding" or "Outstanding Bonds" means all Bonds theretofore issued by the District, except: (1) Bonds theretofore cancelled or surrendered for cancellation in accordance with Section 10.1 hereof, (2) Bonds for payment or redemption of which monies shall have been theretofore deposited in trust (whether upon or prior to the maturity or the redemption date of such Bonds), provided that, if such Bonds are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in this Indenture; and (3) Bonds which have been surrendered to the Trustee for transfer or exchange pursuant to Section 2.9 hereof or for which a replacement has been issued pursuant to Section 2.10 hereof. "Participants" means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds the Bonds as a securities depository. "Rating Agency" means Moody's Rating Service and Standard & Poor's or both, as the context requires. 6 DOCSOC/1616590v3/022273-0006 "Rate and Method of Apportionment" means that certain Rate and Method of Apportionment of Special Tax approved pursuant to the Resolution of Formation as it may be amended from time to time in accordance with the Act and this Indenture. "Rebatable Arbitrage" means the amount (determinable as of the last day of each fifth Bond Year and upon retirement of the Bonds) of arbitrage profits payable to the United States at all times and in the amounts specified in Section 148(f)of the Code and any applicable Regulations. "Rebate Regulations" means any final, temporary or proposed Regulations promulgated under Section 148(f)of the Code. "Record Date" means the fifteenth day of the month preceding an Interest Payment Date, regardless of whether such day is a Business Day. "Regulations" means the regulations adopted or proposed by the Department of Treasury from time to time with respect to obligations issued pursuant to Section 103 of the Code. "Representation Letter" shall mean the Blanket Letter of Representations from the District to the Depository as described in Section 2.12 hereof. "Reserve Requirement" means that amount as of any date of calculation equal to the lesser of (i) 10% of the initial principal amount of the Bonds, if any, (ii)Maximum Annual Debt Service on the then Outstanding Bonds, if any; and (iii) 125% of average Annual Debt Service on the then Outstanding Bonds. "Resolution of Formation" means, Resolution No. _ adopted by the City Council on , pursuant to which the City formed the District. "Resolution of Issuance" means Resolution No. duly adopted by the City Council, acting in its capacity as the legislative body of the District on , 2013, approving this Indenture, and any supplemental bond indenture approved pursuant to Article VI hereof. "Sinking Fund Payment" means the annual payment to be deposited in the Redemption Account to redeem a portion of the Term Bonds in accordance with the schedules set forth in Section 4.1(b) hereof. "Special Tax Prepayments" means any amounts paid by the District to the Trustee and designated by the District as a prepayment of Special Taxes for one or more parcels in the District made in accordance with the Rate and Method of Apportionment. "Special Taxes" means the taxes authorized to be levied by the District in accordance with the Ordinance,the Resolution of Formation,the Act and the Rate and Method of Apportionment. "Special Tax Fund" means the fund by that name established pursuant to Section 3.1. "Supplemental Indenture" means any supplemental indenture amending or supplementing this Indenture. "Surplus Fund"means the fund by that name established pursuant to Section 3.10. 7 DOC SOC/16165900/022273-0006 "Tax Certificate" means the certificate by that name to be executed by the District on a Delivery Date to establish certain facts and expectations and which contains certain covenants relevant to compliance with the Code. "Taxable Property" means the area within the boundaries of the District which is not exempt from application of the Special Tax by operation of law or the Rate and Method of Apportionment. "Term Bonds" means the Bonds maturing on September 1, 20 . "Treasurer" means the Treasurer-Tax Collector of the County of Orange. "Trustee" means U.S. Bank National Association, and any successor thereto. "Underwriter"means Stifel,Nicolaus &Company, Incorporated. ARTICLE II GENERAL AUTHORIZATION AND BOND TERMS Section 2.1 Amount, Issuance. Purpose and Nature of Bonds. Under and pursuant to the Act, the Bonds in the aggregate principal amount of$ shall be issued for the purposes of refunding the Refunded Bonds, funding the Reserve Account and paying Costs of Issuance. The Bonds shall be and are limited obligations of the District and shall be payable as to the principal thereof and interest thereon and any premiums upon the redemption thereof solely from the Net Taxes and the other amounts in the funds created hereunder, other than amounts in the Rebate Fund or the Administration Fund. Section 2.2 Type and Nature of Bonds. Neither the faith and credit nor the taxing power of the City, the State of California, or any political subdivision thereof other than the District is pledged to the payment of the Bonds. Except for the Special Taxes, no other taxes are pledged to the payment of the Bonds. The Bonds are not general or special obligations of the City or general obligations of the District, but are limited obligations of the District payable solely from certain amounts deposited by the District in the Special Tax Fund, as more fully described herein. The District's limited obligation to pay the principal of, premium, if any, and interest on the Bonds from amounts in the Special Tax Fund is absolute and unconditional, free of deductions and without any abatement, offset, recoupment, diminution or set-off whatsoever. No Owner of the Bonds may compel the exercise of the taxing power by the District (except as pertains to the Special Taxes) or the City or the forfeiture of any of their property. The principal of and interest on the Bonds and premiums upon the redemption thereof, if any, are not a debt of the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory limitation or restriction. The Bonds are not a legal or equitable pledge, charge, lien, or encumbrance upon any of the District's property, or upon any of its income, receipts or revenues, except the Net Taxes and other amounts in the Special Tax Fund which are, under the terms of this Indenture and the Act, set aside for the payment of the Bonds and interest thereon and neither the members of the legislative body of the District or the City Council of the City nor any persons executing the Bonds, are liable personally on the Bonds, by reason of their issuance. Notwithstanding anything to the contrary contained in this Indenture, the District shall not be required to advance any money derived from any source of income other than the Net Taxes for the 8 DOC SOC/16165900/022273-0006 payment of the interest on or the principal of the Bonds or for the performance of any covenants contained herein. The District may, however, advance funds for any such purpose, provided that such funds are derived from a source legally available for such purpose. Section 2.3 Equality of Bonds and Pledge of Net Taxes. Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, in order to secure the payment of the principal of and interest on the Bonds in accordance with their terms, the provisions of this Indenture and the Act, the District hereby pledges to the Owners, and grants thereto a lien on and a security interest in, all of the Net Taxes and any other amounts held in the Special Tax Fund. Said pledge shall constitute a first lien on and security interest in such assets, which shall immediately attach to such assets and be effective, binding and enforceable against the District, its successors, purchasers of any of such assets, creditors and all others asserting rights therein, to the extent set forth in, and in accordance with, this Indenture, irrespective of whether those parties have notice of the pledge of, lien on and security interest in such assets and without the need for any physical delivery, recordation, filing or further act. Pursuant to the Act and this Indenture, the Bonds shall be equally payable from the Net Taxes and other amounts in the Special Tax Fund, without priority for number, date of the Bonds, date of sale, date of execution, or date of delivery, and the payment of the interest on and principal of the Bonds and any premiums upon the redemption thereof, shall be exclusively paid from the Net Taxes and other amounts in the Special Tax Fund, which are hereby set aside for the payment of the Bonds. Amounts in the Special Tax Fund shall constitute a trust fund held for the benefit of the Owners to be applied to the payment of the interest on and principal of the Bonds and so long as any of the Bonds or interest thereon remain Outstanding shall not be used for any other purpose, except as permitted by this Indenture or any Supplemental Indenture. Notwithstanding any provision contained in this Indenture to the contrary, Net Taxes deposited in the Rebate Fund or the Surplus Fund shall no longer be considered to be pledged to the Bonds, and none of the Rebate Fund, the Costs of Issuance Fund, the Surplus Fund or the Administration Fund shall be construed as a trust fund held for the benefit of the Owners. Nothing in this Indenture or any Supplemental Indenture shall preclude, subject to the limitations contained hereunder, the redemption prior to maturity of any Bonds subject to call and redemption and payment of said Bonds from proceeds of refunding bonds issued under the Act as the same now exists or as hereafter amended, or under any other law of the State of California.. Section 2.4 Description of Bonds, Interest Rates. The Bonds shall be issued in fully registered form in denominations of$5,000 or any integral multiple thereof. The Bonds of each issue shall be numbered as desired by the Trustee. The Bonds shall be designated "CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 SPECIAL TAX REFUNDING BONDS." The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September 1 in the years and in the aggregate principal amounts and shall be subject to and shall bear interest at the rates set forth in the table below payable on September 1, 2014 and each Interest Payment Date thereafter: Period Ending September I Principal Interest Rate 2014 $ % 2015 2016 9 DOC S OC/1616590v3/022273-0006 2017 2018 2019 2020 Interest shall be payable on each Bond from the date established in accordance with Section 2.5 below on each Interest Payment Date thereafter until the principal sum of that Bond has been paid; provided, however, that if at the maturity date of any Bond (or if the same is redeemable and shall be duly called for redemption, then at the date fixed for redemption)funds are available for the payment or redemption thereof in full, in accordance with the terms of this Indenture, such Bonds shall then cease to bear interest. Interest due on the Bonds shall be calculated on the basis of a 360 day year comprised of twelve 30 day months. Section 2.5 Place and Form of Payment. The Bonds shall be payable both as to principal and interest, and as to any premiums upon the redemption thereof. in lawful money of the United States of America. The principal of the Bonds and any premiums due upon the redemption thereof shall be payable upon presentation and surrender thereof at the Corporate Trust Office of the Trustee in St. Paul, Minnesota, or at the designated office of any successor Trustee. Interest on any Bond shall be payable from the Interest Payment Date next preceding the date of authentication of that Bond, unless (i)such date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication; (ii)the date of authentication is after a Record Date but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication; or(iii)the date of authentication is prior to the close of business on the first Record Date occurring after the issuance of such Bond, in which event interest shall be payable from the dated date of such Bond; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made available for payment on that Bond, interest on that Bond shall be payable from its dated date. Interest on any Bond shall be paid to the person whose name shall appear in the Bond Register as the Owner of such Bond as of the close of business on the Record Date. Such interest shall be paid by check of the Trustee mailed by first class mail, postage prepaid, to such Bondowner at his or her address as it appears on the Bond Register. In addition, upon a request in writing received by the Trustee on or before the applicable Record Date from an Owner of$1,000,000 or more in principal amount of the Bonds, payment shall be made on the Interest Payment Date by wire transfer in immediately available funds to an account designated by such Owner. Section 2.6 Form of Bonds. The definitive Bonds may be printed from steel engraved or lithographic plates or may be typewritten. The Bonds and the certificate of authentication shall be substantially in the form attached hereto as Exhibit A, which form is hereby approved and adopted as the form of such Bonds and of the certificate of authentication. Until definitive Bonds, as applicable, shall be prepared, the District may cause to be executed and delivered in lieu of such definitive Bonds temporary bonds in typed, printed, lithographed or engraved form and in fully registered form, subject to the same provisions, limitations and conditions as are applicable in the case of definitive Bonds, except that they may be in any denominations authorized by the District. Until exchanged for definitive Bonds, as applicable, any temporary bond shall be entitled and subject to the same benefits and provisions of this Indenture as definitive Bonds. If the District issues temporary Bonds, it shall execute and furnish definitive Bonds, as applicable, 10 DOC SOC/16165900/022273-0006 without unnecessary delay and thereupon any temporary Bond may be surrendered to the Trustee at its office, without expense to the Owner, in exchange for a definitive Bond of the same issue, maturity, interest rate and principal amount in any authorized denomination. All temporary Bonds so surrendered shall be cancelled by the Trustee and shall not be reissued. Section 2.7 Execution and Authentication. The Bonds shall be signed on behalf of the District by the manual or facsimile signature of the Mayor of the City and countersigned by the manual or facsimile signature of the City Clerk, or any duly appointed deputy clerk, in their capacity as officers of the District and attested by the signature of the City Clerk. In case any one or more of the officers who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed have been authenticated and delivered by the Trustee (including new Bonds delivered pursuant to the provisions hereof with reference to the transfer and exchange of Bonds or to lost, stolen, destroyed or mutilated Bonds), such Bonds shall nevertheless be valid and may be authenticated and delivered as herein provided, and may be issued as if the person who signed such Bonds had not ceased to hold such office. Only such Bonds as shall bear thereon such certificate of authentication in the form set forth in Exhibit A hereto shall be entitled to any right or benefit under this Indenture, and no Bond shall be valid or obligatory for any purpose until such certificate of authentication shall have been duly executed by the Trustee. Section 2.8 Bond Register. The Trustee will keep or cause to be kept, at the Corporate Trust Office, sufficient books for the registration and transfer of the Bonds which shall be open to inspection by the District during all regular business hours upon reasonable prior notice, and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be transferred on said Bond Register, Bonds as herein provided. The District and the Trustee may treat the Owner of any Bond whose name appears on the Bond Register as the absolute Owner of that Bond for any and all purposes, and the District and the Trustee shall not be affected by any notice to the contrary. The District and the Trustee may rely on the address of the Bondowner as it appears in the Bond Register for any and all purposes. It shall be the duty of the Bondowner to give written notice to the Trustee of any change in the Bondowner's address so that the Bond Register may be revised accordingly. Section 2.9 Registration of Exchange or Transfer. Subject to the limitations of the following paragraph, the registration of any Bond may, in accordance with its terms, be transferred upon the Bond Register by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such Bond for cancellation at the Corporate Trust Office of the Trustee, accompanied by delivery of a written instrument of transfer in a form approved by the Trustee and duly executed by the Bondowner or his or her duly authorized attorney. Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds for other authorized denominations of the same maturity and issue. The Trustee shall not collect from the Owner any charge for any new Bond issued upon any exchange or transfer, but shall require the Bondowner requesting such exchange or transfer to pay any tax or other governmental charge required to be paid with respect to such exchange or transfer. Whenever any Bonds shall be surrendered for registration of transfer or exchange, the District shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, as applicable, of the same issue and 11 DOCSOC/1616590v3/022273-0006 maturity, for a like aggregate principal amount; provided that the Trustee shall not be required to register transfers or make exchanges of(i) Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed; or(ii) any Bonds chosen for redemption. Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds. If any Bond shall become mutilated, the District, at the expense of the Bondowner, shall execute, and the Trustee shall authenticate and deliver, a new Bond of like tenor, date, issue and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be cancelled by the Trustee pursuant to Section 10.1 hereof. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence is satisfactory to the Trustee and, if any indemnity satisfactory to the Trustee shall be given, the District, at the expense of the Bondowner, shall execute and the Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and issue, numbered and dated as the Trustee shall determine in lieu of and in substitution for the Bond so lost, destroyed or stolen. Any Bond issued in lieu of any Bond alleged to be mutilated, lost, destroyed or stolen, shall be equally and proportionately entitled to the benefits hereof with all other Bonds issued hereunder. The Trustee shall not treat both the original Bond and any replacement Bond as being Outstanding for the purpose of determining the principal amount of Bonds which may be executed, authenticated and delivered hereunder or for the purpose of determining any percentage of Bonds Outstanding hereunder, but both the original and replacement Bond shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of delivering a new Bond which has been mutilated, lost, destroyed or stolen, and which has matured, the Trustee may make payment with respect to such Bonds upon receipt of indemnification satisfactory to the Trustee. Section 2.11 Validity of Bonds. The validity of the authorization and issuance of the Bonds shall not be affected in any way by any defect in any proceedings taken by the District and the recital contained in the Bonds that the same are issued pursuant to the Act and other applicable laws of the State shall be conclusive evidence of their validity and of the regularity of their issuance. Section 2.12 Book-Entry System. The Bonds shall be initially issued in the form of a separate single fully-registered Bond for each maturity (which may be typewritten). Upon initial issuance, the ownership of each such Bond shall be registered in the registration books maintained by the Trustee in the name of the Nominee, as nominee of the Depository. Except hereinafter as provided, all of the Outstanding Bonds shall be registered in the registration books maintained by the Trustee in the name of the Nominee. With respect to the Bonds registered in the name of the Nominee,the District and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in the Bonds. Without limiting the immediately preceding sentence, the District and the Trustee shall have no responsibility or obligation with respect to (i)the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in the Bonds, (ii)the delivery to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any notice with respect to the Bonds, including any notice of redemption, (iii)the selection by the Depository and its Participants of the beneficial interests in the Bonds to be redeemed in the event the District redeems the Bonds in part, or (iv)the payment to any Participant or any other person, other than an Owner as shown in the registration books maintained by the Trustee, of any amount with respect to principal of, premium, if any, or interest on the Bonds. The District and the Trustee may treat and consider the Person in 12 DOC SOC/16165900/022273-0006 whose name each Bond is registered in the registration books maintained by the Trustee as the absolute Owner of such Bond for the purpose of payment of principal, premium, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective Owner, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the District's obligations with respect to payment of principal of, premium, if any, and interest on the Bonds to the extent of the sum or sums so paid. No Person other than an Owner shall receive a Bond evidencing the obligation of the District to make payments of principal, premium, if any, and interest pursuant to this Indenture. Upon delivery by the Depository to the Owner, Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to.Record Dates, the term "Nominee" in this Indenture shall refer to such nominee of the Depository. In order to qualify the Bonds the District elects to register in the name of the Nominee for the Depository's book-entry system, the District shall execute and deliver the Representation Letter to the Depository concurrently with the issuance and delivery of the Bonds to their respective original purchasers. The execution and delivery of the Representation Letter shall not in any other way limit the provisions of this Section or in any other way impose upon the District any obligation whatsoever with respect to Persons having interests in the Bonds other than the Owners. In a separate agreement, the Trustee shall have agreed to take all action necessary to ensure compliance with all representations of the District in the Representation Letter with respect to the Trustee at all times. In addition to the execution and delivery of the Representation Letter, the District shall take such other actions, not inconsistent with this Indenture, as are reasonably necessary to qualify the Bonds for the Depository's book-entry program. In the event (i)the Depository determines not to continue to act as securities depository for the Bonds or (ii)the Depository shall no longer so act and gives notice to the Trustee of such determination, then the District will discontinue the book-entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository,the District shall prepare or direct the preparation of a new single, separate, fully-registered Bond for each of the issues and maturities of the Bonds, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace the Depository then the Bonds shall no longer be restricted to being registered in the bond register in the name of the Nominee, but shall be registered in whatever name or names Owners transferring or exchanging Bonds shall designate, in accordance with the provisions of Section 2.9 of this Indenture. Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal of, premium, if any, and interest on such Bond and all notices with respect to such Bond shall be made and given, respectively, as provided in the Representation Letter or as otherwise instructed by the Depository. The initial Depository under this Section shall be The Depository Trust Company, New York, New York("DTC"). The initial Nominee shall be Cede&Co., as Nominee of DTC. 13 DOC SOC/1616590v3/022273-0006 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Section 3.1 Creation of Funds. There is hereby created and established and shall be maintained by the Trustee the following funds and accounts: (1) The Community Facilities District No. 2000-1 Special Tax Fund (the "Special Tax Fund") in which there shall be established and created, a Debt Service Account, a Redemption Account and a Reserve Account; (2) The Community Facilities District No. 2000-1 Rebate Fund (the "Rebate Fund") in which there shall be established a Rebate Account and an Alternative Penalty Account; and (3) The Community Facilities District No. 2000-1 Costs of Issuance Fund (the "Costs of Issuance Fund"). The amounts on deposit in the foregoing funds and accounts shall be held by the Trustee; and the Trustee shall invest and disburse the amounts in such funds and accounts in accordance with the provisions of this Article III and shall disburse investment earnings thereon in accordance with the provisions of Section 3.11 hereof. Section 3.2 Disposition of Bond Proceeds. (a) The proceeds of the sale of the Bonds shall be received by the Trustee on behalf of the District and deposited as follows: (1) $ shall be transferred to the Escrow Bank for deposit into the Escrow Fund pursuant to the terms of the Escrow Agreement, together with $ of moneys held by the Prior Fiscal Agent under the Fiscal Agent Agreement which the District shall direct the Prior Fiscal Agent to deposit in the Escrow Fund pursuant to the Escrow Agreement; (2) $ representing the amount of Costs of Issuance with respect to the Bonds shall be deposited in the Costs of Issuance Fund, and such amount shall be applied to the payment of Costs of Issuance for the Bonds; and (3) $ shall be deposited in the Reserve Account of the Special Tax Fund. The Trustee may, in its discretion, establish a temporary fund or account in its books and records to facilitate such deposits or transfers. Section 3.3 Deposits to and Disbursements from Special Tax Fund. The Director of Finance shall, no later than the last day of each month during which the Special Taxes are apportioned to the District, transfer the Special Taxes net of Special Tax Prepayments (which amounts shall immediately be transferred by the Director of Finance to the Trustee for deposit into the Redemption Account of the Special Tax Fund to be applied in accordance with Section 3.6(b) hereof) to the Trustee for deposit in the Special Tax Fund for the Bonds, to be held in trust by the Trustee in the Special Tax Fund. The Trustee will then transfer the money on deposit in the Special 14 DOC SOC/16165900/022273-0006 Tax Fund on the dates and in the amounts set forth in the following Sections, in the following order of priority,to: (1) The Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied for in the current Fiscal Year up to the Administrative Express Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of Administrative Expenses up to half of the Administrative Expense Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses) levied for in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of(i)the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year, or(ii)March 2 of such Fiscal Year; (2) The Debt Service Account of the Special Tax Fund; (3) The Reserve Account of the Special Tax Fund; (4) Administration Fund for Administrative Expenses not previously deposited to the Administration Fund pursuant to this Section 3.3; (5) Rebate Fund; and (6) Surplus Fund. At the maturity of all Bonds and, after all principal and interest then due on the Bonds then Outstanding has been paid or provided for and any amounts owed to the Trustee have been paid in full, moneys in the Special Tax Fund and any accounts therein may be used by the District for any lawful purpose. Section 3.4 Administration Fund. There is hereby established as a separate fund to be held by the Director of Finance the Administration Fund. Moneys in the Administration Fund may be invested in any Authorized Investments, provided that the maturity or maturities thereof shall not exceed 30 days from the date of purchase. Moneys on deposit in the Administration Fund shall be withdrawn by the Director of Finance and paid to the City or its order upon receipt by the Director of Finance of a Certificate of Authorized Officer stating the amount to be withdrawn, that such amount is to be used to pay an Administrative Expense and the nature of the Administrative Expense. Section 3.5 Debt Service Account of the Special Tax Fund. The principal or Sinking Fund Payment of, and interest on,the Bonds until maturity shall be paid by the Trustee from amounts transferred to the Debt Service Account of the Special Tax Fund. For the purpose of assuring that the payment of principal or Sinking Fund Payment of and interest on, the Bonds will be made when due, at least one Business Day prior to each Interest Payment Date, the Trustee shall make the following transfers to the Debt Service Account; provided, however, that to the extent that deposits have been made in-the Debt Service Account from the proceeds of the sale of the Bonds, or otherwise, or to the extent that a transfer will be made from the Reserve Account to the Debt Service Account in accordance with the last paragraph of Section 3.7 hereof, the transfer from the Special Tax Fund need not be made: an amount such that the balance in the Debt Service Account one (1) Business Day prior to each Interest Payment Date shall be equal to the installments of interest, principal and Sinking Fund Payment due on the Bonds on said Interest Payment Date. Moneys in the Debt Service 15 DOCS OC/1616590v3/022273-0006 Account shall be used for the payment of the interest and principal of the Bonds as the same become due. Section 3.6 Redemption Account of the Special Tax Fund. (a) After making the deposit to the Debt Service Account of the Special Tax Fund pursuant to Section 3.5 above and in accordance with the District's election to call Bonds for optional redemption as set forth in Section 4.1(a) hereof, the Trustee shall transfer from the Special Tax Fund and deposit in the Redemption Account moneys available for the purpose and sufficient to pay the principal of and interest on the Bonds called for redemption, and the premiums payable as provided in Section 4.1(a) hereof on the Bonds called for optional redemption one (1) Business Day prior to the redemption date; provided, however, that Net Taxes may be applied to optionally redeem Bonds only if immediately following such redemption the amount in the Reserve Account will equal the Reserve Requirement. (b) Special Tax Prepayments deposited to the Redemption Account shall be applied on the redemption date established pursuant to Section 4.1(c) hereof for the use of such Special Tax Prepayments to the payment of the principal of, premium, if any, and interest on the Bonds to be redeemed with such Special Tax Prepayments. (c) Moneys set aside in the Redemption Account shall be used solely for the purpose of redeeming Bonds and shall be applied on or after the redemption date to the payment of principal of and premium, if any, on the Bonds to be redeemed upon presentation and surrender of such Bonds; provided, however, in lieu or partially in lieu of such call and redemption, upon receipt by the Trustee of written direction of the District to purchase Bonds, moneys deposited in the Redemption Account may be used to purchase Outstanding Bonds in the manner hereinafter provided. Purchases of Outstanding Bonds may be made by the District at public or private sale as and when and at such prices as the District may in its discretion determine but only at prices (including brokerage or other expenses) not more than par plus accrued interest, or, in the case of purchases to be made from funds to be applied to a redemption pursuant to Section 4.1(a), par plus accrued interest, plus premium, if any, in the case of moneys set aside for an optional redemption. Any accrued interest payable upon the purchase of Bonds may be paid from the amount reserved in the Special Tax Fund for the payment of interest on the next following Interest Payment Date. Section 3.7 Reserve Account of the Special Tax Fund. There shall be maintained in the Reserve Account of the Special Tax Fund an amount equal to the Reserve Requirement. Moneys in the Reserve Account shall be used solely for the purpose of paying the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that the moneys in the Debt Service Account of the Special Tax Fund are insufficient therefor and for the purpose of making any required transfer to the Rebate Fund pursuant to Section 3.8 upon written direction from the District; provided, however, amounts in the Reserve Account may be applied to pay the principal and interest due on any Bonds in the final Bond Year in which any Bonds are Outstanding. If the amounts in the Debt Service Account of the Special Tax Fund are insufficient to pay the principal of, including Sinking Fund Payments, or interest on the Bonds when due, or amounts in the Special Tax Fund are insufficient to make transfers to the Rebate Fund when required, the Trustee shall withdraw from the Reserve Account for deposit in the Debt Service Account of the Special Tax Fund or the Rebate Fund, as applicable, moneys necessary for such purposes. Following any transfer to the Debt Service Account of the Special Tax Fund or to the Rebate Fund as described 16 DOC SOC/1616590v3/022273-0006 above, the District shall then take the steps necessary to cause to be deposited to the Reserve Account the amount needed to replenish the Reserve Account to the Reserve Requirement by transferring such amount from Special Taxes held by the Treasurer or, if the District so elects, by including such amount in the next annual Special Tax levy to the extent of the permitted maximum Special Tax rates. Notwithstanding anything herein to the contrary, whenever moneys are withdrawn from the Reserve Account, after making the required transfers pursuant to Sections 3.5 and 3.6 above, the Trustee shall transfer to the Reserve Account from available moneys in the Special Tax Fund the amount needed to restore the amount of such account to the Reserve Requirement. Moneys in the Special Tax Fund shall be deemed available for transfer to the Reserve Account only if the Trustee determines that such amounts will not be needed to make the deposits required to be made to the Debt Service Account of the Special Tax Fund. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. In connection with a redemption of Bonds pursuant to Section 4.1(a) or (c), or a defeasance of Bonds in accordance with Section 9.1 hereof, amounts in the Reserve Account shall be applied to such redemption or defeasance so long as the amount on deposit in the Reserve Account following such redemption or any partial defeasance equals the Reserve Requirement. The District shall set forth in a Certificate of an Authorized Officer the amount in the Reserve Account to be transferred to the Redemption Account on a redemption date or to be transferred pursuant to this Indenture to partially defease Bonds, and the Trustee shall make such transfer on the applicable redemption or defeasance date, subject to the limitation in the preceding sentence. Notwithstanding any provision herein to the contrary, moneys in the Reserve Account in excess of the Reserve Requirement shall be withdrawn from the Reserve Account on the Business Day before each Interest Payment Date and transferred to the Debt Service Account to be applied to the interest on the Bonds on the next Interest Payment Date. Section 3.8 Rebate Fund. (a) The Trustee shall establish and maintain a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund and shall establish a separate Rebate Account and Alternative Penalty Account therein. The District shall cause to be deposited in the Rebate Fund such amounts as required under the Tax Certificate. All money at any time deposited in the Rebate Account or the Alternative Penalty Account of the Rebate Fund shall be held by the Trustee in trust, for payment to the United States Treasury. All amounts on deposit in the Rebate Fund shall be governed by this Section 3.8 and the Tax Certificate. Without limiting the generality of the foregoing, the District agrees that there shall be paid from time to time all amounts required to be rebated to the United States pursuant to Section 148(f) of the Code and any temporary, proposed or final treasury regulations as may be applicable to the Bonds from time to time, which the District covenants to pay or cause to be paid to the United States at the times and in the amounts determined under the Tax Certificate. The Trustee agrees to comply with all instructions given to it by the District in accordance with this covenant. The Trustee shall conclusively be deemed to have complied with the provisions of this Section 3.8 if it follows the instructions of the District and shall not be required to take any actions hereunder in the absence of instructions from the District. 17 DOCSOC/16165900/022273-0006 (b) Disposition of Unexpended Funds. Any funds remaining in the Accounts of the Rebate Fund with respect to the Bonds after payment in full of such issue and after making the payments required to comply with this Section 3.8 and the Tax Certificate may be withdrawn by the Trustee at the written direction of the District and utilized in any manner by the District. (c) Survival of Defeasance and Final Pam. Notwithstanding anything in this Section or this Indenture to the contrary, the obligation to comply with the requirements of this Section shall survive the defeasance and final payment of the Bonds. (d) Amendment Without Consent of Owners. This Section 3.8 may be deleted or amended in any manner without the consent of the Owners, provided that prior to such event there is delivered to the District an opinion of Bond Counsel to the effect that such deletion or amendment will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax exempt basis. Notwithstanding any provision of this Section, if the District shall provide to the Trustee an opinion of a nationally recognized bond or tax counsel that any specified action required under this Section 3.8 is no longer required or that some further or different action is required to maintain the tax-exempt status of interest on the Bonds,the Trustee and the District may conclusively rely on such opinion in complying with the requirements of this Section, and the covenants hereunder shall be deemed to be modified to that extent. Section 3.9 Costs of Issuance Fund. (a) The moneys in the Costs of Issuance Fund shall be applied exclusively to pay the Costs of Issuance for the Bonds. Amounts for Costs of Issuance shall be disbursed from the Costs of Issuance Fund by the Trustee only upon receipt of a sequentially numbered written requisition, substantially in the form attached hereto as Exhibit B from the Director of Finance or such other person as is designated in writing to the Trustee by the legislative body of the District. (b) Upon the receipt of a Certificate of an Authorized Officer that all or a specified portion of the amount remaining in the Costs of Issuance Fund is no longer needed to pay Costs of Issuance, respectively, the Trustee shall transfer all or such specified portion of the moneys remaining on deposit in such account to the Debt Service Account of the Special Tax Fund. Any moneys remaining in the Cost of Issuance Fund on September 1, 2013 shall be transferred to the Debt Service Account of the Special Tax Fund. Section 3.10 Surplus Fund. There is hereby created and established the "Surplus Fund," to be held by the Director of Finance. After making the transfers required by Sections 3.5, 3.6, 3.7, 3.8 and 3.10, as soon as practicable after each September 1, the Trustee shall transfer all remaining amounts in the Special Tax Fund to the District for deposit in the Surplus Fund. Moneys deposited in the Surplus Fund may be transferred by the District (i)to the Trustee for deposit in the Debt Service Account of the Special Tax Fund to pay the principal of, including Sinking Fund Payments, and interest on the Bonds when due in the event that moneys in the Special Tax Fund and the Reserve Account of the Special Tax Fund are insufficient therefor, (ii)to the Trustee for deposit in the Reserve Account in order to replenish the Reserve Account to the Reserve Requirement, (iii)to the Administration Fund to pay Administrative Expenses to the extent that the amounts on deposit in the Administration Fund are insufficient to pay Administrative Expenses, or (iv)may be used by the District for any other lawful purpose of the District. 18 DOC S OC/1616590v3/022273-0006 The amounts in the Surplus Fund are not pledged to the repayment of the Bonds and may be used by the District for any lawful purpose. In the event that the District reasonably expects to use any portion of the moneys in the Surplus Fund to pay debt service on any Outstanding Bonds, the District shall segregate such amount into a separate subaccount and the moneys on deposit in such subaccount of the Surplus Fund shall be invested in Authorized Investments the interest on which is excludable from gross income under Section 103 of the Code(other than bonds the interest on which is a tax preference item for purposes of computing the alternative minimum tax of individuals and corporations under the Code) or in Authorized Investments at a Yield not in excess of the Yield on the Bonds, unless, in the opinion of Bond Counsel, investment at a higher Yield will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds then Outstanding. Section 3.11 Investments. Moneys held in any of the Funds and Accounts under this Indenture shall be invested by the Trustee at the written direction of the District in accordance with the limitations set forth below only in Authorized Investments which shall be deemed at all times to be a part of such Funds and Accounts. Any loss resulting from such Authorized Investments shall be charged to the Fund or Account from which such investment was made, and any investment earnings on a Fund or Account shall be applied as follows: (i)investment earnings on all amounts deposited in the Costs of Issuance Fund shall be deposited in that Fund, (ii) investment earnings on all amounts in the Rebate Fund shall be deposited in that Fund, (iii)investment earnings on all amounts deposited in the Reserve Account of the Special Tax Fund shall be used to satisfy the Reserve Requirement and any investment earnings not needed to satisfy the Reserve Requirement shall be withdrawn from the Reserve Account one(1)Business Day before each Interest Payment Date and transferred to the Debt Service Account as provided in Section 3.7 hereof; and (iv) all other investment earnings shall be deposited in the Debt Service Account of the Special Tax Fund. Moneys in the Funds and Accounts held under this Indenture may be invested by the Trustee, upon the written direction of the District, from time to time, in Authorized Investments which written direction shall be made in accordance with the following restrictions: (a) Moneys in the Accounts within the Costs of Issuance Fund shall be invested in Authorized Investments which will by their terms mature, as close as practicable to the date the District estimates the moneys represented by the particular investment will be needed for withdrawal from the Costs of Issuance Fund. (b) Moneys in the Debt Service Account of the Special Tax Fund shall be invested only in Authorized Investments which will by their terms mature or are available for withdrawal without penalty, on such dates so as to ensure the payment of principal of, premium, if any, and interest on the Bonds as the same become due. (c) One-half of the amount in the Reserve Account of the Special Tax Fund may be invested only in Authorized Investments which mature not later than six (6) months from their date of purchase by the Trustee, and one-half of such amount shall be invested in Authorized Investments which mature not more than two (2) years from the date of purchase by the Trustee; provided that such amounts may be invested in an investment or repurchase agreement so long as such amounts may be withdrawn at any time, without penalty, for application in accordance with Section 3.5 hereof, and provided that no such Authorized Investment of amounts in the Reserve Account allocable to the Bonds shall mature later than the respective final maturity date of the Bonds to which such amounts relate. 19 DOCSOC/1616590v3/022273-0006 (d) Moneys in the Rebate Fund shall be invested only in Authorized Investments of the type described in clause (a)of the definition thereof which by their terms will mature, as nearly as practicable, on the dates such amounts are needed to be paid to the United States Government pursuant to Section 3.8 hereof. The Trustee, at the direction of the District, shall sell, or present for redemption, any Authorized Investments so purchased whenever it may be necessary to do so in order to provide moneys to meet any payment or transfer to such Funds and Accounts or from such Funds and Accounts. For the purpose of determining at any given time the balance in any such Funds and Accounts, any such investments constituting a part of such Funds and Accounts shall be valued at their cost, except that amounts in the Reserve Account shall be valued at the market value thereof at least semiannually on or before each Interest Payment Date. In making any valuations hereunder,the Trustee may utilize such computerized securities pricing services as may be available to it, including, without limitation, those available through its regular accounting system, and conclusively rely thereon. Notwithstanding anything herein to the contrary, the Trustee shall not be responsible for any loss from investments, sales or transfers undertaken in accordance with the provisions of this Indenture. The Trustee may act as principal or agent in the making or disposing of any investment and shall be entitled to its customary fee for making such investment. The Trustee may sell at the best market price obtainable, or present for redemption, any Authorized Investment so purchased whenever it shall be necessary to provide moneys to meet any required payment,transfer, withdrawal or disbursement from the Fund or Account to which such Authorized Investment is credited, and, subject to the provisions of Section 7.4, the Trustee shall not be liable or responsible for any loss resulting from such investment. For investment purposes, the Trustee may commingle the funds and accounts established hereunder, but shall account for each separately. In the absence of written investment direction the Trustee shall invest solely in Authorized Investments set forth in (c) of the definition thereof. The District acknowledges that regulations of the Comptroller of the Currency grant the District the right to receive brokerage confirmations of security transactions to be effected by the Trustee hereunder as they occur. The District specifically waives the right to receive such confirmations to the extent permitted by applicable law and agrees that it will instead receive periodic cash transaction statements which shall include detail for the investment transactions effected by the Trustee hereunder; provided, however, that the District retains its right to receive brokerage confirmation on any investment transaction requested by the District. ARTICLE IV REDEMPTION OF BONDS Section 4.1 Redemption of Bonds. (a) Optional Redemption. The Bonds are subject, at the option of the District, to call and redemption from any available source of funds prior to their stated maturity on any Interest Payment Date, as a whole or in part, and by lot, at the following redemption prices expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: 20 DOCSOC/1616590v3/022273-0006 Redemption Dates Redemption Price Any Interest Payment Date through March 1,20_ 103% September 1, 20_and March 1, 20_ 102 September 1, 20_and March 1, 20_ 101 September 1, 20_and any Interest Payment Date thereafter 100 (b) Mandatory Sinking Fund Redemption. Bonds maturing on September 1, 20 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20_, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The . Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof,plus accrued interest to the redemption date, without premium, as follows: Term Bonds Due on September 1,20_ Year (September 1) Principal Amount (Maturity) In the event the District shall elect to redeem Bonds as provided in this Section 4.1, the District shall give written notice to the Trustee of its election so to redeem, the redemption date and (other than redemptions pursuant to (b) above) the principal amount of the Bonds to be redeemed. The notice to the Trustee shall be given at least 45 but no more than 60 days prior to the redemption date or such shorter period as shall be acceptable to the Trustee in the sole determination of the Trustee, such notice for the convenience of the Trustee. Special Tax Prepayments and amounts released from the Reserve Account in connection with Special Tax Prepayments in accordance with Section 3.7 hereof shall be allocated to the redemption of the Bonds as nearly as practicable on a proportionate basis based on the outstanding principal amount of the Bonds. (c) Special Mandatory Redemption from Special Tax Prepayments. The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments as a whole, or in part on a pro rata basis among maturities, on any Interest Payment Date, and shall be redeemed by the Trustee, from Special Tax Prepayments deposited to the Redemption Account pursuant to Section 3.6(b), plus amounts transferred from the Reserve Account pursuant to Section 3.7, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed, together with accrued interest to the date of redemption: 21 DOC S OC/1616590v 3/022273-0006 Redemption Dates Redemption Price Any Interest Payment Date through March 1, 20_ September 1, 20_and March 1, 20_ September 1, 20_and March 1, 20_ September 1, 20_and any Interest Payment Date thereafter In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. (d) Purchase of Bonds. In lieu of payment at maturity or redemption, moneys in the Special Tax Fund may be used and withdrawn by the Trustee for purchase of Outstanding Bonds, upon the filing with the Trustee of a Certificate of an Authorized Officer requesting such purchase, at a public or private sale as and when, and at such prices (including brokerage and other charges) as such Certificate of an Authorized Officer may provide, but in no event will Bonds be purchased at a price in excess of the principal amount thereof, plus interest accrued to the date of purchase and any premium which would otherwise be due if the Bonds were to be redeemed in accordance with this Indenture. Section 4.2 Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed (except with respect to mandatory sinking fund redemption in which case selection shall be by lot), the Trustee shall select Bonds pro rata among maturities and by lot within a maturity. The portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of $5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Trustee shall promptly notify the District in writing of the Bonds, or portions thereof, selected for redemption. Section 4.3 Notice of Redemption. When Bonds are to be called for optional or special mandatory redemption under Section 4.1(a) or (c), if the Trustee has received the required notice from the District, the Trustee shall give notice, in the name and at the expense of the District, of the redemption of such Bonds. Such notice of redemption shall (a)specify the serial numbers and the maturity date or dates of the Bonds selected for redemption, except that where all the Bonds subject to redemption, or all the Bonds of one maturity, are to be redeemed, the serial numbers thereof need not be specified; (b) state the date fixed for redemption and surrender of the Bonds to be redeemed; (c)state the redemption price; (d)state the place or places where the Bonds are to be surrendered for redemption; and (e) in the case of Bonds to be redeemed only in part, state the portion of such Bond which is to be redeemed. Such notice may state that redemption is contingent upon the availability of refunding bond proceeds. Such notice shall further state that on the date fixed for redemption, there shall become due and payable on each Bond or portion thereof called for redemption, the principal thereof, together with any premium, and interest accrued to the redemption date, and that from and after such date, interest thereon shall cease to accrue and be payable. At least 30 days but no more than 60 days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and neither the failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of 22 DOCSOC/1616590v3/022273-0006 interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. In addition to the foregoing notice, further notice shall be given by the Trustee as set out below, but no defect in said further notice nor any failure to give all or any portion of such further notice shall in any manner defeat the effectiveness of a call for redemption if notice thereof is given as above prescribed. Each further notice of redemption shall be sent not later than the date that notice of redemption is mailed to the Bondowners pursuant to the first paragraph of this Section by registered or certified mail or overnight delivery service to the Depository and to any other registered securities depositories then in the business of holding substantial amounts of obligations of types comprising the Bonds as determined by the Trustee and to one or more of the national information services that the Trustee determines are in the business of disseminating notice of redemption of obligations such as the Bonds. Upon the payment of the redemption price of any Bonds being redeemed, each check or other transfer of funds issued for such purpose shall to the extent practicable bear the CUSIP number identifying, by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer. Section 4.4 Partial Redemption of Bonds. Upon surrender of any Bond to be redeemed in part only, the District shall execute and the Trustee shall authenticate and deliver to the Bondowner, at the expense of the District, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered, with the same interest rate and the same maturity. Section 4.5 Effect of Notice and Availability of Redemption Money. Notice of redemption having been duly given, as provided in Section 4.3, and the amount necessary for the redemption having been made available for that purpose and being available therefor on the date fixed for such redemption: (a) The Bonds, or portions thereof, designated for redemption shall, on the date fixed for redemption, become due and payable at the redemption price thereof as provided in this Indenture, anything in this Indenture or in the Bonds to the contrary notwithstanding; (b) Upon presentation and surrender thereof at the Corporate Trust Office of the Trustee,the redemption price of such Bonds shall be paid to the Owners thereof, (c) As of the redemption date the Bonds, or portions thereof so designated for redemption shall be deemed to be no longer Outstanding and such Bonds, or portions thereof, shall cease to bear further interest; and (d) As of the date fixed for redemption no Owner of any of the Bonds, or portions thereof so designated for redemption shall be entitled to any of the benefits of this Indenture, or to any other rights, except with respect to payment of the redemption price and interest accrued to the redemption date from the amounts so made available. 