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City Council - 2013-21
RESOLUTION NO. 2013-21 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 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. 2003-I (Huntington Center) (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 February 3, 2003, 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. 2003-1 (Huntington Center) 2004 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$25,000,000 (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 $22,000,000 designated as the "City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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; 13-3774/97073 I Resolution No. 2013-21 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. 2003-1, 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 $22,000,000 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 $22,000,000, (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 13-3774/97073 Resolution No. 2013-21 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 ($217,190,074) 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 ($22,000,000). 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 13-3774/97073 Resolution No: a2013-21 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 3rd day of June, 2013. m Mayor REVIEWED APPROVED: APPROVED AS TO FORM: ng City M ager 3:i:t y Atto ey V_g-� INITIATED AND APPROVED: �aLv�Gk Exhibits to Include: Director of Finance Bond Indenture Escrow Agreement Preliminary Official Statement Bond Purchase Agreement 4 13-3774/97073 Resolution No. 2013-21 FINAL B-ONDPOCUMENTS RECEIVED FROM BOND COUNSEL, STRADLING YOCCA CARLSON & RAUTHY CLOSING AUGUST 2012013 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (UNTINGTON CENTER) 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 Monday, August 19,2013. Closing will take place at 8:30 a.m., on Tuesday,August 20,2013,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 Neal,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 Hall 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 DOC SOG 1636194v2/022273-0006 Special Tax Consultant Beatrice Medina Candace Heiser Willdan Financial Services Verification Agent Mark Peroutka Joe Smith Grant Thornton LLP DOCSOC/1636194v2/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS CLOSING INDEX RESOLUTIONS, ORDINANCES, MINUTES & DOCUMENTS RELATING TO FORMATION 1. Resolution No.2003-10 entitled"Resolution of the City Council of the City of Huntington Beach Establishing City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)and Establishing the Boundaries thereof,"adopted February 3, 2003. 2. Ordinance No. 3631 entitled "An Ordinance of the City Council of the City of Huntington Beach Levying Special Taxes within the City of Huntington Beach Community Facilities District No.20037.1 (Huntington Center),"adopted January 20,2004. 3. Notice of Special Tax Lien recorded February 20,2003 DOCUMENTS TO BE DELIVERED BY THE DISTRICT AND THE CITY 4. Resolution No. 2013-21 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. 2003-1 (Huntington Center) Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount not to $22,000,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith," adopted June 3,2013;Minutes. 5. Certificate of the City Clerk Bringing Forward Resolutions and Ordinances 6. Bond Indenture 7. Continuing Disclosure Agreement of the District 8. Escrow Agreement 9. CDIAC Report of Proposed Debt Issuance, Acknowledgment from CDIAC and Report of Final Sale 10. Certificate as to Finality of the Preliminary Official Statement 11. Incumbency and Signature Certificate of the City and District 12. Certificate Re City Treasurer Designation 13. Issuer Closing Certificate 1 DOCSOC/1636194v2/022273-0006 14. Closing Certificate of the City 15. Instructions to Trustee 16. Instructions to Trustee Re Administration Fund 17. Requisition No. 1 for Disbursement of Costs of Issuance 18. Irrevocable Instructions and Request to Fiscal Agent 19. Tax Certificate of the District and City, together with Certificate of the Underwriter; IRS Form 8038-G 20. Uniform Facsimile Signature Filings of the Mayor and City Clerk 21. Specimen Bond DOCUMENTS TO BE DELIVERED BY THE UNDERWRITER 22. Bond Purchase Agreement 23. Preliminary Official Statement 24. Official Statement 25. Underwriter's Receipt for the Bonds DOCUMENTS TO BE DELIVERED BY THE TRUSTEE AND THE ESCROW BANK 26. Officer's Certificate, together with Extracts from By-Laws and Official Signing Power Authorities Certificate 27. Closing Certificate of Trustee/Escrow Bank 28. Trustee's Receipt for Proceeds and Other Monies 29. Escrow Bank's Receipt for Proceeds DOCUMENTS TO BE DELIVERED BY THE PROPERTY OWNER 30. Property Owner Continuing Disclosure Agreement 31. 1 Ob-5 Certificate of Property Owner 32. Closing Certificate of the Property Owner OPINIONS 33. Opinion of Bond Counsel 34. Reliance Letter to Trustee 2 DOCSOC/1636194v2/022273-0006 35. Supplemental Opinion/Disclosure Counsel Letter 36. Defeasance Opinion 37. Opinion of Counsel to the City/District 38. Opinion of Counsel to the Underwriter 39. Opinion of Counsel to Trustee MISCELLANEOUS 40. Certificate of Tax Consultant 41. Certificate of Dissemination Agent 42. Disclosure Bring-Down Certificates(2) 43. Verification Report 44. Distribution List 3 DOCSOC/1636194v2/022273-0006 RESOLUTION'NO. 2003-10 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH ESTABLISHING CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES D.ISTRICT.NO. 2003-1:.(HUNTINGTON CENTER) AND ESTABLISHING..THE ..BOUNDARIES-THEREOF WHEREAS, the City Council (the"City Council") of the City of Huntington Beach ("City") has heretofore adopted on January 6, 2003, Resolution No.�stating that a proposed community facilities district to be known as"City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center), County of Orange, State of California" (the"Community Facilities District"), is proposed 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 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 boded . indebtedness bythe'Conirtiunity Facilities District,;and of the time an& lace ofaaid :"public headng;-and On February 3, 2003, 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 formation of the Community Facilities District, the levy of the special taxes therein and the financing of facilities by the Community Facilities.District; and On February 3, 2003, 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 formation of the Community Facilities District, the levy of the special taxes therein and the financing of facilities by the Community Facilities District; and Prior-to said hearing there was filed with'the City Council.a report (the.'.'Report"): containing a description of the'services being'finariced 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 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 the public facilities therein were heard, and a full and fair hearing was held; and j PDA 2002 resolutions:CFD 2003-1 (Establishment) RLS 2002-0669 The City Council may therefore proceed to establish the Community Facilities District; NOW, THEREFORE, the City Council of the City of Huntington Beach does ....hereby resolve as follows: Section 1:- Findings: The City-Council finds as follows: (i) All of the preceding recitals are correct. (ii) On February 3, 2003, 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 been recorded pursuant to Sections 3111 and 3113 of the Streets and Highways Code as Instrument No. 2003000028911 in Book 85 of Book of Maps of Assessment and Community Facilities Districts at page 45 of the Official Records of the County of Orange. (ivy All.prior.pi oceedings with respect to.ahe:establi hment of thee. Community.Facilities District prior to and-during the Bearing with respect to.the -.. establishment of the Community Facilities District conducted by the City Council on February 3, 2003, 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 Califomia Government Code. (v) No written protests were received at or prior to the time of said hearing, against the establishment of the 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 resolut orT-of:. formation pursuant to Section 53325-.1'"of the California Government Cade for the establishment of City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center), County of Orange, State of California, and the Community . Facilities District should be established. Section 2. Establishment of District. City of Huntington Beach-Community Facilities District No. 2003-1 (Huntington Center) 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 entitled"Boundaries of City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center), 2 PDA 2002 resolutions:CFD 2003-1 (Establishment) RLS 2002-0669 County of Orange, State of California"which is on file with the Clerk and said boundaries are hereby established. Section 3. Types of Facilities; Incidental Expenses: Maintenance. (1) ..The types.of public facilities proposed to be provided within and finariced'by'the prdposed'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) Public parking facilities including a parking structure. (e) Water distribution facilities, including fire hydrants and reclaimed water and water storage facilities. (f) Street signalization and signage, including traffic fees.:. . (g) Fire facilities including structures and capital equipment. (h) Acquisition of land necessary for any other facilities specified in paragraphs (a)through (g) above. (i) 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 of the 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.districct,Arid (iii).any.other expenses incidental to the construction, acquisition, cornpletioii, and inspectiort.of such facilities. (2) The proposed community facilities district shall also pay for the maintenance of, and the provisions of repair and replacement reserves for, any of the publicly owned facilities listed in clause(1)of this Section 3. Section 4. 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 future, and the annual administrative expenses of City and the Community Facilities District in 3 PDA 2002 resolutions:CFD 2003-1 (Establishment) RLS 2002-0669 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-exempts#atus of such'bonds shall be annually levied within the C6hImunity Facilities District. Additionally, there shall be levied spec altazes sufficient to pay for the maintenance, repair and replacement of such public facilities. The rate and method of apportionment of said special taxes shall be as set forth in Exhibit"B" attached hereto and by this reference made a part hereof. Section 5.. Annexation ofTemtory. Other property within the boundaries of City may be annexed into the Community Facilities District upon the condition that parcels within that territory may be 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 6. Exempt Property. Pursuant to Section 53340 of the California Government Code, properties of entities of the state, federal and local governments 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 7. Report. The Report is hereby approved and is made a part of the Yecord,.of the'public hearing regarding the'formation of the..Community Facilities:Distncf;_ and is of to be kept on file`with the.Clerk.bf th4 - ity as-part'of the.trariscrEpt these proceedings. Section 8. Repayment of.Funds Advanced or Work-in-Kind. Pursuant to Section 53314.9 of the 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 funds 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 determined by the City.Council. .,. Section 9. '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 10. 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 $30,000,000, (ii) the proposition with respect to the levy of special taxes on the land within the Community Facilities District to pay the principal of and interest on the 4 PDA 2002 resolutions'CFD 2003-1 (Establishment) RLS 2002-0669 bonds thereof and to pay the costs of maintenance, repair and replacement of public facilities, and (iii) the proposition with respect to the establishment of an appropriations limit for the Community Facilities District in the amount of$4,000,000, if the Community Facilities District is established and such consolidated special elections (the "consolidated special elections") are field, shall be as follows: (a) if at ieast 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 of the 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 of the California Elections Code governing elections of cities, insofar as they may be applicable, 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 of the community facilities district for each of the 90 days preceding the close of the protest hearing, and pursuant to Section 53326 of the California Government Code, the .vote. is therefore to be-by-the landowners (as de_ fiii�d in Sectlon.3:56.070 of`the` iVlunicipaL Code.of the City of Huntington Beach) of_the.Community Facilities Distric#, _ 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 beheld 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 of the Community Facilities District, upon which such elections can be held pursuant to 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 5 PDA 2002 resolutions:CFO 2003-1 (Establishment) RLS 2002-0669 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 Cierk,by niail With return postage prepaid, or by personal service. (4) Pursuant to applicable sections of the California Elections Code governing the conduct of mail ballot elections of cities, and specifically Division 4 (commencing with §4000 of the 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 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 of the form of Resolution of Formation establishing the:Community'Facilities:Distrct i. ; adopted by.the City-Courc'il 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 ballof, that he or she has been authbrized 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 such proposition, 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 landowner, (iii) a declaration under penalty of perjury s PDA 2002 resolutions:CFO 2003-1(Estabrmhment) RLS 2002-0669 stating that the voter is the landowner or-the authorized 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 the election on each proposition set forth in the official ballot. The procedures set forth in this section for conducting the consolidated special elections,if they are.held,.may-be.-modified as the City Council may determine'to-be necessary or.desirable'by a resolution subsequently adopted'6-'"Ihe City Council: _: PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 3rd day of Februmy , 2003. Mayor ATTEST: APPROVED AS TO FORM: City Clerk Attorney ,a3 REVIEWED AND APPROVED: INITIATED AND APPROVED City Ad nistrator Dir ctor'of Economic Development 7 PDA 2002 resolutions!CFD 2003-1 (Establishment) RLS 2002-0569 ---------------- EXHIBIT A LEGAL DESCRIPTION CITY OF:-HUNTINGTON:BEACO COMMUNITY FACILtT9ES ®ISTRICT_t�.0 2000-1: ". (HUNTIN.G1 N CENTER),-COUNT).OF:_ORANGE, S�'A'TE.OF GA II*ORNIA .City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center), 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: Parcels 2 through 9 as shown on-Parcel Map 85-200 filed in Book 255, pages 40-45, of Parcel Maps in the Office of the County Recorder of Orange County, California PDA 2002 resolutions:CFD 2003-1 (Establishment) RLS 2002-0669 ' CO,NFORNED DOPY ' Nat C."./.d wft OY-.'M PROPOSED BOUNDARIES OFACCEP,ED MFLM CITY OF HUNTINGTON BEACH EAT ST R£Ol67OFTlE CNY CF HWff7iGTW1 W," COMMUNITY FACILITIES DISTRICT No. 2003-1 � PlumEw (HUNTINGTON CENTER) -115 - F�ires�aYcc{ano�zoi COUNTY OF ORANGE DOFYM^ff ...- STATE:OF CALIFORNIA,: DISTRCMN �IMCFRCEOF ,.':. 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SO.GO- T1¢gpAY OF mO3 E>•176 COIPa'E'BWCQCdK- Y,7M=Y CF > I THE CITY OF KwtarcmusICH IE J Nwaa.s' I n S6 1 � 19T 1 b F LI t 7At187 i . 1 rNrm/ I t sT i L eo lit'OPROPOSED 80LICAMM I I I - FAC(JI 9 M919 OF mum , t N0.7007— CBRBtI.rE OF H`JN0s3t AVE igetll®'St�N g I [MM IN 30QK2A PAGES 4.4a4 OF PMKM MAPS NTNEWFm I I OFTHECONNIYRECMEEROF ORMCECOUNMCAI POWFA. 1 t ir I I I I t III 1 � I tOCATX7iMAp t 11. ti v IOC w w ORAFRHC SG1lL ,4 Ul PAF[87L INEZ PII tA99gWN ON PAPGH.lA4P N0.BbmO W N l90W2 6,PAGER 443 OF PAROBNAM LATHE OPPCE OFT1E CULWM RECCROER OP ORANGE CIXMY.CALFORRN SHEET I OF 1 EXHIBIT B CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 RATE AND NiE`TFiOD OF APPORTION�h1ENT OF SPECIAL TAX s PDA 2002 resolutions:CFD 2003-1 (Establishment) RLS 2002-0669 CITY OF HUNTINGTON BEACH COTY FACILITIES DISTRICT NO. 2003-1 (HZtNTINGTON CENTER) 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.2003-1 (Huntington Center) (herein CFD No. 2003-1) shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The real property in CFD No. 2003-1, 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. DEF MTIONS The capitalized terms hereinafter set forth have the following meanings when used in this Rate:azid Method.ofApportioru:nW _ . Acre or Acreage means the land area ofan Assessor's Parcel as-shown on an Assessors 4 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, th'e 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.rea onably- . estimated costs directly-'reiated to the.administration of..CFD No -2003-1: 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 goverranent 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. 2003-1. for means,the DJ .Economic-Developihent.or;such other person:.or: .. .__ Administra_ 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. 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. 2003-1 underAhe Act . City means the City of Huntington Beach. City Council means the City Council of the City of Huntington Beach, acting as the Ie "slatiye bodyof CFD No.2003-1. au o.: Coin s the Cou g.my mean my"for Or Development Agreement means the Owner Participation Agreement(OPA)between the Redevelopment Agency. of the City of Huntington Beach and Huntington Center Associates,LLC,dated October 2,2000. Exempt Land means (1) any real property within the boundaries of CFD No. 2003-1 which generally serves the development subject to the Development Agreement and is owned by a governmental agency for public right-of-way purposes including, but not limited to parking structures, 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 has been.paid in full... Fiscal Agent means the fiscal agent who is a part the Indenture,ifso 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. 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. 2 Maximum Special Tax means, with respect to any Parcel of Taxable Property, the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on such Parcel. Maximum Special Tax shall not include the amounts payable under the Parking Structure Maintenance Special Tax. Outstanding Bonds.means all Bonds that are then outstanding under the Irdenture:' =" _ Parking Structure Maintenance Special Tax means the portion of the Special Tax to be levied in an amount equal to the amount.required in any Fiscal Year for CFD No. 2003-1 necessary to pay all actual, documented maintenance costs,management fees and other operating expenses of the parking structure being financed by a portion of the Bond proceeds to the extent such costs, fees and operating expenses exceed revenues generated by such parking structure. The calculation and inclusion or exclusion of particular items of expense or income into such costs,fees, expenses and revenues shall be subject to and limited by the provisions of the following documents,which documents shall be in the form approved by the City Council in connection the issuance of the Bonds, and which documents,upon such approval, shall be deemed to be incorporated herein by this reference: (i)any covenants,conditions or restrictions encumbering such parking structure and/or the real property upon which it is to be constructed as of the date of issuance of the Bonds, (ii)the initial parking management agreement governing the operation and maintenance of such parking structure(the provisions of such initial parking management agreement to govern the determination of the Parking Structure Maintenance Special Tax far so long as-the Special Tax lien.remains_in.effec ;,, _: notes the andinj any earlier expiration,or- erminatron of such agreement),'arid(iiT):any amendments to the foregoing covenants, conditions or restrictions or agreements. 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. 2003-1, 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 Taxable Property within CFD No. 2003-1. Special Tax Requirement means the amount required in any Fiscal Year.for , 2003-1 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, (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 fluids determined pursuant to the Indenture, and (v) to pay the Parking Structure Maintenance Special Tax. 3 Taxable Property means all of the Assessor's.Parcels within the boundaries of CFD No. 2003-1, which are not Exempt Land or exempt from the Special Tax pursuant to law,but in no circumstance shall the total amount of Taxable Property be less than 40.63 acres. Pp.. :. .. ; Trustee means-_the trustee who is a.party to.tlie Indenture,.if so-a rove 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. 2003-1 are Taxable Property. 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. u C. NLA-NIMUM SPECIAL TAX The Maximum Special Tax for the Assessor's Parcels of Taxable Property in CFD No. 2003-1 shall be the greater of (1) $65,050 per Acre or (2) the amount determined pursuant to the following steps: : Step l- Determine.the maximum annual debt service on all Outstanding. Bonds;- Step 2: Multiply the total debt service deterrimined in Step 1 by 11 and add the Administrative Expenses; Step 3: Determine the Acreage of Taxable Property within the CFD No. 2003-1; 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 APPORTIONWNT-OF THE SPE IAL'TAX. ... . Commencing with Fiscal Year 2004-2005, 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. 4 E. LIMITATIONS _ No Special Taxes shall be levied on any Parcel after such Parcel becomes Exempt Land. The Tax may.be levied .and collected on.Taxable Property..commencing vtith. Fi Ye.ar:2004-2005,andlfor each Fiscal Year,thereafter,.and until the-date'on which; principal and interest'on all OutstandingBonds�have been paid in full'(or provision for i ,." their payment has been made). Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax may be levied and collected until such time as the City and the CFD No. 2003-01 have divested all remaining ownership interests in the parking structure. Upon determination by the Administrator that such requirements have been met,the Special Tax lien shall be removed from all Parcels in CFD No.2003-1. 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 the City on behalf of CFD No.2003-1 may directly bill the special tax or any portion thereof,may collect special taxes or any portion thereof 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 delinquent Assessor's,Parcels.as permitted.by the.Act. Notwithstanding the foregoing, the Parking .. Structure lYlaintenance Special Fax all be directlVbilled in each instance and notbilldd :,-. with ad valorem property taxes: G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No. 2003-1, 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 any Taxable Property within CFD No. 2003-1 claiming thafthe 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, consider written.:aiid= 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, 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 shall be a condition precedent to any legal action by such owner. 5 H. PREPAYMENT OF SPECLkL TAX The following definitions apply solely to this Section H: Arrioexnt.of Current S ecial;Tales- aid mmans-tlie:amoiiat of the Special;Tax'levie.'d' P ; . against the subject Assessor'sTarcel ihafwas paid to the County or the Cityby the.owper of the subject Assessor's Parcel and would be applied to debt service payments on the Redemption Date and the Interest-Payment Date immediately following the Redemption Date. Outstanding Bonds means. all Bbnds that are deemed to be outstanding under the Indenture the day immediately preceding the next Interest Payment Date. Redemption Date means the Interest Payment.Date on which Bonds are proposed to be redeemed from the prepayments of the Special Tax_ 1. Prepayment in Full The Special Tax obligation applicable to such Assessor's Parcel maybe fully prepaid and the obligation of such Assessor's Parcel to pay the Special Tax permanently satisfied as des rein.". The owner infendin to r. a the S ecial:.Tax-obligation..on-one,or , P eP Y ]? more Assessors Parcels)shall pro«de:tlie Admunstrator with written notice of intent�o prepay. It shall-be a condition precedent to prepayment that the owner intending to prepay the Special Tax must pay to the County all past.due Special Tax on.the Assessor's Parcel to be prepaid and provide proof of payment to the Administrator,. Promptly following receipt of such notice, the Administrator shall notify the owner.of such Assessor's Parcel(s) 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 90 days prior to the next occurring date that Bonds maybe redeemed from the proceeds of such prepayment pursuant to the Indenture. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined above or below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Amount of Current Special Taxes Paid Total: Equals Prepayment Amount 6 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 intended to be prepaid,,compute tfie lvlaximum Special Tax for such Assessor's Parcels for the current Fiscal Yean:,- 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 for the current Fiscal Year. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section G 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 less the paramount of Bonds scheduled to mature on the Redemption Date.by the applicable redemption premium (the Redemption Premium). 5. Compute the amount needed to pay interest'on the Bond Redemption Amount from the Interest Payment Date immediately preceding the Redemption Date to the Redemption Date. 6.. .:;-..Compute the aniourit the.. reasonably expects.to,derive:,frozn'the,= reinvestment of-the'Prepaymenf.:AmQunt.fr6ni the :date.of.prepayment until.flie redemption date-for the Outstanding Bonds to be redeemed with the prepayment. 7. Add the amounts computed pursuant to Paragraph 5 and subtract the amount computed pursuant to Paragraph 6 (the Defeasance Amount). 8. Determine the administrative fees and expenses associated with 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). 9. 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 In in effect after the'"edemption 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. 10. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3, 4, 7 and 8, less (i) the amounts computed pursuant to Paragraph 9 and(ii)the Amount of Current Special Taxes Paid (the Prepayment Amount).. 7 11. - From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3, 4, 7 (if greater than zero), and 9 shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments (as appropriate). -The amount computed pursuant to Paragraph 8 shall be retained by the Administrator. With respect to any Assessor's Parcel that is prepaid, the'City Council'shall (i).cause'a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Parcel, (ii) notify the County that the Special Tax, if any, remaining on the secured tax roll for the Assessor's Parcel has been satisfied and that the County should remove such-amounts from-the secured tax roll, and (iii) refund the owner for any Special Tax payments made on the Assessor's Parcel after the date of prepayment. -From and after the prepayment, the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Tax that may levied on Taxable Prop erty,%cdthin CFD No.2003-1 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:Assessar's:Parcel of Taxable.:Property-maybe.partiaty_ 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:l, minus the amounts determined in Paragraph No. 8 of Section H.1. F . the percent by which the owner of an Assessor's Parcel(s) is partially prepaying_ the Maximum Special Tax_ G = the amounts determined in Paragraph Na_:8 of Section H.l The owner of 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, and(ii)the percentage by which the Maximum Special Tax shall be prepaid.. The Administrator shall promptly provide the owner 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. 