23 DOCSOC/16165900/022273-0006 ARTICLE V COVENANTS AND WARRANTY Section 5.1 Warranty. The District shall preserve and protect the security pledged hereunder to the Bonds against all claims and demands of all persons. Section 5.2 Covenants. So long as any of the Bonds issued hereunder are Outstanding and unpaid, the District makes the following covenants with the Bondowners under the provisions of the Act and this Indenture (to be performed by the District or its proper officers, agents or employees), which covenants are necessary and desirable to secure the Bonds and tend to make them more marketable; provided, however, that said covenants do not require the District to expend any funds or moneys other than the Special Taxes and other amounts deposited to the Special Tax Fund: (a) Punctual Payment: Against Encumbrances. The District covenants that it will receive all Gross Taxes in trust and will deposit the Gross Taxes with the Trustee, as provided in Section 3.3, and the District shall have no-beneficial right or interest in the amounts so deposited except as provided by this Indenture. All such Gross Taxes shall be disbursed, allocated and applied solely to the uses and purposes set forth herein, and shall be accounted for separately and apart from all other money, funds, accounts or other resources of the District. Notwithstanding the provisions of this Section, as set forth in Section 8.2, the District shall have the right to accept less than the minimum bid on any delinquent parcel, and is indemnified from legal claim for Owners of the Bonds, if the City Council determines that the acceptance of less than the minimum bid or another action as described in Section 8.2 is in the best interest of the District. The District covenants that it will duly and punctually pay or cause to be paid the principal of and interest on every Bond issued hereunder, together with the premium, if any, thereon on the date, at the place and in the manner set forth in the Bonds and in accordance with this Indenture to the extent that Net Taxes are available therefor, and that the payments into the Funds and Accounts created hereunder will be made, all in strict conformity with the terms of the Bonds and this Indenture, and that it will faithfully observe and perform all of the conditions, covenants and requirements of this Indenture and of the Bonds issued hereunder. The District will not mortgage or otherwise encumber, pledge or place any charge upon any of the Gross Taxes, except as provided in this Indenture, and (except as set forth herein) will not issue any obligation or security having a lien or charge upon the Net Taxes superior to or on a parity with the Bonds. Nothing herein shall prevent the District from issuing or incurring indebtedness which is payable from a pledge of Special Taxes which is subordinate in all respects to the pledge of Net Taxes to repay the Bonds. (b) Leyy and Collection of Special Tax. Subject to the maximum Special Tax rates, the District will comply with all requirements of the Act so as to assure the timely collection of the Special Taxes, including without limitation, the enforcement of delinquent Special Taxes. On or before each June 1, commencing June 1, 2013, the Trustee shall provide a written notice to the District stating the amounts then on deposit in the various funds and accounts established by the Trustee pursuant to this Indenture. The receipt of such notice by the District shall in no way affect the obligations of the District under the following paragraphs. Upon receipt of a copy of such notice,the District shall communicate with the Treasurer or other appropriate official of 24 DOC SOC/16165900/022273-0006 the County of Orange to ascertain the relevant parcels on which the Special Taxes are to be levied, taking into account any parcel splits during the preceding and then current year. The District shall retain an Independent Financial Consultant to assist in the levy of the Special Taxes each Fiscal Year, commencing Fiscal Year 2013-14, in accordance with the Ordinance, such that the computation of the levy is complete before the final date on which the Treasurer will accept the transmission of the Special Tax amounts for the parcels within the District for inclusion on the next secured tax roll. Upon the completion of the computation of the amounts of the levy, and approval by the legislative body of the District, the District shall prepare or cause to be prepared, and shall transmit to the Treasurer, such data as the Treasurer requires to include the levy of the Special Taxes on the next secured tax roll. The District shall fix and levy the amount of Special Taxes within the District required for the payment of principal of and interest on Outstanding Bonds becoming due and payable during the ensuing year including any necessary replenishment or expenditure of the Reserve Account for the Bonds, an amount equal to the estimated Administrative Expenses and any additional amounts necessary for expenses incurred in connection with administration or enforcement of delinquent Special Taxes. The District further covenants that it will take no actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax for so long as the Bonds are Outstanding, including the initiation of proceedings under the Act to reduce the Maximum Special Tax rates (the "Maximum Rates") on Taxable Property in the District below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Outstanding Bonds. The Special Taxes shall be payable and collected in the same manner and at the same time and in the same installment as the general taxes on real property are payable, and have the same priority, become delinquent at the same times and in the same proportionate amounts and bear the same proportionate penalties and interest after delinquency as do the general taxes on real property; provided,the legislative body of the District may provide for direct collection of the Special Taxes in certain circumstances. The fees and expenses of the Independent Financial Consultant retained by the District to assist in computing the levy of the Special Taxes hereunder and any reconciliation of amounts levied to amount received, as well as the costs and expenses of the District (including a charge for District staff time) in conducting its duties hereunder, shall be an Administrative Expense hereunder. (c) Commence Foreclosure Proceedings. Pursuant to Section 53356.1 of the Act, the District hereby covenants with and for the benefit of the Bondowners that it will order, and cause to be commenced, on or before October 1 of the Fiscal Year immediately following the Fiscal Year in which a delinquency in the payment of a Special Tax occurs, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due. Special Taxes collected as a result of a foreclosure proceeding shall be deposited in the Special Tax Fund and only inure to the benefit of the Bonds in the manner provided in Section 3.2. 25 DOC S O C/16165900/022273-0006 (d) Payment of Claims. The District will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the Net Taxes or any part thereof, or upon any funds in the hands of the Trustee, or which might impair the security of the Bonds then Outstanding; provided however that nothing herein contained shall require the District to make any such payments so long as the District in good faith shall contest the validity of any such claims. (e) Books and Accounts. The District will keep proper books of records and accounts, separate from all other records and accounts of the District, in which complete and correct entries shall be made of all transactions relating to the improvements constructed with the proceeds of bonded indebtedness issued by the District, the levy of the Special Tax and the deposits to the Special Tax Fund. Such books of records and accounts shall at all times during business hours be subject to the inspection of the Owners of not less than ten percent (10%) of the principal amount of the Bonds then Outstanding or their representatives authorized in writing. (f) Federal Tax Covenants. Notwithstanding any other provision of this Indenture, absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a .tax-exempt basis will not be adversely affected, the District covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as follows: (1) Private Activity. The District will take no action or refrain from taking any action or make any use of the proceeds of the Bonds or of any other monies or property which would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be "private activity bonds" within the meaning of Section 141 of the Code. (2) Arbitrage. The District will make no use of the proceeds of the Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be "arbitrage bonds" within the meaning of Section 148 of the Code. (3) Federal Guaranty. The District will make no use of the proceeds of the Bonds or take or omit to take any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be"federally guaranteed" within the meaning of Section 149(b) of the Code. (4) Information Reporting. The District will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code. (5) Hedge Bonds. The District will make no use of the proceeds of the Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the Bonds issued on a tax-exempt basis for federal income tax purposes to be considered "hedge bonds" within the meaning of Section 149(g) of the Code unless the District takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income for federal income tax purposes of interest on the Bonds. 26 DOCSOC/16165900/022273-0006 (6) Miscellaneous. The District will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed on the Delivery Date by the District in connection with the Bonds and will comply with the covenants and requirements stated therein and incorporated by reference herein. (7) Other Tax Exempt Issues. The District will not use proceeds of other tax exempt securities to redeem any Bonds without first obtaining the written opinion of Bond Counsel that doing so will not impair the exclusion from gross income for federal income tax purposes of interest on the Bonds issued on a tax-exempt basis. (g) Covenants to Defend. The District covenants that, in the event that any initiative is adopted by the qualified electors in the District.which purports to reduce the maximum Special Tax below the levels specified in Section 5.2(b) above or to limit the power of the District to levy the Special Taxes for the purposes set forth in Section 5.2(b) above, it will commence and pursue legal action in order to preserve its ability to comply with such covenants. (h) Limitation on Right to Tender Bonds. The District hereby covenants that it will not adopt any policy pursuant to Section 53341.1 of the Act permitting the tender of Bonds in full payment or partial payment of any Special Tax unless the District shall have first received a certificate from an Independent Financial Consultant that the acceptance of such a tender will not result in the District having insufficient Special Tax revenues to pay the principal of and interest on the Bonds when due. W Continuing Disclosure Covenant. The District hereby covenants and agrees that it will comply with and carry out all of its obligations under the Continuing Disclosure Agreement. Notwithstanding any other provision of this Indenture, failure of the District to comply with its obligations under the Continuing Disclosure Agreement shall not be considered an event of default under this Indenture, and the sole remedy, in the event of any failure of the District to comply with the Continuing Disclosure Agreement shall be an action to compel performance. (j) Opinions. In the event that an opinion is rendered by Bond Counsel as provided herein from a firm other than the firm which rendered the Bond Counsel opinion at closing, such subsequent opinion by Bond Counsel shall also include the conclusions set forth in numbered paragraphs 1, 2, 3 and 4 of the original Bond Counsel opinion. W Further Assurances. The District shall make, execute and deliver any and all such further agreements, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture and for the better assuring and confirming unto the Owners of the Bonds of the rights and benefits provided in this Indenture. 27 DOCS OC/1616590v3/022273-0006 ARTICLE VI AMENDMENTS TO INDENTURE Section 6.1 Supplemental Indentures or Orders Not Requiring Bondowner Consent. The District may from time to time, and at any time, without notice to or consent of any of the Bondowners, adopt Supplemental Indentures for any of the following purposes: (a) to cure any ambiguity, to correct or supplement any provisions herein which may be inconsistent with any other provision herein, or to make any other provision with respect to matters or questions arising under this Indenture or in any Supplemental Indenture, provided that such action is not materially adverse to the interests of the Bondowners; (b) to add to the covenants and agreements of and the limitations and the restrictions upon the District contained in this Indenture, other covenants, agreements, limitations and restrictions to be observed by the District which are not contrary to or inconsistent with this Indenture as theretofore in effect or which further secure Bond payments; (c) to modify, amend or supplement this Indenture in such manner as to permit the qualification hereof under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, or to comply with the Code or regulations issued thereunder, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute, and which shall not materially adversely affect the interests of the Owners of the Bonds then Outstanding; (d) to modify, alter or amend the Rate and Method of Apportionment in any manner so long as such changes do not reduce the maximum Special Taxes that may be levied in each year on Developed Property (as defined in the Rate and Method of Apportionment) below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to one hundred ten percent (110%) of Maximum Annual Debt Service on the Bonds Outstanding as of the date of such amendment; (e) to modify, alter, amend or supplement this Indenture in any other respect which is not materially adverse to the Bondowners; provided that any amendment or supplement to this Indenture which will affect the Trustee's duties or protections set forth hereunder shall be effective only upon written consent of the Trustee; or Section 6.2 Supplemental Indentures or Orders Requiring Bondowner Consent. Exclusive of the Supplemental Indentures set forth in Section 6.1, the Owners of not less than a majority of in aggregate principal amount of the Bonds Outstanding shall have the right to consent to and approve the adoption by the District of such Supplemental Indentures as shall be deemed necessary or desirable by the District for the purpose of waiving, modifying, altering, amending, adding to or rescinding, in any particular, any of the terms or provisions contained in this Indenture; provided, however,that nothing herein shall permit, or be construed as permitting, (a) an extension of the maturity date of the principal, or the payment date of interest on, any Bond; (b) a reduction in the principal amount of, or redemption premium on, any Bond or the rate of interest thereon; (c)a preference or priority of any Bond over any other Bond; or(d)a reduction in the aggregate principal amount of the Bonds the Owners of which are required to consent to such Supplemental Indenture, without the consent of the Owners of all Bonds then Outstanding. 28 DOCSOC/16165900/022273-0006 If at any time the District shall desire to adopt a Supplemental Indenture, which pursuant to the terms of this Section shall require the consent of the Bondowners, the District shall so notify the Trustee and shall deliver to the Trustee a copy of the proposed Supplemental Indenture. The Trustee shall, at the expense of the District, cause notice of the proposed Supplemental Indenture to be mailed, by first class mail, postage prepaid,to all Bondowners at their addresses as they appear in the Bond Register. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the office of the Trustee for inspection by all Bondowners. The failure of any Bondowners to receive such notice shall not affect the validity of such Supplemental Indenture when consented to and approved by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding as required by this Section. Whenever at any time within one year after the date of the first mailing of such notice, the Trustee shall receive an instrument or instruments purporting to be executed by the Owners of not less than a majority in aggregate principal amount of the Bonds Outstanding, which instrument or instruments shall refer to the proposed Supplemental Indenture described in such notice, and shall specifically consent to and approve the adoption thereof by the District substantially in the form of the copy referred to in such notice as on file with the Trustee, such proposed Supplemental Indenture, when duly adopted by the District, shall thereafter become a part of the proceedings for the issuance of the Bonds. In determining whether the Owners of a majority of the aggregate principal amount of the Bonds have consented to the adoption of any Supplemental Indenture, Bonds which are owned by the District or by any person directly or indirectly controlling or controlled by or under the direct or indirect common control with the District, shall be disregarded and shall be treated as though they were not Outstanding for the purpose of any such determination. Upon the adoption of any Supplemental Indenture and the receipt of consent to any such Supplemental Indenture from the Owners of not less than a majority in aggregate principal amount of the Outstanding Bonds in instances where such consent is required pursuant to the provisions of this section, this Indenture shall be, and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the District and all Owners of Outstanding Bonds shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments. Section 6.3 Notation of Bonds; Delivery of Amended Bonds. After the effective date of any action taken as hereinabove provided, the District may determine that the Bonds may bear a notation, by endorsement in form approved by the District, as to such action, and in that case upon demand of the Owner of any Outstanding Bond at such effective date and presentation of his Bond for the purpose at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation as to such action shall be made on such Bonds. If the District shall so determine, new Bonds so modified as, in the opinion of the District, shall be necessary to conform to such action shall be prepared and executed, and in that case upon demand of the Owner of any Outstanding Bond at such effective date such new Bonds shall be exchanged at the office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, without cost to each Owner of Outstanding Bonds, upon surrender of such Outstanding Bonds. 29 DOC SOC/16165900/022273-0006 ARTICLE VII TRUSTEE Section 7.1 Trustee. U.S. Bank National Association, having a corporate trust office in Los Angeles, California, is hereby appointed Trustee for the District for the purpose of receiving all money which the District is required to deposit with the Trustee hereunder and to allocate, use and apply the same as provided in this Indenture. In the event that the District fails to deposit with the Trustee any amount due hereunder when due, the Trustee shall provide telephonic notice to the District and shall confirm the amount of such shortfall in writing to the extent such amount is known to the Trustee. The Trustee is hereby authorized to and shall mail by first class mail, postage prepaid, or pay by wire transfer as provided in Section 2.5 hereof, interest payments to the Bondowners, to select Bonds for redemption, and to maintain the Bond Register. The Trustee is hereby authorized to pay the principal of and premium, if any, on the Bonds when the same are duly presented to it for payment at maturity or on call and redemption, to provide for the registration of transfer and exchange of Bonds presented to it for such purposes, to provide for the cancellation of Bonds all as provided in this Indenture, and to provide for the authentication of Bonds, and shall perform all other duties assigned to or imposed on it as provided in this Indenture. The Trustee shall keep accurate records of all funds administered by it and all Bonds paid, discharged and cancelled by it. The Trustee shall deliver to the District a monthly accounting of the Funds and Accounts it holds under this Indenture; provided, however, that the Trustee shall not be obligated to deliver such accounting for any Fund or Account that has a balance of zero. The Trustee may establish such Funds and Accounts as it deems necessary or appropriate to perform its obligations hereunder. The Trustee is hereby authorized to redeem the Bonds when duly presented for payment at maturity, or on redemption prior to maturity. The Trustee shall cancel all Bonds upon payment thereof in accordance with the provisions of Section 10.1 hereof. The District shall from time to time, subject to any agreement between the District and the Trustee then in force, pay to the Trustee compensation for its services, reimburse the Trustee for all its advances and expenditures, including, but not limited to, advances to and fees and expenses of independent accountants or counsel employed by it in the exercise and performance of its powers and duties hereunder, and indemnify and save the Trustee, its officers, directors, employees and agents, harmless from and against costs, claims, expenses and liabilities not arising from its own negligence or willful misconduct which it may incur in the exercise and performance of its powers and duties hereunder. The obligations of the District under this Section shall survive the discharge of the Bonds and the resignation or removal of the Trustee. Section 7.2 Removal of Trustee. The District may at any time at its sole discretion remove the Trustee initially appointed, and any successor thereto, by delivering to the Trustee a written notice of its decision to remove the Trustee and may appoint a successor or successors thereto; provided that any such successor shall be a bank or trust company having a combined capital (exclusive of borrowed capital)and surplus of at least fifty million dollars ($50,000,000), and subject to supervision or examination by federal or state authority. Any removal shall become effective only upon acceptance of appointment by the successor Trustee. If any bank or trust company appointed as a successor publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purposes of this section the 30 DOC SOC/1616590v3/022273-0006 combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. Section 7.3 Resignation of Trustee. The Trustee may at any time resign by giving written notice to the District and by giving to the Owners notice of such resignation, which notice shall be mailed to the Owners at their addresses appearing in the registration books in the office of the Trustee. Upon receiving such notice of resignation, the District shall promptly appoint a successor Trustee by an instrument in writing. Any resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Section within thirty (30) days after the Trustee shall have given to the District and the Owners written notice, the Trustee, at the expense of the District, or the District may apply to any court of competent jurisdiction to appoint a successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper, appoint a successor Trustee, which successor shall be acceptable to the District. Section 7.4 Liability of Trustee. The recitals of fact and all promises, covenants and agreements contained herein and in the Bonds shall be taken as statements, promises, covenants and agreements of the District, and the Trustee assumes no responsibility for the correctness of the same and makes no representations as to the validity or sufficiency of this Indenture or the Bonds and shall incur no responsibility in respect thereof, other than in connection with its duties or obligations specifically set forth herein, in the Bonds, or in the certificate of authentication assigned to or imposed upon the Trustee. The Trustee shall be under no responsibility or duty with respect to the issuance of the Bonds for value. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence or willful misconduct. The Trustee shall be protected in'acting upon any notice, resolution, request, consent, order, certificate, report, Bond or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel to the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered hereunder in good faith and in accordance therewith. The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, if required, and his title thereto satisfactorily established, if disputed. Whenever in the administration of its duties under this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of bad faith on the part of the Trustee, be deemed to be conclusively proved and established by a written certificate of the District, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions of this Indenture upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may seem reasonable. The Trustee shall have no responsibility with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the Bonds. 31 DOC SOC/16165900/022273-0006 No provision of this Indenture or any other document related hereto shall require the Trustee to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights hereunder. The immunities extended to the Trustee also extend to its directors, officers, employees and agents. Section 7.5 Merzer or Consolidation. Any company into which the Trustee may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, shall be the successor to the Trustee without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. ARTICLE VIII EVENTS OF DEFAULT; REMEDIES Section 8.1 Events of Default. Any one or more of the following events shall constitute an"Event of Default": (a) Default in the due and punctual payment of the principal of or redemption premium, if any, on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) Default in the due and punctual payment of the interest on any Bond when and as the same shall become due and payable; or (c) Except as described in (a) or (b), default shall be made by the District in the observance of any of the agreements, conditions or covenants on its part contained in this Indenture, the Bonds, and such default shall have continued for a period of thirty (30) days after the District shall have been given notice in writing of such default by the Trustee or the Owners of twenty-five percent(25%)in aggregate principal amount of the Outstanding Bonds. Section 8.2 Remedies of Owners. Following the occurrence of an Event of Default, any Owner shall have the right for the equal benefit and protection of all Owners similarly situated: (a) By mandamus or other suit or proceeding at law or in equity to enforce his rights against the District and any of the members, officers and employees of the District, and to compel the District or any such members, officers or employees to perform and carry out their duties under the Act and their agreements with the Owners as provided in this Indenture; (b) By suit in equity to enjoin any actions or things which are unlawful or violate the rights of the Owners; or (c) By a suit in equity to require the District and its members, officers and employees to account as the trustee of an express trust. 32 DOCSOC/1616590v3/022273-0006 Nothing in this Article or in any other provision of this Indenture, the Bonds shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the interest on and principal of the Bonds to the respective Owners thereof at the respective dates of maturity, as herein provided, out of the Net Taxes pledged for such payment, or affect or impair the right of action, which is also absolute and unconditional, of such Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds and in this Indenture. The principal of the Bonds shall not be subject to acceleration hereunder. A waiver of any default or breach of duty or contract by any Owner shall not affect any subsequent default or breach of duty or contract, or impair any rights or remedies on any such subsequent default or breach. No delay or omission by any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Act or by this article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners. If any suit, action or proceeding to enforce any right or exercise any remedy is abandoned or determined adversely to the Owners, the District and the Owners shall be restored to their former positions, rights and remedies as if such suit,action or proceeding had not been brought or taken. No remedy herein conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing, at law or in equity or by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Act or any other law. In case the moneys held by the Trustee after an Event of Default pursuant to Section 8.1(a) or (b) shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds,then all available amounts shall be applied to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. ARTICLE IX DEFEASANCE Section 9.1 Defeasance. If the District shall pay or cause to be paid, or there shall otherwise be paid, to the Owner of an Outstanding Bond the interest due thereon and the principal thereof, at the times and in the manner stipulated in this Indenture or any Supplemental Indenture, then the Owner of such Bond shall cease to be entitled to the pledge of Net Taxes, and, other than as set forth below, all covenants, agreements and other obligations of the District to the Owner of such Bond under this Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. In the event of a defeasance of all Outstanding Bonds pursuant to this Section, upon payment of all amounts owed by the District to the Trustee hereunder, the Trustee shall execute and deliver to the District all such instruments as may be desirable to evidence such discharge and satisfaction, and the Trustee shall, after payment of amounts payable to the Trustee hereunder, pay over or deliver to the District's general fund all money or securities held by it pursuant to this Indenture which are not required for the payment of the interest due on and the principal of such Bonds. 33 DOCS OC/16165900/022273-0006 Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of this section if such Bond is paid in any one or more of the following ways: (a) by paying or causing to be paid the principal of, premium, if any, and interest on such Bond, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, money which, together with the amounts then on deposit in the Special Tax Fund are available for such purpose, is fully sufficient to pay the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; or (c) by depositing with the Trustee, or another escrow bank appointed by the District, in trust, direct, noncallable Federal Securities, of the type defined in the definition thereof set forth in Section 1.1 hereof, in which the District may lawfully invest its money, in such amount as an Independent Financial Consultant shall determine will be sufficient, together with the interest to accrue thereon and moneys then on deposit in the Special Tax Fund are available for such purpose, together with the interest to accrue thereon, to pay and discharge the principal of, premium, if any, and interest on such Bond, as and when the same shall become due and payable; If paid as provided above, then, at the election of the District, and notwithstanding that any Outstanding Bonds shall not have been surrendered for payment, all obligations of the District under this Indenture and any Supplemental Indenture with respect to such Bond shall cease and terminate, except for the obligation of the Trustee to pay or cause to be paid to the Owners of any such Bond not so surrendered and paid, all sums due thereon and except for the covenants of the District contained in Section 5.2(f) relating to compliance with the Code. Notice of such election shall be filed with the Trustee not less than thirty (30) days prior to the proposed defeasance date. In connection with a defeasance under (b) or (c) above, there shall be provided to the Trustee a certificate of a certified public accountant stating its opinion as to the sufficiency of the moneys or securities deposited with the Trustee or the escrow bank to pay and discharge the principal of and interest on all Outstanding Bonds to be defeased in accordance with this Section, as and when the same shall become due and payable, and an opinion of Bond Counsel (which may rely upon the opinion of the certified public accountant) to the effect that the Bonds being defeased have been legally defeased in accordance with this Indenture and any applicable Supplemental Indenture. Upon a defeasance, the Trustee, upon request of the District, shall release the rights of the Owners of such Bonds which have been defeased under this Indenture and any Supplemental Indenture and execute and deliver to the District all such instruments as may be desirable to evidence such release, discharge and satisfaction. In the case of a defeasance hereunder of all Outstanding Bonds, the Trustee shall pay over or deliver to the District any funds held by the Trustee at the time of a defeasance, which are not required for the purpose of paying and discharging the principal of or interest on the Bonds when due and any fees and expenses of the Trustee remaining unpaid. The Trustee shall, at the written direction of the District, mail, first class, postage prepaid, a notice to the Bondowners whose Bonds have been defeased, in the form directed by the District, stating that the defeasance has occurred. 34 DOC SOC/16165900/022273-0006 ARTICLE X MISCELLANEOUS Section 10.1 Cancellation of Bonds. All Bonds surrendered to the Trustee for payment upon maturity or for redemption shall upon payment therefor and any Bond purchased by the District as authorized herein shall be cancelled forthwith and shall not be reissued. The Trustee shall destroy such Bonds, as provided by law, and, upon written request from the District, furnish to the District a certificate of such destruction. Section 10.2 Execution of Documents and Proof of Ownership. Any request, direction, consent, revocation of consent, or other instrument in writing required or permitted by this Indenture to be signed or executed by Bondowners may be in any number of concurrent instruments of similar tenor may be signed or executed by such Owners in person or by their attorneys appointed by an instrument in writing for that purpose, or by the bank, trust company or other depository for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing any such attorney, and of the ownership of Bonds shall be sufficient for the purposes of this Indenture (except as otherwise herein provided), if made in the following manner: (a) The fact and date of the execution by any Owner or his or her attorney of any such instrument and of any instrument appointing any such attorney, may be proved by a signature guarantee of any bank or trust company located within the United States of America. Where any such instrument is executed by an officer of a corporation or association or a member of a partnership on behalf of such corporation, association or partnership, such signature guarantee shall also constitute sufficient proof of his authority. (b) As to any Bond, the person in whose name the same shall be registered in the Bond Register shall be deemed and regarded as the absolute owner thereof for all purposes, and payment of or on account of the principal of any such Bond, and the interest thereon, shall be made only to or upon the order of the registered Owner thereof or his or her legal representative. All such payments shall be valid and effectual to satisfy and discharge the liability upon such Bond and the interest thereon to the extent of the sum or sums to be paid. Neither the District nor the Trustee shall be affected by any notice to the contrary. Nothing contained in this Indenture shall be construed as limiting the Trustee or the District to such proof, it being intended that the Trustee or the District may accept any other evidence of the matters herein stated which the Trustee or the District may deem sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of the same Bond in respect of anything done or suffered to be done by the Trustee in pursuance of such request or consent. Section 10.3 Unclaimed Moneys. Anything in this Indenture to the contrary notwithstanding and subject to the escheat laws of the State, any money held by the Trustee in trust for the payment and discharge of any of the Outstanding Bonds which remain unclaimed for two (2) years after the date when such Outstanding Bonds have become due and payable, if such money was held by the Trustee at such date, or for two (2) years after the date of deposit of such money if deposited with the Trustee after the said date when such Outstanding Bonds become due and payable, shall be repaid by the Trustee to the District, as its absolute property and free from trust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of such Outstanding Bonds; provided, however, that, before 35 DOCSOC/16165900/022273-0006 being required to make any such payment to the District or the Trustee shall, at the expense of the District, cause to be mailed to the registered Owners of such Outstanding Bonds at their addresses as they appear on the registration books of the Trustee a notice that said money remains unclaimed and that, after a date named in said notice, which date shall not be less than thirty (30) days after the date of the mailing of such notice, the balance of such money then unclaimed will be returned to the District. Section 10.4 Provisions Constitute Contract. The provisions of this Indenture shall constitute a contract between the District and the Bondowners and the provisions hereof shall be construed in accordance with the laws of the State of California. In case any suit, action or proceeding to enforce any right or exercise any remedy shall be brought or taken and, should said suit, action or proceeding be abandoned, or be determined adversely to the Bondowners or the Trustee, then the District, the Trustee and the Bondowners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken. After the issuance and delivery of the Bonds this Indenture shall be irrepealable, but shall be subject to modifications to the extent and in the manner provided in this Indenture, but to no greater extent and in no other manner. Section 10.5 Future Contracts. Nothing herein contained shall be deemed to restrict or prohibit the District from making contracts or creating bonded or other indebtedness payable from a pledge of the Net Taxes which are subordinate to the pledge hereunder, or which is payable from the general fund of the District or from taxes or any source other than the Net Taxes as defined herein. Section 10.6 Further Assurances. The District will adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of this Indenture, and for the better assuring and confirming unto the Owners of the Bonds the rights and benefits provided in this Indenture. Section 10.7 Severability. If any covenant, agreement or provision, or any portion thereof, contained in this Indenture, or the application thereof to any person or circumstance, is held to be unconstitutional, invalid or unenforceable, the remainder of this Indenture and the application of any such covenant, agreement or provision, or portion thereof, to other persons or circumstances, shall be deemed severable and shall not be affected thereby, and this Indenture, the Bonds issued pursuant hereto shall remain valid and the Bondowners shall retain all valid rights and benefits accorded to them under the laws of the State of California. Section 10.8 Notices. Any notices required to be given to the District with respect to the Bonds or this Indenture shall be mailed, first class, postage prepaid or personally delivered to the Director of Finance of the City of Huntington Beach, 2000 Main Street, Huntington Beach, California 92648, and all notices to the Trustee shall be mailed, first class, or personally delivered to the Trustee at U.S. Bank National Association, 633 West 5th Street, 24th Floor, Los Angeles, California 90071, Attention: , Ref: City of Huntington Beach Community Facilities District No. 2000-1. Section 10.9 Action on Next Business Day. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, is not a 36 DOCSOC/1616590v3/022273-0006 Business Day, such payment, with no interest accruing for the period from and after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefore in this Indenture. 37 DOC SOC/16165900/022273-0006 SIGNED AND APPROVED as of the day and year first written above by the Director of Finance of the City of Huntington Beach, acting on behalf of CITY OF HUNTINGTON BEACH FACILITIES COMMUNITY FACILITIES DISTRICT NO. 2000-1 and attested to by the City Clerk and U.S. BANK NATIONAL ASSOCIATION, in token of its acceptance of the duties of the Trustee created hereunder, has caused this Indenture to be signed in its corporate name by its officer identified below, all as of the day and year first above written. By: Director of Finance of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No. 2000-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2000-1 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer S-1 DOC SOC/1616590v3/022273-0006 EXHIBIT A [FORM OF BOND] Unless this Bond certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC'), to the District or its agent for registration of transfer, exchange, or payment, and any Bond certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. No. $ UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 SPECIAL TAX REFUNDING BONDS INTEREST RATE MATURITY DATE DATED DATE CUSIP®NUMBER % September 1, , 2013 REGISTERED OWNER: CEDE &CO. PRINCIPAL AMOUNT: AND NO/100 DOLLARS CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 (the"District"), located in the City of Huntington Beach, County of Orange, State of California, FOR VALUE RECEIVED, hereby promises to pay, solely from certain amounts held under the Indenture (as hereinafter defined), to the Registered Owner named above, or registered assigns, on the Maturity Date set forth above, unless redeemed prior thereto as hereinafter provided, the Principal Amount set forth above, and to pay interest on such Principal Amount from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication hereof to which interest has been paid or duly provided in full, unless (i)the date of authentication is an Interest Payment Date in which event interest shall be payable from such date of authentication, (ii)the date of authentication is after a Record Date (as hereinafter defined) but prior to the immediately succeeding Interest Payment Date, in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication or (iii)the date of authentication is prior to the close of business on the first Record Date in which event interest shall be payable from the Dated Date set forth above; provided, however, that if at the time of authentication of this Bond interest is in default, interest on this Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment or, if no interest has been paid or made A-1 DOC S OC/1616590v3/022273-0006 available for payment, interest on this Bond shall be payable from the Dated Date set forth above. Interest will be paid semiannually on March 1 and September 1 (each, an "Interest Payment Date"), commencing March 1, 2014, at the Interest Rate set forth above, until the Principal Amount hereof is paid or made available for payment. The principal of this Bond is payable to the Registered Owner hereof in lawful money of the United States of America upon presentation and surrender of this Bond at the corporate trust office of U.S. Bank National Association (the "Trustee"). Interest on this Bond shall be paid by check of the Trustee mailed by first class mail, postage prepaid, or, upon request of any Registered Owner of at least $1,000,000 of Bonds, by wire transfer to an account in the continental United States of the Registered Owner hereof prior to the Record Date as of the close of business on the fifteenth day of the month preceding an Interest Payment Date (the "Record Date") at such Registered Owner's address as it appears on the registration books maintained by the Trustee. This Bond is one of a duly authorized issue of "City of Huntington Beach Community Facilities District No. 2000-1 2013 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of $ pursuant to the Mello-Roos Community Facilities Act of 1982, as amended, being Sections 53311, et seq., of the California Government Code (the "Act"), for the purpose of refunding the District's 2001 Special Tax Refunding Bonds, and paying certain costs related to the issuance of the Bonds and funding a reserve account. The issuance of the Bonds and the terms and conditions thereof are provided for by a resolution adopted by the City Council of the City of Huntington Beach, acting in its capacity as the legislative body of the District (the "Legislative Body") on , 2013, and a Bond Indenture dated as of 1, 2013, by and between the District and U.S. Bank National Association, as Trustee, executed in connection therewith (the "Indenture"), and this reference incorporates the Indenture herein, and by acceptance hereof the Registered Owner of this Bond assents to said terms and conditions. The Indenture is executed under and this Bond is issued under, and both are to be construed in accordance with,the laws of the State of California. Pursuant to the Act and the Indenture, the principal of and interest on this Bond are payable solely from the portion of the annual special taxes authorized under the Act to be levied and collected within the District and which are pledged to the repayment of the Bonds (the "Special Taxes"). Any amounts for the payment hereof shall be limited to the Special Taxes pledged and collected or foreclosure proceeds received following a default in payment of the Special Taxes and other amounts on deposit in the Special Tax Fund, except to the extent that other provision for payment has been made by the Legislative Body, as may be permitted by law. The District has covenanted for the benefit of the owners of the Bonds that under certain circumstances it will commence and diligently pursue to completion appropriate foreclosure proceedings in the event of delinquencies of Special Tax installments levied for payment of principal and interest on the Bonds. A-2 DOCSOC/16165900/022273-0006 The Bonds are subject, at the option of the District, to call and redemption from any available source of funds prior to their stated maturity on any Interest Payment Date, as a whole or in part, and by lot, at the following redemption prices expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Redemption Redemption Dates Price Any Interest Payment Date through March 1, 20_ 103% September 1, 20_and March 1, 20_ 102 September 1, 20_and March 1, 20_ 101 September 1, 20 and any Interest Payment Date thereafter 100 The Bonds maturing on September 1, 20_are subject to mandatory sinking fund redemption in part, by lot, on September 1, 20_and on each September 1 thereafter to maturity, at a redemption price equal to the principal amount thereof to be redeemed, together with accrued interest to the date fixed for redemption, without premium, as follows: Term Bonds Due on September 1,20_ Year (September 1) Principal Amount (Maturity) The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments on any Interest Payment Date, in whole or in part, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed,together with accrued interest to the date of redemption: Redemption Redemption Dates Price Any Interest Payment Date through March 1, 20_ September 1, 20_and March 1, 20_ September 1, 20_and March 1, 20_ September 1, 20_and any Interest Payment Date thereafter Notice of redemption with respect to the Bonds to be redeemed shall be mailed to the registered owners thereof not less than 30 nor more than 60 days prior to the redemption date by first class mail, postage prepaid, to the addresses set forth in the registration books. Neither a failure of the Registered Owner hereof to receive such notice nor any defect therein will affect the validity of the proceedings for redemption. All Bonds or portions thereof so called for redemption will cease to accrue interest on the specified redemption date; provided that funds for the redemption are on deposit with the Trustee on the redemption date. Thereafter, the registered owners of such Bonds shall have no rights except to receive payment of the redemption price upon the surrender of the Bonds. A-3 D OC S OC/1616590v3/022273-0006 This Bond shall be registered in the name of the Registered Owner hereof, as to both principal and interest, and the District and the Trustee may treat the Registered Owner hereof as the absolute owner for all purposes and shall not be affected by any notice to the contrary. The Bonds are issuable only in fully-registered form in the denomination of$5,000 or any integral multiple of$5,000 and may be exchanged for a like aggregate principal amount of Bonds of other authorized denominations of the same issue and maturity, all as more fully set forth in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, upon surrender and cancellation of this Bond. Upon such transfer, a new registered Bond of authorized denomination or denominations for the same aggregate principal amount of the same issue and maturity will be issued to the transferee in exchange therefor. The Trustee shall not be required to register transfers or make exchanges of(i)any Bonds for a period of 15 days next preceding any selection of the Bonds to be redeemed, or (ii)any Bonds chosen for redemption. The rights and obligations of the District and of the registered owners of the Bonds may be amended at any time, and in certain cases without notice to or the consent of the registered owners, to the extent and upon the terms provided in the Indenture. The principal of this Bond is not subject to acceleration. If the District shall pay or cause to be paid to the Owner of this Bond the interest due hereon and the principal hereof, at the times and in the manner stipulated herein and in the Indenture, or if there has been deposited with the Trustee moneys or investment securities, which together with the interest to accrue thereon without further investment, will be fully sufficient to pay and discharge the principal of, premium, if any, and interest on all Bonds Outstanding as and when the same shall become due and payable, then the Owner of this Bond shall cease to be entitled to the pledge of Net Taxes under the Indenture, and all covenants, agreements and other obligations of the District to the Owner of this Bond under the Indenture shall thereupon cease, terminate and become void and be discharged and satisfied. THE BONDS DO NOT CONSTITUTE OBLIGATIONS OF THE CITY OF HUNTINGTON BEACH OR OF THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 FOR WHICH THE CITY OF HUNTINGTON BEACH OR THE DISTRICT IS OBLIGATED TO LEVY OR PLEDGE, OR HAS LEVIED OR PLEDGED, GENERAL OR SPECIAL TAXES, OTHER THAN THE SPECIAL TAXES REFERENCED HEREIN. THE BONDS ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE FROM THE PORTION OF THE SPECIAL TAXES PLEDGED UNDER THE INDENTURE BUT ARE NOT A DEBT OF THE CITY OF HUNTINGTON BEACH, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION OR RESTRICTION. This Bond shall not become valid or obligatory for any purpose until the certificate of authentication and registration hereon endorsed shall have been dated and signed by the Trustee. A-4 DOCSOC/1616590v3/022273-0006 IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required by law to exist, happen and be performed precedent to and in the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the amount of this Bond, together with all other indebtedness of the District, does not exceed any debt limit prescribed by the laws or Constitution of the State of California. IN WITNESS WHEREOF, the City of Huntington Beach Community Facilities District No. 2000-1 has caused this Bond to be dated as of the Dated Date,to be executed on behalf of the District by the Mayor of the City of Huntington Beach by facsimile signature and attested by the facsimile signature of the City Clerk. Mayor of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No. 2000-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2000-1 [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-defined Indenture. Dated: U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer A-5 DOC S OC/1616590v3/022273-0006 [FORM OF LEGAL OPINION] The following is a true copy of the opinion rendered by Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, in connection with the issuance of, and dated as of the date of the original delivery of, the Bonds. A signed copy is on file in my office. City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2000-1 [FORM OF ASSIGNMENT] For value received,the undersigned do(es)hereby sell, assign and transfer unto (Name, Address and Tax Identification or Social Security Number of Assignee) the within Bond and do(es)hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the registration books of the Trustee with full power of substitution in the premises. Dated: Signature Guarantee: Notice: Signature(s)must be guaranteed by a Notice: The signature on this assignment must qualified guarantor. correspond with the name(s) as written on the face of the within Bond in every particular without alteration or enlargement or any change whatsoever. A-6 DOCSOC/1616590v3/022273-0006 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 2013 SPECIAL TAX REFUNDING BONDS The undersigned, a duly authorized representative of City of Huntington Beach Community Facilities District No. 2000-1 (the "District"), hereby certifies to U.S. Bank National Association, as trustee (the"Trustee") for purposes of disbursing funds from the Costs of Issuance Fund to pay Costs of Issuance that: (1) The Trustee is to pay to the payees set forth on Exhibit A hereto the amount set forth next to each payee's name for the item described on Exhibit A hereto; (2) The conditions to the release of these amounts from the Costs of Issuance Fund have been satisfied; and (3) There has not been filed with or served upon the District notice of any lien, right to lien or attachment upon, stop notice or claim affecting the right to receive payment of, any of the moneys payable to any of the payees named on Exhibit A hereto which has not been released or will not be released simultaneously with the payment of such amounts, other than materialmen's or mechanic's liens accruing by mere operation of law. Dated: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 By: Authorized Officer B-1 DOCSOC/1616590v3/022273-0006 EXHIBIT A Payee Amount Due Purpose of Expenditure B-2 D OC S OC/16165 90v3/022273-0006 Stradling Yocca Carlson&Rauth Draft dated May 20, 2013 ESCROW AGREEMENT By and Between CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank Dated as of 1,2013 Relating to CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS DOC SOC/1623953v2/022273-0006 ESCROW AGREEMENT THIS 2013 ESCROW AGREEMENT, dated as of 1, 2013 (the "Escrow Agreement"), by and between the City of Huntington Beach Community Facilities District No. 2000- 1 (Grand Coast Resort) (the "District") and U.S. Bank National Association, as escrow bank (the "Escrow Bank"), is entered into in accordance with Resolution No. of the City Council of the City, of Huntington Beach, acting as the legislative body of the District, adopted on , 2013 and a Bond Indenture dated as of 1, 2013 between the District and U.S. Bank National Association, as Trustee (the "Trustee") (the "Indenture"), to refund all of the outstanding bonds issued pursuant to the Fiscal Agent Agreement by and between the District and U.S. Bank Trust National Association, as fiscal agent (the "Prior Fiscal Agent"), dated as of December 1, 2001 (the "Prior Fiscal Agent Agreement"). WITNESSETH.- WHEREAS, pursuant to the Prior Fiscal Agent Agreement, the District has previously issued its 2001 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of $16,000,000, which are currently outstanding in the aggregate principal amount of$13,330,000; and WHEREAS, the District has determined to issue its 2013 Special Tax Refunding Bonds in the aggregate principal amount of$ (the "Bonds") for the purpose of providing moneys which will be used to optionally redeem all of the Refunded Bonds on September 1, 2013 (the"Redemption Date") at a redemption price equal to the outstanding aggregate principal amount thereof, together with interest accrued on the Refunded Bonds through the Redemption Date, without premium(the "Redemption Price"), as required under the Prior Fiscal Agent Agreement; and WHEREAS, the District has taken action to cause to be issued or delivered to the Escrow Bank for deposit in or credit to the escrow fund established and maintained by it(the"Escrow Fund") moneys to be invested in non-callable Federal Securities (as defined herein) or held uninvested as cash, in an amount necessary to refund all of the Refunded Bonds. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the District and the Escrow Bank agree as follows: SECTION 1. Deposit of Moneys. (a) The District hereby deposits with the Escrow Bank $ , comprised of the net sale proceeds of the Bonds and other moneys held under the Prior Fiscal Agent Agreement with respect to the Refunded Bonds, to be held in irrevocable escrow by the Escrow Bank separate and apart from all other securities, investments or moneys on deposit with the Escrow Bank, in a fund hereby created and established and to be known as the "Escrow Fund," and to be applied solely as provided in this Escrow Agreement. Such moneys shall be invested in non-callable Federal Securities (as defined herein) or held uninvested as cash and are at least equal to an amount sufficient to pay when due the Redemption Price on the Redemption Date. (b) As used herein, the term "Federal Securities"means the securities set forth in Schedule A hereto, which constitute direct, non-callable, non-prepayable obligations issued by the United States Treasury or which are unconditionally guaranteed as to full and timely payment by the DOC S OC/1623 953v2/022273-0006 United States of America. The District hereby directs the Escrow Bank to invest $ of moneys in the Escrow Fund in the Federal Securities described on Schedule A hereto and to hold $ of moneys in the Escrow Fund uninvested. (c) The Escrow Bank hereby acknowledges receipt of the written Verification Report of , certified public accountants, dated , 2013 relating to the redemption of the Refunded Bonds on the Redemption Date (the"Verification Report"). SECTION 2. Use and Investment of Moneys. The Escrow Bank acknowledges receipt of the moneys described in Section 1 and agrees: (a) to purchase the Federal Securities listed in Schedule A hereto and hold the balance of the Escrow Fund uninvested as cash; and (b) to make the payments required under Section 3 hereof at the times set forth in Section 3 hereof. SECTION 3. Refunding of the Refunded Bonds. The District hereby directs the Escrow Bank to complete any and all actions necessary to be taken by the Prior Fiscal Agent in connection with the redemption of the Refunded Bonds pursuant to the Prior Fiscal Agent Agreement on the Redemption Date. SECTION 4. Performance of Duties. The Escrow Bank agrees to perform the duties set forth herein. SECTION 5. Indemnity. The District hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated)to indemnify, protect, save and keep harmless the Escrow Bank and its respective successors, assigns, directors, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Bank at any time (whether or not also indemnified against the same by the District or any other person under any other agreement or instrument, but without double indemnity) in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the funds deposited therein, and any payment, transfer or other application of moneys by the Escrow Bank in accordance with the provisions of this Escrow Agreement; provided, however, that the District shall not be required to indemnify the Escrow Bank against the Escrow Bank's own negligence or willful misconduct or the negligent or willful misconduct of the Escrow Bank's respective agents and employees or the breach by the Escrow Bank of the terms of this Escrow Agreement. In no event shall the District or the Escrow Bank be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section 5. The indemnities contained in this Section 5 shall survive the termination of this Escrow Agreement. SECTION 6. Responsibilities of the Escrow Bank. The Escrow Bank and its respective successors, assigns, agents and servants shall not be held to any personal liability whatsoever, in tort, contract or otherwise, in connection with the execution and delivery of this Escrow Agreement, the establishment of the Escrow Fund, the acceptance of the moneys deposited therein, or any payment, transfer or other application of moneys or obligations by the Escrow Bank in accordance with the 2 D OC S OC/1623 95 3 v2/022273-0006 provisions of this Escrow Agreement or by reason of any non-negligent act, non-negligent omission or non-negligent error of the Escrow Bank made in good faith in the conduct of its duties. The recitals of fact contained in the "Whereas" clauses herein shall be taken as the statements of the District, and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representation as to the sufficiency of the deposit of moneys in the Escrow Fund to accomplish the refunding of the Refunded Bonds on the Redemption Date or to the validity of this Escrow Agreement as to the District and, except as otherwise provided herein, the Escrow Bank shall incur no liability with respect thereto. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Bank shall be determined by the express provisions of this Escrow Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the District, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection with respect to any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Bank shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter may be deemed to be conclusively established by a certificate signed by an authorized officer of the District. The liability of the Escrow Bank to make the payments required by this Escrow Agreement shall be limited to the moneys in the Escrow Fund. No provision of this Escrow Agreement shall require the Escrow Bank to expend or risk its own funds or otherwise incur any financial liability in the performance or exercise of any of its duties hereunder, or in the exercise of its rights or powers. The Escrow Bank shall not be liable for the accuracy of any calculations provided herein. Any company into which the Escrow Bank may be merged or converted or with which it may be consolidated or any company resulting from any merger, conversion or consolidation to which it shall be a party or any company to which the Escrow Bank may sell or transfer all or substantially all of its corporate trust business shall be the successor to the Escrow Bank without the execution or filing of any paper or further act, anything herein to the contrary notwithstanding. The District shall pay the Escrow Bank full compensation for its duties under this Escrow Agreement, including out-of-pocket costs such as publication costs, redemption or redemption expenses, legal fees and other costs and expenses relating hereto. Under no circumstances shall amounts deposited in the Escrow Fund be deemed to be available for said purposes. The Escrow Bank may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any agent, attorney, custodian or nominee so appointed. The Escrow Bank agrees to accept and act upon instructions or directions pursuant to this Escrow Agreement sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods, provided, however, that, the Escrow Bank shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the District elects to give the 3 DOC SOC/1623953v2/022273-0006 Escrow Bank e-mail or facsimile instructions (or instructions by a similar electronic method) and the Escrow Bank in its discretion elects to act upon such instructions, the Escrow Bank's understanding of such instructions shall be deemed controlling. The Escrow Bank shall not be liable for any losses, costs or expenses arising directly or indirectly from the Escrow Bank's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The District agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Escrow Bank, including without limitation the risk of the Escrow Bank acting on unauthorized instructions, and the risk of interception and misuse by third parties. SECTION 7. Irrevocable Instructions as to Notice. The Escrow Bank hereby acknowledges that upon the funding of the Escrow Fund as provided in this Escrow Agreement, the receipt of the Verification Report described in Section 1(c) of this Escrow Agreement and the Irrevocable Instructions and Request to Fiscal Agent attached hereto as Schedule C it is in receipt of the items constituting all of the conditions precedent to the redemption of the Refunded Bonds under the Prior Fiscal Agent Agreement. SECTION 8. Amendments. This Escrow Agreement is made for the benefit of the District and the holders from time to time of the Bonds and it shall not be repealed, revoked, altered or amended without the written consent of all such holders, the Escrow Bank and the District, as defined in the Indenture; provided, however, but only after the receipt by the Escrow Bank of an opinion of nationally recognized bond counsel that the exclusion from gross income of interest evidenced and represented by the Bonds and the Bonds will not be adversely affected for federal income tax purposes, the District and the Escrow Bank may, without the consent of, or notice to, such holders, amend this Escrow Agreement or enter into such agreements supplemental to this Escrow Agreement as shall not adversely affect the rights of such holders and as shall not be inconsistent with the terms and provisions of this Escrow Agreement for any one or more of the following purposes: (i)to cure any ambiguity or formal defect or omission in this Escrow Agreement; (ii)to grant to, or confer upon, the Escrow Bank for the benefit of the holders of the Refunded Bonds any additional rights, remedies, powers or authority that may lawfully be granted to, or conferred upon, such holders or the Escrow Bank; and (iii)to include under this Escrow Agreement additional funds, securities or properties. The Escrow Bank shall be entitled to rely conclusively upon an unqualified opinion of nationally recognized bond counsel with respect to compliance with this Section 8, including the extent, if any, to which any change, modification, addition or elimination affects the rights of the holders of the Refunded Bonds or that any instrument executed hereunder complies with the conditions and provisions of this Section 8. SECTION 9. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the later to occur of either (i)the date upon which the Refunded Bonds have been paid in accordance with this Escrow Agreement, or (ii)the date upon which no unclaimed moneys remain on deposit with the Escrow Bank and all amounts owed to the Escrow Bank shall have been paid in full. Any unclaimed money which remains in the Escrow Fund for 2 years from the date upon which the Refunded Bonds have been paid in accordance with this Escrow Agreement shall be remitted by the Escrow Bank to the District. SECTION 10. Compensation. The Escrow Bank shall receive its reasonable fees and expenses as previously agreed to; provided, however, that under no circumstances shall the Escrow Bank be entitled to any lien nor will it assert a lien whatsoever on any moneys or obligations in the 4 DOCSOC/1623953v2/022273-0006 Escrow Fund for the payment of fees and expenses for services rendered by the Escrow Bank under this Escrow Agreement. SECTION 11. Resignation or Removal of Escrow Bank. (a) The Escrow Bank may resign by giving 30 days prior written notice in writing to the District. The Escrow Bank may be removed (1)by (i) filing with the District and the Escrow Bank an instrument or instruments executed by the holders of at least 51% in aggregate principal amount of the Refunded Bonds then remaining unpaid, and (ii)the District delivering written notice to the Escrow Bank, or (2)by a court of competent jurisdiction for failure to act in accordance with the provisions of this Escrow Agreement upon application by the District or the holders of 5% in aggregate principal amount of the Refunded Bonds then remaining unpaid. (b) No resignation or removal of the Escrow Bank shall become effective until a successor Escrow Bank has been appointed hereunder and until the cash held under this Escrow Agreement are transferred to the new Escrow Bank. The District or the holders of a majority in principal amount of the Refunded Bonds then remaining unpaid may, by an instrument or instruments filed with the District, appoint a successor Escrow Bank who shall supersede any Escrow Bank theretofore appointed by the District. If no successor Escrow Bank is appointed by the District or the holders of such Refunded Bonds then remaining unpaid, within 45 days after notice of any such resignation or removal, the holder of any such Refunded Bonds or.any retiring Escrow Bank may apply to a court of competent jurisdiction for the appointment of a successor Escrow Bank. SECTION 12. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the District or the Escrow Bank to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. SECTION 13. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as one original and shall constitute and be but one and the same instrument. SECTION 14. Governing Law. This Escrow Agreement shall be construed under the laws of the State of California. SECTION 15. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Escrow Agreement, shall be a legal holiday or a day on which banking institutions in the city in which is located the principal office of the Escrow Bank are authorized by law to remain closed, such payment may be made or act performed or right exercised on the next succeeding day not a legal holiday or a day on which such banking institutions are authorized by law to remain closed, with the same force and effect as if done on the nominal date provided in this Escrow Agreement, and no interest shall accrue for the period after such nominal date. 5 DOCSOC/1623953v2/022273-0006 SECTION 16. Assi,griment. This Escrow Agreement shall not be assigned by the Escrow Bank or any successor thereto without the prior written consent of the District, IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed by their duly authorized officers and attested as of the date and year first written above. By: Director of Finance of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) [SIGNATURES CONTINUED ON NEXT PAGE.J S-1 DOCSOC/1623 95 3v2/022273-0006 [SIGNATURE PAGE CONTINUED.] U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By: Authorized Officer S-2 DOCSOC/1623953v2/022273-0006 SCHEDULE A FEDERAL SECURITIES Type Principal Interest Rate Maturity Date Cash Receipt from SLGS SLG $ % September 1,2013 $ A-1 DOC SOC/1623953v2/022273-0006 SCHEDULE B REDEMPTION PRICE OF REFUNDED BONDS Payment For Refunded Bonds Principal Redemption Required Deposit to Payment Date Redeemed Interest Premium the Escrow Fund September 1, 2013 $13,330,000 $ $ $ Cash deposited on , 2013 in the Escrow Fund in the amount of$ shall be invested in the Federal Securities described in Schedule A. The cash receipt from such Federal Securities on September 1, 2013 shall be $ $ of cash deposited on 2013 in the Escrow Fund shall be held uninvested in the Escrow Fund. B-1 DOCS OC/1623953v2/022273-0006 SCHEDULE C IRREVOCABLE INSTRUCTIONS AND REQUEST TO FISCAL AGENT U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent ESCROW AGREEMENT RELATING TO THE REFUNDING OF CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2001 SPECIAL TAX BONDS (the "Refunded Bonds") Ladies and Gentlemen: As Fiscal Agent under that certain Fiscal Agent Agreement dated as of December 1, 2001, between the District and U.S. Bank Trust National Association, the predecessor Fiscal Agent (the "Fiscal Agent Agreement"), you are hereby notified of the irrevocable election of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) to redeem on September 1, 2013 all of the outstanding Bonds (as such term is defined in the Fiscal Agent Agreement) issued pursuant to the Fiscal Agent Agreement(the"Refunded Bonds"). You hereby confirm that you have previously mailed, as provided in the Fiscal Agent Agreement, notice of redemption of the Refunded Bonds scheduled to be redeemed prior to maturity. Such notice was substantially in the form required by the Fiscal Agent Agreement and a copy of which is annexed hereto as Exhibit X. C-1 DOCSOC/1623953v2/022273-0006 You are hereby further irrevocably instructed to mail, as soon as practicable, a notice to the holders of the Refunded Bonds (in the form annexed hereto as Exhibit Y) that the deposit of moneys has been made with U.S. Bank National Association, as Escrow Bank, and that the projected withdrawals from such escrow have been calculated to be adequate to pay the principal, redemption price and interest due on said Refunded Bonds outstanding as such become due or are subject to redemption. By: Director of Finance of the City of Huntington Beach, for and on behalf of City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) Receipt acknowledged and consented to: U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer C-2 DOC SOC/1623953v2/022273-0006 EXHIBIT X CONDITIONAL NOTICE OF FULL REDEMPTION to the Holders of City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2001 Special Tax Bonds CUSIP#s: NOTICE IS HEREBY GIVEN, pursuant to the terms of the Fiscal Agent Agreement (the "Fiscal Agent Agreement") as of December 1, 2001, between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort),as Issuer, and U.S.Bank National Association, as successor-in-interest to U.S.Bank Trust National Association,as Fiscal Agent,that all outstanding Bonds,in the aggregate principal amount of$13,330,000.00,have been called for redemption in full on September 1,2013 (the"Redemption Date")at a price of 100%of the principal amount thereof(the"Redemption Price")together with interest accrued to the Redemption Date,conditioned upon the successful issuance of refunding bonds on or about ,2013. If the successful issuance of refunding bonds does not occur on or about , 2013, the Fiscal Agent shall give written notice to the Bondholders that the redemption of Bonds is cancelled and the notice of redemption is rescinded and the Bonds will remain outstanding in accordance with the Fiscal Agent Agreement. Payment of the Redemption Price on the Bonds called for redemption will become due and payable on the Redemption Date upon presentation and surrender thereof in the following manner: If by Mail: (REGISTERED BONDS) If by Hand or Overnight Mail: U.S.Bank Corporate Trust Services U.S.Bank Corporate Trust Services P.O.Box 64111 60 Livingston Avenue St.Paul,MN 55164-0111 1 st Floor—Bond Drop Window St.Paul,MN 55107 800-934-6802 Subject to the terms of this Conditional Notice of Full Redemption, Bondholders are required to surrender their Bonds to the Fiscal Agent at the address above on the Redemption Date and there will become due and payable on each of the Bonds the principal amount thereof, together with interest accrued thereon.to the Redemption Date and from and after such Redemption Date interest thereon shall cease to accrue. Bondholders presenting their Bonds in person for same day payment must surrender their Bond(s) by 1:00 P.M. on the Redemption Date and a check will be available for pick up after 2:OOP.M. Checks not picked up by 4:30 P.M. will be mailed out to the Bondholder via first class mail. If payment of the Redemption Price is to be made to the registered holder,you are not required to endorse the Bond to collect the prepayment. REQUIREMENT INFORMATION For a list of redemption and tender requirements please visit our website at www.usbank.com/coMoratetrust and click on the"Bondholder Information"link. IMPORTANT NOTICE Under Section 3406(a)(1) of the Internal Revenue Code, the paying agent makingpayment of interest or principal on securities may be obligated to withhold a percentage of the payment to a holder who has failed to furnish the registrar with a valid taxpayer identification number, certification that the number supplied is correct, and that the holder is not subject to backup withholding. Holders of the Bonds who wish to avoid the application of these provisions should submit either a completed IRS Form W-9 (use only if the holder is a US. person, including a resident alien), or the appropriate Form W-8 (use only if you are neither a U.S.person or a resident alien), when presenting the Bonds for payment. See IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Publication 515 and W-8 forms and instructions are available through the IRS website at www.irs.gov. * The CUSIP numbers are included solely for the convenience of the Holders of the Bonds. Neither the Issuer nor the Fiscal Agent shall be responsible for any error of any nature relating to such numbers. X-1 DOCSOC/1623953v2/022273-0006 Dated: ,2013 By: U.S.Bank National Association,as Fiscal Agent C-2 DOCSOC/1623953v2/022273-0006 EXHIBIT Y NOTICE OF DEFEASANCE OF OUTSTANDING CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2001 SPECIAL TAX BONDS (the"Refunded Bonds") CUSIP NOS. Notice is hereby given to the holders of the above-captioned Bonds (the "Refunded Bonds") that (i)the Refunded Bonds will be redeemed and defeased; (ii)there has been deposited with The Bank of U.S. Bank National Association, as Escrow Bank, moneys as permitted by that certain Fiscal Agent Agreement dated as of December 1, 2001, between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) and U.S. Bank National Association, as successor-in-interest to U.S. Bank Trust National Association, as Fiscal Agent (the "Fiscal Agent") (the "Fiscal Agent Agreement"), relating to the Refunded Bonds, the principal of and the interest with respect thereto will provide moneys which, together with such other moneys deposited with the Escrow Bank, will be sufficient and available to redeem on September 1, 2013 the Refunded Bonds at the applicable redemption price contained in the Fiscal Agent Agreement; and (iii)the Escrow Bank has been irrevocably instructed to redeem such outstanding Refunded Bonds on September 1, 2013. At least 30 days, but not more than 60 days, prior to September 1, 2013, in accordance with the terms of the Fiscal Agent Agreement, the Fiscal Agent has mailed a redemption notice for such Refunded Bonds. If you have any questions regarding this notice, please contact the Account Manager, , at( ) Dated this_day of , 2013. U.S. BANK NATIONAL ASSOCIATION, as Fiscal Agent Y-1 DOC S OC/1623953v2/022273-0006 c Stradling Yocca Carlson&Rauth y _s Draft dated May 20,2013 c y PRELIMINARY OFFICIAL STATEMENT DATED ,2013 c NEW ISSUE—BOOK-ENTRY-ONLY NO RATING In the opinion of Stradling Yocca Carlson&Rauth,a Professional Corporation,Newport Beach,California("Bond Counsel'),under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and c requirements described herein,interest(and original issue discount)on the Bonds is excluded from gross income for federal income tax purposes and is w not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further s c opinion of Bond Counsel, interest (and original issue discount) on the Bonds is exempt from State of California personal income tax. See "TAX wEXEMPTION"herein with respect to other tax consequences with respect to the Bonds. c $12,9909000* ti .c CITY OF HUNTINGTON BEACH w ;? COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS E e Dated: Delivery Date Due: September 1,as shown on the inside cover L The City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds (the c "Bonds")are being issued by the City of Huntington Beach Community Facilities District No.2000-1 (the"District")to refund the District's outstanding y2001 Special Tax Bonds(the"Refunded Bonds"),to fund a deposit to the Reserve Account securing the Bonds and to pay the costs of issuance of the Bonds. See"THE REFUNDING PLAN"herein. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, e as amended(Sections 53311 et seq.of the Government Code of the State of California),to the Municipal Code of the City of Huntington Beach(the �' "City")and pursuant to that certain Bond Indenture(the"Indenture"),dated as of 2013,by and between the District and U.S.Bank National c s- c Association,as trustee(the"Trustee"). R a E a�i The Bonds are special obligations of the District and are payable from Net Taxes(as defined herein)derived from a certain annual Special Tax y Y (as defined herein)to be levied on the leasehold interest in the property within the District from certain other funds pledged under the Indenture,all as .L further described herein. The Special Tax is to be levied according to the rate and method of apportionment approved by City Council of the City and the o qualified electors within the District. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" and APPENDIX A—"RATE AND Y METHOD OF APPORTIONMENT OF SPECIAL TAX"herein. C The Bonds are issuable in fully-registered form and when issued will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York("DTC"). Individual purchases of the Bonds may be made in principal amounts of$5,000 and integral multiples thereof and will be in book-entry form only. Purchasers of Bonds will not receive certificates representing their beneficial ownership of the Bonds but 5 will receive credit balances on the books of their respective nominees. The Bonds will not be transferable or exchangeable except for transfer to another E •t nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable commencing March 1,2014 and semiannually thereafter on each e w September 1 and March 1. Principal of and interest on the Bonds will be paid by the Trustee to DTC for subsequent disbursement to DTC Participants E O 3 who will remit such payments to the beneficial owners of the Bonds. See"THE BONDS—General Provisions"herein. T E NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY,THE SUCCESSOR AGENCY,THE COUNTY OF ORANGE,THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. = Z EXCEPT FOR THE NET TAXES,NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE 2 ° NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED c OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS y MORE FULLY DESCRIBED HEREIN. R The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments, and mandatory sinking fund y redemption as set forth herein. See"THE BONDS—Redemption of the Bonds"herein. a Investment in the Bonds involves risks that are not appropriate for certain investors. Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled "SPECIAL RISK FACTORS"for a discussion of certain risk factors that should be considered,in addition to the other matters set forth herein,in evaluating the investment quality of the Bonds. •� This cover page contains certain information for general reference only. It is not intended to be a summary of the security or terms of this c w issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. N � C G N L MATURITY SCHEDULE o (See Inside Cover Page) � L .E The Bonds are offered when,as and if issued and accepted by the Underwriter, subject to approval as to their legality by Stradling Yocca 3 Carlson&Rauth,a Professional Corporation,Newport Beach,California,Bond Counsel,and subject to certain other conditions. Stradling Yocca Carlson E a &Rauth,a Professional Corporation,is serving as Disclosure Counsel to the District with respect to the Bonds. Certain legal matters will be passed on s o o for the City and the District by Jennifer McGrath, Esq., City Attorney. Certain legal matters will be passed on by Jones Hall, A Professional Law D 'i:: Corporation,San Francisco,California,as counsel to the Underwriter. It is anticipated that the Bonds in book-entry form will be available for delivery on .> or about 2013. T aGi 'O E y .N STIFEL 5 D .R vz E 4 Y R m U Dated: ,2013 w � a� 'Preliminary,subject to change. a O R L � N a E s DOCSOC/1616674v6/022273-0006 MATURITY SCHEDULE (Base CUSIPt: ) Maturity Date Price or (September 1) Principal Amount Interest Rate Yield CUSIPt $ %Term Bonds due September 1,2031 Price: CUSIP No! ' Copyright 2013, American Bankers Association. CUSIP data herein is provided by Standard and Poor's, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. This data is not intended to create a database and does not serve in any way as a substitute for the CUSIP Service. Neither the District nor the Underwriter make any representations as to the accuracy of CUSIP data herein. DOC SOC/1616674v6/022273-0006 CITY OF HUNTINGTON BEACH CITY COUNCIL Connie Boardman, Mayor Matthew Harper,Mayor Pro Tern Joe Carchio,Council Member Jill Hardy,Council Member Jim Katapodis,Council Member Joe Shaw,Council Member Dave Sullivan,Council Member CITY OFFICIALS Fred Wilson,City Manager Robert Hall,Assistant City Manager Alisa Cutchen,City Treasurer Joyce Zacks,Deputy City Treasurer Lori Ann Farrell,Director of Finance Joan L. Flynn,City Clerk Jennifer McGrath,Esq.,City Attorney Kellee Fritzal,Deputy Director of Economic Development Sunny Han, Senior Administrative Analyst,Finance Department BOND COUNSEL AND DISCLOSURE COUNSEL Stradling Yocca Carlson&Rauth, a Professional Corporation Newport Beach,California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula,California FINANCIAL ADVISOR Public Financial Management,Inc. Los Angeles,California TRUSTEE/ESCROW BANK U.S.Bank National Association Los Angeles,California VERIFICATION AGENT Grant Thornton LLP Minneapolis,Minnesota DOCSOC/1616674v6/022273-0006 Except where otherwise indicated, all information contained in this Official Statement has been provided by the City and the District. No dealer, broker, salesperson or other person has been authorized by the City, the District, the Trustee or the Underwriter to give any information or to make any representations in connection with the offer or sale of the Bonds other than those contained herein and, if given or made, such other information or representations must not be relied upon as having been authorized by the City, the District, the Trustee or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer,solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers or owners of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein,are intended solely as such and are not to be construed as representations of fact. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction,but the Underwriter does not guarantee the accuracy or completeness of such information. The information and expressions of opinion herein are subject to change without notice and neither the delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City or any other parties described herein since the date hereof. All summaries of the Indenture or other documents are made subject to the provisions of such documents respectively and do not purport to be complete statements of any or all of such provisions. Reference is hereby made to such documents on file with the City for further information in connection therewith. Certain statements included or incorporated by reference in this Official Statement constitute "forward- looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT"and"PROPERTY OWNERSHIP AND THE HOTEL." The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results,performance or achievements expressed or implied by such forward-looking statements. Except as set forth in the District's Continuing Disclosure Agreement, a form of which is attached hereto as Exhibit E, neither the District nor the City plans to issue any updates or revisions to the forward-looking statements set forth in this Official Statement. A wide variety of other information, including financial information, concerning the City, is available from publications and websites of the City and others. No such information is a part of or incorporated into this Official Statement. IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF SUCH BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. DOC S OC/1616674v6/022273-0006 TABLE OF CONTENTS Page INTRODUCTION................................................................................................................................................I TheDistrict....................................................................................................................................................... 1 TheSuccessor Agency......................................................................................................................................2 DistrictFormation.............................................................................................................................................2 ForwardLooking Statements............................................................................................................................3 Sources of Payment for the Bonds....................................................................................................................4 Descriptionof the Bonds...................................................................................................:..............................4 TaxExemption..................................................................................................................................................5 Professionals Involved in the Offering.............................................................................................................5 ContinuingDisclosure......................................................................................................................................5 BondOwners'Risks.........................................................................................................................................6 OtherInformation.............................................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS............................................................................................6 THE REFUNDING PLAN...................................................................................................................................6 THEBONDS........................................................................................................................................................7 Authorityfor Issuance......................................................................................................................................7 Purposeof the Bonds........................................................................................................................................7 GeneralProvisions............................................................................................................................................7 DebtService Schedule......................................................................................................................................8 Redemptionof the Bonds.................................................................................................................................8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS..................................................................10 SpecialTaxes..................................................................................................................................................10 Agreement Not to Terminate Lease................................................................................................................12 Proceeds of Foreclosure Sales........................................................................................................................12 Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met...........................................13 ExistingLiens.................................................................................................................................................13 No Obligation of the City Upon Delinquency................................................................................................14 Special Taxes Are Not Within Teeter Plan.....................................................................................................14 ReserveAccount.............................................................................................................................................14 Priority of Bonds and Pledge of Net Taxes.....................................................................................................14 NoAdditional Bonds......................................................................................................................................15 THE COMMUNITY FACILITIES DISTRICT.................................................................................................15 Location..........................................................................................................................................................15 Authorization..................................................................................................................................................15 Rate and Method of Apportionment of Special Tax.......................................................................................16 PublicFacilities...............................................................................................................................................17 Estimated Direct and Overlapping Indebtedness............................................................................................17 Estimated Assessed Value-to-Lien Ratio........................................................................................................18 DelinquencyHistory.......................................................................................................................................19 PROPERTY OWNERSHIP AND THE HOTEL...............................................................................................20 TheHotel........................................................................................................................................................20 Summary of the Ground Lease.......................................................................................................................22 TransientOccupancy Tax...............................................................................................................................23 TheProperty Owner........................................................................................................................................24 THE CITY OF HUNTINGTON BEACH..........................................................................................................24 SPECIALRISK FACTORS...............................................................................................................................25 Risks of Real Estate Secured Investments Generally.....................................................................................25 LimitedObligations........................................................................................................................................25 i DOCSOC/1616674v6/022273-0006 TABLE OF CONTENTS (continued) Page Insufficiency of Special Taxes........................................................................................................................26 NaturalDisasters.............................................................................................................................................27 HazardousSubstances.....................................................................................................................................27 Payment of the Special Tax is not a Personal Obligation of the Property Owner..........................................28 LeaseholdValue.............................................................................................................................................28 Parity Taxes and Special Assessments ...........................................................................................................28 Disclosures to Future Purchasers....................................................................................................................29 FDIC/Federal Government Interests in Properties..........................................................................................29 Bankruptcyand Foreclosure...........................................................................................................................30 Funds Invested in the County Investment Pool..............................................................................................31 NoAcceleration Provision..............................................................................................................................31 LimitedSecondary Market.............................................................................................................................31 Proposition218...............................................................................:...............................................................32 Ballot Initiatives and Legislative Measures....................................................................................................33 Lossof Tax Exemption...................................................................................................................................33 IRS Audit of Tax-Exempt Bond Issues..........................................................................................................33 Considerations Associated with the Dissolution Act......................................................................................33 Limitationson Remedies................................................................................................................................34 CONTINUINGDISCLOSURE..........................................................................................................................34 TAXEXEMPTION............................................................................................................................................35 LEGALOPINION..............................................................................................................................................36 ABSENCE OF LITIGATION............................................................................................................................37 NORATING......................................................................................................................................................37 UNDERWRITING.............................................................................................................................................37 FINANCIAL INTERESTS.................................................................................................................................37 NEWLEGISLATION........................................................................................................................................37 ADDITIONALINFORMATION.......................................................................................................................37 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1 APPENDIX B FORM OF OPINION OF BOND COUNSEL.......................................................................B-1 APPENDIX C GENERAL ECONOMIC AND DEMOGRAPHIC DATA FOR THE CITY OF HUNTINGTON BEACH AND THE COUNTY OF ORANGE..................C-1 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE...................................D-1 APPENDIX E FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER......................................................................E-1 APPENDIX F BOOK-ENTRY-ONLY SYSTEM.........................................................................................F-1 ii D OC S OC/1616674v6/022273-0006 [INSERT REGIONAL MAP] DOC SOC/1616674v6/022273-0006 [INSERT AERIAL MAP] DOCSOC/1616674v6/022273-0006 $12,990,000* CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS INTRODUCTION The purpose of this Official Statement, which includes the cover page, the table of contents and the attached appendices (collectively, the "Official Statement"), is to provide certain information concerning the issuance by the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)(the "District") of its City of Huntington Beach Community Facilities District No. 2000-1 2013 Special Tax Refunding Bonds in the aggregate principal amount of $12,990,000* (the `Bonds"). The proceeds of the Bonds, together with certain existing funds of the District, will be used to defease all of the District's outstanding 2001 Special Tax Bonds, originally issued in the aggregate principal amount of$16,000,000 and now outstanding in the principal amount of$13,330,000(the"Refunded Bonds"). A portion of the Bonds will be used to fund a deposit to the Reserve Account and to pay costs of issuance of the Bonds. See "THE REFUNDING PLAN"and"ESTIMATED SOURCES AND USES OF FUNDS"herein. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (Sections 53311 et seq. of the Government Code of the State of California) (the "Act"), the provisions of Chapter 3.56 (commencing with 3.56.010) of the Municipal Code of the City of Huntington Beach (the "City") and that certain Bond Indenture dated, as of , 2013 (the "Indenture"), by and between the District and U.S. Bank National Association, as trustee (the "Trustee"). The Bonds are secured under the Indenture by a pledge of and lien upon Net Taxes (as defined herein)to be levied within the District and all moneys in the Special Tax Fund as described in the Indenture. This introduction is not a summary of this Official Statement. It is only a brief description of and guide to, and is qualified by, more complete and detailed information contained in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire Official Statement. The sale and delivery of Bonds to potential investors is made only by means of the entire Official Statement. All capitalized terms used in this Official Statement and not defined shall have the meaning set forth in "APPENDIX D — SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." The District The District consists of a single parcel of 15.103 acres located on Pacific Coast Highway directly across from the beach and the Pacific Ocean at the northwest corner of the intersection of Beach Boulevard and Pacific Coast Highway in the City. The District is fully developed with a 517 guest room hotel generally known as the"Hyatt Regency Huntington Beach Resort and Spa" (the"Hotel")owned by PCH Beach Resort, LLC, a California limited liability company (the "Property Owner" or"Lessee"). See "THE COMMUNITY FACILITIES DISTRICT" and "PROPERTY OWNERSHIP AND THE HOTEL." The fee simple interest in the land in the District is owned by the City as Successor Agency (the "Successor Agency") to the Redevelopment Agency of the City of Huntington Beach (the "Agency"). The Property Owner has entered into a ground lease, dated April 4, 2001, with the Agency (the "Ground Lease"), with a term of 99 years (the "Term"), whereby the Property Owner has leased all of the land in the District. The Ground Lease provides that throughout the Term, all improvements constructed pursuant to the Ground Lease are the property of the Lessee; at the expiration or termination of the Ground Lease;the improvements become the property of the fee owner. The Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Ground Lease. See "— The Successor Agency," "PROPERTY OWNERSHIP AND THE HOTEL — Preliminary,subject to change. I D OC S OC/1616674v6/022273-0006 Summary of the Ground Lease" and "SPECIAL RISK FACTORS — Considerations Associated with the Dissolution Act." The Successor Agency On June 29, 2011, Assembly Bill No. 26 ("AB 1X 26") was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27 ("AB 1X 27"). A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 29, 2011) (the "California Redevelopment Association case"), challenging the constitutionality of AB 1X 26 and AB IX 27. The California Supreme Court largely upheld AB 1X 26, invalidated AB 1X 27, and held that AB 1X 26 may be severed from AB 1X 27 and enforced independently. As a result of AB 1X 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies. The primary provisions enacted by AB 1X 26 relating to the dissolution and wind down of former redevelopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484 ("AB 1484"),enacted as Chapter 26, Statutes of 2012(as amended from time to time, the"Dissolution Act"). On January 10, 2012, pursuant to Resolution No. and Sections 341710) and 34173 of the Dissolution Act, the City Council elected for the City to serve as successor agency to the Agency. See Pursuant to legislation enacted by the California Legislature in 2011 (AB 1X 26)and 2012 (AB 1484), the Successor Agency continues to collect the ground rent and all other payments from the Lessee; however, under the Dissolution Act, such payments are allocable among the County of Orange,the City and other taxing agencies having jurisdiction within the Huntington Beach Redevelopment Project(per Ordinance No. 3343 of the City as adopted December 16, 1996). Under the Dissolution Act, the administration by the Successor Agency of assets of the former Agency is subject to an oversight board consisting of representatives of the City,the County of Orange and other taxing agencies (the "Oversight Board") and the California Department of Finance("DOF"). District Formation The District was formed on April 17, 2000. The Bonds are being issued pursuant to the Act, the Municipal Code of the City, and the Indenture. The Act was enacted by the State of California(the "State") legislature to provide an alternative method of financing certain public capital facilities and services,especially in developing areas of the State. Any local agency(as defined in the Act)may establish a community facilities district to provide for and finance the cost of eligible public facilities and services. Generally, the legislative body of the local agency which forms a community facilities district acts on behalf of such district as its legislative body. Subject to approval by two-thirds of the votes cast at an election and compliance with the other provisions of the Act, a legislative body of a local agency may issue bonds for a community facilities district and may levy and collect a special tax within such district to repay such indebtedness. On May 3, 1999, the City Council of the City adopted Ordinance No. 3417 which added Chapter 3.56 to the Huntington Beach Municipal Code entitled "City of Huntington Beach Special Tax Financing Improvement Code."On March 18,2002,the City Council of the City adopted Ordinance No. 3546 amending Chapter 3.56 of the City's Municipal Code to allow for the levy of special taxes to pay for the maintenance of facilities financed under said section of the City's Municipal Code. The proceedings to form the District have been conducted under said section of the City's Municipal Code and, where applicable by reason of the 2 DOC S OC/1616674v6/022273-0006 provisions of the Municipal Code, the Mello-Roos Community Facilities Act of 1982, as amended (collectively,the"Law"). Pursuant to the Law, on January 18,2000,the City Council of the City(the"City Council"), adopted a resolution stating its intention to form the District and to authorize the levy of a special tax on the taxable property within the District. Additionally, on January 18, 2000, the City Council adopted a resolution stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $16,000,000 within the District for the purpose of financing the costs of certain public facilities consisting of the acquisition of land for and construction of certain roadway, pedestrian bridge and other improvements generally related to the development of the Hotel within the District (collectively, the "Public Facilities"). Subsequent to a noticed public hearing on April 17, 2000, the City Council adopted Resolution No.2000-35 (the "Resolution of Formation") which established the District and authorized the levy of a special tax within the District in accordance with the rate and method of apportionment for the District (the "Rate and Method"). The City Council also adopted on April 17,2000 Resolution No. 2000-36 ("Resolution to Incur Bonded Indebtedness") which determined the necessity to incur bonded indebtedness in an amount not to exceed $16,000,000 within the District, called an election within the District on the propositions of forming the District, incurring bonded indebtedness not to exceed$16,000,000 as set forth in the Resolution to Incur Bonded Indebtedness, levying a special tax within the District in accordance with the Rate and Method and setting an appropriations limit. All propositions were approved by the Agency as the sole qualified elector within the District,which was the sole record landowner within the District at the time of the election, at an election held on April 17,2000. On April 24, 2000, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No.20000210584 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by Resolution No.2001-90 adopted by the City Council on November 19,2001. The Bonds are being issued and delivered pursuant to the provisions of the Law and the Indenture. The Bonds are being sold pursuant to a Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter") and the District. For more complete information, see "THE BONDS—General Provisions"herein. Forward Looking Statements Certain statements included or incorporated by reference in this Official Statement constitute "forward-looking statements"within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 2 1 E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the United States Securities Act of 1933, as amended. Such statements are generally identifiable by the terminology used such as a "plan," "expect," "estimate," "project," "budget" or similar words. Such forward-looking statements include, but are not limited to certain statements contained in the information under the caption "THE COMMUNITY FACILITIES DISTRICT" and "PROPERTY OWNERSHIP AND THE HOTEL." THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT. 3 DOC SOC/1616674v6/022273-0006 Sources of Payment for the Bonds As used in this Official Statement, the term "Special Tax" is that tax which has been authorized to be levied against the leasehold interest in the property within the District pursuant to the Act and in accordance with the Rate and Method. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"herein. Under the Indenture,the principal of and interest on the Bonds are payable from Net Taxes and all amounts in the Special Tax Fund (including the Debt Service Account, the Principal Account and the Reserve Account) established under the Indenture. The "Net Taxes" are the Special Tax proceeds, including all proceeds from foreclosure sales for delinquent Special Taxes, remaining after payment of the Administrative Expense Requirement (as defined below). The Bonds are secured only by the Net Taxes collected within the District. Amounts in the Administration Fund are not pledged to the repayment of the Bonds. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES LEVIED WITHIN THE DISTRICT AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. The Net Taxes are the primary security for the repayment of the Bonds. In the event that the Special Taxes are not paid when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in certain funds under the Indenture, including amounts held in the Reserve Account of the Special Tax Fund. The District has covenanted for the benefit of the owners of the Bonds that it will, under certain circumstances described herein, commence, or cause to be commenced, and diligently prosecute to judgment(unless the delinquency is brought current),judicial foreclosure proceedings against the leasehold interest within the District with delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales"herein." The District has covenanted not to issue additional indebtedness secured by the Special Taxes on a parity basis to the lien of the Bonds, except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. Other taxes and/or special assessments with liens equal in priority to the continuing lien of the Special Taxes may also be levied on the property within the District. See"SPECIAL RISK FACTORS— Parity Taxes and Special Assessments"herein. EXCEPT FOR THE NET TAXES, NO OTHER TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. Description of the Bonds The Bonds will be issued and delivered as fully-registered Bonds, registered in the name of Cede& Co. as nominee of The Depository Trust Company, New York, New York ("DTC"), and will be available to actual purchasers of the Bonds (the `Beneficial Owners") in the denominations of $5,000 or any integral multiple thereof, under the book-entry system maintained by DTC, only through brokers and dealers who are or act through DTC Participants as described herein. Beneficial Owners will not be entitled to receive physical delivery of the Bonds. In the event that the book-entry-only system described herein is no longer used with respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX F—"BOOK-ENTRY-ONLY SYSTEM." Principal of, premium, if any, and interest on the Bonds is payable by the Trustee to DTC. Disbursement of such payments to DTC Participants is the responsibility of DTC and disbursement of such 4 DOC SOC/1616674v6/022273-0006 payments to the Beneficial Owners is the responsibility of DTC Participants. See APPENDIX F—"BOOK- ENTRY-ONLY SYSTEM." The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments, and mandatory sinking fund redemption as described herein. For a more complete descriptions of the Bonds and the basic documentation pursuant to which the Bonds are being sold and delivered, see"THE BONDS"and APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE"herein. Tax Exemption In the opinion of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California("Bond Counsel"), under existing statutes, regulations,rulings and judicial decisions, and assuming certain representations and compliance with certain covenants and requirements described herein, interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income tax. See"TAX EXEMPTION"herein. Set forth in APPENDIX B is the opinion of Bond Counsel expected to be delivered in connection with the issuance of the Bonds. For a more complete discussion of such opinion and certain other tax consequences incidental to the ownership of the Bonds, including certain exceptions to the tax treatment of interest, see "TAX EXEMPTION"herein. Professionals Involved in the Offering U.S. Bank National Association, Los Angeles, California, will act as Trustee under the Indenture and as Escrow Bank under the Escrow Agreement (each as defined herein). Stifel, Nicolaus & Company, Incorporated, is the Underwriter of the Bonds. All proceedings in connection with the issuance and delivery of the Bonds are subject to the approval of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel and Disclosure Counsel. Certain legal matters will be passed on for the City and the District by the City Attorney, Jennifer McGrath,Esq. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. Other professional services have been performed by Public Financial Management, Inc., Los Angeles, California, as Financial Advisor, Willdan Financial Services, Temecula, California, as Special Tax Consultant and Grant Thornton LLP,Minneapolis,Minnesota,as verification agent. For information concerning whether certain of the above-mentioned professionals, advisors, counsel and consultants may have a financial or other interest in the offering of the Bonds, see "FINANCIAL INTERESTS"herein. Continuing Disclosure The District will agree to provide, or cause to be provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access system available on the Internet at http://emma.msrb.org ("EMMA")certain annual financial information and operating data. The District will further agree to provide notice of certain listed events. These covenants will be made in order to assist the Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5) (the "Rule"). In addition, the Property Owner will agree to provide or cause to be provided, to EMMA certain annual information with respect to the Property Owner and the Hotel and notice of certain listed events to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" herein and APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and the Property Owner and notices of listed events to be provided by the District and the Property Owner. Within the last five years,none of the City, the 5 DOC SOC/1616674v6/022273-0006 District or the Property Owner has failed to timely comply with its prior continuing disclosure obligations under Rule 15c2-12(b)(5)in all material respects. See"CONTINUING DISCLOSURE." Bond Owners' Risks Certain events could affect the ability of the District to pay the principal of and interest on the Bonds when due. See the section of this Official Statement entitled"SPECIAL RISK FACTORS"for a discussion of certain factors which should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. The Bonds are not rated by any nationally recognized rating agency. The purchase of the Bonds involves risks, and the Bonds may not be appropriate investments for some types of investors. See"SPECIAL RISK FACTORS"herein. Other Information This Official Statement speaks only as of its date, and the information contained herein is subject to change. Brief descriptions of the Bonds and the Indenture are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or defmitive. All references herein to the Indenture,the Bonds and the constitution and laws of the State as well as the proceedings of the City, acting as the legislative body of the District, are qualified in their entirety by references to such documents, laws and proceedings, and with respect to the Bonds, by reference to the Indenture. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Indenture. Copies of the Indenture and other documents and information are available for inspection and (upon request and payment to the District of a charge for copying,mailing and handling)for delivery from the City at 2000 Main Street, Huntington Beach, California 92648,Attention: Director of Finance. ESTIMATED SOURCES AND USES OF FUNDS The following table sets forth the expected sources and uses of Bond proceeds, together with prior funds on hand. Sources of Funds Principal Amount of Bonds $ [Less/Plus]: Original Issue[Discount/Premium] Less: Underwriter's Discount Plus: Prior Funds(l) Total Sources $ Uses of Funds: Escrow Fund $ Reserve Account of the Special Tax Fund Costs of Issuance Fund(2) Total Uses $ Includes Special Tax collections and prior reserve fund. cz) Includes legal,financial advisory,Special Tax Consultant and Trustee fees and costs. THE REFUNDING PLAN A portion of the proceeds from the sale of the Bonds will be used along with other funds held by the District to defease the Refunded Bonds. The District will enter into an Escrow Agreement with regard to the Refunded Bonds (the "Escrow Agreement"), dated as of 2013, by and between the District and 6 DO CSOC/1616674v6/022273-0006 U.S. Bank National Association, as prior trustee and as escrow bank (the "Escrow Bank"). An irrevocable escrow fund will be established under the Escrow Agreement (the "Escrow Fund"). The moneys deposited with the Escrow Bank will be sufficient to defease the remaining Refunded Bonds and redeem such Refunded Bonds on September 1, 2013 (the "Redemption Date"). Moneys on deposit in the Escrow Fund will be held uninvested as cash or invested in non-callable federal securities. The amounts in the Escrow Fund will be held by the Escrow Bank and for the benefit of the owners of the Refunded Bonds and will be applied to redeem the Refunded Bonds on September 1, 2013. Upon the establishment of the Escrow Fund as described above, the Refunded Bonds will be discharged under the Indenture and the owners of the Refunded Bonds will have no rights thereunder except to be paid the principal and interest due on the Refunded Bonds from amounts in the Escrow Fund. Grant Thornton LLP, Minneapolis, Minnesota, upon delivery of the Bonds, will deliver a verification report relating to the sufficiency of moneys deposited into the Escrow Fund to pay the principal of, interest on and the redemption price with respect to the Refunded Bonds on the Redemption Date. THE BONDS Authority for Issuance The Bonds in the aggregate principal amount of $12,990,000* are authorized to be issued by the District under and subject to the terms of the Indenture, the Law and other applicable laws of the State of California and the City. Purpose of the Bonds The Bonds are being issued to provide funds to (i)and redeem the Refunded Bonds on September 1, 2013, (ii)fund a deposit to the reserve account securing the Bonds, and (iii)pay the costs of issuance of the Bonds. See"ESTIMATED SOURCES AND USES OF FUNDS"and"THE REFUNDING PLAN"herein. General Provisions The Bonds will be issued and delivered initially in book-entry form and will bear interest at the rates per annum and will mature on the dates set forth on the cover page hereof. Individual purchases of the Bonds may be made in principal amounts of$5,000 and any integral multiple thereof. The Bonds will be dated the Delivery Date and interest will be payable thereon on September 1 and March 1 of each year, commencing March 1, 2014 (individually, an "Interest Payment Date"). Interest on the Bonds will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Each Bond shall bear interest from the Interest Payment Date next preceding the date of authentication of that Bond,unless(i)the date of authentication is an Interest Payment Date, in which event it shall bear interest from such date, (ii)the date of authentication is after the 15th day of the month,regardless of whether such day is a Business Day but prior to the immediately succeeding Interest Payment Date(a"Record Date"), in which event interest shall be payable from the Interest Payment Date immediately succeeding the date of authentication, or(iii)the date of authentication is prior to the close of business on the first Record Date, in which event interest shall be payable from the Delivery Date; provided, however, that if at the time of authentication of such Bond, interest is in default, interest on that Bond shall be payable from the last Interest Payment Date to which the interest has been paid or made available for payment, or if no interest has been paid or made available for payment on that Bond, interest on that Bond shall be payable from the Delivery Date. The Bonds are issued as fully-registered bonds and will be registered in the name of Cede& Co., as nominee DTC. DTC will act as securities depository of the Bonds. Ownership interests in the Bonds may be Preliminary,subject to change. 7 DOC SOC/1616674v6/022273-0006 purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof See APPENDIX F—"BOOK-ENTRY-ONLY SYSTEM." Debt Service Schedule The Special Tax is to be levied against the leasehold interest in the property within the District and collected according to the Rate and Method. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." The District has covenanted to levy the Special Tax each year in time to have it placed on the secured property tax roll of the County of Orange (the "County"). Actual collections of the Special Tax will depend on the Special Tax delinquencies. See "THE COMMUNITY FACILITIES DISTRICT—Delinquency History." CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS DEBT SERVICE SCHEDULE Period Ending Total September I Principal Interest Debt Service 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Source: The Underwriter. Redemption of the Bonds Optional Redemption.* The Bonds are subject, at the option of the District, to call and redemption from any available source of funds prior to their stated maturity on any date, as a whole or in part, and by lot, at the following redemption prices expressed as a percentage of the principal amount to be redeemed, together with accrued interest to the date of redemption: Preliminary,subject to change. 8 DOCSOC/1616674v6/022273-0006 Redemption Dates Redemption Price Any Interest Payment Date through March 1,2021 103% September 1,2021 and March 1,2022 102 September 1,2022 and March 1,2023 101 September 1,2023 and any date thereafter 100 Special Mandatory Redemption from Special Tax Prepayments.* The Bonds are subject to Special Mandatory Redemption from Special Tax Prepayments as a whole, or in part on a pro rata basis among maturities,on any Interest Payment Date, and shall be redeemed by the Trustee,from Special Tax Prepayments deposited to the Redemption Account pursuant to Section 3.6(b), plus amounts transferred from the Reserve Account pursuant to the Indenture, at the following redemption prices, expressed as a percentage of the principal amount of the Bonds to be redeemed,together with accrued interest to the date of redemption: Redemption Dates Redemption Price Any Interest Payment Date through March 1,2021 103% September 1,2021 and March 1,2022 102 September 1,2022 and March 1,2023 101 September 1,2023 and any Interest Payment Date thereafter 100 Mandatory Sinking Fund Redemption. Bonds maturing on September 1, 20_shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 20_, and on each September 1 thereafter prior to maturity, in accordance with the schedule of Sinking Fund Payments set forth below. The Term Bonds so called for redemption shall be selected by the Trustee by lot and shall be redeemed at a redemption price for each redeemed Term Bond equal to the principal amount thereof,plus accrued interest to the redemption date,without premium,as follows: Term Bonds Due on September 1,20_ Year (September 1) Principal Amount (Maturity) In the event of a partial optional redemption or special mandatory redemption of the Term Bonds, each of the remaining Sinking Fund Payments for such Term Bonds will be reduced, as nearly as practicable, on a pro rata basis. Selection of Bonds for Redemption. If less than all of the Bonds Outstanding are to be redeemed (except with respect to mandatory sinking fund redemption in which case selection shall be by lot),the Trustee shall select Bonds pro rata among maturities and by lot within a maturity. The portion of any Bond of a denomination of more than $5,000 to be redeemed shall be in the principal amount of$5,000 or an integral multiple thereof, and, in selecting portions of such Bonds for redemption, the Trustee shall treat each such Bond as representing that number of Bonds of $5,000 denominations which is obtained by dividing the principal amount of such Bond to be redeemed in part by $5,000. The Trustee shall promptly notify the District in writing of the Bonds,or portions thereof,selected for redemption. Notice of Redemption. At least 30 days but no more than 60 days prior to the redemption date, the Trustee shall mail a copy of such notice, by first class mail, postage prepaid, to the respective Owners thereof at their addresses appearing on the Bond Register. The actual receipt by the Owner of any Bond of notice of such redemption shall not be a condition precedent thereto, and neither the failure to receive such notice nor 9 DOC SOC/1616674v6/022273-0006 any defect therein shall affect the validity of the proceedings for the redemption of such Bonds, or the cessation of interest on the redemption date. A certificate by the Trustee that notice of such redemption has been given as herein provided shall be conclusive as against all parties, and the Owner shall not be entitled to show that he or she failed to receive notice of such redemption. Any notice of redemption may condition such redemption upon the receipt of sufficient available funds on the date of redemption. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS As described below, the principal of and interest on the Bonds are payable from Net Taxes and all amounts in the Special Tax Fund (including the Debt Service Account and the Reserve Account) established under the Indenture. Amounts in the Administration Fund are not pledged to the repayment of the Bonds. The Net Taxes are the Special Tax proceeds, including all proceeds from foreclosure sales for delinquent Special Taxes, remaining after payment of the Administrative Expense Requirement. The Bonds are secured only by the Net Taxes collected within the District. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE CITY, THE COUNTY OF ORANGE, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE BONDS. EXCEPT FOR THE NET TAXES, NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY DESCRIBED HEREIN. Special Taxes In accordance with provisions of the Law, the District was established by the City Council on April 17,2000. The Agency, as the sole owner of the land within the District, voted to authorize the District to incur bonded indebtedness to finance costs related to the Public Facilities, said indebtedness to be secured by the Special Tax to be levied upon the leasehold interest of the Property Owner under the Ground Lease. See "PROPERTY OWNERSHP AND THE HOTEL—Summary of the Ground Lease"herein. At the same time, the Agency approved the levy of the Special Tax as provided in the Special Tax Formula to pay the principal and interest on the Bonds, to pay the administrative expenses of the District, and to replenish the Reserve Account to the amount of the Reserve Requirement, all consistent with the Special Tax Formula,the Law and the Indenture. See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Tax" herein for a description of the Special Tax Formula, and APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" attached hereto for the complete text of the Special Tax Formula. hi the Indenture, the District has agreed to effect the levy of the Special Taxes each Fiscal Year in accordance with the Law by August 1 of each year(or such later date as may be authorized by the Law or any amendment thereof) that the Bonds are outstanding, such that the computation of the levy is complete before the final date on which the County Auditor will accept the transmission of the Special Tax amounts for the parcel within the District, and the leasehold interest thereon, for inclusion on the tax roll for the Fiscal Year then beginning. Upon the completion of the computation of the amounts of the levy of the Special Taxes, the District is obligated under the Indenture to prepare or cause to be prepared, and to transmit to the County Auditor, such data as the County Auditor requires to include the levy of the Special Taxes on the tax roll. The City Treasurer or his or her designee is directed to fix and levy the amount of Special Taxes within the District required for the payment of principal and of interest on the Bonds becoming due and payable on the next Interest Payment Date, including any necessary replenishment or expenditure of the Reserve Account and an amount estimated to be sufficient to pay the Administrative Expenses during such year,taking into account the balances in the funds, and any transfer or expected transfers expected to occur for such purpose, under the Indenture. The Special Taxes may not exceed the authorized maximum amount in the Special Tax Formula. 10 DOC S OC/1616674v6/0222 73-0006 See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Taxes" herein. The Indenture provides that the Special Tax shall be collected in the same manner as ordinary ad valorem property taxes are collected and, except as otherwise provided in the foreclosure covenant in the Indenture and in the Law, the Special Tax shall be subject to the same penalties and the same collection procedure, sale, and lien priority in case of delinquency as is provided for ad valorem property taxes. Notwithstanding the foregoing, the Indenture provides that the City Council may elect, as permitted by the Law, to collect the Special Taxes to be levied for any Fiscal Year directly from the lessee of the parcel of taxable property, and any leasehold thereon, upon which the Special Taxes are levied rather than by transmitting the Special Taxes to the Auditor for collection on the tax roll. The Finance Director will,no later than the last day of each month during which the Special Taxes are apportioned to the District,transfer Special Taxes to the Trustee to be deposited in the Special Tax Fund. Special Tax Prepayments will immediately be transferred by the Finance Director to the Trustee for deposit to the Redemption Account of the Special Tax Fund to redeem Bonds in accordance with the Indenture. See "THE BONDS—Redemption of the Bonds Special Mandatory Redemption for Special Tax Prepayments." On the dates specified in the Indenture and if there are sufficient amounts available in the Special Tax Fund for such purposes, the Trustee shall make the following transfers and in the priority as follows: First: To the Director of Finance for deposit in the Administration Fund, the amount of Administrative Expenses levied for in the current Fiscal Year up to the Administrative Express Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses); provided that no more than half of the amount of Administrative Expenses up to half of the Administrative Expense Cap (plus Extraordinary Administrative Expenses in the event there are Extraordinary Administrative Expenses) levied for in the current Fiscal Year shall be deposited in the Administration Fund until the earlier of (i) the date moneys on deposit in the Debt Service Account of the Special Tax Fund are sufficient to pay debt service on the Bonds on March 1 of such Fiscal Year, or(ii)March 2 of such Fiscal Year; Second: To the Debt Service Account, an amount such that the balance in the Debt Service Account one Business Day prior to each Interest Payment.Date shall be equal to the principal of, and interest on the Bonds, on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest and principal of the Bonds as the same become due; Third: To the Reserve Account of the Special Tax Fund to the extent necessary to replenish the Reserve Account to the Reserve Requirement; Fourth: To the Administrative Expense Fund for Administrative Expenses not previously deposited to the Administrative Expense Fund;and Fifth: To the Rebate Fund established by the Indenture for payment to the United States pursuant to the Indenture. See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE." Although the Special Tax will constitute a lien on the leasehold interest in the property within the District which is subject to taxation, it does not constitute a personal indebtedness of the Property Owner or any future owner of such leasehold interest. There is no assurance that the Property Owner or any future owner of the leasehold interest in the property within the District will be financially able to pay the annual Special Tax or that they will pay such tax even if financially able to do so. The risk of the Property Owner, or subsequent owner of the Hotel, if any, not paying the annual Special Tax is more fully described under the heading"SPECIAL RISK FACTORS—Insufficiency of Special Taxes." 11 DOC SOC/1616674v6/022273-0006 The Successor Agency's fee interest in the land in the District is not subject to the levy of Special Taxes, and may not be foreclosed upon to pay delinquent Special Taxes. For further information regarding the Special Tax Formula, see "THE COMMUNITY FACILITIES DISTRICT — Rate and Method of Apportionment of Special Taxes" herein and Appendix A hereto. Agreement Not to Terminate Lease The City and the Agency entered into an agreement, dated as of December 1, 2001 (the "Lease Remedy Forbearance Agreement"), whereby the Agency agreed that, in the event of the occurrence of a default by the Property Owner or any successor thereto under the Ground Lease,the Agency will not exercise a remedy under the Ground Lease that would allow the Agency to terminate the Ground Lease unless either the Special Taxes have been paid in full and the Bonds are no longer outstanding, or the Agency has prepared a new lease agreement with a subsequent lessee to maintain the leased premises and has obtained the written consent of the City to such termination and new lease. Pursuant to the Dissolution Act and actions taken by the City, the Successor Agency has succeeded to all of the Agency's rights, obligations and covenants under the Lease. Certain actions and the exercising of certain rights by the Successor Agency are subject to review and approval by the Huntington Beach Oversight Board (the "Oversight Board") and the State of California Department of Finance(the"Department of Finance"). In the Indenture, the District has covenanted to cause the City to comply with and enforce its agreements and covenants in the Lease Remedy Forbearance Agreement(which the City entered into on behalf of the District), and to not allow the Successor Agency to enter into a new lease or leases (each, a "Replacement Lease") for substantially all of the real property subject to the Ground Lease or Replacement Lease then being terminated, unless (i)the Special Taxes that may be levied on the property so relet, in the opinion of an Independent Financial Consultant, are estimated to be not less than 110% of Maximum Annual Debt Service, and(ii)such lease or leases have a term at least as long as the remaining term to maturity of the outstanding Bonds. However, nothing in the Lease Remedy Forbearance Agreement or the Indenture in any way restricts the Successor Agency from enforcing any provision of the Ground Lease or any Replacement Lease, or from pursuing any remedy available under the Ground Lease or any Replacement Lease following a default by a tenant thereunder, other than a termination thereof not in accordance with the requirements of the Indenture described in the preceding sentence. Proceeds of Foreclosure Sales Pursuant to the Law, in the event any Special Tax or installment thereof or any interest thereon is not paid when due,the District may order the institution of a court action to foreclose the lien therefore. In such an action, the leasehold interest subject to the unpaid amount may be sold at judicial foreclosure sale. This foreclosure sale procedure is not mandatory under the Law. However, in the Indenture, the District covenants with and for the benefit of the owners of the Bonds that, one Business Day after each Interest Payment Date for the Bonds, the City Treasurer or the Treasurer's designee will compare the amount of Special Taxes theretofore levied in the District to the amount of Net Taxes theretofore received by the District, and if the amount collected is less than 100%of the amount of the Special Taxes so levied, the District will undertake and diligently prosecute foreclosure proceedings not later than thirty(30)days after each Interest Payment Date in the manner prescribed in the Act to collect the amount of any delinquent Special Tax. Under the Indenture, the City's Director of Finance is directed to notify the City Attorney of any such delinquency of which it is aware, and the City Attorney is directed to commence, or cause to be commenced,such proceedings. In the event such superior court foreclosure or foreclosures are necessary, after the Reserve Account has been depleted, there could be a delay in principal or interest payments being made to the Bondowners pending prosecution of the foreclosure proceedings and receipt by the District of the proceeds of the foreclosure sale, if any. No assurances can be given that a judgment ordering foreclosure will be granted or 12 DOC SOC/1616674v6/022273-0006 that the leasehold interest subject to foreclosure and sale at a judicial foreclosure sale will be sold or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax installment. Procedural delays, bankruptcy filings and necessary court and administrative actions incident to any foreclosure proceeding can result in an extended period of time(in some circumstances,more than two years)to complete any foreclosure sale. See "SPECIAL RISK FACTORS — Bankruptcy and Foreclosure," and "— FDIC/Federal Government Interests in Properties" herein. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion,the District is not obligated to purchase or otherwise acquire the leasehold interest sold at the execution sale if there is no other purchaser at such sale. Effective July 1, 1983 a judgment debtor (property owner) has at least 140 days from the date of service of the notice of levy in which to redeem the property to be sold. If a judgment debtor fails to so redeem and the property is sold, his only remedy is an action to set aside the sale, which must be brought within 6 months of the date of sale. If,as a result of such an action a foreclosure sale is set aside,the judgment is revived and the judgment creditor(i.e., the District) is entitled to interest on the revived judgment as if the sale had not been made. The Special Taxes are to be levied on the leasehold interest in the land located in the District, initially being that leasehold interest created by the Ground Lease between the Property Owner and the Successor Agency. The Successor Agency's fee interest in the property within the District is not subject to the levy of Special Taxes and will not be subject to any foreclosure or sale in the event of a delinquency in payment of the Special Taxes. The Ground Lease contains certain remedies that may be available to the Successor Agency in the event of a default by the Property Owner of its obligations under the Ground Lease, including termination of the Ground Lease. However, as described under the heading "SECURITY FOR THE BONDS — Agreement Not to Terminate Lease,"the Successor Agency and the City have entered into the Lease Remedy Forbearance Agreement whereby the Agency agreed to forbear in the exercise of any such termination unless, so long as the Bonds are outstanding, in addition to certain other requirements and immediately following the termination of the Ground Lease the Successor Agency enters into a replacement ground lease. In such event, the leasehold interest under such replacement ground lease would be subject to the levy of Special Taxes. As discussed above under the caption "Agreement Not to Terminate Lease," certain actions taken by the Successor Agency may be subject to Oversight Board and Department of Finance approval. See "SPECIAL RISK FACTORS—Considerations Associated with the Dissolution Act." Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met The District has covenanted in the Indenture that it will not take any actions that would discontinue or cause the discontinuance of the Special Tax levy or the District's authority to levy the Special Tax so long as the Bonds are Outstanding, including the initiation of proceedings under the Act to reduce the maximum Special Tax rates on then existing Taxable Property below the amounts which are necessary to pay Administrative Expenses and to provide Special Taxes in an amount equal to 110% of annual debt service on the Outstanding Bonds. The District has further covenanted that in the event an initiative is adopted which purports to reduce maximum Special Tax rates or to limit the power of the District to levy Special Taxes for the purposes set forth above, it will commence and pursue legal action seeking to preserve its ability to comply with its covenants. There are no California court cases interpreting the enforceability of the foregoing covenants in light of Article XIIIC. See"SPECIAL RISK FACTORS—Proposition 218." Existing Liens The property within the District is subject to additional public indebtedness as set forth under the heading"THE COMMUNITY FACILITIES DISTRICT— Estimated Direct and Overlapping Indebtedness" herein. The lien for the Special Taxes is co-equal to the lien for the overlapping assessments and special taxes and the lien for general property taxes. 13 D OC S O C/1616674v6/022273-0006 Except as disclosed in this Official Statement, the District is unaware of any present or contemplated assessment district or community facilities district that includes property within the District. The District has no control, and the City has only limited control, over the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which,through the levy of a tax or an assessment, will be on a parity with the Special Taxes. No Obligation of the City Upon Delinquency The City is under no obligation to transfer any funds of the City into the Special Tax Fund for payment of the principal of or interest on the Bonds if a delinquency occurs in the payment of any Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales"for a discussion of the District's obligation to foreclosure Special Tax liens upon delinquencies. Special Taxes Are Not Within Teeter Plan The Special Taxes are not encompassed within the alternate procedure for the distribution of certain property tax levies on the secured roll pursuant to Chapter 3, Part 8, Division 1 of the California Revenue and Taxation Code(Section 4701 et seq.), commonly referred to as the"Teeter Plan." The County of Orange has adopted a Teeter Plan under which a tax distribution procedure is implemented and secured roll taxes are distributed to taxing agencies with the County on the basis of the tax levy,rather than on the basis of actual tax collections. However,the City has not elected to have the District participate in the County's Teeter Plan. Reserve Account In order to further secure the payment of principal of and interest on the Bonds, upon delivery of the Bonds, the District will deposit in the Reserve Account such amount equal to the Reserve Requirement with respect to the Bonds. Thereafter,the District is required, subject to the limits on the levy of the Special Tax,to deposit and to maintain the Reserve Requirement in the Reserve Account at all times while any of the Bonds are outstanding. The Reserve Requirement for the Bonds is defined as the amount equal to the lowest of- (i) 10% of the original proceeds of the Bonds; (ii)maximum annual principal and interest requirements on all Bonds outstanding or (iii) 125% of the average annual principal and interest requirements on all Bonds outstanding. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein. Subject to the limits on the maximum annual Special Tax which may be levied within the District, as described in APPENDIX A, the District has covenanted to levy Special Taxes in an amount that is anticipated to be sufficient, in light of the other intended uses of the Special Tax proceeds,to maintain the balance in the Reserve Account at the Reserve Requirement while any Bonds are outstanding. Amounts in the Reserve Account are to be applied to the payment of(i)redemption of the Bonds in whole or in part,(ii)debt service on the Bonds to the extent other moneys are not available therefor, and (iii)the principal and interest due on the final maturity of the Bonds. In addition, moneys in the Reserve Account may be used to make any required transfer to the Rebate Fund. In the event of a prepayment of Special Taxes, under certain circumstances, a portion of the Reserve Account will be added to the amount being prepaid and be applied to redeem Bonds; provided, however,that no such transfer shall be made if it would result in the amount in the Reserve Account being less than the Reserve Requirement. See APPENDIX D—"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" herein for a description of additional requirements. In no event shall amounts in the Reserve Account be used to pay fees or expenses of the Trustee or its counsel. Priority of Bonds and Pledge of Net Taxes The District has pledged and assigned to the Trustee all Net Taxes (Special Taxes remaining after setting aside and depositing amounts sufficient to pay the Administrative Expenses in the Administration Fund)for the payment of principal of,premium, if any, and interest on the Bonds. Pursuant to the Act and the Indenture,the Bonds shall be and are equally secured by a pledge of and lien upon the Net Taxes, and certain other amounts on deposit in the Special Tax Fund and the Reserve Account of the Special Tax Fund. So long 14 DOC SOC/1616674v6/022273-0006 as any of such Bonds are Outstanding and unpaid,the Net Taxes and the interest thereon may be used only as provided in the Indenture unless the Bondowners authorize other uses of such Net Taxes pursuant to the provisions of the Indenture. Nothing in the Indenture or in any Supplemental Indenture shall preclude the redemption prior to maturity of any Bonds subject to call and redemption or the payment of the Bonds from proceeds of refunding bonds issued under the Act or under any other law of the State. Amounts in the Administration Fund are not pledged to the repayment of the Bonds. No Additional Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Special Taxes, except for the purpose of defeasing and refunding Bonds in accordance with the Act. THE COMMUNITY FACILITIES DISTRICT Location The property within the District (Orange County Assessor's Parcel No.024-251-01) consists of a single parcel of 15.103 acres in a.roughly trapezoidal shape, located on Pacific Coast Highway directly across from the beach and the Pacific Ocean in the City. The property within the District is on the northwest corner of the intersection of Beach Boulevard and Pacific Coast Highway,a couple of blocks south of Main Street and the Huntington Beach Pier. Beach Boulevard (State Highway 39) is a major north- south artery, which provides access to Interstate 405(the San Diego Freeway)one of the major freeways in Southern California. The District is fully developed with a 517 guest room hotel generally known as the "Hyatt Regency Huntington Beach Resort and Spa" which opened on January 19, 2002 and is owned by PCH Beach Resort, LLC, a California limited liability. See "PROPERTY OWNERSHIP AND THE HOTEL" for a more complete description of the Hotel. On the other side of a 3.5 acre parcel on the northwest side of the District is the Hilton Waterfront Beach Resort, a twelve story, 290 room hotel tower with accompanying conference facilities and restaurants, which opened for business in July, 1990. The 3.5 acre site between the District and the Hilton Waterfront Beach Resort development has been improved with a pavilion, a wedding gazebo, a tennis court and parking. [It is expected that this parcel will at some time in the future be converted into a third hotel site.] [Still true?] As a component of the Public Facilities financed with the proceeds of the Refunded Bonds,a pedestrian bridge was constructed from the District site across Pacific Coast Highway to the beach so that guests and visitors of the Hotel are able to cross the heavily traveled Pacific Coast Highway in order to reach the beach. All of the property within the District is owned by the Successor Agency and is leased by the Successor Agency to the Property Owner under the terms of the Ground Lease. See "PROPERTY OWNERSHIP AND THE HOTEL—Summary of the Ground Lease" for a description of some of the primary terms of the Ground Lease. The Ground Lease was entered into in implementation of an Amended and Restated Disposition and Development Agreement dated as of September 14, 1998 between the Agency and Mayer Financial, L.P., as thereafter amended and as assigned by Mayer Financial, L.P. to the Lessee (as so amended, the"DDA"). It is expected that at all times the Bonds are Outstanding there will always be a single owner of the leasehold interest in the District which is subject to the levy of the Special Tax. Authorization On May 3, 1999,the City Council of the City adopted Ordinance No. 3417 which added Chapter 3.56 to the Huntington Beach Municipal Code entitled "City of Huntington Beach Special Tax Financing Improvement Code." The proceedings to form the District were conducted under said section of the City's 15 DOC SOC/1616674v6/022273-0006 Municipal Code and, where applicable by reason of the provisions of the Municipal Code, the Mello-Roos Community Facilities Act of 1982,as amended(collectively,the"Law"). Pursuant to the Law,the City Council adopted Resolution No.2000-5 on January 18, 2000, stating its intention to establish the District and Resolution No.2000-6 on January 18, 2000 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos.2000-35,2000-36 and 2000-37 adopted by the City Council on April 17,2000,the District was formed,bonded indebtedness in an aggregate principal amount not to exceed $16,000,000 was determined necessary for the District and an election was called pursuant to the Law. The Agency, as the sole owner of the property within the District, voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $16,000,000 to finance the Public Facilities and the levy of a special tax consistent with the Special Tax Formula on leasehold interests in the property within the District to pay the principal and interest on the Bonds, to pay administrative expenses of the District, and to make any replenishments to the Reserve Account. See"THE COMMUNITY FACILITIES DISTRICT—Rate and Method of Apportionment of Special Tax." The Refunded Bonds were authorized to be issued by the Resolution of Issuance adopted by the City Council on November 19,2001. The Bonds were authorized to be issued to refund the Refunded Bonds by the Resolution of Issuance adopted by the City Council, acting as the legislative body of the District, on June 3, 2013. Rate and Method of Apportionment of Special Tax Special Tax will be levied on and collected from the leasehold interest in the land in the District as set forth in the Special Tax Formula, the complete text of which is contained in APPENDIX D —"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX." There is only one County Assessor's parcel of land in the District,and it is expected that there will always be a single lessee of all of the land in the District,which currently is the Property Owner. Under the Special Tax Formula, not less than fifteen business days prior to the beginning of each Fiscal Year(as defined in the Special Tax Formula), a representative of the City will determine the parcel(s)in the District the leasehold interest in which are subject to the Special Tax (the "Taxable Property"). The City Council will levy the Special Tax proportionately on the leasehold interest in each parcel of Taxable Property in the District up to 100%of the Maximum Special Tax, as needed to satisfy the Special Tax Requirement. Under the Special Tax Formula, the Maximum Special Tax for the leasehold interests in the land in the District constituting "Taxable Property" is the greater of (i)$130,000 per acre or (ii)the amount determined pursuant to the following steps: Step 1: determine the maximum annual debt service on all Outstanding Bonds; Step 2: multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: determine the Acreage of Taxable Property within the District; and Step 4: divide the amount from Step 2 by the acreage from Step 3 to determine the Maximum Special Tax per acre of Taxable Property. As there are slightly in excess of 15 acres of Taxable Property in the District,the Maximum Special Tax is at least$1,950,000, which amount is approximately 1.90*times the expected maximum annual debt services on the Bonds. The Special Tax Requirement is defined in the Special Tax Formula as the amount required in any Fiscal Year for the District necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Fund for all Outstanding Bonds, (iii)to pay Administrative Expenses, and (iv)to pay costs of any credit enhancement(including fees and expenses related to any letter of credit)for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property includes all Assessor's Parcels in the District, except real property owned by a governmental agency for public right-of-way purposes Preliminary,subject to change. 