8 With respect to any Assessor's Parcel that is partially prepaid, CFD No, 2003-1 shall (i) distnbute the funds remitted to it according to Paragraph 11 of Section H.1, and (ii) indicate in the records of CFD No. 2003-1 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 (i.e., 100% - F) of the remaining Maximum Special Tax shall continue to be;authorized.to l7e`levied-on such Assessor's Pazcel pursuant.to:Section Dr 9 Res. No.2003-10 STATE OF CALIFORNIA :.COU. NTY,OF ORANGE. City OF.HUNTINGTON�BEAGH`- ) _ 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 an regular meeting thereof held on the 3`d day of February 2003 by the following voter AYES: Sullivan, Coerper, Green, Boardman, Cook, Houchen, Hardy NOES: None - ASSENT: None ABSTAIN: None City Clerk and ex-offcio C erk of the City Council of the City.Qf;' Huntington Beach, California The kmgc�hV katatarra"b e emed copy d odgy on Attest 20 t ���d Ex-off�ro CIO of 8 00uncl of the City a@ Huntkvbn �y Deputy ' ORDINANCE NO. 3631 AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH LEVYING SPECIAL TAXES WITHIN THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER)'- WHEREAS, on January 6, 2003, 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. 2003-1 (Huntington Center)" (the "Resolution of Intention") stating its intention to establish City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (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 This City Council,has held a..noticed public hearing as required by the.Municipal:Code " and the.Act relative :determination to,proceed with the-,formation of the District:and'the 1_.._ ~. 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 evidence was presented and considered by this City Council and a full and fair hearing was held; and Subsequent to said hearing,this City Council adopted Resolutions entitled "Resolution of the City Council of the City of Huntington Beach Establishing City of Huntington .Beach Community Facilities District No. 2003-1 (Huntington Center), 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 an' d.' Submitting to the Voters of City of Huntington Beach Community Facilities District No. ..2003=1' (Huntington.Center) 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 G:\FIELD\CFD No.2003-1(Huntington Center)Ordinance.rtfl 1/17/2003 Ord. No.3631 Notwithstanding the foregoing and notwithstanding the Rate & Method of Apportionment, the City Treasurer or his/her written designee may collect -one or more installments of the special taxes by means of direct billing by the City of the property owners, within the District, if, in the judgment of the City Treasurer or his/her written designee, such means of collection will reduce the administrative burden on.tbe City oz is otherwise.appropriate und6r the cikcumstances.'.In such event, the special taxes shall.become:delinquent i f n`t paid when due as set f6A,in any such respective billing to the property owners. -Notwithstanding the*;.'--' foregoing, the portion of the Special Tax relating to maintenance and operation of the public parking structure may be levied on the taxable real property within the District by direct billing on a monthly, bi-monthly or semi-annual basis as the Treasurer may determine in his/her discretion. 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 valorem taxes. In addition, the provisions of Section 5-3$6.1 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 become effective thirty(3Q).days after its adopti"ori: ` PASSED AND ADOPTED at a regular meeting of the City Council of the City of Huntington Beach, State of California,on this 20th day of January , 200',. Mayor of the of Huntington Beach ATTEST: APPROVED AS TO FORM: City Cleric C ty Attorney REVIEWED AND APPROVED INITIATED AND APPROVED City AdmfKstrator Director of Economic Development G:FIELDICFD No.2003-1(Huntington Center)lordinance.r fl 111712003 OrcL No.3631 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; 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--arid 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(being Resolution No.2003- 10 of the.City of Huntington Beach) (the "Rate and Method of Apportionment"). The special taxes are hereby levied commencing in fiscal year 2004-05 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 City Treasurer or his/her written designee is hereby authorized and directed each fiscal year to determine the specific special tax rate and amount to be levied for the next ensuing fiscal year for each parcel of real property, 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 fromnny levy of the special taxes, except.those properties subject to:a leasehold.inferesr;. 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, the operation and maintenance of the public parking garage 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 inthe same manner as' ordinary ad valorein taxes are collected. .The City Treasurer of 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 Countyof 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. G:\FIELD\CFD No.2003-1(Hunting on CenterpOrdinances fl 1/17/21003 Ord.No. 3631 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 ordinance was read to said City Council at a regular meeting thereof held on the_5th day of January,2004,and was again read to said City Council at a re ular meeting thereof held on the 20th day of January,2004 and was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council. AYES: Sullivan,Coerper,Hardy, Green,Boardman, Cook NOES:... None- ABSENT: Houchen ABSTAIN: None is mm caffad Copy OfIS OdgbWon fh in M MVM Anew 20 I,Connie Brockway,CITY CLERK of the City of ASIX DiPld rM t i® Huntington Beach and ex-officio Clerk of the City nd Of thO Ofty of i'unti6Vbn Council,do hereby certify that a synopsis.of this BY � t ordinance has been published in the Huntington Beach ". Fountain Valley Independent on January 29,26o4. In accordance.-with the City Charter of said City Connie Brockway,City Clerk City Clerk and ex-officio C erk Deputy city Clerk of the City Council of the City of Huntington Beach, California CONFORMED COPY ILIN. Not Compared with Orig' al EXEMPT PURSUANT TO GROM VERN i PUNSUANT TO GOVERNN <SECTION i RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO Recorded in Official Records, County of Orange Tom Daly,Clerk-Recorder `���� ll1111111111111111111�1illllll�llllll11111(11111111111111dIIIIIIIIINo City of Huntington Beach_ FEE 2000 Main Street 2003000186478 12:39pm 02120103 Huntington Beach,CA 92648 115 27 N20 16 0.00 0.00 0.00. 0.00 0.00 0.00 0.00 0.00 SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S' NOTICE OF SPECIAL TAX LIEN Pursuant to the requirements of Section 3114.5 of the Streets and Highways Code and Section 53328.3 of the Government Code,the undersigned City Clerk of the City of Huntington Beach, County of Orange, State of California, hereby gives notice that a lien to secure payment of special taxes is hereby imposed by the City Council of the City of Huntington Beach, County of Orange, State of f California. The special taxes secured by this lien are authorized to be levied for the purpose of paying principal 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 ofHuntington Beach Community Facilities District No_ 2003-1 (Huntington Center), County of Orange, State of California (the "Community Facilities District"), the boundaries of which 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 of the 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 53330.5 of the Government Code. RVPUBIBJS\647242 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 `gin. ' alao 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 alien 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 January 19, 2003, in Book 85 of Maps of Assessment and Community Facilities Districts, at Page 45, and as Instrument No. 2003-000028911, 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- 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 Director ofEconomic Development ofthe City ofHuntington Beach,2000 Main Street,Huntington Beach, California, telephone number(714)536-5582. Dated-February 42, 2003. City Clerk of the City of Hunti on Beach RVPUS\BI51647242 -2- EXHIBIT "A" CITY OF HUNTINGTON BEACH CONDAUNITY FACILITIES DISTRICT NO. 2003-1 (FIUNTINGTON CENTER) DESCRIPTION OF PUBLIC FACILITIES' The types of public facilities to be provided within and financed by the 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) Public parking facilities including parking structure. (e) Water distribution facilities,including fire hydrants and reclaimed water and water storage facilities. (f) Street signalization and signage, including traffic fees. (g) Fire facilities including structures and capital equipment. .(h) Acquisition of land, rights-of-way and easements necessary for any of the facilities specified in paragraphs(a)through (g) above. (i) 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 of the 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. (j) Maintenance of, and the provisions or repair and replacement reserves for, any of the publicly owned facilities listed above in(a) through(h). f; RVPUH18JS1647242 A-1 _ EXHIBIT "B" LEGAL DESCRIPTION FOR COMMUNITY FACILITIES DISTRICT NO. 2003-1 PURPOSES '- FOR THE HUNTINGTON CENTER THE LAND REFERRED TO HEREIN LIES WITHIN PARCELS 2 THROUGH 9 INCLUSIVE OF PARCEL MAP NO. 86-200, IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA AS SHOWN ON A MAP RECORDED IN BOOK 255, PAGES 40 THROUGH 45 INCLUSIVE OF PARCEL MAPS. IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY OF ORANGE WHOSE PERIMETER IS DESCRIBED AS FOLLOWS: BEGINNING AT THE INTERSECTION OF EDINGER AVENUE AND BEACH BOULEVARD AS SHOWN ON SAID PARCEL MAP NO. 86-200, SAID INTERSECTION BEING-SOUTH 000 19' 42" WEST 0.17 FEET FROM ORANGE COUNTY GPS # 5110, THENCE ALONG SAID CENTERLINE OF EDINGER AVENUE THE FOLLOWING: I. NORTH 890 29' 30" WEST 111.00 FEET; THENCE PERPENDICULAR TO SAID CENTERLINE,MEASURED AT RIGHT ANGLES 2. NORTH 000 30' 30" EAST 50.00 FEET TO THE SOUTHEASTERLY CORNER OF PARCEL 8 OF SAID PARCEL MAP NO. 86-200 AND THE TRUE POINT OF BEGINNING; THENCE ALONG THE SOUTHERLY.LINES OF PARCELS 8, 4, 3 AND 2 3. NORTH 89° 29' 30" WEST 2053.69 FEET TO THE MOST SOUTHWESTERLY CORNER OF SAID PARCEL 2, SAID POINT BEING IN THE NORTHERLY LINE s l; OF SAID EDINGER AVENUE; THENCE NORTHERLY ALONG THE WESTERLY LINES OF SAID PARCEL 2 THE FOLLOWING.COURSES: 4. NORTH 000 30' 30".EAST 403.20 FEET, 5. SOUTH 890 29' P0"EAST 172.56 FEET, 6. NORTH 000 30' 30' EAST 210.00 FEET, 7. NORTH 890 29' 30"WEST 19.50 FEET, 8. NORTH 000 30' 30"EAST 169.00 FEET,. 9. NORTH-890 29' 30"WEST 153.06 FEET, 10.NORTH 000 30' 30" EAST 338.61 FEET, TO THE SOUTHERLY LINE OF THE NORTHERLY 150.00 FEET OF THE SOUTH HALF OF THE SOUTHEAST QUARTER OF SECTION 14, SAID LINE ALSO BEING THE NORTH LINE OF SAID PARCELS,3 AND 4;THENCE ALONG SAID NORTH LINE 11. SOUTH 890 29' 30" EAST 1333.15 FEET TO THE MOST NORTHEASTERLY' CORNER OF SAID PARCEL 4, SAID POINT BEING ON THE SOUTHWESTERLY RIGHT OF WAY LINE OF CENTER DRIVE AND THE BEGINNING OF A NON- TANGENT CURVE CONCAVE SOUTHWESTERLY HAVING A RADIUS OF 504.00 FEET TO WHICH POINT A RADIAL LINE BEARS SOUTH 430 16' 29" WEST; THENCE ALONG SAID SOUTHWESTERLY LINE AND SAID CURVE THROUGH A CENTRAL ANGLE OF 120 04' 12" AN ARC LENGTH OF 106.17. FEET AND A CHORD DISTANCE OF 105.98 FEET; THENCE TANGENT TO SAID CURVE l { 12. SOUTH 340 39' 19"EAST 208.54 FEET;THENCE 13. SOUTH 310 44' 20" EAST 249.92 FEET TO THE BEGINNING OF A NON— TANGENT CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 300.00 FEET TO WHICH POINT A RADIAL LINE BEARS NORTH 75' 14' 40" EAST; THENCE ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 500 58' 58" AN ARC LENGTH OF 266.95 FEET AND A CHORD DISTANCE OF 258.23 FEET; THENCE TANGENT TO SAID CURVE 14.SOUTH 650 44' 18"EAST 233.07 FEET;THENCE 15.SOUTH 350 15' 38" EAST 70.56 FEET TO A POINT ON THE WEST LINE OF BEACH BOULEVARD AS DESCRIBED PER DEED TO THE CITY OF HUNTINGTON BEACH RECORDED AS INSTRUMENT NO. 91-209426 OF OFFICIAL.RECORDS OF SAID COUNTY OF ORANGE; THENCE ALONG SAID . WEST LINE 16.SOUTH 000 19'42"WEST 273.61 FEET;THENCE 17. SOUTH 420 18' 58" WEST 41.42 FEET TO THE NORTH LINE OF EDINGER AVENUE AS SHOWN ON DEED TO THE CITY- OF HUNTINGTON BEACH RECORDED IN BOOK 10418, PAGE 968 OF OFFICIAL RECORDS OF SAID COUNTY OF ORANGE;THENCE 18. SOUTH 890 29' 30"EAST 8.05 FEET; THENCE 19.SOUTH 420 18' 58"WEST 10.73 FEET TO THE TRUE POINT OF BEGINNING. CONTAINING AN AREA OF 44.00 ACRES MORE OR LESS COORDINATES SHOWN ARE BASED UPON THE CALIFORNIA STATE PLANE s COORDINATE SYSTEM, 1983 DATUM. GPS#5110 N 2213732.692 E 6032865.319 FOUND REBAR DOWN 0.1 . STATION IS LOCATED AT APPARENT CENTERLINE INTERSECTION OF BEACH BOULEVARD AND EDINGER AVENUE. 0 N CHRISTOPHER W DmIELS EXP 'vZ NO. 6M qrF OF CAUFaP� P:/PR0IECCS/02100/SURVEY/ADWMCFD LEGAL BELLA TERRA I12602.QOC 2 HB-PCLS2-9.txt °... :•T° Parcel name: PCLS-2-91 North: 2213791.4410 East : 6032761.9937 Line Course: S 42-18-5B W Length: 10.73 North: 2213783.5068 East : G032754-7701 Line Course: N 89-29-30 W Length: 2053.69 North: 2213801.7271 East : 6030701.1609 Line Course: N 00-30-30 E Length: 403.20 North: 2214204.9112 East : 6030704.7381 Line Course: S B9-29-30 E Length: 172.56. North: 2214203.3803 East : G030877.2913 Line Course: N 00-30-30 E Length: 210.00 North: 2214413.3720 East : G030879.1544 Line Course: N B9-29-30 W Length: 19.:50 North: 2214413.5450 East : 6030B59.6552 Line Course: N 00-30-30 E Length: 169.00' North: 2214582.5384 East : 6030B61.1546 Line Course: N 89-29-30 W Length: 153.06 North: 2214583.8963 East : 6030708-1006 Line Course: N 00-30-30 E Length: 338.61 North: 2214922.4930 East : 6030711.1047 Line Course: S 89-29-30 E Length: 1333.15 North: 2214910.6653 East . G032044.2022 Curve Length: 106-.17 Radius: 504.00 Delta: 12-04-12 Tangent: 53.28 Chord: 105.98 Course: S 40-41-25 E Course .In: S 43-16-29 W Course Out: N 55-20-41 E RP North: 2214543.7154 East : 6031698.7117 End North: 2214B30.30B7 East : 6032113.2961. Line Course: S 34-39-19 E Length: 208.54 North: 221465B.7662 East : 6032231.8798 Line Course: S 31-44-20 E Length: 249.92 North: 2214446.1207 East : 6032363.3499 Curve Length: 266.95 Radius: 300.00 Delta: 50-58-58 Tangent: 143.04 Chord: 258.23 Course: S 40-14-49 E Course In: •N 75-14-40 E Course Out: S 24-15-42 W RP North: 2214522.6294 East : 6032653.4563 End North: 2214249.1259 East : 6032530.1B50 Line Course: S .65-44-18 E Length: 233.07 - North: 2214153.3564 East : 6032742.6698 Line Course: S 35-15-3B E Length: 70.56 North: 2214095.7416 East : 6032783.4038 Line Course: S 00-19-42 W Length: 273.61 North: 2213822.1361 East : 6032781.8359 Line Course: S 42-18-58 W Length: 41.42 North: 2213791.5084 East : 6032753.9511 Line . Course: S 89-29-30 E Length: 8.05 North: 2213791.4370 East : 6032762.0008 Perimeter: 6321.78 Area: 1,916,606.9244 sq. ft. 43-9992 acres Mapcheck Closure - (Uses listed courses, radii, and deltas) Error Closure: 0.0081 Course: S 60-33-45 E Error North: 70.00398 East : 0.00706 Page 1 EXHIBIT ."C" �� CITY OF HUNTINGTO`BEACH COmiMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX ble Property in the City of A Special Tax applicable to each Asse ies Distract No.200 arcel of ala(Hunturgton Center) (herein Huntington Beach Community Facilit Q to the tax liability determined CFD No. 2003-1) shall be levied and collected according by the Administrator through the apple xemn ed by of the procedures described provisions b hereof, shall property in CFD No. 2003-1, unless p 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. as shown on an '. Acre or Acreage means the land area of an Assessor's nean Asse Assessor's Parcel Map, thAssessor's landsarea Parcel Map, or if the land area is not shown 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 uncicreage for aParcel.after reference to available maps,thq Administrator shall determine the app p Act means Chapter 3.56 (commencing With Section 3.56.010) of the Municipal Code of pp the City of Huntington Beach and, as applicable, the Mello-Roos Community Facilities (commencing Act of 1982, as amended, being�Chapt entCodeof State of California. n 53311), Part 1, Division 2,of Title 5 of the Goverrun Administrative Expenses means any or all of the following actual or reasonably of CFD No. 2003-1: the fees and estimated costs directly related to the administration Q fees and expenses of its counsel) expenses of any Fiscal Agent or trustee (include co associated with the marketing or employed in connection with any Bonds; any remarketing of the Bonds) the expenses of the Administrator and the City in carrying out jut, n with g, but their duties under any Indenture or re of the S ec al Taxcthe fees and expenset to the Bonds, s of legal not limited to, the levy and collection P counsel,charges levied by the County or any division or office thereof in connection with the levy and collection of Special Taxes, audits, continuin; disclosure or other amounts osts needed to pay arbitrage rebate to th federal des government requirementscostsect tasBonds; ocia edcwtth associated with complying with continuing r' responding to public inquiries regarding Special Tax levies and appeals; attorneys' fees r 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. 2003-1. 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.. 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.2003-1 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. 200 M. County means the County of Orange_ Development Agreement means the Owner Participation Agreement (OPA) between the Redevelopment Agency of the City of Huntington Beach and Huntington Center Associates,LLC,dated October 2,2000. Exempt Land means (1) any real property within the boundaries of CFD No. 2003-1 which generally serves the development subject to the Development Agreement and is owned by a governmental agency for public right-of-way purposes including, but not ay corridors, and slopes as determined limited to parkin structures, streets, public walkwan Assessor's Parcel for which the in each Fiscal Year by the Administrator or (2) Y Special Tax 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. Indenture means the indenture, fiscal agent agreement, resolution or other instrument approved pursuant to the Resolution of issuance from time of ttume�and any rose ltnunent as modified, amended and/or supplemented replacing or supplementing the same. J' 2 Maximum Special Tax means, with respect to any Parcel of Taxable Property, the A maximum Special Tax, determined in accordance with Section C, that can be levied in E=` y any Fiscal Year on such Parcel. Maximum Special Tax shall not include the amounts payable under the Parking Structure Maintenance Special Tax. Outstanding Bonds means all Bonds that are then outstanding under the Indenture. Parking Structure Maintenance Special Tax means the portion of the Special Tax to be levied in an amount equal to the amount required in any Fiscal Year for CFD No. 2003-1 necessary to pay all actual,documented maintenance costs,management fees and other operating expenses of the parking structure being financed by a portion of the Bond proceeds to the extent such costs,'fees and operating expenses exceed revenues generated by sucli parking structure. The calculation and inclusion or exclusion of particular items of expense or income into such costs, fees,expenses and revenues shall be subject to and limited by the provisions-of the following documents,which documents Shall be in the form approved by the City Council in connection the issuance of the Bonds, and which documents,upon such approval, shall be deemed to be incorporated herein by this reference: (i) any covenants, conditions or restrictions encumbering such parking structure and/or the real property upon which it is to be constructed as of the date of issuance of the Bonds,(ii) the initial parking management agreement governing the operation and maintenance of such parking structure(the provisions of such initial parking management agreement to govern the determination of the Parking Structure Maintenance Special Tax for so long as the Special Tax lien remains in,effect, notwithstanding any earlier expiration or termination of such agreement), and(iii)any amendments to the foregoing covenants, conditions or restrictions or agreements. Reserve Fund means the fund of that name created under the Indenture. Resolution of Issaance means the resolution adopted by the City Council of the City, acting as the legislative body of CFD No. 2003-1, 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 Taxable Property within CFD No.2003-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No. 2003-1 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, (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, and (v) to pay the Parking Structure Maintenance Special Tax. f 3 Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No. 2003-1,which are not Exempt Land_or exempt from the Special Tax pursuant to law,but ` in no circumstance shall the total amount of Taxable Property be Less than 40.63 acres. 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. 2003-I are Taxable Property. 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. MAXimw SPECIAL.TAX The Maximum Special Tax for.the Assessor's Parcels of Taxable Property in CFD No. 2003-1 shall be the greater of. (1) .$65,050 per Acre or (2) the amount determined pursuant to the following steps: annual debt service on all Outstanding Step 1: Determine the maximum 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. 2003-1; 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. 1VIETIiOII OF'APPORTIONM ENT OF THE SPECIAL TAX . Year the City Commencing with Fiscal Year 2004-200 nd or e h fiscal Assessor's the eof Taxable Council shall levy the Special Tax proportionately 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. 4 E. LIMITATIONS z _.•,>., No Special Taxes shall be levied on any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on Taxable Property commencing with Fiscal Year 2004-2005, and for each Fiscal Year thereafter, and until the date on which g Bonds have been paid in full (or provision for principal and interest an all Outstandin their payment has been made). Notwithstanding the foregoing, the Parking Structure. Maintenance Special Tax may be levied and collected until such time as the City and the CFD No. 2003-01 have divested all remaining ownership interests in the parking structure. Upon determination by the Administratorall Parcels in CFD No. meats have been met,the Special Tax lien shall be removed F. NIANNER 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 the City on behalf of CFD No. 2003-1 may directly bill the special tax or any portion thereof, may collect special taxes or any portion thereof 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 delinquent Assessor's Parcels as permitted by the Act. Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax shall be directly billed in each instance and not billed with ad valorem property taxes. G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No. City I , 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 any Taxable Property within CFD No. 2003-1 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, 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, 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 shall be a condition precedent to any legal action by such owner. 5 g. PREPAYMENT OF SP]ECLAL TAX The following definitions apply solely to this Section H: Amount of Current Special Taxes Paid means the amount of the Special Tax levied against the subject.Assessor's Parcel that was paid to the County or the City by the owner of the subject Assessor's Parcel and would be-applied to debt service payments on the. Redemption Date and the Interest Payment Date immediately following the-Redemption Date. outstanding Bonds means all Bonds that are deemed to be outstanding under the Indenture the day immediately preceding the next Interest Payment Date. Redemption Date means the Interest Payment Date on which Bonds are proposed to be redeemed from the prepayments of the-Special Tax. I. Prepayment in Full The Special Tax obligation applicable to such Assessor's Parcel may be fully prepaid and the obligation of such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner intending to prepay the Special Tax obligation on one or more Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. It shall be a condition precedent to prepayment that the owner.intending to prepay the Special Tax must pay to the County all past due Special Tax on the Assessor's Parcel to be prepaid and provide proof of payment to the Administrator. Promptly following receipt id.such notice, the Administrator shall notify the owner of such Assessor's 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 90 days prior to the next occurring date that Bonds may be redeemed from the proceeds of such prepayment pursuant to the Indenture. The Prepayment Amount (defined below) shall be calculated as summarized below (capitalized terms as defined above or below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Amount of Current Special Taxes Paid Total: Equals Prepayment Amount f 6 As of the proposed date of prepayment,the Prepayment Amount(defined below) shall be 3r calculated as follows: Paragraph No. 1. For Assessor's Parcels of Taxable Property intended to be prepaid, compute the Maximum'Special Tax for such Assessor's Parcels for the current Fiscal Year. 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 for the current Fiscal Year. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section G 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 less the par amount of Bonds scheduled to mature on the Redemption Date by the applicable redemption premium (the Redemption Premium). 5. Compute the amount needed to pay interest P he Redemption n the Bo Redemption Amount t from the Interest Payment Date immediate) receding P on Date to the Redemption Date. 6. 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. 7. Add the amounts computed pursuant to Paragraph.5 and subtract the amount computed pursuant to Paragraph 6(the Defeasance Amount). 8. Determine the administrative fees and expenses associated with 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). 9. 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 ivith 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_ 10. The Special Tax prepayment is equal to,the sum of the amounts computed pursuant to Paragraphs 3, 4, 7 and 8, less (i) the amounts computed pursuant to Paragraph 9 and(ii) the Amount of Current Special Taxes Paid(the Prepayment i Amount). 7 11, From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3, 4, 7 (if greater than zero), and 9 shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments (as appropriate). The amount computed pursuant to Paragraph 8 shall be retained by the Administrator. With respect to any Assessor's Parcel that is prepaid, the City Council shall (i) cause a suitable notice to be recorded in compliance with the Act, to indicate the prepayment of the Special Talc and the release of the Special Tax lien on such Assessor's Parcel, ii notify the County that the Special Tax, if any, remaining on the secured tax roll for the Assessor's Parcel has been satisfied and that the County should remove suchamoo amounts from the secured tax roll, and (iii)refund the owner for any Special c payments a ym n on the Assessor's Parcel after the date of prepayment. From and after the prepayment, the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing, no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Tax that may be levied on Taxable Property,,N ithin CFD No. 2003-1 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 maybe partially prepaid. The amount.of the prepaymeedntah ordin to the following formula:ated as in Section H.1' except that a partial prepayment shall be calculat g 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. 8 of Section H.1. F = the percent by which the owner of an Assessor's Parcel(s) is partially prep"g the Maximum Special Tax. No.8 of Section H.1. G = the amounts determined in Paragraph The owner of 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, and(ii)the percentage by which the Maximum Special Tax.shall . be prepaid. The Administrator shall promptlyof provide the Maximum Specialsemen Tax sfor of than amount required- for the partial prepayment Assessor's Parcel following receipt of the request. 8 ' f • } With respect to any Assessor's Parcel that is partially prepaid, CFD No. 2003-1 shall (i) distribute the funds remitted to it according to Paragraph 11 of Section H.1, and (ii) indicate in the records of CFD No.2003-1'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 (i.e., 100% - F) of the remaining Maximum Special Tax shall- i continue to be authorized to be levied on such Assessor's Parcel pursuant to,Section D. } 1 i i i a i 9 i EXHIBIT "D" CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (MOUNTAIN COVE) OWNERSMP LIST ASSESSOR'S PARCEL NOS. OWNER'S NAME 142-071-53 Huntington Center Associates, LLC 142-071-61 142-071-80 142-071-85 142-071-93 142-071-97 142-071-98 147-071-99 D-1 RVPUB\BIS\647242 RESOLUTION NO, 2013-21 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 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.2003-I (Huntington Center) (the"District")pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982, as amended, being Chapter 15, 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 February 3, 2003, 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. 2003-1 (Huntington Center) 2004 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$25,000,000(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 $22,000,000 designated as the "City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)20I3 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 lndenture"); 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; na forego"K.Wument Is a corm- espy of the original on file in this oft-C9. Attest ��— J o1_- Che C�ty ity Cleric and -offlcw Clerk t f3erx . 13-3774/97073 I C^,un °I of the City of Huntington Cap% i �1 Resolution No. 2013-21 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.2003-1, 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 $22,000,000 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 $22,000,000, (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 2013SBonds 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 13-3774197073 Resolution No. 2013-21 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($217,190,074) 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($22,000,000). 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 13-3774/97073 Resolution No: .2013-21 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 3rd day of June,2013. e Mayor REVIEWED APPROVED: APPROVED AS TO FORM: City Makager 3ityey INITIATED AND APPROVED: /Jlv,- Exhibits to Include: Director of Finance Bond Indenture Escrow Agreement Preliminary Official Statement Bond Purchase Agreement 4 13-3774/97073 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/aaendas! 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. 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 I 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. Counciimember 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 Tem 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, Counciv 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 Tern 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: 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 bum injuries. 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 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 Councilmember 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 5 of 14 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/aovernment/agendasn. Mayor Pro Tem 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. (00:53:10) 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 Tem Harper closed the Public Comments portion of the meeting. COUNCIL COMMITTEE -APPOINTMENTS - LIAISON REPORTS AND ALL AS 1234 DISCLOSURE REPORTING Councilmember Sullivan reported chairing the Executive Committee and General Committee of the Orange County Senior Citizens'Advisory Council. Councilmember 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 Tem 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 Counciii 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, 20-13, 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 agendized. City Attorney Jennifer McGrath reported it is perfectly appropriate for the Mayor to take a position and requesting ratification by Council Members. 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 Counciimember 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 AB 564 (Mullin)—Community Redevelopment/Successor Agencies; authorize the Mayor to sign a Letter of Opposition for AB 325 (Alejo)- Land use and planning cause of actionsitime 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 Tem 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 Tem Harper felt this would be an appropriate matter to refer to the IRC. A motion was made by Mayor Pro Tem Harper, second by Councilmember Katapodis to approve the Fiscal Year 2013/2014 WOCWB proposed budget in the amount of$165,000, 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 relationship 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 Shorecliff, 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 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 D iM AeclulaitianGFOUPLL-G, 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 Aequkitien Gmup, I 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 Katapods 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. SpeeifiGat!GR fee the D Gte of r. it QeFvjeesz Council/PFA Regular Minutes June 3, 2013 Page 9of14 AY€ NOES-. Sullivan, GaFehie ASSENT-: Q ardman *At the conclusion of the meeting, there was a motion to reconsider this item on June 17, 2013. 8. 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 Katapodis 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, Carchic, 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. 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 Tern Harper opened the Public Hearing. Morrie Goichek, property owner representing the appiicant, 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 Tern Harper closed 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 Medel 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 BeachlEdinger 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 Beach/Edinger 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.staff s 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 CounciU 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: Boardman 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 Tem 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 Tem 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 Cleric of Ve City Council of the City of Huntington Beach, and Secretary of the Huntington Beach Public Finance Authority ATTEST: Ci Clerk, Clerk, Secreta ayor- hair $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS 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. 2003-1 (Huntington Center), 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. Dated: August 20,2013 CITY OF HUNTINGTON BEACH By: , City lerk D OC S OC/1636194/022273-0006 EXHIBIT A Resolution No. 2003-10 entitled "Resolution of the City Council of the City of Huntington Beach Establishing City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) and Establishing the Boundaries thereof,adopted February 3,2003. Ordinance No. 3631 entitled "An Ordinance of the City Council of the City of Huntington Beach Levying Special Taxes within the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)", adopted January 20, 2004. Resolution No. 2013-21 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. 2003-1 (Huntington Center)Authorizing the Issuance of its 2013 Special Tax Refunding Bonds in an Aggregate Principal Amount not to $22,000,000 and Approving Certain Documents and Taking Certain Other Actions in Connection Therewith,"adopted June 3,2013 A-1 DOCSOC/163 6194v2/022273-0006 BOND INDENTURE Between CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) and U.S. BANK NATIONAL ASSOCIATION, as Trustee Relating To $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Dated as of August 1,2013 DOCSOC/1620231v7/022273-0006 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.............................................................................................................11 Section 2.7 Execution and Authentication.....................................................................................11 Section2.8 Bond Register..............................................................................................................11 Section 2.9 Registration of Exchange or Transfer.........................................................................12 Section 2.10 Mutilated,Lost,Destroyed or Stolen Bonds...............................................................12 Section 2.11 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.............................................15 Section 3.4 Administration Fund...................................................................................................16 Section 3.5 Debt Service Account of the Special Tax Fund..........................................................16 Section 3.6 Redemption Account of the Special Tax Fund...........................................................16 Section 3.7 Reserve Account of the Special Tax Fund..................................................................17 Section3.8 Rebate Fund................................................................................................................18 Section 3.9 Costs of Issuance Fund................................................................................................18 Section3.10 Parking Fund...............................................................................................................19 Section 3.11 Surplus Fund..................................................................................... ..............19 Section3.12 Investments .................................................................................................................19 ARTICLE IV REDEMPTION OF BONDS Section 4.1 Redemption of Bonds..................................................................................................21 Section 4.2 Selection of Bonds for Redemption............................................................................23 Section 4.3 Notice of Redemption.................................................................................................23 Section 4.4 Partial Redemption of Bonds......................................................................................24 Section 4.5 Effect of Notice and Availability of Redemption Money...........................................24 i DOCS OC/1620231v7/022273-0006 Table of Contents Page ARTICLE COVENANTS AND WARRANTY 8ectiou5'l Warranty—..----.----.--------.--.—.--.--.--------..—.--24 8cudou5-2 Covenants....................................................................................................................24 ARTICLE VI AMENDMENTS TOINDENTURE Section 6.l Supplemental Indentures oc Orders Not Requiring BoodonmccCooneot------'20 Section 6.2 Supplemental Indentures or Orders Requiring BoodownerCooncm1—.---..---..29 Section 6.3 Notation of Bonds;Delivery of Amended Bonds.......................................................3O ARTICLE VII lJID8TEB Seudou7.l Trustee.........................................................................................................................3O Section -2 Removal of Trustee.....................................................................................................3l Section 7'3 Resignation of Trustee................................................................................................3] Section7.4 Liability of Trustee......................................................................................................3| Seutiou7.5 Merger oc Consolidation.............................................................................................32 ARTICLE VHI EVENTS CF DEFAULT;REMEDIES Section8.l Events of Default.........................................................................................................33 Section 8-2 Remedies of Owners...................................................................................................33 ARTICLE IX DBFGA8ANCB 8ectiou9'l Defeauooue..................................................................................................................34 ARTICLE X MISCELLANEOUS Ocuboul0.l Cancellation of Bonds.................................................................................................35 SeutkxzlO2 Execution of Documents and Proof of Ownership......................................................35 Section l0.3 Unclaimed Moneys -------..----------.-------.--.-----3M Section 10'4 Provisions Constitute Contract....................................................................................3M Section 10.5 Future Contracts..........................................................................................................37 8eutkoolO.M Further Assurances......................................................................................................37 Section10.7 8cverahi|dv .................................................................................................................37 Sectionl0.8 Notices.........................................................................................................................37 D0C80C/ 62023lv7/022273-0006 Table of Contents Page Section l0.9 Action ou Next Business Day.....................................................................................]7 EXHIBIT FORM 0F BOND.....................................................................................................A,l EXlDDIIB FORM OF REQUISITION FOR DISBURSEMENT 0F COSTS OF B-1 ISSUANCE............................................................................................................... � DOC8OC/162023lv7x02227 -0006 BOND INDENTURE THIS BOND INDENTURE ("Indenture") dated as of August 1, 2013, by and between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (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. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) 2004 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$25,000,000 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 April 1, 2004 (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 $20,915,000 designated as the "the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2013-21 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/1620231 v7/022273-0006 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. "Administration Fund" means that certain fund by that name established pursuant to Section 3.4 hereof. "Administrative Expenses Cap"means$30,000 per Fiscal Year. "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 DOCSOC/1620231 v7/022273-0006 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 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 ratings fall within the top 2 ratings; (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; (j) 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. 3 DOCSOC/1620231 v7/022273-0006 "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. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds issued in the original principal amount of $20,915,000. "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 August 1, 2013, by and between the District and Willdan Financial Services, as dissemination agent thereunder. "Corporate Trust Office"means the 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. "Dissemination Agent"means Willdan Financial Services, and any successor thereto. "District" means City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)established pursuant to the Act and the Resolution of Formation. 4 DOCSOC/1620231 v7/022273-0006 "Escrow Agreement" means the Escrow Agreement, by and between U.S. Bank National Association, as Escrow Bank, and the District,dated as of August 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 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; (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. 5 DOC SOC/1620231 v7l022273-0006 "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. "Parking Fund" means the fund by that name established pursuant to the Operating Agreement. "Parking Structure Maintenance Special Tax"means that portion of the Special Taxes levied for the Parking Structure Maintenance Special Tax as defined in the Rate and Method of Apportionment. "Operator" means Huntington Center Associates, L.L.C., a Delaware limited liability company, its successors and assigns. "Operating Agreement" means the Operating Agreement for the Huntington Center Parking Structure,by and between the City and the Operator, dated as of March 1, 2004. "Ordinance" means Ordinance No. 3631 adopted by the City Council, acting as the legislative body of the District on January 20,2004 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. 6 DOC SOC/1620231v7/022273-0006 "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 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; or (iii) 125% of average Annual Debt Service on the then Outstanding Bonds. "Resolution of Formation" means, Resolution No.2003-10 adopted by the City Council on February 3, 2003,pursuant to which the City formed the District. "Resolution of Issuance" means Resolution No.2013-21 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 special 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. 7 DOCSOC/1620231 v7/022273-0006 "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 3.11. "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. "Treasurer"means the Treasurer-Tax Collector of the County of Orange. "Term Bonds"means the Bonds maturing on September 1,2030 and September 1,2033. "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$20,915,000 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, 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 8 DOCSOC/1620231 v7/022273-0006 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, the Parking 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 Parking 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. 2003-1 2013 SPECIAL TAX REFUNDING BONDS." The Bonds shall be dated as of their Delivery Date and shall mature and be payable on September I 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: 9 DOCS OC/1620231 v7/022273-0006 Period Ending September 1 Principal Interest Rate 2014 $ 670,000 2.000% 2015 715,000 3.000 2016 740,000 3.000 2017 765,000 4.000 2018 790,000 4.000 2019 820,000 4.000 2020 855,000 4.000 2021 890,000 4.000 2022 925,000 4.250 2023 965,000 4.500 2024 1,010,000 5.000 2025 1,055,000 5.250 2026 1,115,000 5.250 2027 1,175,000 5.000 2028 1,235,000 5.000 2030 2,655,000 5.250 2033 4,535,000 5.375 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/1620231v7/022273-0006 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 11 DOCSOCJ 1620231v7l022273-0006 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 Reyistration 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/162023 lv7/022273-0006 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. 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 DOC S OC/1620231 v7/022273-0006 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. 2003-1 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. 2003-1 Rebate Fund (the "Rebate Fund") in which there shall be established a Rebate Account and an Alternative Penalty Account; (3) The Community Facilities District No. 2003-1 Administration Fund (the"Administration Fund");and (4) The Community Facilities District No.2003-1 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 3.12 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) $19,075,653.03 shall be transferred to the Escrow Bank for deposit into the Escrow Fund pursuant to the terms of the Escrow Agreement; 14 DOCSOC/1620231v71022273-0006 (2) $1,971.64 shall be transferred to the Director of Finance for deposit to the Administration Fund; (3) $94,339.67 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) $1,680,606.26 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: (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 I 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) Parking Fund; (6) Rebate Fund; and (7) 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. 15 DOCSOC/1620231 v7/022273-0006 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 Payments due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest, principal and Sinking Fund Payments 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 16 DOCSOC/1620231 v7/022273-0006 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 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. 17 DOCSOC/162023 tv7/022273-0006 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. (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 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. 18 D OC SOC/1620231 v7/022273-0006 (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 Parking Fund. After making the deposits required pursuant to Sections 3.3 through 3.7 hereof, the Trustee shall transfer Special Taxes in the amount of the Parking Structure Maintenance Special Tax, which amount shall be specified in a notice to the Trustee from the Director of Finance, to the Director of Finance for deposit into the Parking Fund pursuant to the Operating Agreement. Moneys on deposit in the Parking Fund are not pledged to the repayment of the Bonds. Section 3.11 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, (iv)to the Director of Finance for deposit to the Parking Fund to the extent amounts on deposit in the Parking Fund are less than the Parking Structure Maintenance Special Tax, or (v)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 3.12 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: (1) 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 19 DOCSOC/1620231 v7/022273-0006 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 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. (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 20 DO C S OC/162023 l v7/022273-0006 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 W REDEMPTION OF BONDS Section 4.1 Redemption of Bonds. (a) Optional Redemption. The Bonds maturing on and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing on September 1, 2024 and on and after September 1, 2027 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 on and after September 1, 2023, as a whole or in part, and by lot, 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, 2025 and September 1, 2026 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 on and after September 1, 2018, as a whole or in part, and by lot, 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. The Bonds maturing on September 1, 2030 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2029, 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 DOC S OC/1620231 v7/022273-0006 Term Bonds Due on September 1,2030 Year (September 1) Principal Amount 2029 $1,295,000 2030(Maturity) 1,360,000 The Bonds maturing on September 1, 2033 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2031, 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 1,2033 Year (September 1) Principal Amount 2031 $1,435,000 2032 1,510,000 2033 (Maturity) 1,590,000 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. 22 D O C S O C/1620231 v7/022273-000 6 (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 provided, however, that a notice of a redemption with respect to a redemption pursuant to Section 4.1(a) may be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Bonds to be redeemed. 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 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. 23 DOCSOC/1620231 v7/022273-0006 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 MoneX. 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 Warran 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 24 DOCSOC/162023lv7/022273-0006 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) 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 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 25 DOCSOC/1620231 v7/022273-0006 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 the Park Structure Maintenance Tax 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. (d) PaXment 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 26 DOCSOC/1620231v7/022273-0006 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. (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. 27 DOCSOC/1620231 v7/022273-0006 (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) 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. (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. 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; 28 DOCSOC/1620231 v7/022273-0006 (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. 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 29 DOCSOC/1620231 v7/022273-0006 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. 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 30 DOC S O C/1620231 v7f022273-0006 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 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 31 DOCSOC/1620231 v7/022273-0006 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. 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. 32 DOCS OC/1620231 v7/022273-0006 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. 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. 33 DOCSOC/1620231 v7/022273-0006 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. 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 34 DOCSOC1620231 v7/022273-0006 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. 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: 35 DOC SOCl1620231 v7l022273-0006 (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 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. 36 DOC S O C/1620231 v 7/022273-0006 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 Severabilitv. 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: Global Corporate Trust Services Ref: City of Huntington Beach Community Facilities District No.2003-1. 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 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 DOCSOC/1620231 v7/022273-0006 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. 2003-1 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.2003-1 ATTEST: j Clerk of t e City of tington Beach, g on behalf of City o untington Beach munity Facilities District No.2003-1 U.S.BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer S-1 DO CS OC/1620231/022273-0006 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.2003-1 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.2003-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No.2003-1 U.S. BANK NATIONAL ASSOCIATION,as Trustee By: - }� Authoriz d Officer S-1 DOCS 0C/1620231/022273-0006 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.2003-1 2013 SPECIAL TAX REFUNDING BONDS INTEREST RATE MATURITY DATE DATED DATE CUSIP®NUMBER % September 1, August 20,2013 REGISTERED OWNER: CEDE&CO. PRINCIPAL AMOUNT: AND NO/100 DOLLARS CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 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 DOCSO C/1620231v7/022273-0006 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. 2003-1 2013 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of$20,915,000 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 August 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 and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing on September 1, 2024 and on and after September 1, 2027 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 on and after September 1, 2023, as a whole or in part, and by lot, 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 1,2025 and September 1, 2026 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 on and after September 1, 2018,. as a whole or in part, A-2 DOCS O C/1620231 v7/022273-0006 and by lot, 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, 2030 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2029, 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 1,2030 Year (September 1) Principal Amount 2029 $1,295,000 2030(Maturity) 1,360,000 The Bonds maturing on September 1, 2033 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2031, 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 1,2033 Year (September 1) Principal Amount 2031 $1,435,000 2032 1,510,000 2033 (Maturity) 1,590,000 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: 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 A-3 DOCSOC/1620231 v7/022273-0006 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 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. 