16 DOC SOC/1616674v6/022273-0006 including, but not limited to, streets, public walkway corridors, and slopes, as determined in each Fiscal Year by a representative of the City or any otherwise Taxable Property for which the Special Tax with respect to the leasehold interest has been paid in full, or any property which is otherwise exempt from the Special Tax pursuant to law. Under the Special Tax Formula,the Special Taxes applicable to any leasehold interest in any parcel of property within the District may be prepaid in whole or in part. See Appendix D for the detailed methodology related to any such prepayment. The Indenture contains covenants related to the prepayment of Special Taxes including the following: • The City shall cause all applications of owners of leasehold interests in the District subject to the Special Tax Formula to prepay and satisfy the Special Tax obligation for their property to be reviewed by an independent Financial Consultant and shall not accept any such prepayment by the City and the redemption of Bonds with such prepayment, unless the ratio of(i)the maximum amount of the Special Taxes that may be levied in the District following such prepayment to (ii) Maximum Annual Debt Service on the Bonds which will remain Outstanding following such redemption (e.g., 1.15 to 1.0) will not be less than such ratio as it existed prior to such prepayment. • The City will not include in any calculation of the amount necessary to prepay and permanently satisfy the Special Tax obligation of any parcel of taxable property in the District a proportionate amount of the amount then on deposit in the Reserve Fund, if at the time of such calculation the amount on deposit in the Reserve Fund is less than the Reserve Requirement;provided, however, that in such event the City may pay to the owner of any such property who prepays and permanently satisfies the Special Tax obligation for his or her property,under such circumstances, such a proportionate amount if the amount on deposit in the Reserve Fund is thereafter increased to the Reserve Requirement. Public Facilities The proceeds of the Refunded Bonds were used to finance the construction of certain Public Facilities integral to the development of the Hotel. The"Public Facilities" included the land acquisition, clearance and roadway construction within or adjacent to the District, construction of a pedestrian bridge over Pacific Coast Highway connecting the Hotel with the beach, and a contribution to the construction of a City beach maintenance yard. All construction with respect to the Hotel have been completed and all of the Public Facilities were completed by December,2002. Estimated Direct and Overlapping Indebtedness Within the boundaries of the District are numerous overlapping local agencies providing public services. Some of these local agencies have outstanding bonds which are secured by taxes and assessments on the parcels within the District and others have authorized but have not yet issued bonds which, if issued, will be secured by taxes and assessments levied on the property within the District. Table 1 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied on the leasehold interest within the District, prepared by California Municipal Statistics, Inc., and dated March 1, 2013 (the "Debt Report"). The Debt Report is included for general information purposes only. The District and the Underwriter believe the information is current as of its date,but make no representation as to its completeness or accuracy. Other public agencies may issue additional indebtedness at any time, without the consent or approval of the District. See"SPECIAL RISK FACTORS—Burden of Parity Liens,Taxes and Other Special Assessments on the Taxable Property." The Debt Report generally includes long term obligations sold in the public credit markets by public agencies whose boundaries overlap the boundaries of the District in whole or in part. In many cases long term 17 D OC S OC/1616674v6/0222 73-0006 obligations issued by a public agency are payable only from the general fund or other revenues of such public agency. Additional indebtedness could be authorized by other public agencies at any time. TABLE 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 DIRECT AND OVERLAPPING DEBT AS OF MARCH 1,2013 2012-13 Assessed Valuation: $190,194,724 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 3/1/13 Metropolitan Water District General Obligation Bonds 0.010% $ 15,862 Coast Community College District General Obligation Bonds 0.197 606,507 Huntington Beach Union High School District General Obligation Bonds 0.491 1,091,655 Huntington Beach City School District General Obligation Bonds 1.314 311,431 City of Huntington Beach Community Facilities District No.2000-1 100. 13,330,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $15,355,455 OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 0.047% $ 101,120 Orange County Pension Obligations 0.047 166,310 Orange County Office of Education Certificates of Participation 0.047 7,556 Coast Community College District General Fund Obligations 0.197 39,893 Huntington Beach Union High School District Certificates of Participation 0.491 295,034 Huntington Beach School District Certificates of Participation 1.314 219,382 City of Huntington Beach General Fund Obligations 0.671 313,371 City of Huntington Beach Judgment Obligations 0.671 23,302 Municipal Water District of Orange County Water Facilities Corporation 0.057 5.680 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,171,648 Less: MWDOC Water Facilities Corporation(100%supported by revenues) 5,680 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,165,968 OVERLAPPING TAX INCREMENT DEBT: $1,908,712 GROSS COMBINED TOTAL DEBT $18,435,815121 NET COMBINED TOTAL.DEBT $18,430,135 Ratios to 2012-13 Assessed Valuation: Direct Debt($13,330,000)...............................................................7.01% Total Direct and Overlapping Tax and Assessment Debt..................8.07% Gross Combined Total Debt..............................................................9.69% Net Combined Total Debt.................................................................9.69% Ratios to Redevelopment Incremental Valuation($180.096.172): Total Overlapping Tax Increment Debt............................................. 1.06% (1) Excludes Mello-Roos Act bonds to be sold. (2) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics,Inc. Estimated Assessed Value-to-Lien Ratio The assessed value of the Taxable Property within the District for Fiscal Year 2012-13 is $190,194,724. The estimated assessed value-to-lien ratio of the taxable property within the District based upon the principal amount of the Bonds, overlapping debt payable from other taxes and assessments levied on the property within the District, and the assessed values included on the 2012-13 Assessor's roll is 18 DOCSOC/1616674v6/022273-0006 approximately 14.64*-to-1. Because a parcel's assessed value generally represents the lower of its acquisition cost and adjustments for inflation (but not more than 2% per year) or its current market value, it may not be indicative of the parcel's market value. No assurance can be given that any of the assessed value-to-lien ratio for the District will be maintained during the period of time that the Bonds are outstanding. The District does not have any control over future property values or the amount of additional indebtedness that may be issued in the future by other public agencies, the payment of which is made through the levy of a tax or an assessment with a lien on a parity with the Special Taxes. See"SPECIAL RISK FACTORS— Property Values; Value- to-Lien Ratio." The following Table 2 below summarizes the assessed value of the taxable property within the District for Fiscal Years 2006-07 through 2012-13. TABLE 2 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 ASSESSED VALUES OF TAXABLE PROPERTY FISCAL YEAR 2006-07 THROUGH 2O12-13 Percentage Change in Assessed Value from Fiscal Year Assessed Value Previous Fiscal Year 2006-07 $190,366,838 N/A 2007-08(') 177,885,263 (6.56)% 2008-09 181,442,968 2.00 2009-10 185,056,129 1.99 2010-11 185,071,826 0.01 2011-12 186,465,416 0.75 2012-13(') 190,194,724 2.00 According to the Orange County Assessor's Office,there was a large economic adjustment due to a decline in market value thus reducing the assessed values. ('-) The Property Owner is currently appealing the Fiscal Year 2012-13 assessed value. The Property Owner's opinion of the value of the Taxable Property as set forth is such appeal is$ Source: Orange County Secured Rolls,as compiled by Willdan Financial. Delinquency History Table 3 below summarizes the Special Tax levies and delinquencies for the taxable property within the District for Fiscal Years 2008-09 through Fiscal Year 2012-13. The Property Owner has not been delinquent in the payment of Special Taxes. Preliminary,subject to change. 19 DOCSOC/1616674v6/022273-0006 TABLE 3 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 SPECIAL TAX LEVIES AND DELINQUENCIES FISCAL YEAR 2008-09 THROUGH 2O12-13 Delinquencies as of September 30 of Fiscal Year Delinquencies as of May 7,2013 Remaining Remaining Remaining Fiscal Amount Parcels Parcels Amount Percent Parcels Amount Percent Year Levied Levied Delinquent Delinquents�1 Delinquent Delinquent Delinquent Delinquent 2008-09 $1,213.082.00 1 0 $0.00 0.00% 0 $0.00 0.00% 2009-10121 1,227,014.00 1 0 0.00 0.00 0 0.00 0.00 2010-11 1,224,300.50 .1 0 0.00 0.00 0 0.00 0.00 2011-12 1,265,074.37 1 0 0.00 0.00 0 0.00 0.00 2012-13 1,249,569.75 1 N/A N/A N/A 0 0.00 0.00 (1) Amount does not include any penalties,interest or fees. (2) Delinquency information as of October 5 for this Fiscal Year only. Source: Orange County Tax Collector,as compiled by Willdan Financial Services. PROPERTY OWNERSHIP AND THE HOTEL Information set forth below regarding the Property Owner and the Hotel was provided by the Property Owner and has not, in most instances, been verified by the City or the Underwriter, and the City and the Underwriter make no representation as to its accuracy or completeness. The Hotel The Hotel is generally known as the Hyatt Regency Huntington Beach Resort and Spa. The focus of the Hotel is oriented toward ocean views that are available throughout the planned hotel, four ocean view courtyards, and two pool areas. The following is a description of the principal features of the Hyatt Regency Huntington Beach Resort and Spa: • Main lobby • 517 guest rooms • 990 covered parking spaces in a two story subterranean garage. • 52,000 square feet of conference center at west end of the Hotel • 9,090 square feet of net retail space • 20,000 square foot spa with state of the art facilities including 18 indoor treatment rooms, some with private patios and six outdoor semi-private treatment stations. • Seven restaurants/lounges • Beach access via pedestrian overpass of Pacific Coast Highway. The public areas consist of the main lobby and a number of courtyards. The Lighthouse Courtyard is the access point to the pedestrian overpass to the beach. The courtyard is approximately 34,650 square feet and provides a lawn area with panoramic ocean views. The California Courtyard is adjacent to the main lobby and is surrounded by patios and palm trees. The approximately 22,190 square foot courtyard facility has a large fountain and small grass knoll. The conference center is located at the west end of the Hotel and has a separate lobby/entrance area. That facility consists of a total of 52,000 square feet that can be divided into a number of event spaces. This conference center is adjacent to the Grand Ballroom and the approximately 10,700 square foot exhibition hall. Ocean views are available from the Grand Ballroom. An outdoor-event area is also available with 15,000 square feet of lawn area and ocean views. 20 DOC SOC/1616674v6/022273-0006 The 517 hotel guest rooms are considered upscale in appointments, design and quality. The room sizes range from 465 to 3,100 square feet(presidential suites). Custom king bedrooms range from 651 to 854 square feet. A state of the art spa facility known as Pacific Waters Spa is an integral part of the Hotel. The design of this 20,000 square foot facility is an early California luxury estate theme. Spa facilities include the following: (i)eighteen indoor treatment rooms, (ii)weight training room with weight/ exercise machines and free weights, (iii)a cardiovascular exercise room with exercise equipment and a water station, (iv)a full service beauty salon with manicure/pedicure stations and custom tile foot baths, (v)a separate reception area, (vi)a steam room with eucalyptus oil mist, (vii)a dry sauna, (viii)a cool down lounge, (ix)private showers, (x)Kohler"body spa" custom waterfall shower, (xi) an eight-person hydrotherapy whirlpool, (xii)lockers and private toilets,and(xiii)a relaxation lounge. The outdoor recreation areas include a water playground featuring three water slides, two splash pools, a ribbon shaped main pool,a shallow children's wading pool and a poolside cafe and a lagoon style pool that dominates the pool courtyard and the surrounding decks. A panoramic view is available from the pool area,which has a number of ocean view terraces and decks. Hotel Construction. Construction of the Hotel commenced in April of 2001 and was completed in December of 2002 at a cost of$ . The Hotel opened January 19,2002(the"Opening Date"). Hotel Operation. The Property Owner has entered into a Hotel Management Agreement, dated as of April 11, 2001 (the "Hotel Management Agreement"), with Hyatt Hotels Corporation, formerly known as Hyatt Corporation ("Hyatt Hotels Corporation"), with respect to the management and operation of the Hotel. The Hotel Management Agreement has a stated term of twenty years, which commences with the Opening Date of the Hotel and ends on December 31 of the year in which the 20th anniversary of the Opening Date occurs. Hyatt Corporation has the right and option, in its discretion, to extend the term of the Hotel Management Agreement for two renewal terms of five years each. No assurance can be given that the Hotel Management Agreement will remain in effect for the term of the Bonds. The Hotel Operator. Hyatt was founded by Jay Pritzker in 1957. Over the following decade, Jay Pritzker and his brother Donald Pritzker, working together with other Pritzker family business interests, grew the company into a North American management and hotel ownership company, which became a public company in 1962. In 1968, Hyatt International was formed and subsequently became a separate public company. Hyatt Corporation and Hyatt International Corporation were taken private by the Pritzker family business interests in 1979 and 1982, respectively. On December 31, 2004, substantially all of the hospitality assets owned by Pritzker family business interests, including Hyatt Corporation and Hyatt International Corporation, were consolidated under a single entity, now named "Hyatt Hotels Corporation." Hyatt Hotels Corporation manages, franchises, owns and develops Hyatt branded hotels,resorts and residential and vacation ownership properties around the world. As of June 30,2012, the company's worldwide portfolio consisted of 492 properties. 21 DOCSOC/1616674v6/022273-0006 Average Occupancy Rates. The following table sets forth the average occupancy rates for this Hotel in each of the calendar years ending December 31,2003 through December 31,2012. TABLE 4 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 AVERAGE HOTEL OCCUPANCY CALENDAR YEARS 2003 THROUGH 2O12 Calendar Year Average Hotel Occupancy Ending December 31 Rate(by percentage) 2003 2004 2005 2006 2007 2008 — 2009 59.2% 2010 67.7 2011 73.4 2012 75.9 Source:Property Owner. Summary of the Ground Lease Pursuant to the DDA, the Successor Agency (as successor-in-interest to the Agency), as lessor, and the Property Owner, as lessee. In order to facilitate the Redevelopment Plan for the Huntington Beach Redevelopment Project, the Agency, which owned the parcel in fee simple, agreed to lease Parcel A, consisting of the 15.103 acres of land in the District to the Property Owner for a term of 99 years as part of a variety of documents culminating in the Ground Lease executed on April 4, 2001. The Property Owner constructed and operates a 517-room first class hotel resort, defined as being equal to or better than an AAA four-diamond resort, which is managed by the Hyatt Regency chain. The Property Owner did not obtain any mineral or water rights to the land and took the site in an"as is"condition,thereby assuming responsibility for hazardous substance removal, remediation, and indemnification to the Agency in accordance with applicable law. As a financial incentive to the Property Owner for entering into the DDA,the Agency agreed to repay the Property Owner for$16 million of costs plus interest thereon advanced by the Property Owner toward the construction of offsite infrastructure and other costs of the Hotel. As of September 30,2012, $ in costs remain to be paid. See "Transient Occupancy Tax" below. The Successor Agency's obligations under the Ground Lease and DDA have been approved by DOF on each of the Successor Agency's Recognized Obligation Payment Schedules submitted to date. The effective date of the lease is April 4,2001,and the term of the lease is 99 years from that date. As consideration for obtaining the lease,the Successor Agency is to receive the following payments. • During the first year of hotel operations, a base rent of$25,000 per year prorated over the fraction of the year the hotel is open. During the second year,a base rent of$75,000; during the third year a base rent of$150,000; from the fourth year onward, a base rent of$150,000 per year plus an amount equal to the annual increase in the CPI (lagged by three months for computational purposes) with an annual cap of no more than 5 percent and a five-year cumulative cap of no more than 20 percent. 22 DOC SOC/1616674v6/022273-0006 • Starting in the third year, the Successor Agency is also to receive participation rent equal to 3 percent of"Adjusted Room Revenue." Adjusted Room Revenue takes Gross Room Revenue not counting any food, beverage, parking, telephone, health club, or other ancillary revenue and subtracts off a threshold amount equal to$25 million. The resulting remainder is what is used to calculate the 3 percent participation rent (as described below). This $25 million threshold amount, however, escalates in year four and thereafter by an amount equal to the increase in the CPI index with an annual cap of no more than 5 percent and a five-year cumulative cap of no more than 20 percent. Section 507 of the Ground Lease provides that for each Lease Year commencing with 2001 through 2013,an additional payment is required to be made by Lessee to the Successor Agency of$8,333.34. For each subsequent Lease Year during the Term, the foregoing amount is to be payable as adjusted upward each year based upon the consumer price index. The amounts payable pursuant to Section 507 are not included in Table 5,below. It is expressly stated that the Ground Lease is an absolute net lease. The terms of the Ground Lease may be amended by the Property Owner and the Successor Agency (subject to the approval of the Oversight Board)at any time without notice to or the consent of the Bondowners. The following table sets forth the Base Rent, Gross Room Revenue and Adjusted Room Revenue under the Ground Lease for Fiscal Years 2006-07 through 2012-13. TABLE 5 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 BASE RENT,GROSS ROOM REVENUE,ADJUSTED ROOM REVENUE FISCAL YEAR 2006-07 THROUGH 2O12-13 C Gross Room Adjusted Room Fiscal Year Base Rent Revenue Revenue0) 2006-07 $157,700 $30,142,981 $121,055 2007-08 162,855 34,181,076 215,819 2008-09 166,600 31,831,207 111,319 2009-10 174,098 25,151,223 -0- 2010-11 174,098 28,016,844 -0- 2011-12 174,167 30,815,679 53,633 2012-13 179,567 33,208,940 106,273 Successor Agency receives 3%of these revenues. Source: The Property Owner. Transient Occupancy Tax Even though the Successor Agency still owns the fee simple interest in the property, it is a triple net lease; therefore, the Property Owner is responsible for paying property taxes on the Hotel and the land to the County. However, an additional source of revenue from the Successor Agency to repay the Property Owner for its $16 million advance consists of a defined portion of the "property tax increment" as well as a defined portion of the Available Site Generated Transient Occupancy Tax (the "TOT"). This special hotel tax is currently 12%, 10% of which is allocated 60 percent to the Agency and 40 percent to the City, and 2% of which is allocated to the Marketing and Visitors Bureau. Five-sixths of the Agency's portion of the TOT is also a dedicated source of revenue to repay the Property Owner the Agency's $16 million plus interest obligation. 23 DOC SOC/1616674v6/022273-0006 The following table sets forth the TOT collected in each of the last five Fiscal Years. The TOT is not pledged to the repayment of the Bonds. TABLE 6 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 TRANSIENT OCCUPANCY TAXES FISCAL YEARS 2007-08 THROUGH 2O11-12 Fiscal Year Total Transient Occupancy Tax 2007-08 $3,352,079 2008-09 2,755,409 2009-10 2,684,695 2010-11 3,010,115 2011-12 3,249,408 Source: District. The Property Owner The Property Owner is PCH Beach Resort, LLC, a California limited liability company formed on April 11, 2001 for the primary purpose of being the lessee under the Ground Lease, constructing and owning the Hotel, and developing the other two parcels (not located within the District) leased to the Property Owner under the Ground Lease. The managing member of the Property Owner is Grand Resort, LLC, a California limited liability company, which has a 59.99996% interest in the Property Owner, which, in turn,is controlled by Mayer Financial L.P., Lizard Thicket, L.P. and the Bone Family Trust, all of which entities are comprised of various trusts or other entities controlled by Robert L. Mayer,Jr. and Stephen K. Bone. The other members of the Property Owner are Coast Beach, LLC, with a 39.99994% interest in the Property Owner, which is an entity related to the Pritzker Trusts, and SPE PCH Beach Resort, with a 0.0001% interest in the Property Owner. The Robert Mayer Corporation and related entities,headquartered in Irvine, California, developed The Hilton Waterfront Beach Resort, a 290 room hotel with conference facilities and two restaurants and lounges located on a parcel along Pacific Coast Highway in the City adjacent to the parcel leased to the Property Owner under the Ground Lease, and manages that property through a related entity, Mayer Hospitality Group, LLC. The Robert Mayer Corporation previously assisted in the development of the Quality Inn Hotel and Casino, a 324-suite hotel and casino in Las Vegas, Nevada, and through Ambassador Gaming, Inc. and managed the casino, Villa Capri Apartments, a 110-unit residential apartment complex located in La Habra, California, and Merano, a 30 acre, gate-guarded development with 126 home sites in Palm Desert, California. In addition to the properties listed above in which it previously had interests, The Robert Mayer Corporation maintains an active development program to identify and develop new commercial and residential opportunities, and is expected to play a leading role through related entities in developing the two parcels that are adjacent to the District. THE CITY OF HUNTINGTON BEACH Under the Law, the City Council of the City is authorized to establish and act as the legislative body for community facilities districts. However, the City has no obligations in connection with the District or the Bonds, other than with respect to the collection and enforcement of the Special Tax to the limited extent set forth in the Indenture. See Appendix C hereto for general information regarding the City and the County. 24 DOC SO C/1616674v 6/022273-0006 SPECIAL RISK FACTORS Investment in the Bonds involves risks which may not be appropriate for certain investors. The following is a discussion of certain risk factors, in no particular order of importance, all of which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. This discussion does not purport to be comprehensive or definitive. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of the Property Owner or any future lessee of the land in the District to pay the Special Taxes levied in the District when due. Such failure to pay Special Taxes could result in the inability of the District to make full and punctual payments of debt service on the Bonds. In addition,the occurrence of one or more of the events discussed herein could adversely affect the value of the property in the District. Concentration of Ownership As of the date of issuance of the Bonds, there is only one parcel of land in the District and the sole leasehold interest in that land that is subject to the levy of Special Taxes is that of the Property Owner under the Ground Lease. It is expected that the leasehold interest of the Property Owner will be the sole leasehold interest subject to the levy of Special Taxes for the term of the Bonds. The lack of diversity in the obligation to pay the Special Tax represents a significant risk to Bondowners in that the Property Owner's ability to pay the Special Tax will be dependent in large measure on the success of the Hotel. Failure of the Property Owner (or any future lessee, if any, of the property within the District)to pay the annual Special Tax when due could result in the rapid, total depletion of the Reserve Fund prior to replenishment from the resale of the leasehold interest upon a foreclosure or otherwise. In that event,there could be a default in payments of the principal of, and interest on,the Bonds. See"SPECIAL RISK FACTORS—Insufficiency of Special Taxes"below. Risks of Real Estate Secured Investments Generally The Bondowners will be subject to the risks generally incident to an investment secured by real estate, including, without limitation, (i)adverse changes in local market conditions, such as changes in the market value of real property in the vicinity of the District, the supply of or demand for competitive properties in such area, and the market value of residential property or commercial buildings and/or sites in the event of sale or foreclosure; (ii)changes in real estate tax rates and other operating expenses, governmental rules (including, without limitation, zoning laws and laws relating to endangered species and hazardous materials) and fiscal policies; (iii)natural disasters (including, without limitation, earthquakes, wildfires and floods), which may result in uninsured losses; (iv)adverse changes in local market conditions;and(v)increased delinquencies due to rising mortgage costs and other factors. No assurance can be given that the Property Owner or future lessee will pay Special Taxes in the future or that they will be able to pay such Special Taxes on a timely basis. See"SPECIAL RISK FACTORS —Bankruptcy and Foreclosure"below, for a discussion of certain limitations on the District's ability to pursue judicial proceedings with respect to delinquent parcels. Limited Obligations The Bonds and interest thereon are not payable from the general funds of the City or the Successor Agency. Except with respect to the Special Taxes,neither the credit nor the taxing power of the District or the City is pledged for the payment of the Bonds or the interest thereon, and, except as provided in the Indenture, no Owner of the Bonds may compel the exercise of any taxing power by the District or the City or force the forfeiture of any City, Successor Agency or District property. The principal of, premium, if any, and interest on the Bonds are not a debt of the City or a legal or equitable pledge,charge,lien or encumbrance upon any of the City's or the District's property or upon any of the City's or the District's income, receipts or revenues, except the Special Taxes and other amounts pledged under the Indenture. 25 DOC SOC/1616674v6/022273-0006 Insufficiency of Special Taxes In order to pay debt service on the Bonds, it is necessary that the Special Tax levied within the District be paid in a timely manner. Should the Special Tax not be paid on time, the District has established a Reserve Account in the initial amount specified under the heading "ESTIMATED SOURCES AND USES OF FUNDS" to pay debt service on the Bonds to the extent other funds are not available therefore. Under the Indenture, the District has covenanted to maintain in the Reserve Account an amount equal to the Reserve Requirement, with the sole source of monies to replenish the Reserve Account being Net Taxes collected that are in excess of Bond debt service and Administrative Expenses. See Appendix A hereto. As a result, if the Property Owner or any future lessee of the land in the District is delinquent in the payment of the Special Tax, the District most likely will be unable to replenish the Reserve Account to the Reserve Requirement because the Property Owner or lessee is not then making any Special Tax payments. If such defaults were to continue in successive years,the Reserve Account would soon be depleted and a default on the Bonds would occur. The Law provides that, if any property within the District not otherwise exempt from the Special Tax is acquired by a public entity through a negotiated transaction, or by gift or devise, the Special Tax will continue to be levied on and enforceable against the public entity that acquired the property. The Bondowners will be dependent on the ability and/or willingness of the public entity to pay the Special Tax levied on such property when due. In addition, the Law provides that, if property subject to the Special Tax is acquired by a public entity through eminent domain proceedings, the obligation to pay the Special Tax with respect to that property is to be treated as if it were a special assessment and be paid from the eminent domain award. The constitutionality and operation of these provisions of the Law have not been tested. If for any reason any portion of the leasehold interest subject to the Special Tax becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government, or another public agency, the Special Tax will be reallocated to the remaining portion, if any, of the leasehold interest in the non-tax-exempt land within the District,but in no case more than the maximum authorized Special Tax for such remaining acreage, if any. If a substantial portion of leasehold interest within the District became exempt from the Special Tax because of public ownership or otherwise, the maximum Special Tax which could be levied upon the remaining Taxable Property might not be sufficient to pay principal of and interest on the Bonds when due or the owner of the leasehold interest in the remaining taxable acreage may not have a viable operating development which provides revenues sufficient to pay the Special Taxes,and a default could occur with respect to the payment of such principal and interest on the Bonds. The District has covenanted to institute foreclosure proceedings to sell the leasehold interest with delinquent Special Taxes in order to obtain funds to pay debt service on the Bonds, subject to the limitations set forth in the Indenture. If foreclosure proceedings were ever instituted,any mortgage or deed of trust holder with respect to a deed of trust on the Property Owner's leasehold interest could, but would not be required to, advance the amount of delinquent Special Taxes to protect its security interest. See "SECURITY FOR THE BONDS—Proceeds of Foreclosure Sales" for provisions which apply in the event foreclosure is required and which the District is required to follow in the event of delinquency in the payment.of Special Taxes. In the event such superior court foreclosure or foreclosures are necessary, there could be a delay in payments to Bondowners pending prosecution of the foreclosure sale, if the Reserve Account were depleted. No assurances can be given that the leasehold interest subject to foreclosure and sale at a judicial foreclosure sale will be sold, or, if sold, that the proceeds of such sale will be sufficient to pay any delinquent Special Tax. Although the Law authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Law does not specify the obligations of the District with regard to purchasing or otherwise acquiring any leasehold interest at the execution sale pursuant to the judgment in any such action if there is no other purchaser at such sale. The District has no obligation to be a bidder at a foreclosure sale and has no intention to do so. The District is not included within the "Teeter Plan." The Orange County Board of Supervisors utilizes the alternative method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the 26 D OC S OC/1616674v6/0222 73-0006 "Teeter Plan"), as provided for in section 4701 et seq. of the California Revenue and Taxation Code. Generally, the Teeter Plan provides for a tax distribution procedure in which secured roll taxes and assessments are distributed to taxing agencies within the County on the basis of the tax and assessment levy, rather than on the basis of actual tax and assessment collections. The County, rather than the respective levying agency, then receives all future delinquent tax and assessment payments and penalties. As stated above, the District is not included within the Teeter Plan. Natural Disasters Like other areas of Southern California, property in the District is subject to the risk of major earthquake damage. Although the Huntington Beach area has not experienced any major earthquakes in the past 50 years, the Newport-Inglewood fault, at its closest, is approximately one-half mile from the District. Additional faults within the City that may be geologically active are the North Branch, Bolsa-Fairview, and South Branch Faults, all of which are within the Newport-Inglewood Fault Zone. A significant earthquake along any of the foregoing faults is possible during the period the Bonds will be outstanding. The most recent major earthquake was in 1933,with a magnitude of 6.3 on the Richter scale and an epicenter in the Huntington Harbor area,approximately one mile from the boundary of the District. In the event of a severe earthquake, fire, flood, landslide, high winds or other natural disaster, there may be significant damage to both property and infrastructure in the District. As a result, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition,the value of the Taxable Property in the District could be diminished in the aftermath of such a natural disaster,reducing the resulting proceeds of foreclosure sales in the event of delinquencies in the payment of the Special Taxes. According to the Federal Emergency Management Agency(FEMA),the land in the District is located in an"A99" flood zone,as shown on the National Flood Insurance Program map 065034-0045F, dated January 3, 1997. An "A99" zone is identified as a special flood hazard area inundated by the 100-year flood to be protected from the 100-year flood by a Federal flood protection system under construction. Flood insurance is required by the Flood Disaster Protection Act of 1973. The Property Owner has reported to the District that it maintains property and other insurance for the Hotel, including flood insurance, and it expects to obtain and maintain such insurance. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of such parcel. In general, the owners and operators of a parcel may be required by law to remedy conditions of the parcel relating to releases or threatened releases of hazardous substances. The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known and widely applicable of these laws, but State laws with regard to hazardous substances are also stringent and similar. Under many of these laws, the owner or operator is obligated to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should the Taxable Property be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of remedying the condition, because the purchaser, upon becoming owner, will become obligated to remedy the condition just as is the seller. The value of the leasehold interest in the taxable property within the District, as set forth herein, does not reflect the presence of any hazardous substance or the possible liability of the owner (or operator) for the remedy of a hazardous substance condition of the property. The District has not independently verified,but is not aware, that the owner(or operator) of the Taxable Property has such a current liability with respect to the Taxable Property. However, it is possible that such liabilities do currently exist and that the District is not aware of them. 27 DOC SOC/1616674v6/022273-0006 Further, it is possible that liabilities may arise in the future with respect to the Taxable Property resulting from the existence,currently, on the parcel of a substance presently classified as hazardous but which has not been released or the release of which is not presently threatened, or may arise in the future resulting from the existence, currently on the parcel of a substance not presently classified as hazardous but which may in the future be so classified. Such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly affect the value of the leasehold interest in the property within the District and the willingness or ability of the Property Owner or any successor thereto to pay the Special Tax installments. Payment of the Special Tax is not a Personal Obligation of the Property Owner The Property Owner and its successors in the Taxable Property, if any, are not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the leasehold interest in the taxable parcel in the District. If the value of the Taxable Property is not sufficient, taking into account other liens imposed by public agencies,to secure fully the Special Tax, the District has no recourse against the Property Owner and its successors in the Taxable Property, if any. Leasehold Value The value of the leasehold interest in the taxable property within the District is a critical factor in determining the investment quality of the Bonds. If the Property Owner or its successor in interest in the Taxable Property is delinquent in the payment of Special Taxes, the District's only remedy is to commence foreclosure proceedings against the leasehold interest in the Taxable Property in an attempt to obtain funds to pay the Special Taxes. Reductions in property values due to a downturn in the economy, physical events such as earthquakes, fires, floods, landslides or stricter land use regulations, or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT—Assessed Value-to-Lien Ratios." The assessed value set forth in this Official Statement do not represent market value arrived at through an appraisal process. No assurance can be given that the leasehold interest in the Taxable Property could actually be sold for its assessed value. Prospective purchasers of the Bonds should not assume that the leasehold interest in the Taxable Property could be sold for its assessed value at a foreclosure sale for delinquent Special Taxes. The District cannot foreclose against the fee simple interest in the Taxable Property, only the leasehold interest currently held by the Property Owner. No assurance can be given that any bid will be received for the leasehold interest in the Taxable Property with delinquent Special Taxes offered for sale at foreclosure or,if a bid is received,that such bid will be sufficient to pay all delinquent Special Taxes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales." Parity Taxes and Special Assessments The Taxable Property is subject to taxes and assessments imposed by public agencies also having jurisdiction over the property within the District. See "THE COMMUNITY FACILITIES DISTRICT — Estimated Direct and Overlapping Indebtedness." The Special Taxes and any penalties thereon will constitute a lien against the leasehold interest in the Taxable Property until they are paid. Such lien is on a parity with all special taxes and special assessments levied by other agencies and is co-equal to and independent of the lien for general property taxes regardless of when they are imposed upon the same property. The Special Taxes have priority over all existing and future private liens imposed on the Taxable Property except,possibly, for liens or security interests held by an agency 28 D OC S OC/1616674v 6/0222 73-0006 of the federal government. See "— FDIC/Federal Government Interests in Properties" and "— Bankruptcy and Foreclosure"below. Neither the District nor the City, however, have control over the ability of other entities and districts to issue indebtedness secured by special taxes,ad valorem taxes or assessments payable from all or a portion of the Taxable Property. Any such special taxes,ad valorem taxes or assessments may have a lien on the Taxable Property on a parity with the Special Taxes and could reduce the estimated value- to-lien ratios for the property within the District described herein. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" and "THE COMMUNITY FACILITIES DISTRICT—Estimated Direct and Overlapping Indebtedness." Disclosures to Future Purchasers The willingness or ability of an owner of the Taxable Property to pay the Special Tax even if the value is sufficient may be affected by whether or not the owner was given due notice of the Special Tax authorization at the time the owner purchased the parcel,was informed of the amount of the Special Tax on the parcel, was informed of the maximum tax rate and the risk of such a levy and the ability of such owner to pay the Special Tax as well as pay other expenses and obligations. The City has caused a Notice of the Special Tax to be recorded in the Office of the Recorder for the County against the Taxable Property. While title companies normally refer to such notices in title reports,there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of the Taxable Property or lending of money thereon. FDIC/Federal Government Interests in Properties General. The ability of the District to foreclose the lien of delinquent unpaid Special Tax installments may be limited with regard to properties in which the Federal Deposit Insurance Corporation(the"FDIC"),the Drug Enforcement Agency,the Internal Revenue Service, or other federal agency has or obtains an interest. The supremacy clause of the United States Constitution reads as follows: "This Constitution, and the Laws of the United States which shall be made in Pursuance thereof, and all Treaties made, or which shall be made,under the Authority of the United States,shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the contrary notwithstanding." This means that, unless Congress has otherwise provided, if a federal governmental entity owns the leasehold interest in the parcel that is subject to Special Taxes within the District but does not pay taxes and assessments levied on the parcel (including Special Taxes),the applicable state and local governments cannot foreclose on the parcel to collect the delinquent taxes and assessments. Moreover, unless Congress has otherwise provided, if the federal government has a mortgage interest in the leasehold interest in the taxable parcel and the District wishes to foreclose on the parcel as a result of delinquent Special Taxes,the property cannot be sold at a foreclosure sale unless it can be sold for an amount sufficient to pay delinquent taxes and assessments on a parity with the Special Taxes and preserve the federal government's mortgage interest. In Rust v. Johnson (9th Circuit; 1979) 597 F.2d 174,the United States Court of Appeal, Ninth Circuit held that the Federal National Mortgage Association ("FNMA") is a federal instrumentality for purposes of this doctrine, and not a private entity, and that, as a result, an exercise of state power over a mortgage interest held by FNMA constitutes an exercise of state power over property of the United States. The District has not undertaken to determine whether any federal governmental entity currently has, or is likely to acquire, any interest (including a mortgage interest) in the leasehold interest in the taxable parcel 29 DOC SOC/1616674v6/022273-0006 subject to the Special Taxes within the District, and therefore expresses no view concerning the likelihood that the risks described above will materialize while the Bonds are outstanding. FDIC. In the event that any financial institution making any loan which is secured by the leasehold interest in the taxable parcel within the District is taken over by the FDIC, and prior thereto or thereafter the loan or loans go into default, resulting in ownership of the leasehold interest in the taxable property in the District by the FDIC, then the ability of the District to collect interest and penalties specified by State law and to foreclose the lien of delinquent unpaid Special Taxes may be limited. The FDIC's policy statement regarding the payment of state and local real property taxes (the "Policy Statement") provides that property owned by the FDIC is subject to state and local real property taxes only if those taxes are assessed according to the property's value, and that the FDIC is immune from real property taxes assessed on any basis other than property value. According to the Policy Statement, the FDIC will pay its property tax obligations when they become due and payable and will pay claims for delinquent property taxes as promptly as is consistent with sound business practice and the orderly administration of the institution's affairs, unless abandonment of the FDIC's interest in the property is appropriate. The FDIC will pay claims for interest on delinquent property taxes owed at the rate provided under state law, to the extent the interest payment obligation is secured by a valid lien. The FDIC will not pay any amounts in the nature of fines or penalties and will not pay nor recognize liens for such amounts. If any property taxes (including interest) on FDIC-owned property are secured by a valid lien (in effect before the property became owned by the FDIC), the FDIC will pay those claims. The Policy Statement further provides that no property of the FDIC is subject to levy, attachment, garnishment, foreclosure or sale without the FDIC's consent. In addition, the FDIC will not permit a lien or security interest held by the FDIC to be eliminated by foreclosure without the FDIC's consent. The Policy Statement states that the FDIC generally will not pay non-ad valorem taxes, including special assessments, on property in which it has a fee interest unless the amount of tax is fixed at the time that the FDIC acquires its fee interest in the property, nor will it recognize the validity of any lien to the extent it purports to secure the payment of any such amounts. Special taxes imposed under the Mello-Roos Act and a special tax formula which determines the special tax due each year are specifically identified in the Policy Statement as being imposed each year and therefore covered by the FDIC's federal immunity. The Ninth Circuit has issued a ruling on August 28, 2001 in which it determined that the FDIC, as a federal agency, is exempt from Mello-Roos special taxes. The District is unable to predict what effect the application of the Policy Statement would have in the event of a delinquency in the payment of Special Taxes on the Taxable Property in which the FDIC has or obtains an interest, although prohibiting the lien of the Special Taxes to be foreclosed out at a judicial foreclosure sale could reduce or eliminate the number of persons willing to purchase a parcel at a foreclosure sale. Such an outcome could cause a draw on the Reserve Account and perhaps, ultimately, if enough property were to become owned by the FDIC,a default in payment on the Bonds. Bankruptcy and Foreclosure Bankruptcy, insolvency and other laws generally affecting creditors' rights could adversely impact the interests of owners of the Bonds in at least two ways. First, the payment of property owners' taxes and the ability of the District to foreclose the lien of a delinquent unpaid Special Tax pursuant to its covenant to pursue judicial foreclosure proceedings may be limited by bankruptcy, insolvency or other laws generally affecting creditors' rights or by the laws of the State relating to judicial foreclosure. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales." In addition, the prosecution of a foreclosure could be delayed due to many reasons, including crowded local court calendars or lengthy procedural delays. Secondly,the Bankruptcy Code might prevent moneys on deposit in the Special Tax Fund from being applied to pay interest on the Bonds and/or to redeem Bonds if bankruptcy proceedings were brought by or 30 DOC SOC/1616674v6/022273-0006 against the owner of a leasehold interest in the taxable property in the District and if the court found that any of such owners had an interest in such moneys within the meaning of Section 541(a)(1)of the Bankruptcy Code. Although a bankruptcy proceeding would not cause the Special Taxes to become extinguished, the amount and priority of any Special Tax lien could be modified if the value of the property falls below the value of the lien. If the value of the property is less than the lien, such excess amount could be treated as an unsecured claim by the bankruptcy court. In addition,bankruptcy of a property owner could result in a delay in prosecuting Superior Court foreclosure proceedings. Such delay would increase the likelihood of a delay or default in payment of the principal of, and interest on, the Bonds and the possibility of delinquent tax installments not being paid in full. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified, as to the enforceability of the various legal instruments, by moratorium, bankruptcy, reorganization, insolvency or other similar laws affecting the rights of creditors generally. Funds Invested in the County Investment Pool On January 24, 1996, the United States Bankruptcy Court for the Central District of California held that a State statute providing for a priority of distribution of property held in trust conflicted with, and was preempted by, federal bankruptcy law. In that case, the court addressed the priority of the disposition of moneys held in a county investment pool upon bankruptcy of the county. Following payment of the Special Taxes to the District, such funds may be invested in the name of the City or the District for a period of time in the County investment pool. In the event of a petition of or the adjustment of County debts under Chapter 9 of the Federal Bankruptcy Code, a court might hold that the Bond Owners do not have a valid and/or prior lien on the Special Taxes or debt service payments where such amounts are deposited in the County investment pool and may not provide the Bond Owners with a priority interest in such amounts. In that circumstance, unless the Bond Owners could"trace" the funds that have been deposited in the County investment pool, the Bond Owners would be unsecured(rather than secured) creditors of the County. There can be no assurance that the Bond Owners could successfully so trace the Special Taxes or debt service payments. No Acceleration Provision The Bonds do not contain a provision allowing for the acceleration of the Bonds in the event of a payment default or other default under the terms of the Bonds or the Indenture or in the event interest on the Bonds becomes included in gross income for federal income tax purposes. See APPENDIX D — "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" and "— Limitations on Remedies" herein. Limited Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that such Bonds can be sold for any particular price. Although the District has committed to provide certain statutorily required financial and operating information, there can be no assurance that such information will be available to Bondowners on a timely basis. See "INTRODUCTION — Continuing Disclosure" and APPENDIX E — "FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER." Any failure to provide annual financial information, if required, does not give rise to monetary damages but merely an action for specific performance. Occasionally, because of general market conditions, lack of current information,the absence of a credit rating for the Bonds or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price. 31 DOC SOC/1616674v6/022273-0006 Proposition 218 An initiative measure entitled the"Right to Vote on Taxes Act'(the"Initiative")was approved by the voters of the State at the November 5, 1996, general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the"Title and Summary" of the Initiative prepared by the California Attorney General, the Initiative limits "the authority of local governments to impose taxes and property-related assessments, fees and charges." The provisions of the Initiative have not yet been interpreted by the courts, although a number of lawsuits have been filed requesting the courts to interpret various aspects of the Initiative. The initiative could potentially impact the Special Taxes otherwise available to the District to pay the principal of and interest on the Bonds as described below. Among other things, Section 3 of Article XIIIC states that "...the initiative power shall not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge." The Act provides for a procedure, which includes notice, hearing, protest and voting requirements to alter the rate and method of an existing special tax. However, the Act prohibits a legislative body from adopting any resolution to reduce the rate of any special tax or terminate the levy of any special tax pledged to repay any debt incurred pursuant to the Act unless such legislative body determines that the reduction or termination of the special tax would not interfere with the timely retirement of that debt. On July 1, 1997, a bill was signed into law by the Governor of the State enacting Government Code Section 5854,which states that: Section 3 of Article XIIIC of the California Constitution, as adopted at the November 5, 1996, general election, shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after that date, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights protected by Section 10 of Article I of the United States Constitution. Accordingly, although the matter is not free from doubt, it is likely that the Initiative has not conferred on the voters the power to repeal or reduce the Special Taxes if such reduction would interfere with the timely retirement of the Bonds. It may be possible, however, for voters or the District or the City acting as the legislative body of the District to reduce the Special Taxes in a manner which does not interfere with the timely repayment of the Bonds,but which does reduce the maximum amount of Special Taxes that may be levied in any year below the existing levels. Furthermore, no assurance can be given with respect to the future levy of the Special Taxes in amounts greater than the amount necessary for the timely retirement of the Bonds. Therefore, no assurance can be given with respect to the levy of Special Taxes for Administrative Expenses. Nevertheless, to the maximum extent that the law permits it to do so,the District has covenanted that it will not initiate proceedings under the Act to reduce the maximum Special Tax rates on the leasehold interest in the Taxable Property to less than an amount projected to equal to 110% of annual debt service each year on the Outstanding Bonds plus the Administrative Expense Requirement. In connection with the foregoing covenant, the District has made a legislative finding and determination that any elimination or reduction of Special Taxes below the foregoing level would interfere with the timely retirement of the Bonds. The District also has covenanted that, in the event an initiative is adopted which purports to alter the Rate and Method, it will commence and pursue legal action in order to preserve its ability to comply with the foregoing covenant. However, no assurance can be given as to the enforceability of the foregoing covenants. The interpretation and application of the Initiative will ultimately be determined by the courts with respect to a number of the matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination or the timeliness of any remedy afforded by the courts. See"—Limitations on Remedies." 32 DOC SOC/1616674v6/022273-0006 Ballot Initiatives and Legislative Measures Articles XIIIC and XIIID were adopted pursuant to measures qualified for the ballot pursuant to California's constitutional initiative process and the State Legislature has in the past enacted legislation which has altered the spending limitations or established minimum funding provisions for particular activities. On March 6, 1995, in the case of Rossi v. Brown, the State Supreme Court held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes and that the exemption from the referendum requirements does not apply to initiatives. From time to time, other initiative measures could be adopted by California voters or legislation enacted by the legislature. The adoption of any such initiative or legislation might place limitations on the ability of the State,the City, or local districts to increase revenues or to increase appropriations. Loss of Tax Exemption As discussed under the caption "TAX EXEMPTION," the interest on the Bonds could become includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds as a result of acts or omissions of the District or the City in violation of certain provisions of the Internal Revenue Code of 1986, as amended(the"Code")and the covenants of the Indenture. 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 Indenture 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 Code. Should such an event of taxability occur,the Bonds are not subject to early redemption and will remain outstanding to maturity or until redeemed under the provisions of the indenture relating to special mandatory redemption from Special Tax prepayments. See"THE BONDS—Selection of Bonds for Redemption." Future legislative proposals, if enacted into law,clarification of the Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such future legislative proposals, clarification of the Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. It is possible that subsequent to the issuance of the Bonds there might be federal, State, or local statutory changes(or judicial or regulatory interpretations of federal, State, or local law)that affect the federal, State, or local tax treatment of the Bonds or the market value of the Bonds. No assurance can be given that subsequent to the issuance of the Bonds such changes or interpretations will not occur. See "TAX EXEMPTION"below. IRS Audit of Tax-Exempt Bond Issues The Internal Revenue Service has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the Internal Revenue Service. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds(or by an audit of similar bonds). Considerations Associated with the Dissolution Act The Dissolution Act provides, in part, that an oversight board may direct a successor agency to determine whether any agreement between a dissolved redevelopment and a private party should be terminated or renegotiated to reduce liabilities and increase net revenues to the taxing agencies. In the case of the Ground Lease and the DDA, the Successor Agency has confirmed that there are no executory obligations for the 33 DOC SOC/1616674v6/022273-0006 payment of any moneys to the Lessee from the Successor Agency or the City; accordingly, the City and the Successor Agency are of the view that it is very doubtful that the provision of the Dissolution Act providing for termination or renegotiation of agreements would be applicable. Further, because taxing agencies share in property taxes,at an increased level upon the dissolution of redevelopment agencies,the motivation of a taxing agency to seek disruption regarding the Ground Lease or the DDA would not be apparent. In addition, the Lessee holds substantial property rights under the Ground Lease which could not be eliminated without significant compensation from revenues that would otherwise flow to taxing agencies. The Dissolution Act further provides that assets of a former redevelopment agency, such as the residuary rights of the Successor Agency under the Ground Lease, are to be deployed under a long range property management plan("LRPMP"). Any such LRPMP for the Successor Agency must be approved by the Oversight Board and is further subject to approval or non-action by the DOE No LRPMP has been formulated or approved for the Successor Agency. The Dissolution Act provides that certain assets are to be retained by the host city and others are to be disposed of, all as to be further provided under the applicable LRPMP. As of the date of this Preliminary Official Statement, the Successor Agency does not know which entity will be the holder of the Successor Agency's property interests under the DDA or the Ground Lease following adoption and implementation of a LRPMP for the Successor Agency. It is possible that such interests will ultimately be held by a private party having no connection to the Successor Agency,City or the Lessee. The provisions of the Dissolution Act are relatively new and have been subject to a variety of judicial challenges. The City can provide no assurances concerning the manner in which the Dissolution Act will be interpreted or which entity or entities will ultimately be determined to own the property assets related to the DDA and the Ground Lease as currently held by the Successor Agency." Limitations on Remedies Remedies available to the Owners may be limited by a variety of factors and may be inadequate to assure the timely payment of principal of and interest on the Bonds or to preserve the tax-exempt status of the Bonds. Bond Counsel has limited its opinion as to the enforceability of the Bonds and of the Indenture to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium, or others similar laws affecting generally the enforcement of creditors' rights, by equitable principles and by the exercise of judicial discretion. Additionally, the Bonds are not subject to acceleration in the event of the breach of any covenant or duty under the Indenture. The lack of availability of certain remedies or the limitation of remedies may entail risks of delay, limitation or modification of the rights of the Owners. CONTINUING DISCLOSURE Pursuant to a Continuing Disclosure Agreement (the "District Disclosure Agreement") with Willdan Financial Services, as disclosure dissemination agent, the District has agreed to provide, or cause to be provided, to the Electronic Municipal Market Access System of the Municipal Securities Rulemaking Board, which can be found on the Internet at www.emma.msrb.org ("EMMA") on an annual basis certain financial information and operating data concerning the District. The District has further agreed to provide notice to EMMA of certain listed events. Additionally, pursuant to a Continuing Disclosure Agreement(the "Property Owner Disclosure Agreement," and, together with the District Disclosure Agreement, the "Disclosure Agreements")with U.S. Bank National Association, as disclosure dissemination agent,the Property Owner has agreed to provide, or cause to be provided, to EMMA, on an annual basis certain information concerning the Property Owner. The District and the Property Owner have further agreed to provide notice to EMMA of certain listed events. These covenants have been made in order to assist the Underwriter in complying with Rule 15c2-12 adopted by the Securities and Exchange Commission. See APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and the Property Owner and 34 DOC SOC/1616674v6/022273-0006 notices of listed events to be provided by the District and the Property Owner. Within the last five years, neither the City nor the District nor the Property Owner has failed to timely comply with its prior continuing disclosure obligations under Rule 15c2-12(b)(5) in all material respects. The full text of the forms of the Disclosure Agreements are set forth in APPENDIX E. TAX EXEMPTION In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes, and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount)on the Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Bonds may be included as an adjustment in calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations. In the opinion of Bond Counsel, the difference between the issue price of a Bond (the first price at which a substantial amount of the Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount.deemed received by a Beneficial Owner will increase the Beneficial Owner's basis in the applicable Bond. The amount of original issue discount that accrues to the Beneficial Owner of the Bonds is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax. Bond Counsel's opinion as to the exclusion from gross income for federal income tax purposes of interest on the Bonds (including any original issue discount) is based upon certain representations of fact and certifications made by the District,the Underwriters and others and is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code") that must be satisfied subsequent to the issuance of the Bonds to assure that interest on the Bonds (including any original issue discount)will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest on the Bonds (including any original issue discount) to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District will covenant to comply with all such requirements. The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Beneficial Owner's basis in the applicable Bond(and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Bond to the Beneficial Owner. Purchasers of the Bonds should consult their own tax advisors as to the treatment,computation and collateral consequences of amortizable bond premium. The Internal Revenue Service (the "IRS") has initiated an expanded program for the auditing of tax- exempt bond issues, including both random and targeted audits. It is possible that the Bonds will be selected for audit by the IRS. It is also possible that the market value of the Bonds might be affected as a result of such an audit of the Bonds (or by an audit of similar bonds). No assurance can be given that in the course of an 35 DOC SOC/1616674v6/022273-0006 audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Bonds to the extent that it adversely affects the exclusion from gross income of interest(and original issue discount)on the Bonds or their market value. Bond Counsel's opinion may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) with respect to any Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson& Rauth, a Professional Corporation. SUBSEQUENT TO THE ISSUANCE OF THE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE BONDS OR THE MARKET .VALUE OF THE BONDS. LEGISLATIVE CHANGES HAVE BEEN PROPOSED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME TAX BEING IMPOSED ON CERTAIN OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE BONDS. NO ASSURANCE CAN,BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE BONDS, SUCH CHANGES(OR OTHER CHANGES)WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS,AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE BONDS. Although Bond Counsel has rendered an opinion that interest on the Bonds (including any original issue discount) is excluded from gross income for federal income tax purposes provided that the District continues to comply with certain requirements of the Code, the accrual or receipt of interest on the Bonds (including any original issue discount) may otherwise affect the tax liability of the recipient. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, all potential purchasers should consult their tax advisors before purchasing any of the Bonds. Should interest on the Bonds (including any original issue discount) become includable in gross income for federal income tax purposes, the Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture. The proposed form of Bond Counsel's opinion with respect to the Bonds is attached as APPENDIX B. LEGAL OPINION The legal opinions of Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, approving the validity of the Bonds in substantially the form set forth as APPENDIX B hereto,will be made available to purchasers at the time of original delivery. Certain legal matters will be passed upon for the City and the District by the City Attorney, Jennifer McGrath, Esq. and by Stradling Yocca Carlson& Rauth, a Professional Corporation, Newport Beach, California, as Disclosure Counsel. Certain legal matters will be passed on for the Underwriter by Jones Hall, A Professional Law Corporation, San Francisco, California. 36 DOCSOC/1616674v6/022273-0006 ABSENCE OF LITIGATION No litigation is pending or threatened concerning the validity of the Bonds and a certificate of the District to that effect will be furnished to the Underwriter at the time of the original delivery of the Bonds. Neither the City nor the District is aware of any litigation pending or threatened which questions the existence of the District or the City or contests the authority of the District to levy and collect the Special Taxes or to issue and retire the Bonds. NO RATING The District has not made and does not contemplate making application to any rating agency for the assignment of a rating to the Bonds. UNDERWRITING The Bonds are being purchased by the Underwriter. The Underwriter has agreed to purchase the Bonds at a price of$ (being $ aggregate principal amount thereof, [less net original issue discount] [plus net original issue premium] of $ , and less underwriter's discount of $ ). The purchase contract relating to the Bonds provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation to make such purchase is subject to certain terms and conditions set forth in such purchase contract,the approval of certain legal matters by counsel and certain other conditions. The Underwriter may offer and sell the Bonds to certain dealers and others at prices lower than the offering price stated on the inside cover page hereof. The offering price may be changed from time to time by the Underwriter. FINANCIAL INTERESTS The fees being paid to the Underwriter,Bond Counsel, Disclosure Counsel,Jones Hall,A Professional Law Corporation, as counsel to the Underwriter, the Trustee and the Escrow Bank are contingent upon the issuance and delivery of the Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the Bonds. NEW LEGISLATION The District is not aware of any significant pending legislation which would have material adverse consequences on the Bonds or the ability of the District to pay the principal of and interest on the Bonds when due. ADDITIONAL INFORMATION The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations and summaries and explanations of the Bonds and documents contained in this Official Statement do not purport to be complete, and reference is made to such documents for full and complete statements and their provisions. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representatives of fact. 37 DOC SOC/1616674v6/022273-0006 The execution and delivery of this Official Statement by the Finance Director of the City has been duly authorized by the City Council of the City of Huntington Beach acting in its capacity as the legislative body of the District. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 By: Finance Director of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 38 DOC SOC/1616674v6/022273-0006 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX CITY OF 14UNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) A Special Tax applicable to each Assessor's Parcel of Taxable Property in the City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) (herein CFD No.2000-1) shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The leasehold interests in the real property in CFD No.2000-1, unless exempted by law or by the provisions hereof, shall be taxed for the purposes, to the extent, and in the manner herein provided. DEFINITIONS The capitalized terms hereinafter set forth have the following meanings when used in this Rate and Method of Apportionment: Acre or Acreage means the land area of an Assessor's Parcel as shown on an Assessor's Parcel Map, or if the land area is not shown on an Assessor's Parcel Map, the land area shown on the applicable final map, parcel map, or the other parcel map recorded with the County Recorder. If the Acreage of a particular Parcel is unclear after reference to available maps, the Administrator shall determine the appropriate Acreage for a Parcel. Act means Chapter 3.56(commencing with Section 3.56.010)of the Municipal Code of the City of Huntington Beach and, as applicable, the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 2.5 (commencing with Section 53311), Part 1, Division 2, of Title 5 of the Government Code of the State of California. Administrative Expenses means any or all of the following actual or reasonably estimated costs directly related to the administration of CFD No.2000-1: the fees and expenses of any Fiscal Agent or trustee (including any fees and expenses of its counsel)employed in connection with any Bonds; any costs associated with the marketing or remarketing of the Bonds;the expenses of the Administrator and the City in carrying out their duties under any Indenture or resolution with respect to the Bonds, including,but not limited to,the levy and collection of the Special Tax, the fees and expenses of legal counsel, charges levied by the County or any division or office thereof in connection with the levy and collection of Special Taxes, audits, continuing disclosure or other amounts needed to pay arbitrage rebate to the federal government with respect to Bonds; costs associated with complying with continuing disclosure requirements; costs associated with responding to public inquiries regarding Special Tax levies and appeals; attorneys' fees and other costs associated with commencement or pursuit of foreclosure for delinquent Special Taxes; and all other costs and expenses of City,the Administrator,the County, and any Fiscal Agent, escrow agent or trustee related to the administration of CFD No.2000-1. Administrator means the Director of Economic Development or such other person or entity designated by the City Administrative Officer or the City Council to administer the Special Tax according to this Rate and Method of Apportionment of Special Tax. Assessor's Parcel or Parcel means a lot,parcel or airspace parcel shown on an Assessor's Parcel Map with an assigned Assessor's Parcel number. A-1 DOC S OC/1616674v 6/022273-0006 Assessor's Parcel Map means an official map of the Assessor of the County designating Parcels by Assessor's Parcel number. Bonds mean any bonds or other debt (as defined in Section 53317(d) of the Act), whether in one or more series, issued by the City for CFD No.2000-1 under the Act. City means the City of Huntington Beach. City Council means the City Council of the City of Huntington Beach, acting as the legislative body of CFD No.2000-1. County means the County of Orange. Development Agreement means the Amended and Restated Disposition and Development Agreement between the City and the developer, Mayer Financial, Ltd. and its subsidiaries,successors and assigns,and any subsequent amendments thereto. Exempt Land means (1)any real property within the boundaries of CFD No.2000-1 which generally serves the development subject to the Development Agreement and/ or Ground Lease and is owned by a governmental agency for public right-of-way purposes including, but not limited to, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator or (2)any Assessor's Parcel for which the Special Tax with respect to the leasehold interest has been paid in full. Fiscal Agent means the fiscal agent who is a party to the Indenture, if so approved. Fiscal Year means the period commencing on July 1 and ending on the following June 30, in any year in which the Bonds are outstanding. Ground Lease means the ground lease with respect to the land within CFD No.2000-1 boundary covering a term exceeding the maturity date for the Bonds between the City and the tenant,Mayer Financial, Ltd. and its subsidiaries,successors and assigns, and any subsequent amendments thereto. Indenture means the indenture, fiscal agent agreement, resolution or other instrument approved pursuant to the Resolution of Issuance and pursuant to which Bonds are issued, as modified, amended and/or supplemented from time to time,and any instrument replacing or supplementing the same. Maximum Special Tax means, with respect to the leasehold interest in any Parcel of Taxable Property, the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on the leasehold interest in such Parcel. Outstanding Bonds means all Bonds which are then outstanding under the Indenture. Reserve Fund means the fund of that name created under the Indenture. Resolution of Issuance means the resolution adopted by the City Council of the City, acting as the legislative body of CFD No.2000-1,authorizing the issuance of the Bonds in accordance with the Act. Special Tax means the special tax to be levied pursuant to the Act and this Rate and Method of Apportionment of Special Tax in each Fiscal Year on the leasehold interests in Taxable Property within CFD No.2000-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No. 2000-1 necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the calendar year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Fund for A-2 DOC SOC/1616674v6/022273-0006 all Outstanding Bonds, (iii)to pay Administrative Expenses, and (iv)to pay costs of any credit enhancement (including fees and expenses related to any letter of credit)for the Bonds, and less a credit for available funds determined pursuant to the Indenture. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No.2000-1, which are not Exempt Land or exempt from the Special Tax pursuant to law. Trustee means the trustee who is a party to the Indenture, if so approved. B. IDENTIFYING TAXABLE PROPERTY Not less than fifteen business days prior to the beginning of each Fiscal Year, the Administrator shall. determine which Parcels in CFD No.2000-1 are Taxable Property. The leasehold interest in the Taxable Property shall be subject to Special Taxes in accordance with the rate and method of apportionment described in Sections C and D below. C. MAXIMUM SPECIAL TAX The Maximum Special Tax for the leasehold interests in Taxable Property in CFD No.2000-1 shall be the greater of(1)$130,000 per Acre or(2)the amount determined pursuant to the following steps: Step 1: Determine the maximum annual debt service on all Outstanding Bonds; Step 2: Multiply the total debt service determined in Step 1 by 1.1 and add the Administrative Expenses; Step 3: Determine the Acreage of Taxable Property within the CFD No. 2000-1; Step 4: Divide the amount from Step 2 by the Acreage from Step 3 to determine the Maximum Special Tax per Acre of Taxable Property. D. METHOD OF APPORTIONMENT OF THE SPECIAL TAX Commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter, the City Council shall levy the Special Tax proportionately on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax,as determined by reference to Section C,above,as needed to satisfy the Special Tax Requirement. E. LIMITATIONS No Special Taxes shall be levied on the leasehold interest in any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on the leasehold interests in Taxable Property commencing with Fiscal Year 2000-2001, and for each Fiscal Year thereafter, and until the date on which principal and interest on all Outstanding Bonds have been paid in full (or provision for their payment has been made). Upon determination by the Administrator that this requirement has been met, the Special Tax lien shall be removed from the leasehold interests in all Parcels in CFD No.2000-1. F. MANNER OF COLLECTION The Special Tax shall be collected in the same manner and at the same time as ordinary ad valorem property taxes, provided, however,that CFD No.2000-1 may directly bill the special tax,may collect special taxes at a different time or in a manner if necessary to meet its financial obligations, and may covenant to foreclose and may actually foreclose on the leasehold interest in delinquent Assessor's Parcels as permitted by the Act. A-3 DOC SOC/1616674v6/022273-0006 G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No.2000-1, a special three-member Review / Appeal Committee. The Review / Appeal Committee shall interpret this Rate and Method of Apportionment and make determinations relative to the annual administration of the Special Tax and any appeals, as herein specified. The owner of the leasehold interest in any Taxable Property within CFD No.2000-1 claiming that the amount or application of the Special Tax is not correct may file a written notice of appeal with the Review /Appeal Committee not later than one calendar year after having paid the Special Tax that is disputed. The Review/Appeal Committee shall promptly review the appeal, and if necessary,meet with the owner of the leasehold interest, consider written and oral evidence regarding the amount of the Special Tax, and resolve the appeal. If the Review/Appeal Committee's decision requires the Special Tax to be modified or changed in favor of the owner of the leasehold interest, a cash refund shall not be made(except for the last year of the levy), but an adjustment shall be made to the next Special Tax levy. This procedure shall be exclusive and its exhaustion by any owner of a leasehold interest shall be a condition precedent to any legal action by such owner. H. PREPAYMENT OF SPECIAL TAX The following defmitions apply solely to this Section H.: Outstanding Bonds means all Previously Issued Bonds which are deemed to be outstanding under the Indenture after the first interest and/or principal payment date following the current Fiscal Year. Previously Issued Bonds means all Bonds that have been issued by CFD No.2000-1 prior to the date of prepayment. 1. Prepayment in Full The Special Tax applicable to any leasehold interest in any Assessor's Parcel of Taxable Property may be prepaid. The Special Tax obligation applicable to the leasehold interest in such Assessor's Parcel in CFD No.2000-1 may be fully prepaid and the obligation of the leasehold interest in such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner of the leasehold interest intending to prepay the Special Tax obligation on one or a combination of Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. Following receipt of such notice,the Administrator shall notify the owner of the leasehold interest in such Assessor's Parcel or Parcels of the prepayment amount of such Assessor's Parcel(s). The Administrator may charge a reasonable fee for providing this figure. Prepayment must be made not less than 45 days prior to the next occurring date that notice of redemption of Bonds from the proceeds of such prepayment may be given by the Fiscal Agent pursuant to the Indenture. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Capitalized Interest Credit Total: Equals Prepayment Amount A-4 DOC SOC/1616674v6/022273-0006 As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows: Paragraph No. 1. For Assessor's Parcels of Taxable Property intending to prepay, compute the Maximum Special Tax for such Assessor's Parcels. 2. Divide the Maximum Special Tax computed pursuant to Paragraph 1 by the total Maximum Special Tax of all Assessor's Parcels of Taxable Property in CFD No.2000-1, excluding any Assessor's Parcels which have prepaid their Special Taxes in full. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section H to compute the amount of Outstanding Bonds to be retired and prepaid, and round the result up to the nearest multiple of$5,000(the Bond Redemption Amount). 4. Multiply the Bond Redemption Amount computed pursuant to Paragraph 3 by the applicable redemption premium, if any, on the Outstanding Bonds to be redeemed(the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the first bond interest and/or principal payment date following the current Fiscal Year until the earliest redemption date for the Outstanding Bonds. 6. Determine the Special Taxes levied on the Assessor's Parcel in the current and any previous Fiscal Year,which have not yet been paid. 7. Compute the amount the Administrator reasonably expects to derive from the reinvestment of the Prepayment Amount from the date of prepayment until the redemption date for the Outstanding Bonds to be redeemed with the prepayment. 8. Add the amounts computed pursuant to Paragraphs 5 and 6 and subtract the amount computed pursuant to Paragraph 7(the Defeasance Amount). 9. Determine the administrative fees and expenses of CFD No.2000-1, including the costs of computation of the prepayment, the costs to invest the prepayment proceeds, the costs of redeeming Bonds, and the costs of recording any notices to evidence the prepayment and the redemption (the Administrative Fees and Expenses). 10. Determine the reserve fund credit (the Reserve Fund Credit) which shall equal the lesser of: (a)the expected reduction in the reserve requirement(as defined in the Indenture), if any, associated with the redemption of Outstanding Bonds as a result of the prepayment, or (b)the amount derived by subtracting the new reserve requirement(as defined in the Indenture)in effect after the redemption of Outstanding Bonds as a result of the prepayment from the balance in the reserve fund on the prepayment date,but in no event shall such amount be less than zero. 11. If any capitalized interest for the Outstanding Bonds will not have been expended at the time of the first interest and/ or principal payment following the current Fiscal Year, a capitalized interest credit shall be calculated by multiplying the quotient computed pursuant to Paragraph 2 by the expected balance in the capitalized interest fund after such first interest and/ or principal payment (the Capitalized Interest Credit). 12. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3,4, 8 and 9,less the amounts computed pursuant to Paragraphs 10 and 11 (the Prepayment Amount). A-5 DOC S OC/1616674v6/022273-0006 13. From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3,4, 8, 10 and 11 shall be deposited into the appropriate fund as established under the Indenture and be used to retire Outstanding Bonds or make debt service payments. The amount computed pursuant to Paragraph 9 shall be retained by the Administrator. As a result of the payment of the current Fiscal Year's Special Tax levy as determined under Paragraph 6 (above), the Administrator shall remove the current Fiscal Year's Special Tax levy for such Assessor's Parcel from the County tax rolls. With respect to any Assessor's Parcel that is prepaid,the City Council shall cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of Special Taxes and the release of the Special Tax lien on such Assessor's Parcel, and the obligation of such Assessor's Parcel to pry the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Taxes that may be levied on Taxable Property within CFD No.2000-1 both prior to and after the proposed prepayment is at least 1.1 times the maximum annual debt service on all Outstanding Bonds. 2. Prepayment in Part The Maximum Special Tax on an Assessor's Parcel of Taxable Property may be partially prepaid. The amount of the prepayment shall be calculated as in Section H.1, except that a partial prepayment shall be calculated according to the following formula: PP=(PH xF)+G Where these terms are defined as follows: PP = the partial prepayment PH = the Prepayment Amount calculated according to Section H.1, minus the amounts determined in Paragraph No.6 and 9 of Section H.1. F = the percent by which the owner of the leasehold interest in the Assessor's Parcel(s) is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No.6 and 9 of Section H.1. The owner of the leasehold interest in an Assessor's Parcel who desires to partially prepay the Maximum Special Tax shall notify the Administrator of(i)such owner's intent to partially prepay the Maximum Special Tax, (ii)the percentage by which the Maximum Special Tax shall be prepaid, and(iii)the company or agency that will be acting as the escrow agent, if applicable. The Administrator shall provide the owner of the leasehold interest with a statement of the amount required for the partial prepayment of the Maximum Special Tax for an Assessor's Parcel following receipt of the request. With respect to any Assessor's Parcel that is partially prepaid, CFD No. 2000-1 shall (i)distribute the funds remitted to it according to Paragraph 13 of Section H.1,and(ii)indicate in the records of CFD No.2000-1 that there has been a partial prepayment of the Maximum Special Tax and that a portion of the Maximum Special Tax equal to the outstanding percentage(1.00-F)of the remaining Maximum Special Tax shall continue to be authorized to be levied on such Assessor's Parcel pursuant to Section D. A-6 DOC S OC/1616674v6/022273-0006 APPENDIX B FORM OF OPINION OF BOND COUNSEL [Closing Date] City Council of the City of Huntington Beach Huntington Beach,California Re: $ City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Ladies and Gentlemen: We have examined the Constitution and the laws of the State of California, a certified record of the proceedings of the City of Huntington Beach(the"City")taken in connection with the formation of the City of Huntington Beach Community Facilities District No. 2000-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$ (the "Bonds") and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the District, the initial purchasers of the Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us. The Bonds have been issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (comprising Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California) and Resolution No. (the "Resolution of Issuance"), adopted by the City Council (the "City Council") of the City on , 2013, and by a Bond Indenture dated as of , 2013 (the "Indenture"), by and between the District and U.S. Bank National Association, as trustee. All capitalized terms not defined herein shall have the meanings set forth in the Indenture. The Bonds are dated the date of delivery and mature on the dates and in the amounts set forth in the Indenture. The Bonds bear interest payable semiannually on each September 1 and March 1, commencing on March 1, 2014, at the rates per annum set forth in the Indenture. The Bonds are registered Bonds in the form set forth in the Indenture redeemable in the amounts, at the times and in the manner provided for in the Indenture. Based upon our examination of the foregoing, and in reliance thereon and on all matters of fact as we deem relevant under the circumstances,and upon consideration of applicable laws, we are of the opinion that: (1) The Bonds have been duly and validly authorized by the District and are legal, valid and binding limited obligations of the District, enforceable in accordance with their terms and the terms of the Indenture, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other laws affecting creditors' rights generally, by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California. The Bonds are limited obligations of the District but are not a debt of the City, the State of California or any other political subdivision thereof within the meaning of any constitutional or statutory limitation, and, except for the Special Taxes, neither the faith and credit nor the taxing power of the City, the State of California, or any of its political subdivisions is pledged for the payment thereof. B-1 DOC SOC/1616674v6/022273-0006 (2) The Indenture has been duly executed and delivered by the City Council on behalf of the District. The Indenture creates a valid pledge of, and the Bonds are secured by the Net Taxes and the amounts on deposit in certain funds and accounts established under the Indenture, as and to the extent provided in the Indenture. The Indenture is enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer or other similar laws affecting creditors' rights generally,by the exercise of judicial discretion in accordance with general principles of equity or otherwise in appropriate cases and by limitations on remedies against public agencies in the State of California; provided,however, we express no opinion as to the enforceability of the covenant of the District contained in the Indenture to levy Special Taxes for the payment of Administrative Expenses or as to any indemnification,penalty, contribution,choice of law,choice of forum or waiver provisions contained therein. (3) Under existing statutes, regulations, rulings and judicial decisions, interest(and original issue discount) on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations; however, it should be noted that, with respect to corporations, such interest (and original issue discount) will be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of corporations. (4) Interest(and original issue discount)on the Bonds is exempt from State of California personal income tax. (5) The difference between the issue price of a Bond(the first price at which a substantial amount of the Bonds of a maturity are to be sold to the public)and the stated redemption price at maturity with respect to such Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Bond owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Bond owner will increase the Bond owner's basis in the applicable Bond. Original issue discount that accrues for the Bond owner is excluded from the gross income of such owner for federal income tax purposes, is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals or corporations(as described in paragraph(3)above)and is exempt from State of California personal income tax. (6) The amount by which a Bond owner's original basis for determining loss on sale or exchange in the applicable Bond(generally the purchase price) exceeds the amount payable on maturity(or on an earlier call date) constitutes amortizable Bond premium which must be amortized under Section 171 of the Code; such amortizable Bond premium reduces the Bond owner's basis in the applicable Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Bond premium may result in a Bond owner realizing a taxable gain when a Bond is sold by the owner for an amount equal to or less (under certain circumstances)than the original cost of the Bond to the owner. The opinion expressed in paragraphs (3) and (5) above as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Bonds is subject to the condition that the District complies with all requirements of the Internal Revenue Code of 1986, as amended (the "Code"), that must be satisfied subsequent to the issuance of the Bonds to assure that such interest (and original issue discount)will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest(and original issue discount)on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. The District has covenanted to comply with all such requirements. Except as set forth in paragraphs (3), (4), (5)and(6)above,we express no opinion as to any tax consequences related to the Bonds. Certain agreements, requirements and procedures contained or referred to in the Indenture, the Tax Certificate executed by the District and other documents related to the Bonds may be changed and certain actions may be taken or omitted, under the circumstances and subject to the terms and conditions set forth in B-2 DOCSOC/I616674v6/022273-0006 such documents. We express no opinion as to the effect on the exclusion from gross income for federal income tax purposes of interest(and original issue discount) on any Bond if any such change occurs or action is taken or omitted upon advice or approval of bond counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation. We are admitted to the practice of law only in the State of California and our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction and express no opinion as to the enforceability of the choice of law provisions contained in the Indenture. The opinions expressed herein are based upon an analysis of existing statutes,regulations,rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the foregoing opinions may be affected by actions taken (or not taken)or events occurring(or not occurring)after the date hereof. We have not undertaken to determine,or to inform any person, whether such actions or events are taken(or not taken)or do occur(or do not occur). Our engagement with respect to the Bonds terminates upon their issuance, and we disclaim any obligation to update the matters set forth herein. We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the owners of the Bonds with respect to matters contained in the Official Statement or other offering material. Respectfully submitted, B-3 DOC SOC/1616674v6/022273-0006 APPENDIX C GENERAL ECONOMIC AND DEMOGRAPHIC DATA FOR THE CITY OF HUNTINGTON BEACH AND THE COUNTY OF ORANGE The following economic data for the City of Huntington Beach (the "City') and the County of Orange (the "County') is presented for information purposes only. The Bonds are not a debt or obligation of the City or the County. General The City of Huntington Beach is a seaside city located in the County. The City is famous for an 8.5 miles stretch of beach that is complemented by a mild climate and surf culture that has earned the Huntington Beach the title, "Surf City, USA." Incorporated in 1909, the City has a council/administrator form of government. The City Council is comprised of seven members elected biannually at large to four-year terms and the Mayor is selected by the Council Members to one-year term. The City Council appoints the City Administrator who is responsible for the day-to-day administration of Huntington Beach's business and the coordination of all departments. Orange County is third most populous county in California and is located adjacent to the Pacific Ocean and the Counties of Los Angeles, San Bernardino, Riverside and San Diego. The County is located in the most heavily populated region of California, necessitating easy access to road, rail, air and sea transportation. The County is also a major Southern California tourist center with a large number of amusement parks and recreational and entertainment activities. The County's Pacific Coast shoreline includes five state beaches and parks, five Municipal beaches and five County beaches. Orange County is a general law county and governed by a five-member Board of Supervisors, each of whom serves for four-year terms. The County provides a wide range of services to its residents, including police, medical and health services, senior citizen assistance, library services, judicial institutions (including support programs), airport service, roads, solid waste management, harbors, beaches and parks, life guard services and a variety of public assistance programs. C-1 DOC SOC/1616674v6/022273-0006 Population The following table summarizes population estimates for the City, County and State from 2001 through 2013. POPULATION ESTIMATES The City of Huntington Beach,Orange County and the State of California 2001-2013111 Year Huntington Beach Orange County California 2001 190,860 2,871,926 34,430,970 2002 191,802 2,902,207 35,063,959 2003 192,650 2,927,118 35,652,700 2004 193,069 2,948,135 36,199,342 2005 192,581 2,956,847 36,676,931 2006 191,653 2,956,334 37,087,005 2007 190,813 2,960,659 37,463,609 2008 190,018 2,974,321 37,871,509 2009 190,079 2,990,805 38,255,508 2010 190,136 3,008,855 37,223,900 2011 190,355 3,028,846 37,427,946 2012 192,524 3,055,792 37,678,563 2013 193,616 3,081,804 37,966,471 January 1 data. Source: California State Department of Finance,Demographic Research Unit. March 2010 Benchmark. Income The following tables show the personal income and per capita personal income for the County, State of California and United States from 2005 through 2011. PERSONAL INCOME County of Orange, State of California,and United States 2005-2011 (Dollars in Thousands) Year County of Orange California United States 2005 $139,408,948 $1,387,661,013 $10,476,669,000 2006 150,598,3 54 1,495,533,3 88 11,256,516,000 2007 153,446,641 1,566,400,134 11,900,562,000 2008 155,925,156 1,610,697,843 12,380,225,000 2009 146,052,466 1,526,531,367 12,168,161,000 2010 150,467,328 1,587,403,857 12,353,577,000 2011 154,131,535 1,676,564,972 12,981,740,848 Source: U.S.Department of Commerce,Bureau of Economic Analysis. C-2 DOCSOC/1616674v6/022273-0006 PER CAPITA PERSONAL INCOME"' County of Orange, State of California,and United States 2005-2011 County of Year Orange California United States 2005 $47,417 $38,767 $35,424 2006 51,359 41,567 37,698 2007 52,342 43,240 39,461 2008 52,720 43,853 40,674 2009 48,624 42,395 39,635 2010 48,760 42,514 39,937 2011 50,440 44,481 41,663 Per capita personal income is the total personal income divided by the total mid-year population estimates of the U.S. Bureau of the Census. All dollar estimates are in current dollars(not adjusted for inflation). Source: U.S.Department of Commerce,Bureau of Economic Analysis. Employment The following table summarizes the labor force, employment and unemployment figures over the past five years for the City, County and State of California. CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT City of Huntington Beach, Orange County, State of California and the United States 2008-2012"' Unemployment Area Labor Force EmploymenP Unemployment63) Rate(4) 2008 City of Huntington Beach 123,700 118,400 5,300 4.3% Orange County 1,618,100 1,532,800 85,300 5.3 State of California 18,191,000 16,883,400 1,313,200 7.2 2009 City of Huntington Beach 120,600 111,900 8,700 7.2% Orange County 1,588,800 1,448.200 140,600 8.9 State of California 18,204,200 16,1411500 2,086,200 11.3 2010 City of Huntington Beach 120,600 111,300 9,400 7.8% Orange County 1,591,000 1,440,400 150,700 9.5 State of California 18,176,200 15,916,300 25264,900 12.4 2011 City of Huntington Beach 121,800 113,100 8,600 7.1% Orange County 1,603,700 1,464,400 139,300 8.7 State of California 185172,000 16,185,100 2,158,300 10.9 2012 City of Huntington Beach 123,200 115,600 7,600 6.2% Orange County 1,618,700 1,496.00 122,700 7.6 State of California 18,494,900 16,560,300 1,934,500 10.5 (1) Data is based on annual averages,unless otherwise specified,and is not seasonally adjusted. (2) Includes persons involved in labor-management trade disputes. (3) Includes all persons without jobs who are actively seeking work. (4) The unemployment rate is computed from un-rounded data;therefore,it may differ from rates computed from rounded figures in this table. Source: U.S.Department of Labor-Bureau of Labor Statistics,California Employment Development Department. March 2012 Benchmark. C-3 DOC SOC/1616674v6/022273-0006 Industry The following table summarizes employment figures by industry for the Santa-Ana-Anaheim- Irvine Metropolitan Division,which is located entirely within the County. INDUSTRY EMPLOYMENT& LABOR FORCE ANNUAL AVERAGES Santa Ana-Anaheim-Irvine MD (Orange County) 2008-2012 2008 2009 2010 2011 2012 Farming 4,600 3,800 3,700 3,200 2,700 Mining and Logging 600 500 500 500 500 Construction 91,200 74,200 68,000 68,300 71,300 Manufacturing 174,100 154,800 150,400 153,600 157,800 Wholesale Trade 86,700 79,400 77,600 77,900 76,700 Retail Trade 155,600 142,300 140,100 141,600 142,200 Transportation,Warehousing and