2003-1 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 A-4 DOCSOC/1620231 v7/022273-0006 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. 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. 2003-1 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.2003-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2003-1 [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION] This is one of the Bonds described in the within-defined Indenture. Dated: August 20,2013 U.S.BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer A-5 DOCSOC/162023 l v7l022273-0006 [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. 2003-1 [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/1620231 v7/022273-0006 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 2013 SPECIAL TAX REFUNDING BONDS The undersigned, a duly authorized representative of City of Huntington Beach Community Facilities District No. 2003-1 (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. j 2003-1 By: Authorized Officer B-1 DOCSOC/1620231 v7/022273-0006 EXHIBIT A Payee Amount Due Purpose of Expenditure B-2 DOCSOC/1620231v7/022273-0006 CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement(the "Disclosure Agreement"), dated as of August 1, 2013, is executed and delivered by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the"Issuer")and Willdan Financial Services,as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds (the `Bonds"). The Bonds are being issued pursuant to Resolution No.2013-21 that certain Bond Indenture (the "Indenture"), dated as of August 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 Director of Finance 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, 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 the Securities and Exchange Commission, filings with the MSRB are to DOCSOC/1637077v 1/022273-0006 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. 2 DOCSOC/1637077/022273-0006 (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 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 3 DOCSOC/1637077/022273-0006 amount value-to-lien ratios,prior delinquencies and foreclosure status of the applicable properties as of May 1 each year; (vi) information regarding the percentage of delinquency, if any, in the collection of special taxes levied on property in the District, the number of parcels delinquent, amount delinquent compared to the total levy and the assessed value of each delinquent parcel as of May 1 each year in the form set forth in Table 8; (vii) an update to the assessed value-to-lien information set forth in Table 7 as of May 1 each year, except that the overlapping debt information is not required to be included in the assessed value-to-lien calculations; 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 (vii), 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; 4 DOCSOC/1637077/022273-0006 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,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. 5 DOCSOC/163 7077/022273-0006 (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. 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. (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. 6 DOCSOC/1637077/022273-0006 (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 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 7 DOC SOC/1637077/022273-0006 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.2003-1 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 Facsimile : (213)615-6199 To the Dissemination Agent: Willdan Financial Services 27368 Via Industria, Suite 110 Temecula, CA 92590 Attention: Candace Heiser Telephone: (800)755-6864 Facsimile: (951) 587-3510 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. 8 DOCSOC/1637077/022273-0006 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 land 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.2003-1 By. Vat..- - a4,-t- Its: 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.2003-1 WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Its: Authorized Officer 9 DOCS OC/1637077/022273-0006 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 land 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. Seyerability. 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. 2003-1 By: Its: 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. 2003-1 WILLDAN FINANCIAL SERVICES, as Dissemination Agent By: Its: Authorize fficer 9 DOCS OC/1637077/022273-0006 EXHIBIT A NOTICE TO THE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) Name of Bond Issue: $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: August 20, 2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2003-1 (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 August 1, 2013. [The Issuer anticipates that the Annual Report will be filed by J Dated: WILLDAN FINANCIAL SERVICES,as Dissemination Agent cc: City of Huntington Beach 10 DOC SOC/1637077l022273-0006 ESCROW AGREEMENT By and Between CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) and U.S.BANK NATIONAL ASSOCIATION, as Escrow Bank Dated as of August 1,2013 Relating to CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DOCS OC/1623952v4/022273-0006 ESCROW AGREEMENT THIS 2013 ESCROW AGREEMENT, dated as of August 1, 2013 (the "Escrow Agreement"),by and between the City of Huntington Beach Community Facilities District No. 2003- 1 (Huntington Center) (the "District") and U.S. Bank National Association, as escrow bank (the "Escrow Bank"), is entered into in accordance with Resolution No.2013-21 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 August 1, 2013 between the District and U.S. Bank National Association, as trustee (the "Indenture"), to defease and 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 April 1, 2004 (the "Prior Fiscal Agent Agreement"). WITNESSETK- WHEREAS,pursuant to the Prior Fiscal Agent Agreement,the District has previously issued its 2004 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of $25,000,000,which are currently outstanding in the aggregate principal amount of$21,595,000;and WHEREAS, the District has determined to issue its 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,915,000 (the "Bonds") for the purpose of providing moneys which will be used to defease and optionally redeem all of the Refunded Bonds on September 1, 2013 (the"Redemption Date") at a redemption price equal to 101% 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$22,423,437.50 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 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 are at least equal to an amount sufficient to pay when due the Redemption Price on the Redemption Date. The $22,423,437.50 consists of$19,075,653.03 of Bond proceeds, $1,814,311.57 held in the Reserve Fund under the Prior Fiscal Agent Agreement, $1,971.64 held in the Administrative Expense Fund under the Prior Fiscal Agent Agreement, and $1,531,501.26 from cash on hand and the balance in the Debt Service Fund under the Prior Fiscal Agent Agreement, both held by the City. (b) The Escrow Bank hereby acknowledges receipt of the written Verification Report of Grant Thornton LLP, certified public accountants, dated August 20, 2013 relating to the redemption of the Refunded Bonds on the Redemption Date (the"Verification Report"). DOCSOCI1623952v41022273-0006 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 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 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 2 DOCSOC/1623952v4/022273-0006 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 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. 3 DOCSOC/1623 952v4/022273-0006 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 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. The District shall indemnify and save the Escrow Bank, 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 of the Escrow Bank. 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 4 DOCSO C/1623952v4/022273-0006 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 from and after such nominal date. 5 DOCS OCl1623952v4/022273-0006 SECTION 16. Assiannen . 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.2003-1 (Huntington Center) ATTEST: Ci lerk of the City of tington Beach, a i on behalf of City o untington Beach C munity Facilities District No. 2003-1 (Huntington Center) [SIGNATURES CONTINUED ON NEXT PA GE S-1 DOCSOC/1623952/022273-0006 [SIGNATURE PAGE CONTINUED.] U.S.BANK NATIONAL ASSOCIATION,as Escrow Bank By: Autho ' ed Officer S-2 DOCSO C/1623952/022273-0006 SCHEDULE A ESCROW REQUIREMENTS Principal Redeemed with Required Deposit to Payment Date Principal Interest Premium the Escrow Fund September 1,2013 $570,000.00 $618,187.50 $21,025,000.00 $22,423,437.50 A-1 DOC SOC/1623952v4/022273-0006 SCHEDULE B IRREVOCABLE INSTRUCTIONS AND REQUEST TO FISCAL AGENT August 20, 2013 U.S.BANK NATIONAL ASSOCIATION,as Fiscal Agent ESCROW AGREEMENT RELATING TO THE REFUNDING OF CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2004 SPECIAL TAX BONDS (the"Refunded Bonds") Ladies and Gentlemen: As Fiscal Agent under that certain Fiscal Agent Agreement dated as of April 1, 2004, 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. 2003-1 (Huntington Center) 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, conditional notice of redemption of the Refunded Bonds scheduled to be redeemed prior to maturity. C-1 DOCSOC/1623 952v4J022273-0006 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. 2003-1 (Huntington Center) Receipt acknowledged and consented to: U.S.BAND NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer C-2 DOC SOC/1623 952v4/022273-0006 EXHIBIT Y NOTICE OF DEFEASANCE OF OUTSTANDING CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2004 SPECIAL TAX BONDS (the"Refunded Bonds") CUSIP NOS. 446188DA9,446188DB7,446188DC5,446188DD3,446188DE1,446188DF8 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 April 1, 2004, between the City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center)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 mailed a redemption notice for such Refunded Bonds. Dated this 20th day of August,2013. U.S.BANK NATIONAL ASSOCIATION, as Fiscal Agent Y-1 DO C S OC/1623 952A/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.' ISSUER NAME City of Huntington Beach (If pool bond,list participants) ISSUE NAME Community Facilities District No.2003-1 (Huntington Center)2013 Special Tax Refunding Bonds Please specify Type/name of project: PROPOSED SALE DATE 07/10/2013 PRINCIPAL TO BE SOLD S 20,230,000.00 IS ANY PORTION OF THE DEBT FOR REFUNDING?z (`, No (o! Yes,proposed amount for refunding S 20,230,000.00 Private Placement? Q Issuer Contact First Name Lori Middle Name Ann Last Name Farrell Title Director of Finance E-mail Lo ban n.farrell@surfcity-h b.c rg Address 2000 Main Street Addr,coat. 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 Bond Counsel Financial Advisor ( ; Lead Underwriter } 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.coat. Addr.coat. Addr.Cont. City Newport Beach State CA zip Code 92660 Phone 949 7254000 Extension 4193 E-mail bforbath@sycr.ccm Send acknowledgement to: ,Julie Alvarez E-mail jalvarez@sycr.eom FINANCING PARTICIPANTS: BOND COUNSEL Stradling Yocca Carlson&Rauth FINANCIAL ADVISOR Public Financial Management, Inc. UNDERWRITERTURCHASER Stifel,Nicolaus&Company, Incorporated IS THE INTEREST ON THE DEBT TAXABLE? Under State law: j*-; No(tax-exempt) ( Yes(taxable) Under Federal law: (Ok No(tax-exempt (, 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 (G`i; No,not a preference item TYPE OF SALE: ( Competitive Negotiated 1 Section 8855(k)of the California Government Code requires the issuer ofany proposed ne,v public debt issue to give written notice of the proposed sale to the CDIAC no 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 signing of the bond purchase contract in a negotiated orprivate financing,or after the acceptance of a bid in a competilive offering,submit a report offrnal sale and official statement to the Commission.The Commission may require information to be submitted in the report offfinal sale that is considered appropriate. Z 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) (j Other note(Please specify below.)(OTHN) (`: General obligation(GOB) (� Grant anticipation(GAN) Co' Limited tax obligation(LTOB) (' Revenue anticipation(RAN) r Other bond(Please specify below.)(OTHB) Tax allocation(TALN) r Public lease revenue(PLRB) (` Tax and revenue anticipation(TRAN) ( , Revenue(Pool)(RB) (7, Tax anticipation(TAN) (' Revenue(Public enterprise)(PERB) Sales tax revenue(STRB) C, Commercial paper(CP) r. Special assessment(SAB) ( Certificates of participation/leases(COP/L) C� Tax allocation(TAB) (� Other(Please specify below.)(OTH) Please specify if"Other note/Other bond/Other"was checked SOURCE(S)OF REPAYMENT n Bond proceeds(BDPR) ❑ Property tax revenues(PRTX) ❑ General fund of issuing jurisdiction(GNFD) ❑ Public enterprise revenues(PER) Grants(GRNT) ❑ Sales tax revenues(SATR) Intergovernmental transfers other than grants(ITGV) ❑ Special ssessments(SA) ❑ Local obligations(LOB) Special tax revenues(SPTR) Other(Please specify.)(OTHS) ❑ Tax-increment(TI) ❑ Private obligor payments(POP) Please specify if"Other"was checked PURPOSE(S)OF FINANCING r Airport(APRT) ❑ Cash flow,interim financing(CFIF) ❑ Bridges and highways(BRHI) ❑ Project,interim financing(PIF) F-1 Convention center(CCTR) ❑ Equipment(EQUP) ❑ College/university housing(CUH) ❑ Flood control/storm drainage(FLDS) ❑ Multifamily housing(MFH) Multiple capital improvements and public works(MCAP) ❑ Single-family housing(SFH) ❑ Other capital improvements and public works(OCAP) ❑ Parking(PRKG) ❑ Health care facilities(HCF) ❑ Parks/Open space(PRKG) ❑ Hospital(HOSP) ❑ Ports and marinas(PRTS) f7j Other/multiple health care purposes(equipment;etc.)(OMHC) ❑ Power generations/transmission(PWR) ❑ Prisons/jails/correctional facilities(PRSN) C College/university facility(CUF) ❑ Public building(PB) K-12 school facility(KSCH) ❑ Public transit(PTR) Other/multiple educational uses(equipment,etc.)(OMED) ❑ Recreation and sports facilities(RCSP) ❑ Student Loans(SLC) ❑ Seismic safety improvments/repair(SSI) ❑ Solid waste recovery facilities(SWST) ❑ Redevelopment, multiple uses(RD) ❑ Street construction and improvements(SCI) ❑ Wastewater collection and treatment(WSTW) Commercial development(CMDV) n Water supply/storage/distribution(WTR) Industrial development(INDV) Pollution control(PC) ❑ Insurance/pension funds(IPF) ❑ Other than listed above(OTH) Please specify type/name of project if different from above propo d.pdf03-0S Bill Lockyer STATE OF CALIFORNIA State Treasurer and Chair CALIFORNIA DEBT AND INVESTMENT ADVISORY CONBUSSION 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 FROM pbell,Executive Director RE: CKP.rOWLEDGEMENT 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: 2013-1204 Issuer: Huntington Beach CID No 2003-1 Project: Huntington Ctr Proposed Amount: $20,230,000 Proposed Sale Date: July 10, 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: 2013-1204 Password: 25003421 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/cdiae/reporting.asp under the heading "Reporting Forms". Official Statements/Offering Memorandums or other Bond Documents can be sent by e-mail to CDIAC_issuance@treasurer.ca.gov. Any questions regarding reporting requirements may be directed to CDIAC's Data Unit at(916)653-3269. Cc: Lori Ann Farrell Finance Director REPORT OF FINAL SALE California Debt and Investment Advisory Commission 915 Capitol Mall,Room 400,Sacramento,CA 95814 CDIAC#: 2013-1204 P.O.Box 942809,Sacramento,CA 94209-0001 Tel.:(916)653-3269 FAX:(916)654-7440 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: City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) (If pool bond,list participants) ISSUE NAME:2013 Special Tax Refunding Bonds IF THIS IS A POOLED FINANCING,WHICH ISSUANCE STATUTE IS IT AUTHORIZED UNDER? 1)Marks-Roos Local Bond Pooling Act 2)JPA Law 3)Installment Sales Agreement,Lease... 4)Housing Revenue Bond Law&Industrial Development Bond Law 5)Other ACTUAL SALE DATE: 07/30/2013 PRINCIPAL SOLD:S 20,915,000.00 (Date Purchase Agreement Signed/Bid Acceptance) DATED DATE: 08/20/2013 IS ANY PORTION OF THE DEBT FOR REFUNDING?' ❑No ®Yes,refunding amount(including costs)$20,915,000.00 Issuer Contact: Name: Lori Ann Farrell Title: Director of Finance Address: 2000 Main Street City, State,Zip:Huntington Beach,CA 92648 Phone: 714-536-5225 ISSUER LOCATED IN Orange COUNTY E-Mail:loriaim.farrell@surfeity-hb.org Filing Contact: Name of Individual(representing: ® Bond Counsel, ❑ Issuer, ❑ Financial Advisor, or ❑ Lead Underwriter) 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:949-725-4000 E-Mail:bforbath@asycr.com Send acknowledgement/copies to: Quang Le E-Mail: glega sycr.com Name of individual to whom an invoice for the CDIAC issue fee should be sent:Z Name:Sara Brown Firm: Stifel,Nicolaus&Company,Incorporated Address: One Ferry Building City,State,Zip:San Francisco,CA 94111 Phone:213-443-5004 E-Mail: sbrown@stifel.com 1 Section 53583(c)(2)(B)of the California Government Code requires that any local agency selling refunding bonds atprivate sale or on a negotiated basis shall send a written statement,within hvo weeks after the bonds are sold,to the 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 public sale. z This fee is authorLed by Section 8856 of the California Government Code and is charged to the lead underwriter or purchaser of the issue. The fee is administratively set by the Commission.The currentfee schedule may be obtainedfrom CDIAC. American r.egaINet,Inc. - > www.Forms W orkFl ow.co m G:Data Unit\Forms�Final form.doc,Revised 11(27/2012 CDIAC:Report of Final Sale Page 2 FINANCING PARTICIPANTS(Firm name) OFFICE LOCATION(City/State) FINANCIAL ADVISOR:Public Financial Management,Inc. Los Angeles,CA Stifel,Nicolaus& LEAD UNDERWRITER/PURCHASER:Company,Incorporated San Francisco,CA BOND COUNSEL:Stradling Yocca Carlson&Rauth Newport Beach,CA CO-BOND COUNSEL: N/A TRUSTEE/PAYING AGENT: U.S.Bank National Association Los Angeles,CA PLACEMENT AGENT: N/A MATURITY SCHEDULE IS THE INTEREST ON THE DEBT TAXABLE? ❑Attached ®Included in Official Statement MATURITY STRUCTURE Under State Law: ❑Yes(taxable) ®No(tax-exempt) Under Federal Law: ❑Yes(taxable) ER No(tax-exempt) ❑Serial(S}❑Term(T) If the issue is federally tax-exempt,is interest a specific preference ® Serial and term bonds or two or more term(B) item for the purpose of alternative minimum tax? ❑Yes®No FINAL MATURITY DATE: 09/01/2033 INTEREST TYPE: FIRST OPTIONAL CALL DATE: 09/01/2018 ®NIC-Int.Cost: 5.042665% SENIORISUBORDINATE STRUCTURE ❑Yes ®No ®TIC-Int.Cost: 5.002529 OFFICIAL STATEMENT/OFFERING MEMORANDUM: ❑Variable ®Enclosed ❑None prepared CAPITAL APPRECIATION BOND:❑Yes ®No WAS THE ISSUE INSURED OR GUARANTEED? ®No ISSUANCE COSTS AND FEES: ❑Bond Insurance(I) A)Management Fee $ ❑Letter of Credit(L) B)Total Takedown $ ❑ State Intercept Program(T) C)Underwriter Expenses $ ❑ Other(0) GUARANTOR: Underwriter Spread or Discount $ 118,625.00 ENHANCEMENT EXPIRATION DATE: D)Bond Counsel $ 65,500.00 INDICATE CREDIT RATING: E)Co-Bond Counsel $ 0.00 (For example,"AAA"or"Aaa") F)Disclosure Counsel $ 0.00 Not Rated G)Financial Advisor $ 8,750.00 Rated Standard&Poor's: H)Rating Agency $ 0.00 Fitch: 1)Credit Enhancement $ 0.00 Moody's: Other: J)Trustee Fee $ 4,250.00 REASON FOR NEGOTIATED REFUNDINGS K)Placement Agent $ 0.00 If the issue is a negotiated refunding,indicate the reason(s)why the bonds were issued at a private or negotiated versus a L)Other Expenses $ 15,839.67 competitive sale. (1)Timing of the sale provided more flexibility than a public sale Total Issuance Costs $ 212,964.67 (2)More cost savings were expected to be realized than a public sale ORIGINAL ISSUE PREMIUM $ 56,195.60 u(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 ORIGINAL ISSUE DISCOUNT $ 0.00 sale ®(5)All of the above NET ORIGINAL ISSUE ❑(6)Other(please specify) DISCOUNT/PREMIUM $ 0.00 American I.egniNey Ina Revised 11/27/2012 www FormsWorkFlow.Cnm $20,230,000* CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) 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 17, 2013 setting forth information concerning the Bonds, the City and Community Facilities District No. 2003-1 therein (the"Preliminary Official Statement"); and (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, principal 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 17,2013. CITY OF HUNTINGTON BEACH By 011--. 4vw Lori Ann Farrell Director of Finance $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS INCUMBENCY AND SIGNATURE CERTIFICATE OF THE CITY AND DISTRICT 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. 2003-1 (Huntington Center) (the "District") to execute the District's 2013 Special Tax Refunding Bonds, in the aggregate principal amount of$20,915,000, issued in accordance with Resolution No. 2003-21 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 certifies 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 he or she was duly authorized by the District pursuant to the Resolution of Issuance to execute each of the documents that he or she 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 30, 2013, by and between the District and Stifel, Nicolaus&Company,Incorporated,as Underwriter. DOCSOC/1636194v2/022273-0006 IN WITNESS WHEREOF, the undersigned have signed this certificate this 20th day of August,2013. Name Office Sign ure Connie Boardman Mayor Joan L.Flynn City Clerk Lori Ann Farrell Director of Finance 6 va-t� -4CCA.,w 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. City Clerk of the City of Huntington Beach Director of Finance of the City of Huntington Beach 2 DOC S OC/1636194/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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 August 1, 2013 (the "Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) 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. Alisa Cutchen Treasurer L�✓���i�l/t-- I Dated August 21, 2013 Lori Ann Farrell,Director of Finance of the City of Huntington Beach DOCSOC/163 8006v 1/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 to be incorrect or incomplete in any material respect or would cause the information in the Final Official Statement 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 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. DOCS OC/1636194v2l022273-0006 Capitalized terms used in this Certificate and not defined herein shall have the same meaning set forth in the Bond Purchase Agreement dated July 30, 2013, between the Issuer and Stifel, Nicola-us &Company,Incorporated, as Underwriter. Dated: August 20, 2013 THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) By: VO4"t- a6t.,.- Direvctor of Finance of the City of Huntington Beach 2 DOCSOC/1636144/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF THE CITY I The undersigned, in her capacity as Director of Finance of the City of Huntington Beach(the "City") and not in her 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") pursuant to the Bond Purchase Agreement, dated July 30, 2013 (the "Purchase Agreement"), by and between the City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center)(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 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. 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 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 &(c)(xvii) of the Purchase Agreement are all the securities of the DOCSOC/1636194v2/022273-0006 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. 2 DOCSOC/1636194/022273-0006 All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Purchase Agreement. Dated: August 20, 2013 CITY OF HUNTINGTON BEACH By: Ot.- " � Director of Finance of the City of Huntington Beach 3 D O C S O C/163 6194/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center)(the"District"),hereby states and certifies to U.S. Bank National Association,as trustee (the "Trustee") under the Bond Indenture dated as of August 1, 2013 (the "Indenture"), by and between the District and the Trustee,pursuant to the terms thereof that: 1. The undersigned is a duly appointed Authorized Representative of the District, as such term 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 $20,915,000. 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, $20,852,570.60 (consisting of the principal amount of $20,915,000.00, plus Net Original Issue Premium of$56,195.60 and less Underwriter's discount of $118,625.00),as follows: S 19,075,653.03 shall be transferred to the Escrow Bank for deposit into the Escrow Fund 1,971.64 shall be deposited in the Administration Fund 94,339.67 shall be deposited in the Costs of Issuance Account 1,680,606.26 shall be deposited in the Reserve Account of the Special Tax Fund 20,852,570.60 TOTAL PROCEEDS RECEIVED DOCSOC/1636194v2/022273-0006 All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Indenture. Dated: August 20,2013 THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) By. 041-te�V`. Director of Finance of the City o Huntington Beach 2 DOC SOC/1636194/022273-0006 $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 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) THE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) By: Director of Finance of the City of Huntington Beach DOCSOG1637490v 1I022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS REQUISITION NO. 1 FOR DISBURSEMENT OF COSTS OF ISSUANCE The undersigned, a duly authorized representative of City of Huntington Beach Community Facilities District No. 2003-1 (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: August 20,2013 THE CITY OF HUNTINGTON BEACH COMM-UNITY FACILITIES DISTRICT NO. 2003-1 (HUNTIN GENTER) By: 4a,4� Director of Finance of the City of Huntington Beach DOC SOC/1636194/022273-0006 EXHIBIT A $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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 4,250.00 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 2,000.00 CalMuni OS Tables 900.00 Harrell&Company Advisors, LLC Continuing Disclosure Review 1,534.00 Contingency 9,905.67 TOTAL 94 339.67 DOCSOC/1636194v2/022273-0006 IRREVOCABLE INSTRUCTIONS AND REQUEST TO FISCAL AGENT August 20,2013 U.S.BANK NATIONAL ASSOCIATION,as Fiscal Agent ESCROW AGREEMENT RELATING TO THE REFUNDING OF CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2004 SPECIAL TAX BONDS (the"Refunded Bonds") Ladies and Gentlemen: As Fiscal Agent under that certain Fiscal Agent Agreement dated as of April 1, 2004, 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. 2003-1 (Huntington Center) 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, conditional notice of redemption of the Refunded Bonds scheduled to be redeemed prior to maturity. DOCSOC/1636194/022273-0006 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 a such becam due or are sub' ct 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.2003-1 (Huntington Center) Receipt acknowledged and consented to: U.S.BAND NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer 2 DOCSOC/1636194/022273-0006 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.200'M (Huntington Center) Receipt acknowledged and consented to: U.S.BANK NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Author ed Officer 2 DOCSO C/1636194/022273-0006 x MyE MA I Alerts I Feedback I Contact V EMMAO- Electronic Municipal Market Access The Official Source for Municipal DiScl08ur't5 and Market Data About EMMA Search 529 Plans Market Activity Education Center EMMA Dataport Quick Search Enter CUSP.,N.. Home>Market Activity>Continuing Disclosure Continuing Disclosure Details EVENT FILING(CUSIP-9 BASED) Rule 15c2-12 Disclosure VIEW DOCUMENTS Bond Call dated 08/0V=3 a.-Event Fling dated 081811203 Total CUSIPs associated with this submission:4 — 458124.pdf posted 08/02/2013 view H CUSIP-6s HUNTINGTON BEACH CALIFCMNTYFACS DIST SPL TAX,CA(446188) Displaying 1 issue. I HUNTINGTON BEACH CALIF CMNTY FACS DIST Total CUSIPs selected for this CU IP-6:4. SPL TAX.CA.(4461881 I _ i Issue Description" Dated Date Maturity Official Statement Dates [+j NO 2003-1-HUNTINGTON CTR 04/15/2o04 2006 to 2033 Preview SUBMITTER'S CONTACT INFORMATION Company. Fiduciary Communications Company Name: FZDISCLOSE Address: ONE STATE STREET PLAZA City,State NEW YORK,NY 10004 Zip: Phone2128038600 Number: Email: euliselose@sourcemedia.com NOTICE:'CUSIP numbers and certain related descriptive information are copyrighted by the American Bankers Association(ABA)and are used with permission fromthe CUSIP Service Bureau managed on behalf of the ABA by Standard&Poor's.©2013 ABA See EMMA's Terre;and Conditions of Use for a description of proprietary rights in and restrictions on use of such data."CUSIP' is a registered trademark of ABA. Sitemap I Privacy Policy I Terms of Use I MSRB.org I MSRB System Status Portions of EMMA data provided by Standard&Poor's Securities Evaluations,Inc., ©2013 Municipal Securities Rulemakhg Board(MSRB) CUSIP Service Bureau&American Bankers Association. EMMA is a service of the Municipal Securities Rulemaking 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 Fitch,Inc.Reprinted w ith permission. 00:00.2501352 1.0.13224.1130-.41-A 458124 Conditional Notice of Redemption $25,000,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO-2003-1 (HUNTINGTON CENTER) 2004 SPECIAL TAX BOND umberRate 017SilgR At)C3N _ 2014 4.9% 446188DB7 $595,000 1010/0 2015 5.00 446188DC5 $625,000 101°/a 2017 5.30 446188DD3 $1,355,000 101°/a 2023 1 5.80 1 446188DE1 $5,060,000 101°/a 2033 1 5.85 1 446188DF8 $13,390,000 101% NOTICE IS HEREBY GIVEN, that the City of Huntington Beach Community Facilities District No. 2003-1 (the "Issuer") has conditionally called for redemption on September 1,2013(the"Redemption Date")its City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)2004 Special Tax Bonds(the`Bonds")in the aggregate principal amount of$21,025,000 at a price of 101% of the principal amount,together with accrued interest to the Redemption Date(the"Redemption Price"). The Bonds are being conditionally called for redemption on the Redemption Date subject to the provisions of the succeeding paragraph of this notice, and pursuant to the provisions of the governing documents of the Bonds. The Conditional Notice of Redemption, and the payment of the principal of and interest and premium on the aforesaid Bonds an the specified Redemption Dale, &subject to the receipt of funds in an amount sufficient to pay in full the specifred redemption price of all of the Bonds on or before the Redencption Date,resulting from the sales of the District's Special Tax Refunding Bonds,Series 2013(the"2013 Bonds") which Refunding Bonds are expected to be delivered on or about August 20,2013. In the event such funds are not received by the Redemption Date,this notice shall be null and void and of no force and effect. The Bonds delivered for redemption shall be returned to the respective owners thereof, and said Bonds shall remain outstanding as though this notice of conditional redemption had not been given. Notice of a failure to receive funds, and cancellation of this redemption, shall be given by the Fiscal Agent by first class mail,postage prepaid,to the registered holders of the Bonds. Payment of the Redemption Price on the Bonds called for redemption will be paid only upon presentation and surrender thereof in the following manner: If It ltiTar - = if b br(3� el hfllA U.S.Bank National Association U.S.Bank National Association Corporate Trust Services Corporate Trust Services P.O.Box 64111 60 Livingston Avenue St.Paul,MN 55164-0111 1'Floor,Bond Drop Window St_Paul,MN 55107-2292 Bondholders presenting their Bonds in person for same day payment must surrender their bond(s)by 1:00 PM on the Redemption Date and a check will be available for pickup alter 2.00 PM. Checks not picked up by 4:30 PM will be mailed out to the bondholder via first class mail. If payment of the Redemption Price is to be made to the registered owner of the Bond,you are not required to endorse the Bond to collect the Redemption Price. Interest on the principal amount designated to be redeemed shall cease to accrue on and after the Redemption Date. IMPORTANT NOTICE Under the Economic Growth and Tax Relief Reconciliation Act of 2005(the"Act")28%will be withheld if a tax identification number is mat properly certified "Neither the Authority nor the Fiscal Agent shall be held responsible for the selection or use of the CUSIP number, nor is any representation made as to its correctness as shown in the Redemption Notice. It is included solely for convenience of the Holders. Dated: August 1,2013 By U.S.Bank National Association, as Fiscal Agent ezDisclose Notice Proof Summary Report 458124 08/01/2013 Client Name: U.S.Bank N.A.(St.Paul) Reliance: 2 Notice Issuer: CITY OF HUNTINGTON BEACH Issue Title: COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER)2004 SPECIAL TAX BONDS Job Type: Redemption Issue Data: 04/15/2004 Pub Date: 08/01/2013 Call Type: Full Call Date: 09/01/2013 Total Amt Called: $21,025,000.00 Notice Memo: Customers: ..EI > ..�....,...�..........�..: M^,r�,r .-..::- cr - .3�• + 1, ..`P,. ..S✓, -...,..., ".T+ .:.. k n:,... k5.ti :s I; F:ifi7 �y �.` t x r.fh:p.k ,: _.a- r, ante .. r� .. o, „ t 7si r a„ i(11t �. c E i.zfi.7 uiA7,.:s, M N�:k xr1$. �u � $si b 3: ii �� ,. �I.�,,.,...7a'.;.t ....:.. .,,.... .,,..:..s..k x. ..._,4..:4...,:�, ._._.•:......... ...x, ..:...:,H.�:k,. .... .....„.... .k .: 4, ...:.... _, _..0 Paying Agent U.S.Bank N.A.(St.Paul) 096000690 40071706 60 Livingston Avenue 1 at Floor, St.Paul MN 55107 651-973-5800 Default Org Paying Agent Bond Drop Window Address 4 Issues: :- ..:., e Tr Six, ip ? _A�c ►a tau 1e rl , ,..,. ,. i 10 V— F,. .: t� . 446188DC5 5.0000 0.0000 09/01/2015 00 MU F $625,000.00 101.00000000 N/A N/A N/A 446188DC5 $625,000.00 446188DFB 5.8500 0.0000 09/01/2033 00 MU F $13,390,000.00 101.00000000 NIA N/A NIA 446188DFB $13,390,000.00 446188DB7 4.9000 0.0000 09/01/2014 00 MU F $595,000.00 101.00000000 N/A N/A N/A alai lid � �� , Ilf 446188DB7 $595,000-00 446188DE1 5.8000 0.0000 09/01/2023 00 MU F $5,060,000.00 101.00000000 N/A NIA NIA 446188DEI $5,060,000.00 446188DD3 5.3000 0.0000 09101/2017 00 MU F $1,355,000.00 101.00000000 NIA N/A NIA 446188DD3 $1,355,000,00 Page 1 of 1 ezDisclose Notice Proof Summary Report $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS TAX CERTIFICATE The City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) (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 $20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) 2004 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 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. 1 DOCS OC/1636402v 1/022273-0006 H. 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 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 2 DOCSOC/1636402v 1/022273-0006 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$20,852,570.00(representing$20,915,000.00 principal amount of the Obligations,plus net original issue premium of$50,195.00, less an Underwriter's discount of$118,625.00), are expected to be needed and fully expended as follows: (i) $94,339.67 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) $1,680,606.26 of such proceeds will be deposits in the Reserve Account; (iii) $19,075,033.03 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) $1,971.64 of such proceeds 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. $19,077,624.67 (together with $3,345,812.83 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. (ii) Purpose of Refunding. The Obligations are being issued for present value debt service savings. (iii) Other Monies. $1,971.64 held with respect to the Current Refunded Obligations will be deposited in the Administration Fund. Other than as stated above, there are no unexpended proceeds of the Current Refunded Obligations. 3 DOCSOC/1636402v 1/022273-0006 (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) 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 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. (ii) 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 payment of debt service on the Obligations. (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 4 DOCSOC/163 6402v 1/022273-0006 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 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 all 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 $20,971,195.00 which is equal to the price paid by the first buyer of the Obligations, as represented by the Underwriter in Exhibit B. 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. 5 DOCSOC/1636402v 1/022273-0006 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 (h)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 respect to rebate compliance methodology. See Subparagraph(b)(i) below for a description of 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 6 DOCSOC/1636402v 1/022273-0006 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) Non�urpose 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: (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); (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; (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 7 DOCSOC/1636402v1/022273-0006 (F) any other amounts which are replacement proceeds of the Obligations within the meaning of Treasury Regulation § 1.148-1(c). (iii) Universal Cap. 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 Obligations computed in accordance with Section 1.148-4 of the Treasury Regulations. The 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. (iv) Yield. See Section III hereof. 8 DOCS OC/1636402v 1I022273-0006 (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. (ii) 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. (iii) Nonpurpose Investments that are investment contracts or an investment purchased for a yield restricted defeasance escrow will be considered acquired and disposed 9 DOCSOC/1636402v 1/022273-0006 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: (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 10 DOCSOC/1636402v 1/022273-0006 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 parry 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. (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. 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 11 DOCSOC/1636402v 1/022273-0006 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). (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 12 DOCSOC/1636402v 1/022273-0006 (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. (v) Except as otherwise provided in paragraph(d), any Nonpurpose Investment 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 1 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 (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 13 DOCSOC/1636402v 1/022273-0006 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 frequently than once every five years and on each date a new issue is added or retired(if relative 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. 14 DOCSOC/1636402v 1/022273-0006 V1. 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. 15 DOCSOC/1636402v1/022273-0006 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) Authori1y. 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: August 20, 2013 COMMUNITY FACILITIES DISTRICT NO. 2003-1 OF THE CITY OF HUNTINGTON BEACH (HUNTINGTON CENTER) By: — /�� &:�V � Lori Ann Farre Director of Finance of the City of Huntington Beach, acting as the legislative body of Community Facilities District No. 2003-1 of the City of Huntington Beach(Huntington Center) CITY OF :GTON BEACH By: ` Lori Ann Farre -11 Director of Finance S-1 D O C S O C/16 3 64021022273-0006 EXHIBIT A [RESERVED] A-1 DOCSOC(1636402v1(022273-0006 EXHIBIT B $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF THE UNDERWRITER This Certificate is furnished by Stifel, Nicolaus & Company, Incorporated, as underwriter (the "Underwriter") of the $20,915,000 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. B. Arbitrage Yield. 1. We have calculated the arbitrage yield with respect to the Obligations to be 4.917071% 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 DOCSOC/1636402v 1/022273-0006 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 Iaws 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: August 20,2013 STIFEL, NICOLAUS & COMPANY, INCORPORATED By: M ing it ctor B-2 DOCSOC/1636402v1/022273-0006 EXHIBIT A Price of Obligations Offered or Reasonably Expected to be Offered to the General Public in a Bona Fide Public Offering Maturity Yieldto Call gall BondCompmd Date Amoont be Yield. Price Maturity Date Price Serial Bands(911123 Par Call): 091019014 670,000 2.000% 0.950°I 101,074 MOW 715,000 3.000% 1.600% 102.785 0910I016 740,000 3.000% 2.200°!° 102.332 091019017 765,000 4.0006% 2.§0N 104,155 0910112018 790,ow 4.t>DO°lo 3.25N9 101,453 09/00019 820,000 4.000°% 3.550% 102.422 09JQIi2020 855,000 4.000% 3.900% 100.608. 0910112021, 890,000 4.0000A 4.1801, 99.781 09/019022 925,000 4.250% 4.400% 98.890 0910ll2023 965,000 4.500% 4.60T/ 99,202 091019024 1,010,000 5.000% 4.750°la 101,974 C 4.768% 09/019023 100.000 09/019027 1,1751000 5.000% 5,100% 99.004 09/019028 145,000 5.000% 5.200% 97.929 11,555,000 Said Bands(9I1118 Par Uf)} 09/019025 1,055,000 5.250%0 4.520% 103.250 C 4.889% 0910112018 100.000 C910112026 1,115,000 5150% 4.710% 102.392 C 4998% 09(IM18 100,000 $170,000. Team Bond 2030(911123 Par Call): 0910MO29 1,295,000 5.250% 5350% 98.889 09I0112030 1,364,000 5.250% 5.350% 08.889 2,655,000 Tenn Bond 2033(911123 Par Ua : 0910031 1,435,000 5.375% 5.480% 98.710 09101032 1,510,000 5.375% 5.480% 98.730 000112033 1,90,000 5,37% 5.480% 98,730 4,535,000 20,915,000 B-3 DOCSOCJ1636402v 1/022273-0006 PROOF OF ARBITRAGE YIELD PROOF OF ARBITRAGE YIELD City of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.2003-1(Huntington Center) Refunding MOM Special Tax Bonds FINAL PRICING #ir#x{}x##s#axiax#r#atii#:}xs#sassx#iissaaaa}#a#x#asxssx#ssxxxsx}i#xi$xsxx###x*sx#sssx#xxakxxsrsxxxx Present Value to 08/20/2013 Data DebtScrvice (a2 4.9170705786% 031OW014 516,048.18 502,918.37 09/0112014 I,156,328.13 1,099,867.06 03/012015 479,628.13 445,261.98 09/012015 1,194,628.13 1,082,419.17 03/012016 46SX3.13 414,665.41 09/0I2016 1,208,903.13 1,043,417.30 031012017 457,803.13 385,653.38 09/012017 1,222,803.13 1,005,372,01 031012018 442,503.13 355,090.01 09/012018 3,402,503.13 2,664,348.32 03/0120/9 369,740.63 282,633.08 09/012019 1,189,740.63 887,625.90 03/012020 353,340.63 257,290.12 09/012020 1,208,340.63 858,757.94 03/012021 336,240.63 233,229.48 091012021 1,226,240.63. 830,158.09 03/012022 318,440.63 210,409.54 09/01/2022 1,243,440,63 901,889.29 03/OI2023 298,78439 188,06092 09/012023 1,263,78438 776,36422 03/01/2024 277,071.88 166,125.71 09/012024 J,287,07L88 753,180.46 03/012025 251,82198 143,827,38 09/012025 251,921.88 140,376-.18 03/012026 25.1,821.88 137,00739 09/012026 251,821.88 133,720.24 031012027 251,821.88 130,511.56 09/012027 1,426,821.88 721,733.97 03/0111029 222,446.88 109,821.04 09/012028 1,457,446.88 702,269.54 03/01/2029 191,571.88 90,093.76 09/012029 1,486,571.88 682,339.84 03/012030 157,578.13 70,593,16 09101/2010 1,517,578.13 663,543.79 03/01/2031 121,878.13 52,011.12 09/012031 1,556,878.13 648,450.54 - 031012032 8331250 33,86759 091012032 1,593,312,50 632,159,86 03/01/2033 42,731.25 16,547.16 09/012033 1,632-73125 617,084.12 32,672,25733 2Q971,195.60 ProceedsSwnmary Delivery date 00012013 Par value 20,915,000.00 Premiwn(Discount) 56,195.60 Target foryield calculation 20,971,195-60 Jul 30,2013 11:35 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 12 B-4 DOCSOC/1636402v 1/022273-0006 PROOF OF ARBTfRAGE YTELD City,of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.200M(Huntington Center) Refunding of 2004 Special Tax Bonds FINAL PRICING Assumed Call/Comontation Dates forPreouum Bonds Net Present Value(NPV). Boud Maturity Call Call to 0812020I3 Component Date Rate Yield Date Price @ 4.9170705786% SERIALS 09/01/2025 5250% 4.520% 09/012018 100.000 -18,82237 SERIAL5 09/01/2026 5250% 4.710% 09/012019 100-000 -10,326.13 Rejected Call/Computation Dates for Prernium Bonds NetTresent Value(NPV) Bond Maturity Call Call to 082012013 Increase Component Date Rate Yield Date Prim ®4.9170705786% toNPV SERIALS 09/0112025 52501A 4.520% -2,695.68 16,126.69 SERIALS 091012026 . 525014 4.710% 8,713.I4 19,03927 Jul 30,2013 1 t_v a,n Prepared by Stifel,Nicolaus&Company,Lrc.(TJ) Page 13 B-5 DOCSOC/1636402v1/022273-0006 EXHIBIT C INFORMATION REPORTING FORM 8038-G C-1 D OC S OC/1636402v 1/022273-0006 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 I►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 lip- 1 Issuer's name 2 Issuer's employer identification number(EIN) Community Facilities District No.2003-1(Huntington Center)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) Room/suite 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 08/20/2013 8 Name of Issue 9 CUSIP number 2013 Special Tax Refunding Bonds 446188EQ3 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 ► Public Infrastructure 18 20,971,1951 60 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 (c)Stated redemption (d)Weightednal maturity date (b)Issue price (e)Yield price at maturity average maturity 21 09/01/2033 $ 20,971,195.60 $ 20,915,0001 11.9440 years 4.9171 /o 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 20,971,195 60 24 Proceeds used for bond issuance costs(including underwriters'discount) . 24 212,964 67 25 Proceeds used for credit enhancement . . . . . . . . . . . 25 0 00 26 Proceeds allocated to reasonably required reserve or replacement fund 26 1,680,606 26 27 Proceeds used to currently refund prior issues . . . . . . . . . 27 19,075,653 03 28 Proceeds used to advance refund prior issues . . . . . . . . . 28 0 00 29 Total(add lines 24 through 28) . . . . . . . . . . . . . . . . . . . . . . . 29 20,969,223 96 30 Nonrefunding proceeds of the issue(subtract line 29 from line 23 and enter amount here) . . . 30 1,971 L64 ff� 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 . ® 12.0319 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) . . . . . . ® 09101/2013 34 Enter the date(s)the refunded bonds were issued®(MM/DD/YYYY) 0411 5/2 0 0 4 For Paperwork Reduction Act Notice,see separate instructions. Cat.No.63773S Form 803E-G(Rev.9-2011) Form 8038-G(Rev.9-2011) Page 2 GMEV—M-fiscellaneous 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) . . . . . . . . . . . . . . . . . . . . . . . . . J37 0 00 b Enter the final maturity date of the GIC►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 . . . . . . . . . . . . . . . . . . . . . . . 01 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► 39 If the issuer has designated the issue under section 265(b)(3)(13)(i)(III)(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► ❑ and enter the following information: b Name of hedge provider No. c Type of hedge No- 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 No. ❑ and enter the amount of reimbursement . . . . . . . . . Bo- b Enter the date the official intent was adopted No- 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,they 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 th' return,to rson that�uthl ve. Consent / OV-1-` U8/2 U/2 U I3 Lori Ann Farrell,Director of Finance Stdnature of issuer's authorized representative Date Type or print name and title Paid Print/Type preparer's name Pre r 's signat a Date Check ❑ if PTIN Preparer Carol L.Lew,Esq. 8/2 U/2 U 13 self-employed P01259683 Use Only Firm's name ► Stradling Yocca Carlson&Rauth Firm s EIN ► Firm's address s 660 Newport Center Drive,Suite 1600,Newport Beach,CA 92660 Phone no. 949-725-4237 Form 8038-G(Rev.9-2011) ---------------- $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS CERTIFICATE OF MAILING I, Quang Le, of Stradling Yocca Carlson &Rauth, a Professional Corporation, 660 Newport 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.. 2003-1 untington Center), Huntington Beach, California, , and on the date hereof, I caused to be mailed Internal Revenue Service Form 8038-G relating to the above-captioned financing, postage reed d, to the Internal Revenue Service Center, Ogden,Utah 84201 a true copy of which Form is hereto. Dated: August 20,2013 Qua e ST LING YOCCA CARLSON&RAUTH, a Professional Corporation 2 Article Number . COMPLETEoMON, : u EL A RAcerved (P / Date o Demry' C Signature ce)� JEP. J 2013 s) Agw Addressee 7196 9008' 9115 .0119 1428 I} tryES,e ter d�ssdtrerentfioe wm,r N 3. Service Type CERTIFIEDlNAIt � i--" ---- 4. Restnct o�"Delivery?_(Ex7rd'Feel.; I Yes 1:Article Addressed to: INTERNAL REVENUE SERVICE CENTER OLDEN, UTAU. 84201 PS Form 3811,February 2003 Domestrc rietum Receipt UNITED STi4TES POSTAL SERVICE® 1 - First-class Mail Posta a&Fees Paid . PerrnitNa._G.yo .. r Pnat your name, address grid Z}P Code TM'below,*- �IIIlIfllil.f l�lif��IC1�1111��l II�IIIIfFIIk[IIIIIIIJIIIJllfll-ll STRADLtNG YOCCA CARLSON.& RAUTH 660 N_WPORT Cl`R DR SUITE 1600 NEWPORT BEACH CA 92660-6422 U22273 �UU6 QLE LL ------------ EXHIBIT D $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS POST ISSUANCE COMPLIANCE On this 20th day of August, 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: 1. 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 OC/163 6402/022273-00 06 All terms not defined herein have the meanings ascribed in the attached Tax Certificate. COMMUNITY FACILITIES DISTRICT NO. 2003-1 OF THE CITY OF HUNTINGON BEACH (HUNTINGTON CENTER) B �� Y: �� 14�— Lori Ann Farrell Director of Finance of the City of Huntington Beach, acting as the legislative body of Community Facilities District No. 2003-1 of the City of Huntington Beach(Huntington Center) CITY OF HUNTINGTON BEACH By: Lori Ann Farrell Director of Finance D-2 DOC SOC/1636402/022273-0006 ENDORSED - FILED In the office of the Secretary of State Of the$tate of Comb [SECRETARY OF STATE: PLEASE AUG 1-9 2013 AFFIX STAMP BELOW THIS SPACE] STATE OF CALIFORNIA ) ) ss. COUNTY OF ORANGE ) 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 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.2003-1 (Huntington Center) I certify under penalty of perjury that the foregoing is true and correct. EXECUTED this l day of August,2013, at Huntington Beach, California. Signed Connie Boardman DOCSOC/1 636441 v 1/022273-0006 [SECRETARY OF STATE: PLEASE AFFIX STAMP BELOW THIS SPACE] ENDORSED - FILED In the Ace of the Secretary of State of the S►�►e of Cai'dania STATE OF CALIFORNIA ) AUG 1.5 2013 ss. COUNTY OF ORANGE ) 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 Clerk 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) I certify under penalty of,pe//rjury that the foregoing is true and correct. EXECUTED this day of August,2013, at Huntington Beach,California. Signed Joa .Flynn DOC S OC/1636441 v 1/022273-0006 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 owner hereof, Cede & Co., has an interest herein. No. 17 $4,535,000 UNITED STATES OF AMERICA STATE OF CALIFORNIA COUNTY OF ORANGE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 2013 SPECIAL TAX REFUNDING BONDS INTEREST RATE MATURITY DATE DATED DATE CUSIP®NUMBER 5.375% September,;1, 0,2013 446188EQ3 REGISTERED OWNER: CEDE JL PRINCIPAL AMOUNT: FOUR HUNDRED THIRTY-FIVE THOUSAND .AND NO/100 DOLLARS CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 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, (h)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. DOCSOC/1637183v 1/022273-0006 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. 2003-1 2013 Special Tax Refunding Bonds" (the "Bonds") issued in the aggregate principal amount of$20,915,000 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 August 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 and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing on September 1, 2024 and on and after September 1, 2027 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 on and after September 1,2023, as a whole or in part, and by lot, 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, 2025 and September 1, 2026 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 on and after September 1, 2018, as a whole or in part, and by lot, 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, 2030 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2029, and on each September 1 thereafter prior to maturity, in accordance with the 2 DOC SOC/1637183 v 1/022273-0006 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 1,2030 Year (September 1) Principal Amount 2029 $1,295,000 2030 (Maturity) 1,360,000 The Bonds maturing on September 1, 2033 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2031, 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 1,2033 Year (September 1) Principal Amount 2031 $1,435,000 2032 1,510,000 2033 (Maturity) 1,590,000 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: 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 3 DOCSOC/1637183v 1/022273-0006 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 alike 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. 2003-1 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 LMTATION OR RESTRICTION. 4 DOCSOC/1637183v l/022273-0006 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. IN WITNESS WHEREOF, the City of Huntington Beach Community Facilities District No. 2003-1 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. cod- I 9Ll Mayor of mgton Beach,for an on behalf o o untington Beach Community acilities District No.2003-1 ATTEST: City i of Huntingt each, acti nX20fCity of Huntirigp6n Beach Community Facilities District No. 2003-1 5 DOCS OC/163 7183 v 1/022273-000 6 TRUSTEE'S CERTIFICATE OF AUTHENTICATION AND REGISTRATION This is one of the Bonds described in the within-defined Indenture, Dated: August 20,2013 U.S.BANK NATIONAL ASSOCIATION,as Trustee By: Authori i 6 D O C S O C/163 718 3 v I/02227 3-0006 i LEGAL OPINION i 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. � r City CIerk f 4o untington Be , acting on behalf of City of n each Communi acilities District No. 2003-1 7 DOCSOC/1637183v 1/022273-0006 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 (858)925-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)283-2240 TELEPHONE(949)125-4000 SANTA BARBARA FACSIMILE(949)725-4100 (805)730.6800 SANTA MONICA (424)214-7000 SACRAMENTO (916)449-2350 August 20,2013 City Council of the City of Huntington Beach Huntington Beach, California Re: $20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,915,000 (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 and Resolution No.2013-21 (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 August 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/1637136v1/022273-0006 City Council of the City of Huntington Beach August 20,2013 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 DOCSOC/1637136v 1/022273-0006 City Council of the City of Huntington Beach August 20,2013 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 detennining 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. D OC S O C/163713 6v 1/022273-0006 City Council of the City of Huntington Beach August 20,2013 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 submitte DOCSOC/1 63713 6v 1/022273-0006 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. DOCSOC/1637183 v 1/022273-0006 Jones Hall,A Professional Law Corporation Execution copy BOND PURCHASE AGREEMENT $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS July 30, 2013 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) (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 $20,852,570.60 (equal to the par amount of the Bonds ($20,915,000.00) plus a net original issue premium of$56,195.60, less an Underwriter's discount of$118,625.00). 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. 2013-21 (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. 2003-10, adopted by the City Council on February 3, 2003 (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 February 3, 2003, and (iii) Ordinance No. 3631 enacted by the City Council on January 20, 2004 (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. The Bonds will be issued pursuant to the terms of a Bond Indenture, dated as of August 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. 