Utilities 29,300 27,800 26,700 27,500 27,700 Information 30,100 27,300 24,800 23,800 24,200 Financial Activities 113,100 105,100 103,500 103,900 108,100 Professional and Business Services 266,600 240,200 243,500 246,700 255,900 Education and Health Services 150,700 152,100 155,500 158,700 163,400 Leisure and Hospitality 176,400 169,100 168,600 173,200 180,500 Other Services 46,500 42,600 42,200 42,800 44,300 Government 160,800 156,600 152.300 149.600 147.800 Total: 1,486,200 1,375,900 1,357,400 1,371,300 1,403,000 Note: Items may not add to total due to independent rounding. Source: California Employment Development Department,Labor Market Information Division.March 2012 Benchmark. Largest Employers The following table presents the largest employers in the City and the County during calendar year 2011. Name of Business No.Employed %of Total Boeing 4,609 4.17% Quiksilver 1,230 1.11 Cambro MFG Co. 951 0.86 Hyatt Regency Huntington Beach 641 0.58 C&D Aerospace 555 0.50 Huntington Beach Hospital 503 0.45 Rainbow Disposal 408 0.37 Huntington,Beach Healthcare 381 0.34 Waterfront Hilton Beach Resort 343 0.31 Cleveland Golf/Srixon 280 0.25 Total of top 10 9,901 8.95 all others 100,699 91.05 Total employment(public and private) 110,600 100.00% Source: City of Huntington Beach,Comprehensive Annual Financial Report for Fiscal Year Ended September 30,2011. C-4 DOC SOC/1616674v6/022273-0006 LARGEST EMPLOYERS Orange County 2013 Name of Business Location Type of Business Allergan Inc. Irvine Drug Millers(Mfrs) Anaheim City Hall Anaheim City Government-Executive Offices Blogtagon Social Media Fountain Valley Internet Service Boeing Co. Huntington Beach Aircraft Manufacturer Boeing Co. Sea]Beach Aerospace Industries Broadcom Corp Irvine Semiconductors&Related Devices(Mfrs) California State-Fullerton Fullerton Schools-Universities&Colleges Academic Disneyland Resort Anaheim Anaheim Amusement&Theme Parks Emplicity Irvine Employment Contractors-Temporary Help First American Title Ins Co. Santa Ana Title Companies First Team San Clemente Real Estate San Clemente Real Estate Fountain Valley Regional Hospital Fountain Valley Hospitals Hoag Hospital Newport Beach Hospitals Jones Lang La Salle Brea Real Estate Management Pacifi Care Cypress Health Plans Puro Clean Anaheim Water Damage Restoration-Residential Quiksilver Eyeware USA Huntington Beach Optical Goods-Retail Saddleback Memorial Hospital Laguna Hills Hospitals St.John Knits Intl Inc. Irvine Women's Apparel-Retail St.Jude Medical Ctr. Fullerton Hospitals St.Jude Medical Ctr. Brea Hospitals Tenet Healthcare Fountain Valley Hospitals UC Irvine Healthcare Orange Hospitals University of CA-Irvine Irvine Schools-Universities&Colleges Academic Walt Disney Parks&Resorts Anaheim Amusement&Theme Parks Source: California Employment Development Department, Labor Market Information Division. Major Employers in Orange County. C-5 DOC SOC/I616674v6/022273-0006 Building Activity The following tables summarize building permits and valuations for the City and the County during calendar years 2007 through 2011. BUILDING PERMITS AND VALUATIONS City of Huntington Beach 2007-2011 2007 2008 2009 2010 2011 Valuation(In$000's) Residential $ 61,640 $ 39,114 $26,788 $33,567 $44,375 Nonresidential 66,821 66.477 31.221 42.546 102,623 Total Valuation(') $128,461 $105,591 $58,009 $76,113 146,998 New Dwelling Units(#) Single-Family 50 20 9 4 24 Multi-Family 4 0 0 16 45 Total: 54 20 9 20 69 Total may not add up due to rounding. Source: Construction Industry Research Board. BUILDING PERMITS AND VALUATIONS Orange County 2007-2011 2007 2008 2009 2010 2011 Valuation(In$000's) Residential $1,792,269 - $1,037,710 $ 855,193 $1,029,406 $1,236,970 Nonresidential 2.005.197 1.439.121 952.485 1,115.928 1.300.021 Total Valuation(') $3,797,466 $2,476,831 $1,807,678 $2,181,334 $2,536,992 New Dwelling Units(#) Single-Family 2,182 1,295 1,376 1,553 1,898 Multi-Family 4.890 1.864 824 1.538 2.909 Total: 7,072 3,159 2,200 3,091 4,807 Total may not add up due to rounding. Source: Construction Industry Research Board. C-6 DO C SOC/1616674v6/022273-0006 Taxable Sales The history of taxable transactions in the City and the County from 2007 through 2011 is shown in the following tables. TAXABLESALES Huntington Beach 2007-2011 Retail Retail and Food Total Outlets Year Permits Taxable Transactions Total Permits Taxable Transactions 2007 2,985 $2,096,249 7,177 $2,631,199 2008 3,105 1,916.823 7,127 2,563,546 2009 41274 1,673,149 6,582 2,247,735 2010 4,563 1,723,952 6,847 2,366,485 2011 4,701 2,012,833 6,968 2,584,793 Source: "Taxable Sales in California(Sales&Use Tax),"California Board of Equalization. TAXABLESALES Orange County 2007-2011 Retail Retail and Food Total Outlets Year Permits Taxable Transactions Total Permits Taxable Transactions 2007 44,093 $38,988,227 99,088 $57,293,471 2008 45,705 35,768,595 97,612 53,606,829 2009 56,259 31,162,619 90,231 45,712,784 2010 58,076 23,690,727 92,407 34,828,607 20111') 58,795 35,587,795 92,207 51,731,139 Source: "Taxable Sales in California(Sales&Use Tax),"California Board of Equalization. C-7 DOC SOC/1616674v6/022273-0006 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE [TO COME] D-1 DOCSOC/1616674v6/022273-0006 APPENDIX E FORMS OF CONTINUING DISCLOSURE AGREEMENTS OF THE DISTRICT AND THE PROPERTY OWNER ------------------------------------ FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement(the"Disclosure Agreement"), dated as of 2013, is executed and delivered by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and , as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to Resolution No. that certain Bond Indenture(the"Indenture"), dated as of , 2013, by and between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"). The Issuer covenants as follows: SECTION 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Issuer, for the benefit of the Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule(as defined below). SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section,the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the Issuer pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Beneficial Owner" shall mean any person which (a)has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or(b)is treated as the owner of any Bonds for federal income purposes. "Disclosure Representative" shall mean the City Manager of the City,the Finance Director of the City or his or her designee, or such other officer or employee as the City shall designate in writing to the Dissemination Agent from time to time. "Dissemination Agent" shall mean, initially, or any successor Dissemination Agent designated in writing by the Issuer which has filed with the then current Dissemination Agent a written acceptance of such designation. "EMMA"shall mean the Electronic Municipal Market Access system of the MSRB. "Listed Events" shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filings made pursuant to the Rule. "Participating Underwriter"shall mean Stifel,Nicolaus&Company, Incorporated. "Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or E-1 DOC SOC/I616674v6/022273-0006 the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB, currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5)adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. "Tax-exempt" shall mean that interest on the Bonds is excluded from gross income for federal income tax purposes, whether or not such interest is includable as an item of tax preferences or otherwise includable directly or indirectly for purposes of calculating any other tax liability, including any alternative minimum tax or environmental tax. SECTION 3. Provision of Annual Reports. (a) Not later than nine months after the end of the City's fiscal year (which shall be July 1 of each year, so long as the City's fiscal year ends on September 30), commencing with the report for the report for the 2012-13 fiscal year (which is due not later than July 1, 2014), the Issuer shall provide, or shall cause the Dissemination Agent to provide, to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4 of this Disclosure Agreement;provided that the audited financial statements of the Issuer may be submitted separately from and later than the balance of the Annual Report if they are not available by the date required above for the filing of the Annual Report. An Annual Report shall be provided at least annually notwithstanding any fiscal year longer than 12 calendar months. The Issuer's fiscal year is currently effective from October 1 to the immediately succeeding September 30 of the following year. The Issuer will promptly notify the Repository of a change in the fiscal year dates. (b) In the event that the Dissemination Agent is an entity other than the Issuer, then the provisions of this Section 3(b)shall apply. Not later than fifteen(15)Business Days prior to the date specified in subsection(a)for providing the Annual Report to the Repository,the Issuer shall provide the Annual Report to the Dissemination Agent. If by fifteen(15) Business Days prior to such date the Dissemination Agent has not received a copy of the Annual Report,the Dissemination Agent shall contact the Issuer to determine if the Issuer will be filing the Annual Report in compliance with subsection (a). The Issuer shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Issuer and shall have no duty or obligation to review such Annual Report. (c) If the Issuer is the Dissemination Agent and the Issuer is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Issuer shall send a notice to the Repository in substantially the form attached to this Disclosure Agreement as Exhibit A. If the Dissemination Agent is other than the Issuer and if the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repository by the date required in subsection (a), the Dissemination Agent shall send a notice to the Repository, in substantially the form attached as Exhibit A. E-2 DOC SOC/1616674v6/022273-0006 (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB;and (ii) promptly after receipt of the Annual Report, file a report with the Issuer certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. (e) Notwithstanding any other provision of this Disclosure Agreement, all filings shall be made in accordance with the MSRB's EMMA system or in another manner approved under the Rule. SECTION 4. Content of Annual Reports. The Issuer's Annual Report shall contain or include by reference: (a) Financial Statements. The audited financial statements of the City for the most recent fiscal year of the Issuer then ended. If the audited financial statements are not available by the time the Annual Report is required to be filed, the Annual Report shall contain any unaudited financial statements of the Issuer in a format similar to the audited financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. Audited financial statements of the Issuer shall be audited by such auditor as shall then be required or permitted by State law or the Indenture. Audited financial statements shall be prepared in accordance with generally accepted accounting principles as prescribed for governmental units by the Governmental Accounting Standards Board; provided, however, that the Issuer may from time to time, if required by federal or state legal requirements, modify the basis upon which its financial statements are prepared. In the event that the Issuer shall modify the basis upon which its financial statements are prepared, the Issuer shall provide a notice of such modification to the Repository, including a reference to the specific federal or State law or regulation specifically describing the legal requirements for the change in accounting basis. (b) Financial and Operating Data. The Annual Report shall contain or incorporate by reference the following information: (i) the principal amount of Bonds outstanding as of September 30 of each year; (ii) the balance in each fund under the Indenture as of the September 30 preceding the filing of the Annual Report, including the Reserve Account and a statement of the Reserve Requirement; (iii) any changes to the Rate and Method approved or submitted to the electors for approval prior to the filing of the Annual Report; (iv) the status of any foreclosure actions being pursued by the District with respect to delinquent Special Taxes as of May 1 of each year•, (v) the identity of any property owner whose delinquent special taxes represent more than 5% of the amount levied and the number of lots, assessed value, delinquency amount value-to-lien ratios,prior delinquencies and foreclosure status of the applicable properties as of May 1 of each year; (vi) information regarding the percentage of delinquency, if any,in the collection of special taxes levied on property in the District for the Fiscal Year preceding the Annual Report date in the form set forth in Table 3,the number of parcels delinquent, amount delinquent compared to the total levy and the assessed value of each delinquent parcel as of May 1 of each year; E-3 D OC S OC/1616674v6/022273-0006 (vii) If available without significant expense to the District, the aggregate transient occupancy taxes collected from the hotel constructed within the District in the form set forth in Table 6;and (vii!) any information not already included under (1)through (vii)above that the Issuer is required to file in its annual report to the California Debt and Investment Advisory Commission pursuant to the provisions of the Mello-Roos Community Facilities Act of 1982,as amended. In addition to any of the information expressly required to be provided under paragraphs (a)or (b)of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements set forth in clauses(i)to(viii), in the light of the circumstances under which they were made,not misleading. (c) Any or all of the items listed in (a)or (b)above may be included by specific reference to other documents, including official statements of debt issues of the Issuer or related public entities,which have been submitted to the Repository. If the document included by reference is a final official statement, it must be available from the MSRB. The Issuer shall clearly identify each such other document so included by reference. SECTION 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause the Dissemination Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner not more than ten(10)business days after the event: 1. principal and interest payment delinquencies; 2. unscheduled draws on debt service reserves reflecting financial difficulties; 3. unscheduled draws on credit enhancements reflecting financial difficulties; 4. substitution of credit or liquidity providers, or their failure to perform; 5. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability or of a Notice of Proposed Issue (IRS Form 5701- TEB); 6. tender offers; 7. defeasances; 8. ratings changes; and 9. bankruptcy,insolvency,receivership or similar proceedings. Note: for the purposes of the event identified in subparagraph(9),the event is considered to occur when any of the following occur: the appointment of a receiver, trustee or similar officer for an obligated person in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, E-4 DOCSOC/1616674v6/022273-0006 arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person. (b) Pursuant to the provisions of this Section 5, the Issuer shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: 1. unless described in paragraph 5(a)(5)above,notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 2. the consummation of a merger, consolidation or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person,other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a defmitive agreement relating to any such actions,other than pursuant to its terms; 3. appointment of a successor or additional trustee or the change of the name of a trustee; 4. nonpayment related defaults; 5. modifications to the rights of Owners of the Bonds; 6. notices of redemption; and 7. release,substitution or sale of property securing repayment of the Bonds. (c) Upon the occurrence of a Listed Event under Section 5(b) above, the Issuer shall as soon as possible determine if such event would be material under applicable federal securities laws. (d) If the Issuer determines that knowledge of the occurrence of a Listed Event under Section 5(b)would be material under applicable federal securities laws,the Issuer shall file a notice of such occurrence with the Repository in a timely manner not more than 10 business days after the event. (e) The Issuer hereby agrees that the undertaking set forth in this Disclosure Agreement is the responsibility of the Issuer and that the Dissemination Agent shall not be responsible for determining whether the Issuer's instructions to the Dissemination Agent under this Section 5 comply with the requirements of the Rule. SECTION 6. Termination of Reporting Obligation. The obligations of the Issuer and the Dissemination Agent under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Issuer shall give notice of such termination in the same manner as for a Listed Event under Section 5(a). SECTION 7. Dissemination Agent. The Issuer may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under the Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be . The Dissemination Agent may resign by providing (i)thirty days written notice to the Issuer,and(ii)upon appointment of a new Dissemination Agent hereunder. E-5 DOC S OC/1616674v6/0222 73-0006 SECTION 8. Amendment. (a) This Disclosure Agreement may be amended, by written agreement of the parties, without the consent of the Owners, if all of the following conditions are satisfied: (1)such amendment is made in connection with a change in circumstances that arises from a change in legal (including regulatory) requirements, a change in law, or a change in the identity, nature or status of the Issuer or the type of business conducted thereby, (2)this Disclosure Agreement as so amended would have complied with the requirements of the Rule as of the date of this Disclosure Agreement, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances, (3)the Issuer shall have delivered to the Dissemination Agent an opinion of a nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer and the Participating Underwriter, to the same effect as set forth in clause (2) above, (4)the Issuer shall have delivered to the Dissemination Agent an opinion of nationally recognized bond counsel or counsel expert in federal securities laws, addressed to the Issuer, to the effect that the amendment does not materially impair the interests of the Owners or Beneficial Owners, or such amendment shall have been approved by the Owners in the same manner as an amendment to the Indenture, and(5)the Issuer shall have delivered copies of such opinion and amendment to the Repository. (b) This Disclosure Agreement also may be amended by written agreement of the parties upon obtaining consent of Owners in the same manner as provided in the Indenture for amendments to the Indenture with the consent of the Owners of the Bonds; provided that the conditions set forth in Section 8(a)(1),(2)and(3)have been satisfied. (c) To the extent any amendment to this Disclosure Agreement results in a change in the type of financial information or operating data provided pursuant to this Disclosure Agreement, the first Annual Report provided thereafter shall include a narrative explanation of the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. (d) If an amendment is made to the basis on which financial statements are prepared,the Annual Report for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. Such comparison shall include a quantitative and, to the extent reasonably feasible, qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information. SECTION 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Issuer from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Issuer shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. The District acknowledges and understands that other state and federal laws, including but not limited to the Securities Act of 1933 and Rule lOb-5 promulgated under the Securities Exchange Act of 1934, as amended may apply to the District, and that under some circumstances compliance with this Disclosure Agreement,without additional disclosures or other action,may not fully discharge all duties and obligations of the District under such laws. SECTION 10. Default. In the event of a failure of the Issuer or the Dissemination Agent to comply with any provision of this Disclosure Agreement,any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Issuer and/or the Dissemination Agent to comply with their respective obligations under E-6 DOC SOC/1616674v6/022273-0006 this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Issuer or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. SECTION 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Issuer agrees to indemnify and save the Dissemination Agent and its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of their powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. Any Dissemination Agent other than the Issuer shall be paid (i)compensation by the Issuer for its services provided hereunder in accordance with a schedule of fees to be mutually agreed to; and(ii)all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Issuer pursuant to this Disclosure Agreement. The obligations of the Issuer under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to commence any action against the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. The Dissemination Agent shall not be liable under any circumstances for monetary damages to any person for any breach under this Disclosure Agreement. SECTION 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds,and shall create no rights in any other person or entity. SECTION 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 14. Governing Law. This Disclosure Agreement shall be construed and governed in accordance with the laws of the State of California. SECTION 15. Notices. Any notice or communications to be among any of the parties to this Disclosure Agreement may be given as follows: To the Issuer: City of Huntington Beach Community Facilities District No. 2000-1 c/o City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance Telephone: (714)536-5630 Facsimile: To the Trustee: U.S.Bank National Association 633 West 5th Street,24th Floor Los Angeles,California 90071 Attention: Corporate Trust Services Telephone: (213)615-6024 Facsimile : (213)615-6199 E-7 D OC S OC/1616674v 6/022273-0006 To the Dissemination Agent: Telephone: Facsimile: To the Participating Underwriter: Stifel,Nicolaus&Company, Incorporated One Ferry Building San Francisco,California 94111 Attention: Municipal Research Department Telephone: (415)445-2602 Facsimile: (415)445-2395 Any person may,by written notice to the other persons listed above, designate a different address or telephone number(s)to which subsequent notices or communications should be sent. SECTION 16. Future Determination of Obligated Persons. In the event the Securities Exchange Commission amends, clarifies or supplements the Rule in such a manner that requires any landowner within the District to be an obligated person as defined in the Rule, nothing contained herein shall be construed to require the District to meet the continuing disclosure requirements of the Rule with respect to such obligated person and nothing in this Disclosure Agreement shall be deemed to obligate the District to disclose information concerning any owner of property within the District except as required as part of the information required to be disclosed by the District pursuant to Section 4 and Section 5 hereof. The validity, interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California. SECTION 17. Severability. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. SECTION 18. Merger. Any person succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor Dissemination Agent without the filing of any paper or any further act. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2000-1 By: Its: Finance Director of the City of Huntington Beach, which is acting in its capacity as the legislative body of City of Huntington Beach Community Facilities District No.2000-1 WILLDAN FINANCIAL SERVICES,as Dissemination Agent By: Its: Authorized Officer E-8 D OC S OC/1616674v 6/022273-0006 EXHIBIT A NOTICE TO THE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) Name of Bond Issue: $ CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2000-1 (the"Issuer")has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, dated as of 2013. [The Issuer anticipates that the Annual Report will be filed by ] Dated: WILLDAN FINANCIAL SERVICES,as Dissemination Agent cc: City of Huntington Beach E-9 DOCSOC/1616674v6/022273-0006 CONTINUING DISCLOSURE AGREEMENT-LESSEE This Continuing Disclosure Agreement-Lessee (the "Disclosure Agreement") is executed and delivered by PCH Beach Resort,LLC,a California limited liability company(the"Lessee")in connection with the issuance of $ City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort) 2013 Special Tax Refunding Bonds (the "Bonds"). The Bonds are being issued pursuant to a Bond Indenture,dated as of 1, 2013 (the`Bond Indenture"), between the City of Huntington Beach Community Facilities District No. 2001-1 (Grand Coast Resort) (the "District") and U.S. Bank National Association,as trustee(the"Trustee"). The Lessee covenants and agrees as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Lessee for the benefit of the owners and beneficial owners of the Bonds and in order to assist the Participating Underwriter in complying with S.E.C.Rule 15c2-12(b)(5). Section 2. Definitions. In addition to the definitions set forth in the Bond Indenture, which apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: "Affiliate" of another Person means (a)a Person directly or indirectly owning, controlling, or holding with power to vote,5%or more of the outstanding voting securities of such other Person,(b)any Person 5%or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, (c)any Person directly or indirectly controlling such other Person, and (d)with respect to any general partner of a partnership or member of a limited liability company for purposes hereof, control means the power to exercise a controlling influence over the management or policies of a Person, unless such power is solely the result of an official position with such Person. "Annual Report" shall mean any Annual Report provided by the Lessee pursuant to, and as described in,Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a leasehold interest in the land located in the District, or an Affiliate thereof, and the Dissemination Agent containing terms substantially similar to this Disclosure Agreement, whereby such entity or Affiliate agrees to provide annual reports and notices of significant events to the Dissemination Agent of the character described in Sections 3 and 4 hereof, with respect to the portion of the Property owned by such entity and its Affiliates and which contains an assumption provision of the character set forth in Section 6 hereof. "City"means the City of Huntington Beach. "Disclosure Representative" means the Chief Financial Officer of Mayer Financial Ltd., or his designee,or such other officer, employee or agent as the Lessee shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent" shall mean the Trustee, acting in the capacity as Dissemination Agent under this Disclosure Agreement,or any successor Dissemination Agent designated in writing by the City and which has filed with the Lessee,the City and the Trustee a written acceptance of such designation. "Emma"shall mean the Electronic Municipal Market Access system of the MSRB. "Event of Bankruptcy"means, with respect to a Person,that such Person files a petition or institutes a proceeding under any act or acts, state or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby such Person asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of such Person's debts or obligations, or offers to E-10 DOC SOC/1616674v6/022273-0006 such Person's creditors to effect a composition or extension of time to pay such Person's debts or asks, seeks or prays for reorganization or to effect a plan of reorganization,or for a readjustment of such Person's debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character is filed or instituted or taken against such Person, or if a receiver of the business or of the property or assets of such Person is appointed by any court,or if such Person makes a general assignment for the benefit of such Person's creditors. "Fiscal Year"shall mean the Lessee's fiscal year for its financial accounting purposes. "Listed Events" shall mean any of the events listed in Section 5(a)of this Disclosure Agreement. "MSRB" shall mean the Municipal Securities Rulemaking Board and any successor entity designated under the Rule as the repository for filing made pursuant to the Rule. "Participating Underwriter"shall mean Stifel,Nicolaus&Company, Incorporated. "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a trust, any unincorporated organization or a government or political subdivision thereof "Property" means the leasehold interest in the real property within the boundaries of the District on which special taxes are authorized to be levied by the District. "Repository" shall mean the MSRB or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Unless otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access(EMMA)website of the MSRB, currently located at http://emma.msrb.org. "Rule" shall mean Rule 15c2-12(b)(5)adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. Section 3. Provision of Annual Reports. (a) Until this Disclosure Agreement terminates in accordance with Section 7 below, the Lessee shall, or upon written request shall cause the Dissemination Agent to, not later than three months after the end of the Fiscal Year, commencing with the report for the 2013/2014 Fiscal Year,provide or cause to be provided to the Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Agreement. Not later than fifteen (15) Business Days prior to said date, the Lessee shall provide the Annual Report to the Dissemination Agent. The Lessee shall provide a written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual Report required to be furnished by the Lessee hereunder. The Dissemination Agent may conclusively rely upon such certification of the Lessee, and shall have no duty or obligation to review such Annual Report. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 4(a) of this Disclosure Agreement. If the Lessee's fiscal year changes,it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). (b) If the Lessee is unable to provide to the Repository an Annual Report by the date required in subsection(a),the Lessee shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) The Dissemination Agent shall: E-11 DOC S OC/1616674v6/022273-0006 (i) determine each year prior to the date for providing the Annual Report the name and address of the Repository if other than the MSRB; and (ii) to the extent the Annual Report has been provided to the Dissemination Agent, file a report with the Lessee, the City and the Trustee (if the Dissemination Agent is other than the Trustee) certifying that the Annual Report has been provided pursuant to this Disclosure Agreement,stating the date it was provided and listing the Repository to which it was provided if other than the MSRB. Section 4. Content of Annual Reports. The Lessee's Annual Report shall contain or incorporate by reference the following: (a) Any delinquency in the payment of Special Taxes by the Lessee or any Affiliate thereof (b) Any pending litigation which would adversely affect the ability of the Lessee to complete the Improvements or to pay Special Taxes levied on the Property. (c) Any material change in the ownership of the Lessee. (d) The average occupancy rate for the hotel constructed on the Property during the Fiscal Year for which the Annual Report is provided, along with the average occupancy rate for similar hotel properties in the market area for such hotel to the extent published by reputable industry sources. (e) The assumption of any obligations of the Lessee pursuant to Section 6. In addition to any of the information expressly required to be provided as described above,the Lessee shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Lessee or related public entities, which have been submitted to the Repository or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from EMMA. The Lessee shall clearly identify each such other document so included by reference. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of.this Section 5,the Lessee shall give,or cause to be given,notice of the occurrence of any of the following events: (i) failure by the Lessee or any Affiliate thereof to pay any real property taxes(including any Mello-Roos special taxes)levied within the District, (ii) material damage to or destruction of any of the Property, (iii) default by the Lessee or any Affiliate thereof on any loan with respect to the construction or permanent financing of the Property, and (iv) The occurrence of an Event of Bankruptcy with respect to the Lessee, or any Affiliate of the Lessee. Section 6. Assumption of Obligations. If the Property owned by the Lessee, or any Affiliate of the Lessee, is to be conveyed to a Person,the Lessee shall include a provision in the conveyance agreement for such Person to agree to execute an Assumption Agreement following the closing of escrow for the conveyance. E-12 DOC SOC/1616674v6/022273-0006 The Lessee shall enter into an Assumption Agreement with any Person described in the preceding paragraph, which Assumption Agreement shall be in form and substance satisfactory to the City, or the acquiring entity shall otherwise enter into an agreement with Dissemination Agent in form substantially identical to this Disclosure Agreement (except for the identity of the "Lessee" therein). From and after the date on which an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement) is executed with respect to the Property, the Lessee shall no longer be required to comply with the requirements of this Disclosure Agreement;provided however that if, following a conveyance by the Lessee of the character described in the first sentence of this Section 6, an Assumption Agreement (or replacement agreement in form equivalent to this Disclosure Agreement) is not executed(other than by reason of the willful misconduct of the Dissemination Agent), the Lessee shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term "Lessee" shall include, in addition to Lessee, the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Lessee's obligations under this Disclosure Agreement shall terminate upon the earliest to occur of. (a)the legal defeasance,prior redemption or payment in full of all the Bonds, (b)the date on which the Lessee and all Affiliates of the Lessee no longer have a leasehold interest in the land in the District(subject, however,to the last paragraph of Section 6 above), (c)the date on which all Special Taxes on the Property are paid or prepaid in full(as evidenced by the recording of a Notice of Cancellation of Special Tax Lien by the City with respect to such property), and (d)the date on which the Lessee delivers to the City and the Dissemination Agent an opinion of bond counsel acceptable to the City to the effect that the continuing disclosure provided for in this continuing Disclosure Agreement is no longer required under the Rule to allow the Participating Underwriter to deal in the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Lessee shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Section 8. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to act as such under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The initial Dissemination Agent shall be the Trustee. The Dissemination Agent may at any time resign by providing thirty days written notice to the City, the Lessee and the Trustee, such resignation to become effective upon acceptance of appointment by a successor Dissemination Agent. Upon receiving notice of such resignation, the City shall promptly appoint a successor Dissemination Agent by an instrument in writing, delivered to the Trustee and the Lessee. If no appointment of a successor Dissemination Agent shall be made pursuant to the foregoing provisions of this Section within forty-five (45)days after the Dissemination Agent shall have given to the City, the Lessee and the Trustee written notice of its resignation, the Dissemination Agent may apply to any court of competent jurisdiction to appoint a successor Dissemination Agent. Said court may thereupon after such notice, if any, as such court may deem proper, appoint a successor Dissemination Agent. The City shall provide the Lessee and the Trustee with written notice of the identity of any successor Dissemination Agent appointed or engaged by the City. Section 9. Amendment. Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Lessee may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be waived,provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3, 4 or 5(a), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature, or status of an obligated person with respect to the Bonds, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the E-13 DOCSOC/1616674v6/022273-0006 primary offering of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; (c) the proposed amendment or waiver either (i)is approved by owners of the Bonds in the manner provided in the Bond Indenture for amendments to the Bond Indenture with the consent of owners, or (ii)does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the owners or beneficial owners of the Bonds; and (d) no amendment increasing or affecting the obligations or duties of the District, the City, the Dissemination Agent or the Trustee shall be made without the consent of such party. If any annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the first annual financial information filed pursuant hereto containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements,the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the Lessee to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repository in the same manner as for a Listed Event under Section 5(c). Section 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Lessee from disseminating any other information,using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Lessee chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Lessee shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 11. Default. In the event of a failure of the Lessee to comply with any provision of this Disclosure Agreement any Participating Underwriter or any owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Lessee to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Bond Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Lessee to comply with this Disclosure Agreement shall be an action to compel performance. Section 12. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Lessee. agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the District for its services provided hereunder and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder, promptly following receipt by the City of a written invoice therefor. The Dissemination Agent shall have no duty or obligation to review any information provided to it by the Lessee E-14 DOCSOC/1616674v6/022273-0006 and shall not be deemed to be acting in any fiduciary capacity for the Lessee, the Bondholders, or any other party. The obligations of the District and the Lessee under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the Lessee (its successors and assigns), the Trustee, the Dissemination Agent, the Participating Underwriter and the owners and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Dated: 2013 "LESSEE" PCH BEACH RESORT, LLC, a California limited liability company By: GRAND RESORT,LLC,a California limited liability company,Managing Member By: RLM MANAGEMENT, INC.,a California corporation,Manager By. Its: "DISSEMINATION AGENT" U.S.BANK NATIONAL ASSOCIATION By: Its: E-15 DOC SOC/1616674v6/022273-0006 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: City of Huntington Beach Name of Bond Issue: City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that PCH Beach Resort, LLC (the "Lessee") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement-Lessee dated , 2013 executed by the Lessee for the benefit of the owners and beneficial owners of the above-referenced bonds. The Lessee anticipates that the Annual Report will be filed by Dated: 2013 PCH BEACH RESORT,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance U.S. Bank National Association, as Trustee 633 West 5t`Street,24t'Floor Los Angeles, California 90071 E-16 DOC S OC/1616674v6/022273-0006 APPENDIX F BOOK-ENTRY-ONLY SYSTEM The information in this section concerning DTC and DTC's book-entry only system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the Bonds,payment ofprincipal,premium, if any, accreted value and interest on the Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to be reliable, but the District and the Underwriter do not and cannot make anv independent representations concerning these matters and do not take responsibility for the accuracy or completeness thereof Neither the DTC, Direct Participants, Indirect Participants nor the Beneficial Owners should rely on the foregoing information with respect to such matters, but should instead confirm the same with DTC or the DTC Participants, as the case may be. The Depository Trust Company ("DTC"), New York, New York, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully- registered Bond will be issued for each annual maturity of the Bonds,each in the aggregate principal amount of such maturity, and will be deposited through the facilities of DTC. DTC,the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a"banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a"clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post trade settlement among Direct Participants of sales and other securities transactions in deposited securities,through electronic computerized book- entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ('*DTCC"). DTCC is the holding company for DTC,National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard&Poor's rating of"AA+."The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond (`Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive Bonds representing their ownership interests in Bonds,except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers,all Bonds deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;DTC's records reflect only the identity of the Direct Participants to whose accounts F-1 D OC S OC/1616674v6/022273-0006 such Bonds are credited,which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them,subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as prepayments, tenders, defaults, and proposed amendments to the Bond documents. For example,Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative,Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede& Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy). Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede&Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the District or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede&Co. (or such other nominee as may be requested by an authorized representative of DTC)is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. A Bond Owner shall give notice to elect to have its Bonds purchased or tendered,through its Participant,to the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Bonds to the Trustee's DTC account. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor depository is not obtained,physical certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry only transfers through DTC (or a successor securities depository). In that event,Bonds will be printed and delivered to DTC. THE TRUSTEE,AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE. F-2 DOC SOC/1616674v6/022273-0006 Jones Hall,A Professional Law Corporation 4-15-13 5-20-13 BOND PURCHASE AGREEMENT $ CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS ' 2013 City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) c/o City of Huntington Beach 2000 Main Street Huntington Beach, California 92648 Ladies and Gentlemen: Stifel, Nicolaus & Company, Incorporated (the "Underwriter"), acting not as a fiduciary or agent for you, but on behalf of itself, offers to enter into this Bond Purchase Agreement (this "Purchase Contract") with City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"), which, upon your acceptance of this offer, will be binding upon the Issuer and the Underwriter. Capitalized terms used in this Purchase Contract and not otherwise defined herein have the meanings given to such terms in the Bond Indenture described below. This offer is made subject to the acceptance by the Issuer of this Purchase Contract on or before 5:00 p.m. on the date set forth above. 1. Upon the terms and conditions and in reliance upon the respective representations, warranties and covenants herein, the Underwriter hereby agrees to purchase from the Issuer, and the Issuer hereby agrees to sell to the Underwriter, all (but not less than all) of the above-captioned bonds (the "Bonds") at a purchase price (the "Purchase Price") of $ (equal to the par amount of the Bonds ($ ) less a net original issue discount of$ , less an Underwriter's discount of The Bonds will be issued by the Issuer under the authority of the Mello-Roos Community Facilities Act of 1982 (constituting Section 53311 et seq. of the California Government Code) (the "Act"), the provisions of Chapter 3.56 (commencing with Section 3:56.010) of the Municipal Code of the City of Huntington Beach (the "Municipal Code"), and Resolution No. (the "Bond Resolution") adopted on , 2013 by the City Council (the "City Council") of the City of Huntington Beach (the "City"), acting as the legislative body of the Issuer. The special taxes that will provide a source of payment for the Bonds (the "Special Taxes") are being levied pursuant to (i) Resolution No. 2000-35, adopted by the City Council on April 17, 2000 (the "Resolution of Formation"), which established the Issuer and authorized the levy of a special tax within the Issuer (ii) a two-thirds vote of the qualified electors at an election held in the boundaries of the Issuer on April 17, 2000, and (iii) Ordinance No. enacted by the City Council on 2000 (the "Ordinance"), pursuant to which the Special Taxes were levied on the taxable property in the boundaries of the Issuer. Together, the Bond Resolution, the Resolution of Formation and the Ordinance are referred to as the "Resolutions and the Ordinance" in this Purchase Contract. All of the property in the boundaries of the District is owned by the City as successor agency (the "Successor Agency") to the Redevelopment Agency of the City of Huntington Beach (the "Redevelopment Agency") and leased to PCH Beach Resort, LLC (the "Lessee") under a Ground Lease, dated April 4, 2001(the "Ground Lease"). The City and the Redevelopment Agency entered into an agreement, dated as of December 1, 2001 (the "Forbearance Agreement'), which restricts the exercise of remedies by the Successor Agency under the Ground Lease. The Bonds will be issued pursuant to the terms of a Bond Indenture, dated as of 1, 2013 (the "Bond Indenture"), by and between the Issuer and U.S. Bank National Association, as trustee (the "Trustee"). The proceeds of the sale of the Bonds will be applied in accordance with the Bond Indenture to (i) refund in full the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) 2001 Special Tax Bonds (the "Prior Bonds"); (ii) fund a debt service reserve fund for the Bonds; and (iii) pay costs of issuing the Bonds. The refunding of the Prior Bonds will be accomplished as described in an Escrow Agreement, dated as of 1, 2013 (the "Escrow Agreement'), by and between the Issuer and U.S. Bank National Association, as escrow bank(the"Escrow Bank"). 2. The Bonds will mature on the dates and in the principal amounts, and will bear interest at the rates, as set forth in Exhibit B hereto. The Underwriter agrees to make a bona fide public offering of all of the Bonds at the offering prices set forth on Exhibit B hereto. The Bonds will be subject to redemption as set forth on Exhibit B. 3. The Issuer agrees to deliver to the Underwriter as many copies of the Official Statement dated the date hereof relating to the Bonds (as supplemented and amended from time to time, the "Final Official Statement") as the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the "Rule"). The Issuer agrees to deliver such Final Official Statements within seven (7) business days after the execution hereof, or such earlier date identified by the Underwriter to be necessary to allow the Underwriter to meet its obligations under the Rule and Rule G-32 of the Municipal Securities Rulemaking Board ("MSRB"). The Underwriter agrees to file the Final Official Statement with the MSRB on or as soon as practicable after the Closing Date (defined below). The Underwriter agrees to deliver a copy of the Final Official Statement to each of its customers purchasing Bonds no later than the settlement date of the transaction. The Issuer has authorized and approved the Preliminary Official Statement dated 2013 relating to the Bonds (the "Preliminary Official Statement') and the Final Official Statement and consents to their distribution and use by the Underwriter in connection with the 2 offer and sale of the Bonds. The Issuer deems such Preliminary Official Statement final as of its date for purposes of the Rule, except for information allowed by the Rule to be omitted, and has executed a certificate to that effect in the form of Exhibit C. In connection with the printing and distribution of the Preliminary Official Statement, PCH Beach Resort, LLC (the "Lessee") executed a certificate in the form attached hereto as Exhibit I. In connection with issuance of the Bonds, and in order to assist the Underwriter in complying with the Rule, the (i) Issuer will execute a Continuing Disclosure Agreement dated as of 1, 2013 (the "Issuer Continuing Disclosure Agreement"), by and between the Issuer and Willdan Financial Services, as dissemination agent (the "Dissemination Agent") and (ii) the Lessee will execute a Continuing Disclosure Agreement-Lessee dated as of 1, 2013 (the "Lessee Continuing Disclosure Agreement"), by and between the Issuer and the Disseminaton-Agent. The forms of the Issuer Continuing Disclosure Agreement and the Lessee Continuing Disclosure Agreement are attached as Appendix E to the Final Official Statement. 