2003-1 (Huntington Center) 2004 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 August 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 June 17, 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 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 issuance of the Bonds, and in order to assist the Underwriter in complying with the Rule, the Issuer will execute a Continuing Disclosure Agreement dated as of August 1, 2013 (the "Issuer Continuing Disclosure Agreement"), by and between the Issuer and Willdan Financial Services, as dissemination agent (the "Dissemination Agent'). Also in 2 order to assist the Underwriter in complying with the Rule, Bella Terra Associates, LLC ("Bella Terra Associates") and Bella Terra C LLC ("Bella Terra C"), related owners of approximately 39 acres in the District, will execute a Property Owner Continuing Disclosure Agreement dated as of August 1, 2013 (the "Property Owner Continuing Disclosure Agreement"), by and among Bella Terra Associates, Bella Terra C LLC and the Dissemination Agent. The forms of the Issuer Continuing Disclosure Agreement and the Property Owner Continuing Disclosure Agreement are attached as Appendices E and F to the Final Official Statement, respectively. 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 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 3 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, (H) any provision of the State Constitution, or(iii)any existing law, rule, regulation, ordinance,judgment, order or 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. 0) 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 4 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. (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, (H) in connection with such transaction, the 5 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 August 20, 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. 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, 6 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 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 7 (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 (j) 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. 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 Property Owner Continuing Disclosure Agreement, the Escrow Agreement and the Bond Indenture shall be in full 8 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 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 9 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. (vii!) 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 and the Issuer Continuing Disclosure Agreement, the Property Owner 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: (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 10 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; and (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 11 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 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. (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. (xvii) A defeasance opinion of Bond Counsel with respect to the Prior Bonds. (xviii) Certificates (the "Disclosure Bring-Down Certificates") of Willdan Financial Services and Harrell & Company Advisors, LLC (the "Disclosure Consultants") stating that the information set forth in certificates of the Disclosure Consultants dated July 31, 2013, which certificates shall be attached as exhibits to the Disclosure Bring-Down Certificates, is true and correct as of the Closing Date. (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 G, 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. 12 �.---_` (xxi) Evidence satisfactory to the Underwriter that Bella Terra Associates and Bella Terra C have not failed to comply in all material respects with any continuing disclosure undertakings during the past five years. (xxii) Executed certificates of 8eUo Terra Associates and 8e||o Terra C in the form of Exhibits H and | hereto. (xx||i) Such additional legal opiniono, 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 tobesatisfied. If the Issuer shall be unable to satisfy the conditions to the obligations of the Underwriter contained in this Purchase Contnyct, or if the obligations of the Underwriter to purchase and accept delivery of the Bonds ohoU 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 expenoeo, oo provided in Section 11 hereof shall continue in full force and effect. 8. The obligations of the Issuer to issue and deliver the Bonds on the Closing Date shall be subject. at the option of the |oouer, to the performance by the Underwriter of its obligations to be performed hereunder at or prior to the Closing Oote, 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 nepreoentadiono, warranties and agreements of the Issuer hereunder shall remain operative and in full force and effeut, regardless of any investigations mode 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 Contnoct, inn|udinO, but not limited to, delivery of the Bondo, costs of printing the Bonds, the Preliminary Official Statement and the Final Official Stotement, any amendment or supplement to the Preliminary Official Statement or Final Official Statement and this Purchase Contront, 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, haeo of the Fiouo| Agent and the Eonn»m 8onk, and fees and disbursements in connection with the quo|ifinotionof 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 8ondo, 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 obove, and any notice or other communication to be given to the Underwriter under this Purchase Contract may 13 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: uth ri d Repres n ' e 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. 2003-1 (HUNTINGTON CENTER) By: Authorized Representative Time: (Pacific Time) i i 15 I 15. This Purchase Contract shall.become effective upon acceptance hereof by the. Issuer. STIFEL, NICOLAUS & COMPANY, INCORPORATED By: Authorized Representative Accepted and agreed tows of the date first above'written and the time set: forth below: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNT] GTON CENTER) By: r— A,OpUeef Reepresentative Time: f (Pacific Time) 15 EXHIBIT A CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 Agreementor 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 to be incorrect or incomplete in any material respect or would cause the information in the Final Official Statement 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. Capitalized terms used in this Certificate and not defined herein shall have the same meaning set forth in the Bond Purchase Agreement dated July 30, 2013, between the Issuer and Stifel, Nicolaus&Company, Incorporated A-1 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. 2003-1 (HUNTINGTON CENTER) By: Authorized Representative A-2 EXHIBIT B CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Serial Bonds Maturity Principal Interest Date(Sept. 1) Amount Rate Yield Price 2014 $670,000 2.000% 0.950% 101.074 2015 715,000 3.000 1.600 102.785 2016 740,000 3.000 2.200 102.332 2017 765,000 4.000 2.900 104.155 2018 790,000 4.000 3.250 103.453 2019 820,000 4.000 3.550 102.422 2020 855,000 4.000 3.900 100.608 2021 890,000 4.000 4.180 98.781 2022 925,000 4.250 4.400 98.890 2023 965,000 4.500 4.600 99.202 2024 1,010,000 5.000 4.750 101.974°1 2025 1,056,000 5.250 4.520 103.250 G1 2026 1,115,000 5.250 4.710 102.392 cz 2027 1,175,000 5.000 5.100 99.004 2028 1,235,000 5.000 5.200 97.929 Term Bonds 2030 2,655,000 5.250 5.350 98.889 2033 4,535,000 5.375 5.480 98.730 Cl: Priced to first par call on September 1,2023. C2: Priced to first par call on September 1,2018. Redemption Provisions Optional Redemption, The Bonds maturing on September 1, 2025 and September 1, 2026 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 on and after September 1, 2018, as a whole or in part, and by lot, 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 and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing on September 1, 2024 and on or after September 1, 2027 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 on and after September 1, 2023, as a whole or in part, and by lot, at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the date of redemption, without premium. B-1 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 the Indenture, plus amounts transferred from the Reserve Account, 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 100 thereafter Mandatory Sinking Fund Redemption. Bonds maturing on September 1, 2030 and September 1, 2033 (the "Term Bonds") shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, prior to maturity, in accordance with the schedules 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 1,2030 Year (September 1) Principal Amount 2029 $1,295,000 2030(Maturity) 1,360,000 Term Bonds Due on September 1,2033 Year (September 1) Principal Amount 2031 $1,435,000 2032 1;510,000 2033(Maturity) 1,590,000 B-2 EXHIBIT C CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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. 2003-1 (HUNTINGTON CENTER) By: Authorized Representative C-1 EXHIBIT D CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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 August 1, 2013 (the "Bond Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the "Issuer") and the Bank, and (B) as escrow bank (the "Escrow Bank") under the Escrow Agreement, dated as of August 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. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 30, 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 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.2003-1 (HUNTINGTON CENTER) 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 a Continuing Disclosure Agreement dated as of 1, 2013 (the "Continuing Disclosure Agreement"), by and between the Issuer 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: (1) The Dissemination Agent has the full power and authority to enter into and perform its duties under the Issuer Continuing Disclosure Agreement. (2) The Issuer Continuing Disclosure Agreement has been duly authorized, executed and delivered by the Dissemination Agent, and is a legal, valid and binding agreement of the Dissemination Agent enforceable upon the Dissemination Agent in accordance with its 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 Issuer Continuing Disclosure Agreement or contesting the powers of the Dissemination Agent or its authority to enter into and perform its obligations under the Issuer Continuing Disclosure Agreement. Dated: [closing date] WILLDAN FINANCIAL SERVICES By Authorized Officer F-1 EXHIBIT G CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 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 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 G-1 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 By: Authorized Representative G-2 EXHIBIT H CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS 10b-5 CERTIFICATE OF PROPERTY OWNER The undersigned (the "Property Owner"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the "Issuer" or the "District") of the bonds captioned above (the "Bonds"), hereby certify as follows as of the date hereof: (1) The undersigned is duly authorized to execute this Certificate on behalf of the Property Owner. (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 Property Owner, the Property Owner's organization, activities, properties and financial condition, and the Property Owner's development within the District. (4) The sections in the Preliminary Official Statement entitled "THE COMMUNITY FACILITIES DISTRICT — The Development, "THE COMMUNITY FACILITIES DISTRICT — The Property Owners," "THE COMMUNITY FACILITIES DISTRICT — The Summary of Leases; Occupancy Rates" and "THE COMMUNITY FACILITIES DISTRICT — The Operating Agreement, the REA and the OPA," to the extent they include information about the Property Owner, the Property Owner's organization, activities, properties and financial condition, and the Property Owner's development within the District, contain no untrue statement of a material fact and do 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 Property Owner 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 Property Owner and its affiliates have never defaulted to any material extent in the payment of special taxes or assessments in connection with H-1 the District or any other community facilities districts or assessment districts in California within the past five years. (7) The Property Owner 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 Property Owner in the District. (8) The Property Owner 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 Property Owner has been served, or is pending or threatened which, if successful, would materially adversely affect the Property Owner's ability to own and operate the property leased by the Property Owner 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 Property Owner Continuing Disclosure Agreement executed by the Property Owner. 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(1) BELLA TERRA ASSOCIATES and (ii) BELLA TERRA C] H-2 EXHIBIT I CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF PROPERTY OWNER The undersigned (the "Property Owner"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (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 Property Owner. (2) The Property Owner is duly authorized to execute, deliver and perform its Property Owner Continuing Disclosure Agreement. (3) The Property Owner has duly executed and delivered the Property Owner Continuing Disclosure Agreement. (4) The Property Owner 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 Property Owner. (6) The representations and warranties made by the Property Owner in the 10b-5 Certificate of Property Owner 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 BELLA TERRA ASSOCIATES AND BELLA TERRA C] 1-1 PRELIMINARY OFFICIAL STATEMENT DATED JUNE 17,2013 NEW ISSUE—BOOK-ENTRY-ONLY NO RATING In the opinion of Stradling Yocca Carlson&Rauth,a Professional Corporation,Newport Beach, California("Bond Counsel'),under U = 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. c h r„ ^ _ $20,230,000* L ' CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 .J (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS c Dated: Delivery Date Due: September 1,as shown on inside front cover c The City of Huntington Beach Community Facilities District No.2003-1(Huntington Center)2013 Special Tax Refunding Bonds(the "Bonds") are being issued by the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)(the"District")to refund the District's outstanding 2004 Special Tax Bonds(the"Refunded Bonds'),to fund a deposit to the Reserve Account securing the Bonds E 7 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 v Mello-Roos Community Facilities Act of 1982,as amended(Sections 53311 et seq.of the Government Code of the State of California),pursuant _ to 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"). V r 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 taxable land 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 c 2 —"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 3 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. J 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 n THE NET TAXES,NO OTHER REVENUES OR TAXES ARE PLEDGED TO THE PAYMENT OF THE BONDS. THE BONDS ARE NOT v. GENERAL OR SPECIAL OBLIGATIONS OF THE CITY OR GENERAL OBLIGATIONS OF THE DISTRICT BUT ARE LIMITED c' r OBLIGATIONS OF THE DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE r. = INDENTURE AS MORE FULLY DESCRIBED HEREIN. r .J 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. r 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 � V this issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment c decision. _ MATURITY SCHEDULE (See Inside Cover Page) The Bonds arc offered when, as and if issued and accepted by the.Underwriter,subject to approval as to their legality by Stradling v 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 wiII be passed on for the City and the District by Jennifer McGrath,Esq.,City Attorney. Certain legal matters will be passed on by y 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 18,2013. V y � c v STIFEL 7 y r Dated: June_2013 L 'j F *Preliminary,subject to change. MATURITY SCHEDULE (Base CUSIPt: Maturity Date Price or (September 1) Principal Amount Interest Rate Yield CUSIP f $ %Term Bonds due September 1,2033 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 makes any representations as to the accuracy of CUSIP data herein. CITY OF HUNTINGTON BEACH CITY COUNCIL Connie Boardman,Mayor Matthew Harper,Mayor Pro Tem 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 FINANCIAL ADVISOR Public Financial Management, Inc. Los Angeles,California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula,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." 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. Bella Terra Associates,the owner of the majority of the Taxable Property in the District, has also agreed to provide certain on-going financial and operating data. See "CONTINUING DISCLOSURE." 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 DistrictFormation.............................................................................................................................................2 ForwardLooking Statements............................................................................................................................3 Sourcesof Payment for the Bonds....................................................................................................................3 Descriptionof the Bonds..................................................................................................................................4 No Additional Bonds Except Refunding Bonds...............................................................................................4 TaxExemption..................................................................................................................................................4 Professionals Involved in the Offering.............................................................................................................5 ContinuingDisclosure......................................................................................................................................5 BondOwners' Risks.........................................................................................................................................5 OtherInformation.............................................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS............................................................................................6 THEREFUNDING PLAN...................................................................................................................................6 THEBONDS........................................................................................................................................................7 Authorityfor Issuance......................................................................................................................................7 Purposeof the Bonds........................................................................................................................................7 GeneralProvisions............................................................................................................................................7 DebtService Schedule......................................................................................................................................7 Redemptionof the Bonds.................................................................................................................................8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS..................................................................10 LimitedObligations........................................................................................................................................10 SpecialTaxes..................................................................................................................................................10 Debt Service Coverage from Maximum Special Taxes..................................................................................13 Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met...........................................14 ExistingLiens.................................................................................................................................................15 No Obligation of the City Upon Delinquency................................................................................................15 Special Taxes Are Not Within Teeter Plan.....................................................................................................15 Proceeds of Foreclosure Sales........................................................................................................................15 ReserveAccount.............................................................................................................................................16 Priority of Bonds and Pledge of Net Taxes.....................................................................................................16 No Additional Bonds Except Refunding Bonds.............................................................................................17 THE COMMUNITY FACILITIES DISTRICT.................................................................................................17 General............................................................................................................................................................17 TheDevelopment............................................................................................................................................17 TheProperty Owners......................................................................................................................................19 Summary of Leases;Occupancy Rates...........................................................................................................21 Property Owner Financial Information...........................................................................................................23 The Operating Agreement,the REA and the OPA.........................................................................................24 Estimated Direct and Overlapping Indebtedness............................................................................................26 Estimated Assessed Value-to-Lien Ratios......................................................................................................27 DelinquencyHistory.......................................................................................................................................30 THE CITY OF HUNTINGTON BEACH..........................................................................................................30 SPECIALRISK FACTORS...............................................................................................................................30 Risks of Real Estate Secured Investments Generally.....................................................................................31 LimitedObligations........................................................................................................................................31 Insufficiencyof Special Taxes........................................................................................................................31 NaturalDisasters.............................................................................................................................................32 HazardousSubstances.....................................................................................................................................32 i TABLE OF CONTENTS (continued) Page Payment of the Special Tax is not a Personal Obligation of the Owners........................................................33 PropertyValues...............................................................................................................................................33 Parity Taxes and Special Assessments............................................................................................................34 Disclosures to Future Purchasers....................................................................................................................34 SpecialTax Delinquencies..............................................................................................................................34 FDIC/Federal Government Interests in Properties..........................................................................................35 Bankruptcyand Foreclosure...........................................................................................................................36 No Acceleration Provision..............................................................................................................................37 LimitedSecondary Market.............................................................................................................................37 Proposition218...............................................................................................................................................37 Ballot Initiatives and Legislative Measures....................................................................................................38 Lossof Tax Exemption...................................................................................................................................38 IRS Audit of Tax-Exempt Bond Issues...........................................................................................................39 Limitationson Remedies................................................................................................................................39 CONTINUING DISCLOSURE..........................................................................................................................39 TAXEXEMPTION............................................................................................................................................40 LEGALOPINION..............................................................................................................................................41 ABSENCEOF LITIGATION............................................................................................................................42 NORATING......................................................................................................................................................42 UNDERWRITING.............................................................................................................................................42 FINANCIAL INTERESTS.................................................................................................................................42 NEWLEGISLATION........................................................................................................................................42 ADDITIONALINFORMATION.......................................................................................................................42 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 FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT...............E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES........................................................................................................................F-1 APPENDIX G BOOK-ENTRY-ONLY SYSTEM........................................................................................G-1 ii AERIAL PHOTOGRAPH Huntington Center COMMUNITY FACILITIES DISTRICT NO. 2003-1 City of Huntington Beach �- * rr' + w u cH cK . 011h I, g S 1 f I - a II ll x p � � �I .L. ,. � ','I I I � -.n . �, �ti"aRr�. � -..•�'•a'. r+*� �t�� `a3 ,,, �� �'�'" :, '�, k :-L,Ip - s t w � - 1 a.Al +u wa r�r .q't qt , .Id I w•`,�:�. w�TT II t Bella' erra 'ol °�,�• -�1' ti��' a II�II�IIi � � - � _� _�f I�LT � •_-_ .ry�,l@N1 tiww ,d p,,�,c� ., - _ u: y I�iX.:1�• I i:1�, � w,i' � 9+ -�II�rll�4✓~ -^ � I I ul I, h tiNhho:N��? ����4 to Gu � �I '�"'" Ili�, u � I _ BI k tlV " �I..�, h k IIII I �Wr ��_' � r �• ,J .�!� ww = °��',' Nx i i!%' z � r r+. >,C ? 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I■ - '�' I V�,�, � � I III ���I�yNI I till, (THIS PAGE IS INTENTIONALLY LEFT BLANK) $20,230,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (the "District") of its City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,230,000*(the"Bonds"). The proceeds of the Bonds, together with certain existing funds of the District,will be used to refund all of the outstanding City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2004 Special Tax Bonds, originally issued in the aggregate principal amount of $25,000,000 and now outstanding in the principal amount of$21,595,000 (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 approximately 42 net taxable acres presently divided into nine taxable parcels (the"Taxable Property")which have been developed into a commercial,retail and entertainment center known as "Bella Terra" (the"Development"). The District is located on Edinger Avenue generally between Gothard Street and Beach Boulevard, just off of the 405 Freeway in the City. The Development includes the Bella Terra Mall and two adjacent parcels, one of which includes a Costco fuel station and one of which is open space. The Bella Terra Mall is a Tuscan themed open air lifestyle retail center with approximately 690,000 square feet of retail, restaurants, open-air courtyards and entertainment uses. The Bella Terra Mall includes four clustered major buildings on the interior of the Development site, several smaller buildings on the perimeter of the Development site and an outdoor amphitheater. See "THE COMMUNITY FACILITIES DISTRICT—The Development." Preliminary,subject to change. 1 The Bella Terra Mall was originally developed in 1965 through 1969. In 1999, Huntington Center Associates,LLC, a Delaware limited liability company(the"Prior Landowner")acquired the Bella Terra Mall with the intention to rehabilitate and renovate the site. In connection with the renovation, the District was formed, and the Refunded Bonds were issued, to finance the land acquisition and construction of a six story, approximately 1,536 stall parking structure adjacent to the Bella Terra Mall(the"Parking Structure")and other public facilities related to the renovation of the Development. See "THE COMMUNITY FACILITIES DISTRICT—General." In August 2005, Bella Terra Associates, LLC, a Delaware limited liability company ("Bella Terra Associates"), acquired the Development from the Prior Landowner for $245 million. Bella Terra Associates and a related entity,Bella Terra C LLC, a Delaware limited liability company ("Bella Terra C"),own all of the Taxable Property in the District,except one parcel of open space,and are sometimes referred to in this Official Statement as the"Property Owners." The Property Owners are single purpose entities related to DIM Capital Partners, Inc., San Jose, California, which manages Bella Terra Mall. The one parcel not owned by the Property Owners in the District is owned by Bella Terra Vistas LLC, an entity unrelated to the Property Owners, and such parcel is required to be maintained as open space in connection with the development of a multi-family housing development located on an adjacent parcel not in the District. See"THE COMMUNITY FACILITIES DISTRICT—The Property Owners." District Formation The District was formed on February 3, 2003. 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 Chapter 3.56 of the City's Municipal Code and, where applicable by reason of the provisions of the Municipal Code,the Act(collectively,the"Law"). Pursuant to the Law, on January 6, 2003,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 6, 2003, the City Council adopted a resolution stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 within the District for the purpose of financing the costs of the Parking Structure and certain other public facilities consisting of the acquisition of the right-of-way and the installation of the streets, traffic signals and street lighting, sewer and water lines, and storm drains and related improvements in connection with the development of the District (collectively, the "Public Facilities"). Subsequent to a noticed public hearing on February 3, 2003, the City Council adopted Resolution No. 2003-10 (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 February 3, 2003, Resolution No. 2003-11 ("Resolution to Incur Bonded Indebtedness")which determined the necessity to incur 2 bonded indebtedness in an amount not to exceed$30,000,000 within the District, called an election within the District on the propositions of forming the District, incurring bonded indebtedness not to exceed$30,000,000 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 qualified electors within the District, which were the record landowners within the District at the time of the election,at an election held on February 3,2003. On February 20, 2003, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No. 2003000186478 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by the Resolution No. 2004-1 adopted by the City Council on January 5,2004. 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 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." 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 certain 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 Administrative Expenses up to the Administrative Expenses Cap of$30,000 per Fiscal Year. The Bonds are secured only by the Net Taxes collected within the District and amounts in the Special Tax Fund. Amounts in the Administration Fund, Rebate Fund, Surplus Fund and Parking 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 3 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 assessor's parcels 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 respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX G—"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 G — "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 description 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. No Additional Bonds Except Refunding Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Net Taxes,except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. 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 4 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 Willdan Financial Services, Temecula, California, as Special Tax Consultant, Public Finance Management, Inc., Los Angeles, California, Financial Advisor 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, Bella Terra Associates will agree to provide or cause to be provided to EMMA certain annual information with respect to Bella Terra Associates and the Development and notice of certain listed events to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" herein. See APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District. See APPENDIX F hereto for a description of the specific nature of the annual reports to be filed by Bella Terra Associates and notices of listed events to be provided by Bella Terra Associates. 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. 5 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 Council, 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 funds on hand for the Refunded Bonds. Sources of Funds Principal Amount of Bonds $ [Less/Plus]: Original Issue[Discount/Premium] Less: Underwriter's Discount Plus: Prior Funds Total Sources $ Uses of Funds: Escrow Fund to Redeem Refunded Bonds $ Reserve Account of the Special Tax Fund Costs of Issuance Fund ) Total Uses Includes legal fees,trustee fees,financial advisory fees,printing costs and other costs of delivery of the Bonds. 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 fiscal agent 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. 6 Grant Thornton, LLP, 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 $20,230,000* are authorized to be issued by the District under and subject to the terms of the Indenture, the Act and other applicable laws of the State of California. Purpose of the Bonds The Bonds are being issued to provide funds to (i)pay 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 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. 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 G—"BOOK-ENTRY-ONLY SYSTEM." Debt Service Schedule The Special Tax is to be levied against the Taxable 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." Preliminary,subject to change. The following table shows the scheduled debt service on the Bonds assuming no optional or special mandatory redemptions. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DEBT SERVICE SCHEDULE Period Ending Total September 1 Principal Interest Debt Service 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Source: The Underwriter. Redemption of the Bonds Optional Redemption.* The Bonds maturing on and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing on and after September 1, 2024 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 on and after September 1, 2023, as a whole or in part, and by lot, 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 pursuant to the Indenture, plus amounts transferred from the Reserve Account, 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, 2033 (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 1,2033 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 Preliminary,subject to change. 9 show that he or she failed to receive notice of such redemption. Any notice of redemption may condition such redemption upon the receipt of available funds on the date of redemption. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Net Taxes are the primary security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses of up to $30,000 (the "Administrative Expenses Cap")) and from amounts held in the Special Tax Fund established under the Indenture. "Extraordinary Administrative Expenses" include 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 Bond Owner consent under the Indenture, or actual or threatened Bond Owner or property owner litigation arising out of the Bonds or the District. Extraordinary Administrative Expenses will be paid from collected Special Taxes prior to the payment of debt service on the Bonds. While the District does not anticipate requiring Extraordinary Administrative Expenses, events such as high delinquencies requiring the District to take foreclosure actions against property owners within the District may require the District to use Special Taxes to pay Extraordinary Administrative Expenses. See "— Special Taxes" and"SPECIAL RISK FACTORS" for a description of the risks which could affect Special Tax delinquencies within the District. Special Tax revenues include the proceeds of the 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. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein held, for the exclusive benefit of the Owners of the Bonds,and foreclosure proceeds resulting from the sale of delinquent parcels if and when available. 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 General. Pursuant to the Law, the City Council adopted Resolution No. 2003-3 on January 6, 2003, stating its intention to establish the District and Resolution No. 2003-4 on January 6, 2003 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos. 2003-10, 2003-11 and 2003-12 adopted by 10 the City Council on February 3, 2003, the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 was determined necessary for the District and an election was called pursuant to the Law. See "— Rate and Method of Apportionment of Special Tax" immediately below. The Refunded Bonds were authorized to be issued by the Resolution No. 2004-1 adopted by the City Council on January 5, 2004. All propositions were approved by the Prior Landowner, as the sole owner of the land within the District at the time of the election,at an election held on February 3,2003. On February 20, 2003, a Notice of Special Tax Lien was recorded as Instrument No. 2003000186478 in the office of the County Recorder for the District. Rate and Method of Apportionment of Special Tax. The District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to the Rate and Method,which the City Council and the qualified electors of the District have approved. The Rate and Method apportions the total amount of Special Taxes to be collected among the nine parcels of Taxable Property in the District as more particularly described herein. The District adopted the Rate and Method following public hearings and elections conducted pursuant to the provisions of the Law. The full text of the Rate and Method is set forth in APPENDIX A hereto. The Special Tax is levied on and collected from the owners of the property in the District as set forth in the Rate and Method. The Rate and Method provides that, on not less than 15 days prior to July 1, the Director of Finance, as the designated person to administer the Special Tax (the "Administrator"), shall determine which Assessor's Parcels in the District are Taxable Property. Taxable Property is defined as all of the Assessor's Parcels within the boundaries of the District, which are not Exempt Land, or otherwise exempt from the Special Tax pursuant to Law, but in no circumstance shall the total Taxable Property be less than 40.63 acres. Exempt Land is defined as (i)any real property within the boundaries of the District which generally serves the development subject to the Development Agreement (defined below) and is owned by a governmental agency for public right-of-way purposes including, but not limited to parking structures, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator, and (ii)any Assessor's Parcel for which the Special Tax has been paid in full. In connection with the rehabilitation and construction work related to the renovation of Bella Terra Mall and the construction of the public facilities in connection therewith, including the Parking Structure, the Redevelopment Agency of the City of Huntington Beach (the "Redevelopment Agency") and the Prior Landowner entered into an Owner Participation Agreement, dated October 2, 2000 (the "Original Owner Participation Agreement"). Subsequently, the Original Owner Participation Agreement was amended by the Redevelopment Agency and Bella Terra Associates through a First Implementation Agreement and a Second Implementation Agreement, the latter being executed and delivered in November, 2007 (collectively, as amended,the"OPA"). "Development Agreement"is defined in the Rate and Method as the OPA. There are nine parcels of Taxable Property within the District which have been fully built out. See "THE COMMUNITY FACILITIES DISTRICT." The Rate and Method provides that during each Fiscal Year, the City Council or its designee shall levy the Special Tax proportionally on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax for that Fiscal Year, as needed to satisfy the Special Tax Requirement. The Special Tax Requirement is defined as the amount required in any Fiscal Year necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the next succeeding Bond Year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Account for all Outstanding Bonds, (iii)to pay Administrative Expenses, (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,and(v)to pay the Parking Structure Maintenance Special Tax. 11 In each Fiscal Year, the Maximum Special Tax for the Assessor's Parcels of Taxable Property in the District is the greater of(1)$65,050 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 District; 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. The Special Tax may be levied and collected on Taxable Property for each Fiscal Year 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 in accordance with the terms of the Indenture). There are currently 42.083 acres of Taxable Property within the District. Based on a Maximum Special Tax of $65,050 per Acre, the Maximum Special Taxes that may be levied each Fiscal Year is $2,737,499.15. Special Tax revenues received by the District and designated the Parking Structure Maintenance Tax (which are just a portion of the Special Tax that maybe levied under the Rate and Method) are not pledged to the repayment of the Bonds. The collection of the Parking Structure Maintenance Tax is subordinate to payment of debt service on the Bonds. See"—Collection of Special Taxes and Flow of Funds" below. The Rate and Method allows for partial and/or full prepayment of the Special Tax obligation with respect to any parcel. If a prepayment of the Special Tax is made with respect to any parcel in the District,the net proceeds of any such prepayment, together with a transfer of a portion of the amount in the Reserve Account, will be used to redeem Bonds on the next Interest Payment Date following such prepayment for which notice of redemption can timely be given. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" for the detailed provisions of the Rate and Method pertaining to prepayments of Special Taxes, and "THE BONDS — Redemption of the Bonds — Special Mandatory Redemption from Special Tax Prepayments" herein. Any parcel in the District for which the Special Tax has been prepaid in full will thereafter be classified as Exempt Land under the Rate and Method. UNDER NO CIRCUMSTANCES MAY THE SPECIAL TAX ON ANY ASSESSOR'S PARCEL EXCEED THE MAXIMUM RATES AS SET FORTH IN APPENDIX A HERETO. See APPENDIX A— "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"hereto. In connection with the issuance of the Bonds, Willdan Financial Services, the District's Special Tax Consultant, will certify that the Maximum Special Tax that may be levied on assessor's parcels within the District will be at least equal to 110% of maximum annual debt service on the Bonds plus the Administrative Expense Cap. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the County Treasurer in the same manner and at the same time as ad valorem property taxes and transferred to the District by the County Treasurer. The Director of Finance will,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 will 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; see "THE BONDS—Redemption of the Bonds— Special Mandatory Redemption for the Special Tax Prepayments")to the Trustee for deposit in the Special Tax 12 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 Indenture, in the following order of priority: 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 will be deposited in the Administration Fund until the earlier of(a) 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(b)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 Administration Fund for any Administrative Expenses previously deposited in the Administration Fund; Fifth: To the Director of Finance for deposit in the Parking Fund established pursuant to the Operating Agreement (defined herein) to deposit the Parking Structure Maintenance Special Tax (See "THE COMMUNITY FACILITIES DISTRICT — The Operating Agreement,the REA and the OPA"); Sixth: To the Rebate Fund established by the Indenture for payment to the United States pursuant to the Indenture;and Seventh: To the Director of Finance for deposit in the Surplus Fund any Net Taxes remaining after steps one through six above. Although the Special Taxes will constitute liens on the Taxable Property within the District, such taxes do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the District or the landowners in the District. See "SPECIAL RISK FACTORS — Parity Taxes and Special Assessments" herein. There is no assurance that the property owners in the District will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so. See the portion of this Official Statement entitled"SPECIAL RISK FACTORS." Debt Service Coverage from Maximum Special Taxes Table 1 below demonstrates the projected Debt Service Coverage assuming the Special Taxes were levied at the Maximum Special Tax rate set forth in the Rate and Method. Such debt service coverage reflects the fact that there are only eight separate parcels owned by the Property Owners and one parcel owned by an entity unrelated to the Property Owners which is required to be maintained as open space. Due to the 13 concentration of ownership, in the event of delinquencies with respect to one or more parcels, it is likely that most if not all parcels will be delinquent. See"—Existing Liens"below and"SPECIAL RISK FACTORS— Special Tax Delinquencies." TABLE 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ESTIMATED MAXIMUM TAXING CAPACITY Parking Structure Year Ending Maximum Administrative Bonds Debt Bond Debt Service Maintenance September 1, Special Tax() Expenses(2) Service` Coverage(3) Special Tax(4) 2014 $2,737,499.15 $30,000.00 $1,571,893.00 1.72 $530,000.00 2015 2,737,499.15 30,000.00 1,574,037.50 1.72 540,600.00 2016 2,737,499.15 30,000.00 1,578,937.50 1.71 551,412.00 2017 2,737,499.15 30,000.00 1,578,437.50 1.72 562,440.24 2018 2,737,499.15 30,000.00 1,577,637.50 1.72 573,689.04 2019 2,737,499.15 30,000.00 1,572,512.50 1.72 585,162.83 2020 2,737,499.15 30,000.00 1,572,912.50 1.72 596,866.08 2021 2,737,499.15 30,000.00 1,577,562.50 1.72 608,803.40 2022 2,737,499.15 30,000.00 1,574,125.00 1.72 620.979.47 2023 2,737,499.15 30,000.00 1,572,625.00 1.72 633,399.06 2024 2,737,499.15 30,000.00 1,577,750.00 1.72 646,067.04 2025 2,737,499.15 30,000.00 1,569,250.00 1.73 658,988.38 2026 2,737,499.15 30,000.00 1,573,750.00 1.72 672,168.15 2027 2,737,499,15 30,000.00 1,575,500.00 1.72 685,611.51 2028 2,737,499.15 30,000.00 1,574,500.00 1.72 699.323.74 2029 2,737,499.15 30,000.00 1,575,750.00 1.72 713,310.22 2030 2,737,499.15 30,000.00 1,574,000.00 1.72 727,576.42 2031 2,737,499.15 30,000.00 1,574,250.00 1.72 742,127.95 2032 2,737,499.15 30,000.00 1,571,250.00 1.72 756,970.51 2033 2,737,499.15 30,000.00 1,575,000.00 1.72 772,109.92 * Preliminary,subject to change. (1) As determined pursuant to the steps listed in Section C of the Rate and Method,the Maximum Special Tax is calculated to be$65,050 per taxable acre and totals$2,737,499.15. (2) Equals the Administrative Expenses Cap. (3) Equals the Maximum Special Tax column, less the Administrative Expenses column, divided by Bonds Debt Service column. Debt service coverage includes Special Taxes from one 2.494 acre parcel (Parcel No. 142-073-045) which is required to be maintained as open space. Excluding such parcel from the debt service coverage calculation results in debt service coverage of approximately 1.63 times Administrative Expenses plus debt service on the Bonds. See "THE COMMUNITY FACILITIES DISTRICT—The Development." (4) The Parking Structure Maintenance Special Tax constitutes part of the Special Tax and is used to pay the cost of operation and maintenance of the Parking Structure on a basis subordinate to the application of Special Taxes to debt service on the Bonds. Pursuant to Section 4 of the Operating Agreement(as defined herein),the Parking Structure Maintenance Special Tax is deposited into the Parking Fund thereunder only if sufficient moneys have been collected to fund the debt service on the Bonds and Administrative Expenses. See`THE COMMUNITY FACILITIES DISTRICT—The Operating Agreement, the REA and the OPA." Source: Bonds Debt Service provided by the Underwriter; Maximum Special Taxes and debt service coverage provided by Willdan Financial Services. 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 the Parking Structure Maintenance Tax and to provide Special Taxes in an amount equal to 110% of annual debt service on the Outstanding Bonds. The District has further covenanted 14 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 lots within the District are 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 than the District, 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 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. Proceeds of Foreclosure Sales The net proceeds received following a judicial foreclosure sale of land within the District resulting from a property owner's failure to pay the Special Tax when due are pledged to the payment of principal of and interest on the Bonds. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Collection of Special Taxes and Flow of Funds"herein. Pursuant to Section 53356.1 of the Act, the District has covenanted 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. If foreclosure is necessary and other funds (including amounts in the Reserve Account of the Special Tax Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, 15 involvement by agencies of the federal government and other factors beyond the control of the District. See "SPECIAL RISK FACTORS—Bankruptcy and Foreclosure" herein. Moreover,no assurances can be given that the real property 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. See "SPECIAL RISK FACTORS—Property Values"herein. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion,the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency,the Special Tax will have the same lien priority as is provided for ad valorem taxes. 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 an 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 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 to the extent that 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 Administrative Expenses, not in excess of the Administrative Expenses Cap, in the Administration Fund) for the payment of principal of, premium, if any, and interest on the Bonds. Extraordinary Administrative Expenses are paid from Net Taxes ahead of debt service on the Bonds in the event there are Extraordinary Administrative Expenses. 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,Rebate Fund and Surplus Fund are not pledged to the repayment of the Bonds. 16 No Additional Bonds Except Refunding Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Net Taxes,except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. THE COMMUNITY FACILITIES DISTRICT General Location. The District consists of approximately 42.083 net taxable acres which have been primarily developed into a commercial, retail and entertainment center in the City known as "Bella Terra" (the "Bella Terra Mall"). The District is located on Edinger Avenue between Gothard Street and Beach Boulevard,just off of the 405 Freeway in the City. The District currently consists of nine County Assessor's parcels which are subject to the Special Tax levy, with additional separate parcels for the land on which the Parking Structure (defined below) is located and for certain easement areas (which additional parcels are not subject to the Special Tax levy). Formation. 