4. The Issuer represents and warrants to the Underwriter that: (a) The Issuer is a community facilities district duly organized and validly existing under the laws of the State of California (the "State"), including the Act and the Municipal Code. The Issuer has the full legal right, power and authority, among other things, (i) upon satisfaction of the conditions in this Purchase Contract and the Bond Indenture, to issue the Bonds for the purpose specified in Section 1 hereof, (ii) to secure the Bonds in the manner contemplated in the Bond Indenture and (iii) to levy the Special Taxes according to the rate and method of apportionment of special taxes for the Issuer (the"Rate and Method"). (b) The City Council has the full legal right, power and authority to adopt the Resolutions and the Ordinance, and the Issuer has the full legal right, power and authority (i) to enter into this Purchase Contract, the Bond Indenture, the Escrow Agreement and the Issuer Continuing Disclosure Agreement (such documents are collectively referred to herein as the "Issuer Documents"), (ii) to issue, sell and deliver the Bonds to the Underwriter as provided herein, and (iii) to carry out and consummate all other transactions on its part contemplated by each of the Issuer Documents and the Resolutions and the Ordinance, and the Issuer and the City Council have complied with all provisions of applicable law, including the Act and the Municipal Code, in all matters relating to such transactions. (c) The Issuer has duly authorized (i) the execution and delivery by the Issuer and the execution, delivery and due performance by the Issuer of its obligations under the Issuer Documents, (ii) the distribution and use of the Preliminary Official Statement and execution, delivery and distribution of the Final Official Statement, and (iii) the taking of any and all such action as may be required on the part of the Issuer to carry out, give effect to and consummate the transactions on its part contemplated by such instruments. All consents or approvals necessary to be obtained by the Issuer in connection with the foregoing have been received, and the consents or approvals so received are still in full force and effect. (d) The Resolutions and the Ordinance have been duly adopted by the City Council, acting as legislative body of the Issuer, and are in full force and effect; and the Issuer Documents, when executed and delivered by the Issuer and the other party 3 thereto, will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally. (e) When delivered to the Underwriter, the Bonds will have been duly authorized by the City Council, acting as legislative body of the Issuer, and duly executed, issued and delivered by the Issuer and will constitute legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or other laws affecting creditors' rights generally, and will be entitled to the benefit and security of the Bond Indenture. (f) The information relating to the Issuer contained in the Preliminary Official Statement is, and as of the Closing Date such information in the Final Official Statement will be, true and correct in all material respects, and neither the Preliminary Official Statement nor the Final Official Statement will as of the Closing Date contain any untrue or misleading statement of a material fact relating to the Issuer or omit to state any material fact relating to the Issuer necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (g) If, at any time prior to the date twenty-five (25) days following the later of the Closing (as described in Section 6 below) or the date the Underwriter no longer retains, directly or as a member of an underwriting syndicate, an unsold balance of the Bonds for sale to the public, which date, if other than the date of the Closing, shall be provided to the Issuer by written notice of the Underwriter (the "End of the Underwriting Period"), any event of which the Issuer has knowledge shall occur which might or would cause the Final Official Statement to contain an untrue statement of a material fact or to omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer will promptly notify the Underwriter in writing of the circumstances and details of such event. If, as a result of such event or any other event, it is necessary, in the opinion of the Underwriter, the Issuer or their respective counsel, to amend or supplement the Final Official Statement in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Issuer will forthwith cooperate with the Underwriter in the prompt preparation and furnishing to the Underwriter of a reasonable number of copies of an amendment of or a supplement to the Final Official Statement, in form and substance reasonably satisfactory to the Underwriter, which will so amend or supplement the Final Official Statement so that, as amended or supplemented, it will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (h) None of the adoption of the Resolutions and the Ordinance, the execution and delivery of the Issuer Documents or the Final Official Statement, the consummation of the transactions on the part of the Issuer contemplated herein or therein and the compliance by the Issuer with the provisions hereof or thereof will conflict with, or constitute on the part of the Issuer, a material violation of, or a material breach of or default under, (i) any indenture, mortgage, commitment, note or other agreement or instrument to which the Issuer is a party or by which it is bound, (ii) any provision of the State Constitution, or (iii) any existing law, rule, regulation, ordinance,judgment, order or 4 decree to which the Issuer (or the members of the City Council or any of its officers in their respective capacities as such) is subject, that would have a material adverse affect on the ability of the Issuer to perform its obligations under the Issuer Documents. (i) The Issuer has never been in default at any time, as to principal of or interest on any obligation which it has issued, including those which it has issued as a conduit for another entity, which default may have an adverse effect on the ability of the Issuer to consummate the transactions on its part under the Issuer Documents, except as specifically disclosed in the Final Official Statement; and other than the Bond Indenture, the Issuer has not entered into any contract or arrangement of any kind which might give rise to any lien or encumbrance on the Special Taxes following issuance of the Bonds. Q) Except as is specifically disclosed in the Final Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the Issuer has been served with process or known by the official of the Issuer executing this Purchase Contract to be threatened, which in any way questions the powers of the City Council or the Issuer referred to in paragraph (b) above, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions on the part of the Issuer contemplated by this Purchase Contract, or of any other Issuer Document, or which, in any way, could adversely affect the validity or enforceability of the Resolutions, the Ordinance, the Bond Indenture, the Escrow Agreement, the Bonds or this Purchase Contract or, to the knowledge of the official of the Issuer executing this Purchase Contract, which in any way questions the exclusion from gross income of the recipients thereof of the interest on the Bonds for federal income tax purposes or in any other way questions the status of the Bonds under State tax laws or regulations. (k) Any certificate signed by an official of the Issuer authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Issuer Documents shall be deemed a representation and warranty by the Issuer to the Underwriter as to the truth of the statements therein contained. (1) The Issuer has not been notified of any listing or proposed listing by the Internal Revenue Service to the effect that it is a bond issuer whose arbitrage certifications may not be relied upon. (m) The Bonds will be paid from Special Taxes received by the Issuer and moneys held in certain funds and accounts established under the Bond Indenture and pledged thereunder to the payment of the Bonds. (n) The Special Taxes may lawfully be levied in accordance with the Rate and Method, and the Ordinance, and, when levied, will be secured by a lien on the property on which they are levied. (o) The Bond Indenture creates a valid pledge of and first lien upon the Special Taxes deposited thereunder, and the moneys in certain funds and accounts established pursuant to the Bond Indenture, subject in all cases to the provisions of the Bond Indenture permitting the application thereof for the purposes and on the terms and conditions set forth therein. 5 (p) Except as disclosed in the Preliminary Official Statement and the Final Official Statement, the Issuer has not failed in any material respect to comply with any undertaking of the Issuer under the Rule in the previous five years. (q) The Issuer acknowledges and agrees that: (i) the purchase and sale of the Bonds pursuant to this Purchase Contract is an arm's length, commercial transaction between the Issuer and the Underwriter, (ii) in connection with such transaction, the Underwriter is acting solely as a principal and is not acting as a municipal advisor, financial advisor or fiduciary to the Issuer; (iii) the Underwriter has not assumed any advisory or fiduciary responsibility to the Issuer with respect to the transaction contemplated hereby and the discussions, undertakings and proceedings leading thereto (irrespective of whether the Underwriter has provided other services or is currently providing other services to the Issuer on other matters) or any other obligation to the Issuer except the obligations expressly set forth in this Purchase Contract and (iv) the Issuer has consulted its own legal, accounting, tax, financial and other advisors, as applicable, to the extent it has deemed appropriate in connection with the transaction contemplated herein. 5. The Issuer covenants with the Underwriter that the Issuer will cooperate with the Underwriter (at the cost and written directions of the Underwriter), in qualifying the Bonds for offer and sale under the securities or Blue Sky laws of such jurisdictions of the United States as the Underwriter may reasonably request; provided, however, that the Issuer shall not be required to consent to suit or to service of process, or to qualify to do business, in any jurisdiction. The Issuer consents to the use by the Underwriter of the Issuer Documents, the Preliminary Official Statement and the Final Official Statement in the course of its compliance with the securities or Blue Sky laws of the various jurisdictions related to the offering and sale of the Bonds. 6. At 9:00 a.m. on 2013 (the "Closing Date") or at such other time and/or date as shall have been mutually agreed upon by the Issuer and the Underwriter, the Issuer will deliver or cause to be delivered to the Underwriter the Bonds in definitive form duly executed and authenticated by the Fiscal Agent together with the other documents mentioned in Section 8 hereof; and the Underwriter will accept such delivery and pay the Purchase Price of the Bonds by delivering to the Fiscal Agent for the account of the Issuer a check payable in federal funds or making a wire transfer in federal funds payable to the order of the Fiscal Agent. The activities relating to the final execution and delivery of the Bonds and the Bond Indenture and the payment therefor and the delivery of the certificates, opinions and other instruments as described in Section 8 of this Purchase Contract shall occur at the offices of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California ("Bond Counsel"). The payment for the Bonds and simultaneous delivery of the Bonds to the Underwriter is herein referred to as the "Closing." The Bonds will be delivered as fully registered, book-entry only Bonds initially in denominations equal to the principal amount of each maturity thereof. The Bonds will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, and will be made available for checking by the Underwriter at such place as the Underwriter and the Fiscal Agent shall agree not less than 24 hours prior to the Closing. 6 7. The Underwriter shall have the right to cancel its obligations to purchase the Bonds if between the date hereof and the date of Closing: (a) the House of Representatives or the Senate of the Congress of the United States, or a committee of either, shall have pending before it, or shall have passed or recommended favorably, legislation introduced previous to the date hereof, which legislation, if enacted in its form as introduced or as amended, would have the purpose or effect of imposing federal income taxation upon revenues or other income of the general character to be derived by the Issuer or by any similar body under the Bond Indenture or upon interest received on obligations of the general character of the Bonds, or of causing interest on obligations of the general character of the Bonds, to be includable in gross income for purposes of federal income taxation, and such legislation, in the Underwriter's opinion, materially adversely affects the market price of the Bonds; or (b) a tentative decision with respect to legislation shall be.reached by a committee of the House of Representatives or the Senate of the Congress of the United States, or legislation shall be favorably reported or re-reported by such a committee or be introduced, by amendment or otherwise, in or be passed by the House of Representatives or the Senate, or recommended to the Congress of the United States for passage by the President of the United States, or be enacted or a decision by a federal court of the United States or the United States Tax Court shall have been rendered, or a ruling, release, order, circular, regulation or official statement by or on behalf of the United States Treasury Department, the Internal Revenue Service or other governmental agency shall have been made or proposed to be made having the purpose or effect, or any other action or event shall have occurred which has the purpose or effect, directly or indirectly, of adversely affecting the federal income tax consequences of owning the Bonds, including causing interest on the Bonds to be included in gross income for purposes of federal income taxation, or imposing federal income taxation upon revenues or other income of the general character to be derived by the Issuer under the Bond Indenture or upon interest received on obligations of the general character of the Bonds, or the Bonds and also including adversely affecting the tax-exempt status of the Issuer under the Code, which, in the opinion of the Underwriter, materially adversely affects the market price of or market for the Bonds; or (c) legislation shall have been enacted, or actively considered for enactment with an effective date prior to the Closing, or a decision by a court of the United States shall have been rendered, the effect of which is that the Bonds, including any underlying obligations, or the Bond Indenture, as the case may be, is not exempt from the registration, qualification or other requirements of the Securities Act of 1933, as amended and as then in effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (d) a stop order, ruling, regulation or official statement by the Securities and Exchange Commission or any other governmental agency having jurisdiction of the subject matter shall have been issued or made or any other event occurs, the effect of which is that the issuance, offering or sale of the Bonds, including any underlying obligations, or the execution and delivery of the Bond Indenture as contemplated hereby or by the Final Official Statement, is or would be in violation of any provision of the federal securities laws, including the Securities Act of 1933, as amended and as then in 7 effect, the Securities Exchange Act of 1934, as amended and as then in effect, or the Trust Indenture Act of 1939, as amended and as then in effect; or (e) any event shall have occurred or any information shall have become known to the Underwriter which causes the Underwriter to reasonably believe that the Final Official Statement includes an untrue statement of a material fact, or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Issuer fails to amend or supplement such Final Official Statement to cure such omission or misstatement pursuant to Section 4(g); or (f) there shall have occurred any outbreak of hostilities or any national or international calamity or crisis, including a financial crisis, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (g) there shall be in force a general suspension of trading on the New York Stock Exchange, the effect of which on the financial markets of the United States is such as, in the reasonable judgment of the Underwriter, would materially adversely affect the market for or market price of the Bonds; or (h) a general banking moratorium shall have been declared by federal, New York or State authorities; or (i) any proceeding shall be pending or threatened by the Securities and Exchange Commission against the Issuer; or 0) additional material restrictions not in force as of the date hereof shall have been imposed upon trading in securities generally by any governmental authority or by any national securities exchange which adversely affects the Underwriter's ability to sell the Bonds; or (k) the New York Stock Exchange or other national securities exchange, or any governmental authority, shall impose, as to the Bonds or obligations of the general character of the Bonds, any material restrictions not now in force, or increase materially those now in force, with respect to the extension of credit by, or the charge to the net capital requirements of, the Underwriter; or (1) an amendment to the federal or State constitution shall be enacted or action taken by any federal or State court, legislative body, regulatory body or other authority materially adversely affecting the tax status of the Issuer, its property, income or securities (or interest thereon), the validity or enforceability of the Special Tax or the ability of the Issuer to issue the Bonds and levy the Special Tax as contemplated by the Bond Indenture, the Rate and Method and the Final Official Statement; or (m) any rating on the Bonds shall have been downgraded or withdrawn by a national rating service, which, in the Underwriter's reasonable opinion, materially adversely affects the marketability of the Bonds or the sale, at the contemplated offering prices, by the Underwriter of the Bonds. 8 8. The obligation of the Underwriter to purchase the Bonds shall be subject (a) to the performance by the Issuer of its obligations to be performed by it hereunder at and prior to the Closing, (b) to the accuracy as of the date hereof and as of the time of the Closing of the representations and warranties of the Issuer herein, and (c) to the following conditions, including the delivery by the Issuer of such documents as are enumerated herein in form and substance satisfactory to the Underwriter: (a) At the time of Closing, (i)the Final Official Statement, this Purchase Contract, the Issuer Continuing Disclosure Agreement, the Lessee Continuing Disclosure Agreement, the Escrow Agreement and the Bond Indenture shall be in full force and effect and shall not have been amended, modified or supplemented except as may have been agreed to by the Underwriter, and (ii) the Issuer shall have duly adopted and there shall be in full force and effect such resolutions and ordinances (including, but not limited to, the Resolutions and the Ordinance) as, in the opinion of Bond Counsel, shall be necessary in connection with the transactions contemplated hereby. (b) Receipt of the Bonds, executed by the Issuer and authenticated by the Fiscal Agent, at or prior to the Closing. The terms of the Bonds, when delivered, shall in all instances be as described in Final Official Statement. (c) At or prior to the Closing, the Underwriter shall receive the following documents in such number of counterparts as shall be mutually agreeable to the Underwriter and the Issuer: (i) A final approving opinion of Bond Counsel dated the date of Closing in the form attached to the Final Official Statement as Appendix B. (ii) A letter or letters of Bond Counsel addressed to the Underwriter, which includes a statement to the effect that Bond Counsel's final approving opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to the Underwriter, and further provides: (A) the statements contained in the Official Statement on the cover page and under the captions "INTRODUCTION," "THE BONDS" (other than information relating to DTC and its book-entry only system, as to which no opinion need be expressed), "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS," and "TAX EXEMPTION," and in Appendices B and D thereto, are accurate insofar as such statements expressly summarize certain provisions of the Bonds, the Bond Indenture and Bond Counsel's opinion concerning certain federal tax matters relating to the Bonds; (B) this Purchase Contract constitutes the legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; and (C) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Indenture is 9 exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended. (iii) A letter of Stradling Yocca Carlson & Rauth, a Professional Corporation ("Disclosure Counsel"), addressed to the Issuer and the Underwriter, to the effect that: (A) during the course of serving as Disclosure Counsel in connection with the issuance of the Bonds and without having undertaken to determine independently or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Official Statement, no information came to the attention of the attorneys in such firm rendering legal services in connection with the issuance of the Bonds that would lead them to believe that the Final Official Statement (excluding therefrom the financial statements, any financial or statistical data, or forecasts, charts, numbers, estimates, projections, assumptions or expressions of opinion included in the Official Statement, information regarding DTC, and the appendices to the Official Statement, as to which no opinion need be expressed), as of the date thereof or the Closing Date, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (B) the Bonds are exempt from registration pursuant to the Securities Act of 1933, as amended. (iv) A letter of Jones Hall, A Professional Law Corporation ("Underwriter's Counsel"), addressed to the Underwriter, in form and substance acceptable to the Underwriter. (v) The Final Official Statement executed on behalf of the Issuer by a duly authorized officer of the Issuer. (vi) Certified copies of the Resolutions and the Ordinance. (vii) Evidence of recordation in the real property records of the County of Orange of the Notice of Special Tax Lien in the form required by the Act. (viii) A certificate, in form and substance as set forth in Exhibit A hereto, of the Issuer, dated as of the Closing Date. (ix) Evidence that Federal Form 8038 has been executed by the Issuer and will be filed with the Internal Revenue Service. (x) Executed copies of the Bond Indenture, the Escrow Agreement, the Issuer Continuing Disclosure Agreement and the Lessee Continuing Disclosure Agreement. (xi) A tax certificate in form satisfactory to Bond Counsel. 10 (xii) An opinion, dated the Closing Date and addressed to the Underwriter, of the City Attorney, to the effect that: (A) the Issuer is duly organized and validly existing as a community facilities district under and by virtue of the Constitution and laws of the State, with full legal right, power and authority to adopt the Resolutions and the Ordinance; (B) the Resolutions and the Ordinance were each duly adopted at a meeting of the City Council, acting as legislative body of the Issuer, which was called an6held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and the Resolutions and the Ordinance are in full force and effect and have not been amended or repealed, except as set forth therein; (C) the Escrow Agreement and the Issuer Continuing Disclosure Agreement were duly authorized, executed and delivered by the Issuer, and constitute the legal, valid and binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; (D) no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body is pending with respect to which the Issuer has been served with process or to the knowledge of the City Attorney, is threatened, in any way affecting the existence of the Issuer or the titles of the Issuer's officials to their respective offices, or seeking to restrain or to enjoin the issuance, sale or delivery of the Bonds or the application of the proceeds thereof in accordance with the Bond Indenture, or the collection or application of the Special Taxes to pay the principal of and interest on the Bonds, or in any way contesting or affecting the validity or enforceability of the Bonds, the Issuer Documents or any action of the Issuer contemplated by any of said documents, or in any way contesting the completeness or accuracy of the Final Official Statement or the powers of the Issuer or its authority with respect to the Bonds, the Issuer Documents or any action on the part of the Issuer contemplated by any of said documents, wherein an unfavorable decision, ruling, or finding could materially adversely affect the validity or enforceability of the Bonds or the Issuer Documents; (E) the execution and delivery of the Bonds and the Issuer Documents, and compliance with the provisions of each, will not conflict with or constitute a breach of or default under any loan agreement, note, ordinance, resolution, indenture, contract, agreement or other instrument of which the Issuer is a party or is otherwise subject or bound, a consequence of which could be to materially and adversely affect the ability of the Issuer to perform its obligations under the Bonds or the Issuer Documents; 11 (F) all approvals; consents, authorization, elections and orders of or filings or registrations with any governmental authority, board, agency or commission having jurisdiction which would constitute a condition precedent to, or the absence of which would materially adversely affect, the ability of the Issuer, to perform its obligations under the Bonds or the Issuer Documents, have been obtained or made, as the case may be, and are in full force and effect; (G) based upon the information made available to the City Attorney in the course of its participation in the transaction and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Official Statement, nothing has come to the attention of the City Attorney which has led the City Attorney to believe that the Final Official Statement (excluding therefrom the section entitled "PROPERTY OWNERSHIP AND THE HOTEL" and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed) contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading in any material respect; (H) the Ground Lease and the Forbearance Agreement were duly authorized, executed and delivered by the Redevelopment Agency, and constitute the legal, valid and binding obligations of the Successor Agency, as the successor agency to the Redevelopment Agency, enforceable against the Successor Agency in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought; and (1) the Forbearance Agreement was duly authorized, executed and delivered by the City on behalf of the Issuer, and constitutes the legal, valid and binding obligation of the City, enforceable against the City in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws affecting enforcement of creditors' rights in general and to the application of equitable principles if equitable remedies are sought. (xiii) In connection with printing and distribution of the Preliminary Official Statement, an executed certificate of the Issuer in the form attached hereto as Exhibit C. (xiv) A certificate in form and substance as set forth in Exhibit D hereto of the Fiscal Agent/Escrow Bank and an opinion of its counsel in form and substance satisfactory to the Underwriter. (xv) A certificate in form and substance as set forth in Exhibit E hereto, of Willdan Financial Services, in its capacity as special tax consultant ('Special Tax Consultant"), dated as of the Closing Date. 12 (xvi) A certificate in form and substance as set forth in Exhibit F hereto, of Willdan Financial Services, in its capacity as Dissemination Agent, dated as of the Closing Date. (xvii) A defeasance opinion of Bond Counsel with respect to the Prior Bonds. (xviii) (A) Certificates of Willdan Financial Services and Harrell & Company Advisors, LLC, in substantially the form of Exhibit G, to the collective effect that, except as set forth in the Preliminary Official Statement and the Final Official Statement, the Issuer, the City, the Huntington Beach Public Financing Authority, other community facilities districts established by the City and any other related entities have not failed to comply in all material respects with any continuing disclosure undertakings during the past five years. (B) Evidence satisfactory to the Underwriter that the Lessee has not failed to comply in all material respects with any continuing disclosure undertakings during the past five years. (xix) A Certificate of Representations and Warranties of the City, dated as of the date of this Purchase Contract (the "City Pricing Certificate"), in substantially the form of Exhibit H, with only such changes therein as shall have been accepted by the Underwriter on or prior to the date of this Purchase Contract. (xx) A certificate dated the Closing Date and signed by the City Manager of the City certifying that the representations and warranties of the City contained in the City Pricing Certificate are true and correct in all material respects on and as of the Closing Date, with the same effect as if made on the Closing Date, except that all references therein to the Preliminary Official Statement shall be deemed to be references to the Official Statement. (xxi) Executed certificates of the Lessee in the form of Exhibits I and J hereto. (xxii) An opinion of counsel to the Lessee in form and substance acceptable to the Underwriter. (xxiii) Executed copies of the Ground Lease and the Forbearance Agreement. (xxiv) Such additional legal opinions, certificates, proceedings, instruments and other documents as the Underwriter or Bond Counsel may reasonably request to evidence compliance by the Issuer with legal requirements, the truth and accuracy, as of the time of Closing, of the respective representations of the Issuer herein contained and the due performance or satisfaction by the Issuer at or prior to such time of all agreements then to be performed and all conditions then to be satisfied. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Contract, or if the obligations of the Underwriter to purchase and 13 accept delivery of the Bonds shall be terminated for any reason permitted by this Purchase Contract, this Purchase Contract shall terminate and neither the Underwriter nor the Issuer shall be under further obligation hereunder; except that the respective obligations to pay expenses, as provided in Section 11 hereof shall continue in full force and effect. 9. The obligations of the Issuer to issue and deliver the Bonds on the Closing Date shall be subject, at the option of the Issuer, to the performance by the Underwriter of its obligations to be performed hereunder at or prior to the Closing Date, and to the delivery by Bond Counsel of the opinion described in Section 8(c)(i) and by Disclosure Counsel of the letter described in Section 8(iii). 10. All representations, warranties and agreements of the Issuer hereunder shall remain operative and in full force and effect, regardless of any investigations made by or on behalf of the Underwriter, and shall survive the Closing. 11. The Issuer shall pay or cause to be paid all expenses incident to the performance of its obligations under this Purchase Contract, including, but not limited to, delivery of the Bonds, costs of printing the Bonds, the Preliminary Official Statement and the Final Official Statement, any amendment or supplement to the Preliminary Official Statement or Final Official Statement and this Purchase Contract, fees and disbursements of Bond Counsel and Disclosure Counsel, the financial advisor and other consultants engaged by the Issuer, including the fees and expenses of the Special Tax Consultant, the California Debt Investment and Advisory Commission fee, fees of the Fiscal Agent and the Escrow Bank, and fees and disbursements in connection with the qualification of the Bonds for sale under the securities or "Blue Sky" laws of the various jurisdictions and the preparation of"Blue Sky" memoranda. The Underwriter shall pay all advertising expenses in connection with the public offering of the Bonds, and all other expenses incurred by it in connection with its public offering and distribution of the Bonds, including fees and expenses of its counsel, if any. 12. Any notice or other,communication to be given to the Issuer under this Purchase Contract may be given by delivering the same in writing at its address set forth above, and any notice or other communication to be given to the Underwriter under this Purchase Contract may be given by delivering the same in writing to the following: Stifel, Nicolaus & Company, Incorporated, One Ferry Building, San Francisco, CA 94111, Attention: Sara Brown, 13. This Purchase Contract is made solely for the benefit of the Issuer and the Underwriter (including the successors or assigns of the Underwriter) and no other person, including any purchaser of the Bonds, shall acquire or have any right hereunder or by virtue hereof. 14. This Purchase Contract shall be governed by and construed in accordance with the laws of the State applicable to contracts made and performed in the State. 14 15. This Purchase Contract shall become effective upon acceptance hereof by the Issuer. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Authorized Representative Accepted and agreed to as of the date first above written and the time set forth below: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (Grand Coast Resort) By: Authorized Representative Time: 15 EXHIBIT A CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS ISSUER CLOSING CERTIFICATE I, the undersigned, hereby certify that I am the of the City of Huntington Beach, the City Council of which is the legislative body for City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"), a community facilities district duly organized and existing under the laws of the State of California (the "State") and that as such, I am authorized to execute this Certificate on behalf of the Issuer in connection with the issuance of the above-referenced bonds (the"Bonds"). I hereby further certify on behalf of the Issuer that: (A) no litigation is pending with respect to which the Issuer has been served with process or, to my best knowledge after reasonable inquiry, threatened (1) to restrain or enjoin the issuance of any of the Bonds or the collection of Special Taxes pledged under the Bond Indenture; (2) in any way contesting or affecting the authority for the issuance of the Bonds or the validity or enforceability of the Bonds, the Bond Indenture, the Escrow Agreement, the Issuer Continuing Disclosure Agreement or the Purchase Contract; or(3) in any way contesting the existence or powers of the Issuer; (B) the representations and warranties made by the Issuer in the Issuer Documents are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing Date; (C) no event has occurred since the date of the Final Official Statement that, as of the Closing Date, would cause any statement or information contained in the Final Official Statement (excluding therefrom the section entitled "PROPERTY OWNERSHIP AND THE HOTEL" and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed) to be incorrect or incomplete in any material respect or would cause the information in the Final Official Statement (excluding therefrom the section entitled "PROPERTY OWNERSHIP AND THE HOTEL" and the financial and statistical data included in the Final Official Statement, as to which no opinion need be expressed) to contain an untrue statement of a material fact or omit to state a material fact necessary in order to make such statements therein, in the light of the circumstances under which they were made, not misleading; and (D) as of the date hereof, the Bond Indenture is in full force and effect in accordance with its terms and has not been amended, modified or supplemented except in such case as may have been agreed to by the Underwriter; and (E) the Issuer has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied under the Issuer Documents prior to issuance of the Bonds. A-1 Capitalized terms used in this Certificate and not defined herein shall have the same meaning set forth in the Bond Purchase Agreement dated , 2013, between the Issuer and Stifel, Nicolaus & Company, Incorporated IN WITNESS WHEREOF, the undersigned has executed this certificate as of the date set forth below. Dated: [Closing Date] CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) By: Authorized Representative A-2 EXHIBIT B CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS Serial Bonds Maturity Principal Interest Date Amount Rate Yield Price Term Bond Redemption Provisions [to come] B-1 EXHIBIT C CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS RULE 15C2-12 CERTIFICATE The undersigned hereby certifies and represents that she is the duly elected and acting of the City of Huntington Beach (the "Issuer"), the City Council of which is the legislative body of the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"), and is duly authorized to execute and deliver this Certificate and further hereby certifies on behalf of the Issuer as follows: (1) This Certificate is delivered in connection with the offering and sale of the above-referenced bonds (the "Bonds") in order to enable the underwriter of the Bonds to comply with Securities and Exchange Commission Rule 15c2-12 under the Securities Exchange Act of 1934, as amended (the"Rule"). (2) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement, setting forth information concerning the Bonds and the Issuer (the"Preliminary Official Statement'). (3) As used herein, "Permitted Omissions" shall mean the offering price(s), interest rate(s), selling compensation, aggregate principal amount, principal amount per maturity, delivery dates, ratings and other terms of the Bonds depending on such matters, all with respect to the Bonds. (4) The Preliminary Official Statement is, except for the Permitted Omissions, deemed final within the meaning of the Rule. IN WITNESS WHEREOF, I have hereunto set my hand as of , 2013. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) By: Authorized Representative C-1 EXHIBIT D CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF TRUSTEE/ESCROW BANK The undersigned hereby states and certifies that the undersigned is an authorized officer of U.S. Bank National Association, (the "Bank"), which is acting (A) as trustee (the "Trustee") under that certain Bond Indenture, dated as of 1, 2013 (the "Bond Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and the Bank, and (B) as escrow bank (the "Escrow Bank") under the Escrow Agreement, dated as of 1, 2013 (the "Escrow Agreement"), between the Issuer and the Bank, and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Bank: (1) The Bank is duly organized and existing as a national banking association under the laws of the United States of America, having the full power and authority to enter into and perform its duties under the Bond Indenture and the Escrow Agreement. (2) The Bond Indenture and the Escrow Agreement have been duly authorized, executed and delivered by the Bank, and are legal, valid and binding agreements of the Bank enforceable upon the Bank in accordance with their respective terms. (3) The Bonds have been authenticated by a duly authorized representative of the Bank in accordance with the Bond Indenture. (4) To the best knowledge of the Bank, after due inquiry, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Bank or threatened against the Bank which in the reasonable judgment of the Bank would affect the existence of the Bank or in any way contesting or affecting the validity or enforceability of the Bond Indenture or the Escrow Agreement or contesting the powers of the Bank or its authority to enter into and perform its obligations under the Bond Indenture and the Escrow Agreement. Dated: [closing date] U.S. BANK NATIONAL ASSOCIATION By Authorized Officer D-1 EXHIBIT E CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF SPECIAL TAX CONSULTANT Willdan Financial Services (the "Special Tax Consultant") has been retained as Special Tax administrator for the City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer") and has reviewed the Rate and Method of Apportionment of Special Tax for the Issuer (the "Rate and Method"), a copy of which is set forth in Appendix A to the Official Statement, dated , 2013 (the "Official Statement') relating to the above- captioned bonds (the "Bonds"). Based upon such review, the Special Tax Consultant hereby certifies that the Special Tax, if collected in the maximum amounts permitted pursuant to the Rate and Method on the date hereof, would generate % debt service coverage on the Bonds, provided that the annual debt service figures on the attached debt service schedule, which were relied upon by Special Tax Consultant, are substantially true and correct. Although the Special Tax if collected in the maximum amounts pursuant to the Rate and Method, would generate the debt service coverage described in the previous paragraph, no representation is made herein as to actual amounts that will be collected in future years. All information with respect to the Rate and Method in the Official Statement and all other information sourced to the Special Tax Consultant is true and correct as of the date of the Official Statement and as of the date hereof, and a true and correct copy of the Rate and Method is attached to the Official Statement as Appendix A. Dated: 2013 WILLDAN FINANCIAL SERVICES By: Authorized Officer E-1 EXHIBIT F CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF DISSEMINATION AGENT The undersigned hereby states and certifies that the undersigned is an authorized officer of Willdan Financial Services, as dissemination agent (the "Dissemination Agent") pursuant to (i) a Continuing Disclosure Agreement dated as of 1, 2013 and (ii) a Continuing Dislcosure Agreement — Lessee (the "Continuing Disclosure Agreements"), by and between the Issuer and the Dissemination Agents, and as such, is familiar with the following facts and is authorized and qualified to certify the following facts on behalf of the Dissemination Agent: (1) The Dissemination Agent has the full power and authority to enter into and perform its duties under the Continuing Disclosure Agreements. (2) The Continuing Disclosure Agreements have been duly authorized, executed and delivered by the Dissemination Agent, and re legal, valid and binding agreement of the Dissemination Agent enforceable upon the Dissemination Agent in accordance with their terms. (3) To the best knowledge of the Dissemination Agent, after due inquiry, there is no action, suit, proceeding or investigation, at law or in equity, before or by any court or governmental agency, public board or body pending against the Dissemination Agent or threatened against the Dissemination Agent which in the reasonable judgment of the Dissemination Agent would affect the existence of the Dissemination Agent or in any way contesting or affecting the validity or enforceability of the Continuing Disclosure Agreements or contesting the powers of the Dissemination Agent or its authority to enter into and perform its obligations under the Continuing Disclosure Agreements. Dated: [closing date] WILLDAN FINANCIAL SERVICES By Authorized Officer F-1 EXHIBIT G CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE REGARDING CONTINUING DISCLOSURE The undersigned hereby states and certifies that: (i) I am an authorized representative of which acts as dissemination agent (the "Dissemination Agent") in connection with the continuing disclosure undertakings (the "Previous Undertakings") of the issuer (the "Issuer") of the bonds listed on Schedule 1 (the "Listed Bonds") pursuant to Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (the "Rule"), and as such, I am familiar with the facts herein certified and am authorized and qualified to certify the same; and (ii) in our capacity as Dissemination Agent, we have reviewed the Previous Undertakings, and all annual filings and other event filings (if any) made pursuant thereto, and conclude that in the previous five years, [Option #1: the Issuer has filed each annual report in a complete and timely manner, and all event filings required to be made pursuant to the Rule have also been made in a timely manner pursuant to the Rule] [Option #2: the information in the Official Statement under the heading "CONTINUING DISCLOSURE" is accurate with respect to the Issuer's filing history for the previous five years]. Dated: [NAME OF CERTIFYING PARTY] By: Authorized Officer G-1 Schedule 1 Issuer Name of Bonds G-2 EXHIBIT H CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF REPRESENTATIONS AND WARRANTIES OF THE CITY 2013 To: Stifel, Nicolaus & Company, Incorporated One Ferry Building San Francisco, CA 94111 Ladies and Gentlemen: We are delivering to you this certificate in connection with the issuance and sale of the captioned bonds (the "Bonds") and pursuant to the Bond Purchase Agreement, dated the date hereof (the "Purchase Agreement"), by and between you and City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer"). All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Purchase Agreement. The undersigned, in his capacity as an officer of the City of Huntington Beach (the "City") and not in his individual capacity, on behalf of the City, represents and warrants to you that: (1) The City is duly organized and validly existing as a municipal corporation and charter city under the Constitution and laws of the State of California and the City Council has duly and validly adopted each of the Resolutions and Ordinance and authorized the formation of the Issuer pursuant to the Act. (2) The information contained in the Preliminary Official Statement (other than information in the section entitled "PROPERTY OWNERSHIP AND THE HOTEL," information provided by Willdan Financial Services, the County of Orange and information relating to The Depository Trust Company and its book-entry only system, as to which no view is expressed) is, as of the date thereof and as of the date hereof, true and correct in all material respects and does not, as of the date thereof and as of the date hereof, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. H-1 (3) Except as is specifically disclosed in the Preliminary Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, public board or body, pending with respect to which the City has been served with process or is known to have been threatened, which in any way questions the powers of the City Council to adopt the Resolutions and the Ordinance, or the validity of any proceeding taken by the City Council in connection with the issuance of the Bonds, or wherein an unfavorable decision, ruling or finding could materially adversely affect the transactions contemplated by the Purchase Contract, or of any other Issuer Document, or which, in any way, could adversely affect the validity or enforceability of the Resolutions, the Ordinance, the Bond Indenture, the Escrow Agreement, the Bonds or the Purchase Contract. (4) Any certificate signed by an official of the City authorized to execute such certificate and delivered to the Underwriter in connection with the transactions contemplated by the Issuer Documents shall be deemed a representation and warranty by the City to the Underwriter as to the truth of the statements therein contained. (5) Except as disclosed in the Preliminary Official Statement, the City has not failed in any material respect to comply with any undertaking of the Issuer under the Rule in the previous five years. CITY OF HUNTINGTON BEACH By: Authorized Representative H-2 EXHIBIT I CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS 10b-5 CERTIFICATE OF LESSEE The undersigned (the "Lessee"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer" or the "District") of the bonds captioned above (the "Bonds"), hereby certifies as follows as of the date hereof: (1) The undersigned is duly authorized to execute this Certificate on behalf of the Lessee. (2) This Certificate is delivered in connection with the offering and sale of the Bonds. (3) In connection with the offering and sale of the Bonds, there has been prepared a Preliminary Official Statement (the "Preliminary Official Statement"), setting forth certain information concerning, among other things, the Bonds, the Lessee, the Lessee's organization, activities, properties and financial condition, and the Lessee's development within the District. (4) The section in the Preliminary Official Statement entitled "PROPERTY OWNERSHIP AND THE HOTEL" contains no untrue statement of a material fact and does not omit any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (5) [confirm] The Lessee has never failed in any material respect to comply with previous undertakings to provide periodic continuing disclosure reports or notices of material events with respect to community facilities districts or assessment districts in California within the past five years. (6) The Lessee [and related entity to be identified] has never defaulted to any material extent in the payment of special taxes or assessments in connection with the District or any other community facilities districts or assessment districts in California within the past five years. (7) The Lessee [and related entity to be identified] is not currently in default on any loans, lines of credit or other obligation, the result of which could materially adversely affect the property leased by the Lessee in the District. J-1 (8) The Lessee [and related entity to be identified] is solvent and no proceedings are pending or threatened in which they may be adjudicated as bankrupt or become the debtor in a bankruptcy proceeding, or discharged from all of their debts or obligations, or granted an extension of time to pay their debts or a reorganization or readjustment of their debts. (9) There is no litigation or administrative proceeding of any nature in which the Lessee has been served, or is pending or threatened which, if successful, would materially adversely affect the Lessee's ability to complete the development and sale of the property leased by the Lessee within the District, or to pay the Special Taxes, the special benefit assessments or ordinary ad valorem property tax obligations when due on its property within the District, or which challenges or questions the validity or enforceability of the Bonds or the Continuing Disclosure Agreement - Lessee executed by the Lessee. Capitalized terms not defined herein have the same meaning as is set forth in the Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated and the Issuer relating to the Bonds. Dated: 12013 [SIGNATURE BLOCK OF LESSEE] J-2 EXHIBIT J CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2000-1 (GRAND COAST RESORT) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF LESSEE The undersigned (the "Lessee"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2000-1 (Grand Coast Resort) (the "Issuer" or the "District") of the bonds captioned above (the "Bonds"), hereby certifies as follows as of the date hereof: (1) The undersigned is duly authorized to execute this Certificate on behalf of the Lessee. (2) The Lessee is duly authorized to execute, deliver and perform its Continuing Disclosure Agreement- Lessee. (3) The Lessee has duly executed and delivered the Lessee Continuing Disclosure Agreement. (4) The Lessee has full power and authority to lease the property located within the District and to carry on its business as presently conducted and as described in the Final Official Statement. (5) Except as disclosed in the Final Official Statement, no event has occurred since the date of the Preliminary Official Statement which has materially and adversely affected or is reasonably expected to materially and adversely affect the business, properties, operations or financial condition of the Lessee. (6) The representations and warranties made by the Lessee in the 10b-5 Certificate of Lessee are true and correct in all material respects on the Closing Date, with the same effect as if made on the Closing-Date. If at any time subsequent hereto and within 25 days after the Closing Date any such statements in the Official Statement become untrue, the Developer agrees to notify the County and the Underwriter immediately. (7) The Lessee covenants that, while the Bonds are outstanding, the Lessee will not bring any action, suit, proceeding, inquiry or investigation at law or in equity, before any court, regulatory agency, public board or body which in any way seeks to challenge or overturn the Lessee, the levy of the Special Tax in accordance with the rate and method of apportionment contained in the Notice of Special Tax Lien recorded in the real property records of the County of Orange (the "Rate and Method") or the validity of the Bonds or the proceedings leading up to their issuance. The foregoing covenant shall J-1 not prevent the Lessee from bringing an action or suit contending that the Special Tax has not been levied in accordance with the methodology contained in the Rate and Method, so long as any such action or suit does not seek to interfere, or have the effect of interfering, with the levy and collection of the Special Tax in amounts and at times sufficient to pay the principal of and interest on the Bonds when due. Capitalized terms not defined herein have the same meaning as is set forth in the Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated and the Issuer relating to the Bonds. Dated: 12013 [SIGNATURE BLOCK OF LESSEE] J-2 Res. No. 2013-19 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, JOAN L. FLYNN the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a Regular meeting thereof held on June 3, 2013 by the following vote: AYES: Sullivan, Hardy, Harper, Carchio, Shaw, Katapodis NOES: None ABSENT: Boardman ABSTAIN: None y Clerk and ex-offici Clerk of the City Council of the City of Huntington Beach, California