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 Law. The District was formed to facilitate financing certain public infrastructure and facilities needed in the renovation of the Bella Terra Mall undertaken by the Prior Landowner. Pursuant to the Law, the City Council adopted Resolution No.2003-3 on January 6, 2003,stating its intention to establish the District and Resolution No. 2003-4 on January 6, 2003 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos. 2003-10, 2003-11 and 2003-12 adopted by the City Council on February 3, 2003, the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 was determined necessary for the District and an election was called pursuant to the Law. The Prior Landowner, as the then sole owner of the land within the District,voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $30,000,000 to finance the Public Facilities and the levy of a special tax consistent with the Special Tax Formula on the land within the District to pay the principal and interest on the Bonds, to pay administrative expenses of the District, to make any necessary replenishments to the Reserve Account and to pay the Parking Structure Maintenance Special Tax. On February 20, 2003, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No.2003000186478 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by Resolution 2004-1 adopted by the City Council, acting as the legislative body of the District,on January 5,2004. Public Facilities. The "Public Facilities" financed through the issuance of the Refunded Bonds included the land acquisition and construction of a six story, approximately 1,536 stall parking structure adjacent to the Bella Terra Mall (the "Parking Structure") and all work appurtenant thereto, infrastructure improvements along Edinger Avenue and Center Avenue, police substation improvements, and other miscellaneous fees,permits and costs. All of the Public Facilities were complete by 2005. The Development The property in the District includes nine parcels of Taxable Property totaling approximately 42 acres which constitute the "Development." The Development includes the Bella Terra Mall, the adjacent property on which a Costco fuel station is located and one approximately 2.5 acre parcel which is required to be maintained as open space in connection with the development of a multi-family housing development which is 17 located near the Development but is not within the District. The Costco Warehouse itself is located on property immediately adjacent to the District on a site which used to be a Mervyn's, but is not within the boundaries of the District and not subject to the Special Tax. The Bella Terra Mall was originally developed in 1965 through 1969 with the construction of a Broadway Department store, a JC Penny Department Store, a Montgomery Ward Department Store, a JC Penny/Firestone Auto Center, and other mall shops and related businesses. The Prior Landowner purchased the Development on November 16, 1999 for approximately $48,500,000 with the intention of renovating the Bella Terra Mall. The District was formed,and the Refunded Bonds were issued, to finance the Parking Structure and other public facilities related to the renovation of the Development. The Bella Terra Associates purchased the Development for$245,000,000 in August,2005. See "—The Property Owners." The Bella Terra Mall is a Tuscan themed open air lifestyle retail center with approximately 690,000 square feet of retail, restaurant, open-air courtyards and entertainment uses. The Bella Terra Mall includes four clustered major buildings on the interior of the Development site, several smaller buildings on the perimeter of the Development site and an outdoor amphitheater. Larger tenants in the Bella Terra Mall include Whole Foods,The Cheesecake Factory,Barnes and Noble, Kohl's,REI, Bed Bath&Beyond,Huntington Surf and Sport, and Cost Plus World Market. The Bella Terra Mall also includes a 4,000-seat, 20-screen Century Theaters cineplex. Set forth below is Table 2 indicating the current Orange County Assessor's Parcels in the District,the size of the parcels and the current owners and tenants whose businesses are located on the parcels. TABLE 2 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 PARCELS,OWNERSHIP AND TENANTS (as of April 1,2013) Orange County Assessor's Parcel Size Parcel No. in Acres Current Owner Current Tenant(s) 142-073-021 0.439 Bella Terra Associates,LLC Romano's Macaroni Grill 142-073-023 1.704 Bella Terra Associates,LLC Burlington Coat Factory 142-073-043 2.988 Bella Terra C LLC Costco Fuel Station 142-073-045 2.494 Bella Terra Villas LLC(' Open Space 142-013-047 0.320 Bella Terra Associates,LLC King's Fish Market 142-073-048 0.280 Bella Terra Associates,LLC Bank of America 142-073-049 0.340 Bella Terra Associates,LLC California Pizza Kitchen 142-073-050 0.280 Bella Terra Associates,LLC Islands 142-073-046 33.178 Bella Terra Associates,LLC All other tenants of Bella Terra Mall Total 42.083 (1) Bella Terra Villas LLC is a single purpose entity related to UDR,Inc.,the developer of a multi-family housing development located near the District known as"The Residences at Bella Terra." Bella Terra Villas LLC is not related to Bella Terra C LLC or Bella Terra Associates,LLC,both of which are under common ownership.See"—The Property Owners." Source: Bella Terra Associates. The property within the District has undergone multiple lot line adjustments and re-mapping since the formation of the District in connection with the completion of the renovations of Bella Terra Mall and reconfigurations and construction undertaken for the current and future tenants located therein, as well as the adjacent Costco. The information in Table 2 above is based on the most recent information available to the District and the Property Owners. 18 An approximately 154,000 square foot Costco is located at 7562 Center Avenue near the District, adjacent to the Bella Terra Mall on property owned by Bella Terra Villas. This Costco opened for business in May,2012 and includes a fuel station. While the Costco fuel station is located in the District and subject to the Special Tax, the Costco Warehouse itself is not located within the District and is not subject to the Special Tax. See "— Summary of Leases; Occupancy Rates" for additional information concerning the tenants and lease terms within the Bella Terra Mall. The District also includes one 2.494 acre parcel (Parcel No. 142-073-045) which is required to be maintained as open space(the"Open Space Parcel"). The Open Space Parcel is owned by Bella Terra Villas LLC ("Bella Terra Villas"), a single purpose entity related to UDR, Inc. ("UDR"), a publicly traded multi- family real estate investment trust traded on the New York Stock Exchange under the symbol "UDR." The Open Space Parcel is required by the City to be maintained as open space in connection with UDR's development of"The Residences at Bella Terra," an upscale apartment complex near the Development. The first phase of development with respect to The Residences at Bella Terra has been completed and the first occupants moved into The Residences at Bella Terra in mid-May 2013. The Residences at Bella Terra is not within the District and is not subject to the Special Tax. In the event Bella Terra Villas, or a future owner, becomes delinquent in the payment of Special Taxes with respect to the Open Space Parcel, the Special Tax burden would be spread among the other parcels in accordance with the Rate and Method. Excluding the Open Space Parcel from debt service coverage results in debt service coverage of approximately 1.63` times the Administrative Expenses Cap plus debt service on the Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Debt Service Coverage from Maximum Special Taxes." The following information about the Property Owners (and their owners) and the Taxable Property within the District in the sections of the Official Statement under the subheadings "— The Property Owners," — Summary of Leases; Occupancy Rates" and "— Property Owners Financial Information" has been provided by Bella Terra Associates and has not been independently confirmed or verified by the City, the District or the Underwriter. Such information is included because it may be relevant to an informed evaluation of the security for the Bonds. The inclusion in this Official Statement of information related to the Property Owners should not be construed to suggest that the Bonds, or the Special Taxes that will be used to pay the Bonds, are recourse obligations of the Property Owners, Bella Terra Villas or any other subsequent property owner within the District. Neither the City nor the District nor the Underwriter can guarantee the accuracy or completeness of such information. The Property Owners As indicated above,the Open Space Parcel is owned by Bella Terra Villas, and entity unrelated to the other Property Owners within the District. Assessor's Parcel No. 142-073-43 (the parcel on which Costco fuel station is located) is owned by Bella Terra C LLC, a Delaware limited liability company ("Bella Terra C"). The other seven parcels of Taxable Property within the District are owned by Bella Terra Associates, LLC, a Delaware limited liability company("Bella Terra Associates"). Both Bella Terra C and Bella Terra Associates are single purpose entities owned by common ownership. Bella Terra C is wholly owned by BTDJM Associates LLC, a Delaware limited liability company ("BTDJM Associates"). Bella Terra Associates is wholly owned by Bella Terra Borrower, LLC a Delaware limited liability company, which is in turn wholly owned by BTDJM Associates. Bella Terra C and Bella Terra Associates are sometimes referred to in this Official Statement as the "Property Owners." BTDJM Associate's members are(i)Bella Terra Holding, LLC (with an 87.75% interest), whose sole member is SRA Holding, LLC, whose sole member is PERS Holding Company Limited L.L.C; and(ii)Bella Terra Group Retail, LLC (with a 12.25% interest), whose members include (a) Bella Terra Retail Holdings Preliminary,subject to change. 19 Corp., a California Corporation owned by D. John Miller (21%), Eric Sahn (22%), Lindsay Parton (21%), Dieter Mees (15%), John Cappetta (15%) and various others (6%) and (b) various Class "A" members including John Miller(1.54%), Eric Sahn(.62%), Lindsay Parton (.62%),Dieter Mees(5.02%), John Cappetta (3.09%)and various others(9.11%). BTDJM Associates is managed by Bella Terra Group Retail, LLC, a California limited liability company ("Bella Terra Group"), an entity controlled by DIM Capital Partners, Inc., San Jose, California ("DJM Capital Partners"). DIM Capital Partners manages Bella Terra Mall. DIM Capital Partners reports that it is a provider of value-added private equity investment, development and asset management services in the retail sector. Since 2003, DIM Capital Partners has executed acquisitions, financing and sale transactions in excess of $1.5 billion. Currently, DIM Capital Partners' west coast portfolio is valued at more than $650 million, consisting primarily of retail properties in coastal Southern California markets. Set forth below is a listing of recent retail developments in which DIM Capital Partners has been involved: Size(`000) Year Project Location Type sf. Acquired Anchor Tenants La Habra Marketplace La Habra,CA Retail 375 2004 LA Fitness,Office Max,La Habra 16 Regal Cinemas Lakewood Square Lakewood,CA Retail 188 2004 Von's Supermarket,Chuck E.Cheese, Cost Plus World Markets,Michaels Montalvo Square Ventura,CA Retail/Office 219 2003 Ralph's,LA Fitness Village Del Amo Torrance,CA Retail 181 2004 Sport Chalet,BevMo The following is a brief description of the key management personnel of DIM Capital Partners. D. John Miller, Chief Executive Officer. D. John Miller is the founder and chief executive officer of DJM Capital Partners,which was started in 1992. DIM Capital Partners has managed more than $1 billion in assets since its founding. Mr. Miller has over 30 years of experience in commercial real estate, working as a broker, investor, manager and developer,with expertise covering many products and market types. Mr. Miller began his career as a broker with Cornish & Carey Commercial Real Estate in Santa Clara, California, specializing in income property. Prior to starting DIM Capital Partners, Miller was a principal with the commercial real estate firm of MacMillan, Moore and Buchanan, Inc. in San Jose, California. While at the firm, Miller was general partner and asset manager of a partnership portfolio of income properties valued in excess of$50 million, and he brokered more than $300 million of investment sales. Mr. Miller formed DIM Capital Partners in the early 1990s to participate as a broker and principal in the wide-spread liquidation of commercial real estate in the United States, resulting from the savings and loan crisis of the time. From 1993 through 1995, he acquired over $75 million of bank-owned apartment and retail properties in California, subsequently selling the portfolio over a period at a significant return. Mr. Miller is a member of the Association of Silicon Valley Brokers, the Commonwealth Club of California, the California Association of Realtors,the Tri-County Apartment Association,UC Berkeley/South Bay Cal Business Alumni,and the Urban Land Institute. Mr. Miller is a California licensed real estate broker and holds a B.A. in Political Science from the University of California at Berkeley,where Mr. Miller graduated cum laude. Eric Sahn. Eric Sahn oversees all financial affairs and asset management for DIM Capital Partners. Mr. Sahn has over 27 years' experience in real estate investment and development. Sahn began his career at a private real estate investment and development firm in New York, where he managed over $700 million in acquisitions, development and financing for a variety of property types including hotels, office buildings, industrial/flex buildings, shopping centers and apartments. A specialist in urban, in-fill development, Mr. Sahn later worked for Avalon Bay Communities,a large national multi-family real estate investment trust, and as Vice President of Development for Legacy Partners. Sahn is a California licensed real estate broker and a Certified Property Manager(CPM) Candidate. Sahn holds a B.S. in Applied Mathematics and Economics from 20 Brown University, where he graduated magna cum laude, and an MBA in Real Estate from the University of California at Berkeley. Lindsay Parton, President. As President of DJM Capital Partners, Lindsay Parton is responsible for directing Southern California property acquisitions and supervising all construction and development activities for DJM Capital Partners. Mr. Parton's team is responsible for all entitlements, governmental and community relations, architectural and land planning, construction management, marketing and positioning of development and redevelopment properties, from project inception through completion. Mr. Parton has over 30 years' experience in the construction development industry. Mr. Parton is founder and chairman of Parton & Edwards Construction, a Santa Barbara based company that has, since 1980, developed a broad range of residential and commercial properties throughout California, as well as institutional and public works projects in excess of$300 million. Mr. Parton holds a B.A. in economics from Westmont College in Santa Barbara. Summary of Leases; Occupancy Rates Bella Terra Associates leases property within Bella Terra Mall to tenants. The following Table 3 sets forth the occupancy rates for the past five years based on the Property Owner's property leases for the leasable space within the District. As of April 1,2013, approximately 658,731 square feet out of a total leasable area of approximately 686,727 square feet within the Development, or approximately 95.9%, was subject to executed triple-net leases. The following Table 3 summarizes historical lease occupancy rates in the Development as of December 31 in the years 2008 through 2012. The following Table 4 sets forth the status of tenant leases within the District as of April 1, 2013,together with the number of leased square feet and the termination dates of the current triple-net leases. TABLE 3 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 LEASE OCCUPANCY RATES 2008 THROUGH 2O12 As of Leasable Area Leased Area December 31, (approximate)�t� (approximate) Lease Occupancy Rate 2008 7759037 6569951 84.76% 2009 774,962 657,465 84.84 2010 774,989 649,719 83.84 2011 685,805 677,814 98.83 2012 686,727 656,672 95.62 (1) Changes in leasable area are due to configurations of individual tenant spaces. 2008 through 2010 also include a Mervyn's building which has since been demolished. Mervyn's was located on a portion of the parcel on which the Costco fuel station is now located and on a portion of the parcel on which the Costco is now located,which is outside the District. Source: Bella Terra Associates. 21 TABLE 4 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 SUMMARY OF LEASES AND STATUS (as of April 1,2013) Square Lease Term/ Tenant(') Footage Use Expiration Dater2) Pei Wei#86 3,195 Restaurant/Food 12/31/2015 Chronic Tacos 1,334 Restaurant/Food 04/30/2021 Comer Bakery#209 3,025 Restaurant/Food 01/31/2016 King Seafood Company 7,887 Restaurant/Food 09/30/2021 Bank of America PCA7 8,240 Services 12/31/2015 Burlington Coat Factory 149,001 Retail 01/31/2025 Fantastic Sam's 1,516 Retail 06/30/2018 Ong Shao Dental,Inc 1,622 Services 02/28/2017 H&N Group Management 2,354 Corporate 04/30/2018 DJM/Holland Bella Terra 2,059 Corporate 09/30/2013 Ulta#166 9,981 Retail 02/28/2021 Cost Plus#270 18,300 Retail 01/31/2016 REI#88 22,500 Retail 07/31/2015 Kohl's Department St 97,394 Retail 02/03/2024 Justice Stores LLC. 4,402 Retail 05/31/2016 LensCrafters#5603 2,912 Retail 08/31/2017 Angl.Inc. 2,195 Retail 04/30/2019 Loma Jane USA 2,085 Retail 08/31/2022 No Rest for Bridget 2,248 Retail 01/31/2017 Huntington Surf and Sport 7,029 Retail 03/31/2016 OZ Accessories 746 Retail 12/31/2015 Cinemark 482 Century 77,269 Theater 11/17/2020 HatStop,etc. 807 Retail 10/31/2014 Rocky Mountain Chocolate Factory 990 Retail 09/30/2015 CorePower Yoga,LLC 7,809 Services 08/31/2017 Dental Oasis of Orange County 4,000 Services 11/30/2017 Atlantis Eye Care 3,643 Services 08/14/2021 Bed Bath&Beyond 40,555 Retail 05/31/2021 Time Warner Cable Services 1,204 Services 07/31/2013 Kabuki Restaurants 5,229 Restaurant/Food 10/31/2015 Johnny Rocket's 2,163 Restaurant/Food 10/31/2015 Wreath Equity,LLC 1,865 Services 10/31/2015 Western Federal Credit Union 2,254 Services 11/30/2017 Taco De Ojo 2,975 Restaurant/Food 10/31/2015 Pinkberry 911 Restaurant/Food 04/30/2017 Buffalo Wild Wings 5,587 Restaurant/Food 01/31/2022 Luna Rossa 2,448 Restaurant/Food 01/31/2017 Diane's Beachwear 1,379 Retail 02/28/2019 Pizzarito 911 Restaurant/Food 04/30/2014 Princess Bride Diamonds 839 Retail 03/31/2021 Jamba Juice Company 1,443 Restaurant/Food 09/30/2015 Peet's#324 1,525 Restaurant/Food 09/30/2015 T-Mobile USA,Inc. 1,418 Retail 08/31/2015 GameStop#3354 1,534 Retail 08/31/2013 Bella Hue,Inc. 2,613 Services 11/30/2015 California Pizza Kitchen 5,994 Restaurant/Food 02/28/2020 Islands Huntington Beach 5,406 Restaurant/Food 03/31/2020 Cheesecake Factory 9,925 Restaurant/Food 01/31/2027 Barnes&Noble 42743 40,300 Retail 01/31/2015 Carter's Retail 4,516 Retail 02/28/2019 OC Skincare,Inc. 1,713 Services 04/30/2016 Jos.A.Bank Clothiers 4,200 Retail 12/31/2015 Ucatan,Inc. 2,220 Retail 06/30/2016 Massage Envy Limited 3,735 Services 12/31/2019 Staples,Inc.#0152 19,012 Retail 01/31/2015 See's Candy 958 1,496 Retail 12/31/2015 Whole Foods Market 31,530 Retail 09/30/2030 Romano's Macaroni Grill 7,288 Restaurant/Food 01/31/2022 TOTAL EXECUTED LEASES 658,731 (1) Does not include the executed ground lease with Costco Wholesale Corporation which is not within the boundaries of the District and is not subject to the Special Tax. (2) Does not include extension options. Source: Bella Terra Associates. 22 No assurance can be given that all executed leases will continue for their current terms or that tenants will exercise any applicable renewal options. Property Owner Financial Information Bella Terra Associates, LLC is a single purpose entity that owns all of the Taxable Property in the District (except for Assessor Parcel No. 142-073-43 that is owned by Bella Terra C LLC, an entity related to Bella Terra Associates, LLC, and Assessor Parcel No. 142-073-45 which is owned by Bella Terra Villas, an entity unrelated to Bella Terra Associates,LLC). According to unaudited consolidated financial statements for the fiscal year ended December 31, 2012 filed on EMMA by Bella Terra Associates on behalf of itself and its related entities, including Bella Terra C, Bella Terra Associates' consolidated net income (excluding depreciation and amortization) was approximately $7.68 million on total revenues of approximately $26.7 million. In comparison, Bella Terra Associates reported consolidated net income of$3.4 million on total revenues of approximately $23.4 million for the fiscal year ended December 31, 2011. The increase in revenue in 2012 over 2011 included, among other things, approximately$2 million in additional lease revenue from leases executed with respect to Costco (although Costco is not within the District), Luna Rossa, Buffalo Wild Wings and Hat Stop Etc. Additionally, expenses were lowered by approximately $1.4 million in 2012 over 2011 as a result of the payoff of the Second Mortgage Loan(defined below)in June 2011. Bella Terra Associates acquired the Bella Terra Mall in August 2005 from the Prior Landowner for $260 million. In connection with the acquisition of the Bella Terra Mall, Bella Terra Associates entered into a Loan Agreement with GMAC Commercial Mortgage Corporation, a California corporation ("GMAC Commercial"), dated as of August 15, 2005 (the "First Mortgage Loan"), and a Loan Agreement (Second Mortgage), by and between GMAC and Bella Terra Associates, dated as of August 15, 2005 (the "Second Mortgage Loan"). Bella Terra Associates borrowed an aggregate principal amount of $188 million under the First Mortgage Loan. The First Mortgage Loan is secured by two promissory notes executed and delivered by Bella Terra Associates in the aggregate principal amount of$188 million(the "First Mortgage Promissory Notes") and a Deed of Trust, Assignment of Rents And Leases, Security Instrument and Fixture Filing (First Mortgage), executed by Bella Terra Associates, dated as of August 15, 2005 (the "First Mortgage Loan Deed of Trust"). At the time Bella Terra Associates entered into the First Mortgage Loan, it also entered into the Second Mortgage Loan for $17 million which was subordinate to the First Mortgage Loan and has subsequently been paid off. Unless extended, the maturity date of the First Mortgage Deed of Trust is September 1, 2015 (the "First Mortgage Loan Maturity Date"). Interest is fixed on the entire balance of the First Mortgage Loan and is 5.20%per annum on the first$160 million of the First Mortgage Loan and approximately 5.837%thereafter. Interest only payments on the First Mortgage Loan balance are due monthly on the first day of each month commencing October 1, 2005 until the First Mortgage Loan Maturity Date. All unpaid interest and principal outstanding on the First Mortgage Loan is due on the First Mortgage Loan Maturity Date. Bella Terra Associates has represented to the District that it is current with respect to all amounts due under the First Mortgage Loan. Under the Law,the lien securing the First Mortgage Loan is subordinate to the lien of Special Taxes. The First Mortgage Loan includes the establishment of a"Lockbox Account" pursuant to a Lockbox Agreement whereby all rents collected on the leases within Bella Terra Mall are deposited into the Lockbox Account held by Bella Terra Associates and disbursed in accordance with the First Mortgage Loan and the Lockbox Agreement. On the closing date with respect to the First Mortgage Loan(the"Closing Date"), Bella Terra Associates was required to deposit into a Tax Escrow Account established under the First Mortgage Loan and held by GMAC Commercial estimated taxes, including Special Taxes, on the Bella Terra Mall for the 12 months following the Closing Date. Thereafter, Bella Terra Associates is required to deposit each 23 month into the Tax Escrow Account one-twelfth of the estimated annual taxes, including Special Taxes, on Bella Terra Mall. GMAC pays such taxes, including Special Taxes,out of the Tax Escrow Account. In connection with the construction of the Costco Warehouse at 7562 Center Avenue and the adjacent Costco fuel station, Bella Terra C LLC, a Delaware limited liability company, an entity related to Bella Terra Associates, LLC, borrowed$17.25 million pursuant to a Loan Agreement, by and between Bella Terra C and NLI Commercial Mortgage Fund, LLC, a Delaware limited liability ("NLI Commercial"), as lender, dated as of April 13, 2012 (the "Costco Mortgage Loan"). The Costco Mortgage Loan is secured by the property on which the Costco Warehouse is located, which is not in the District, including the ground lease between Costco Wholesale Corporation and Bella Terra C. The Costco Mortgage Loan is also secured by Assessor Parcel Nos. 142-073-43 in the District, which include the Costco fuel station, open space and parking for Costco. Interest on the Costco Mortgage Loan is fixed at 4.45% and matures May 10, 2022 (the "Costco Mortgage Loan Maturity Date"). The Costco Mortgage Loan is amortized, and monthly payments of principal and interest in the amount of$90,709 are due on the tenth day of each month commencing June 10, 2012. Taxes on the property secured by the Costco Mortgage Loan are not escrowed unless there has been a default under the Costco Mortgage Loan. Bella Terra C has represented to the District that it is current with respects to all amounts due under the Costco Mortgage Loan. Under the Law, the lien securing the Costco Mortgage Loan is subordinate to the lien of Special Taxes. The Property Owners are not personally obligated to pay the Special Tax. Rather the Special Tax is an obligation only against the Taxable Property in the District. See"SPECIAL RISK FACTORS—Payment of the Special Tax is not a Personal Obligation of the Owners." The Operating Agreement,the REA and the OPA In connection with the construction of the Parking Structure, and in order to provide for the operation and maintenance of the Parking Structure once it was completed, the City and the Prior Landowner entered into(i)a Parking and Reciprocal Easement Agreement and Option to Purchase, dated as of March 1, 2004(the "REA"), and (ii)an Operating Agreement for Huntington Center Parking Structure, dated as of January 15, 2004 (the"Operating Agreement"). In connection with the rehabilitation and construction work related to the renovation of Bella Terra Mall and the construction of the Public Facilities including the Parking Structure,the Redevelopment Agency and the Prior Landowner entered into an Owner Participation Agreement, dated October 2, 2000 (the "Original Owner Participation Agreement"). Subsequently, the Original Owner Participation Agreement was amended by the Redevelopment Agency and Bella Terra Associates through a First Implementation Agreement and a Second Implementation Agreement, the latter being executed and delivered in November,2007(collectively,as amended,the"OPA"). In connection with the acquisition of the Bella Terra Mall,Bella Terra Associates,the Redevelopment Agency and the Prior Landowner entered into an Assignment and Assumption Agreement, dated as of August 8, 2005 (the "Assignment and Assumption"), pursuant to which Bella Terra Associates assumed the rights and obligations of the Prior Landowner under the REA, the OPA and the Operating Agreement. The REA, the OPA and the Operating Agreement are subject to amendment by the City, on its behalf and as successor to the Redevelopment Agency, and the Property Owners at any time without any requirement for notice to or the consent of the Bondowners. The REA provides for various easements related to the construction and use of the Parking Structure. The REA grants the Property Owners an exclusive easement with respect to 5% of the parking spaces (the "Reserve Spaces") in the Parking Structure. Other easements were granted by the City and the Prior Landowner for utilities necessary for the operation of the Parking Structure and that otherwise serve the Development,for common structural support and security, and for ingress and egress. 24 The REA provides that Bella Terra Associates is to rebuild or repair the Parking Structure in the case of any future damage or destruction. Any proceeds of any governmental condemnation of the Parking Structure will be used first to replace any public parking lots as a result of such condemnation, and second to redeem Bonds under the optional redemption provisions of the Indenture. The REA provides that the City is to operate and maintain the Parking Structure from the proceeds of the portion of the Special Tax constituting the Parking Structure Maintenance Tax to be levied for such purpose. The City may delegate its operating responsibilities and has done so pursuant to the Operating Agreement described below. Pursuant to the REA, Bella Terra Associates is required to provide for capital replacement and repairs to the Parking Structure, subject to the receipt of any applicable insurance proceeds. The REA grants the Property Owners an option to purchase the Parking Structure, at its then fair market value, following the date that the Bonds have been fully paid and retired. The Operating Agreement provides for the operation of the Parking Structure. The Operating Agreement provides for an annual fee of$1,500 to Bella Terra Associates, subject to cost of living increases, for their services in operating the Parking Structure. The term of the Operating Agreement extends to the date that is 15 years from the date when the City provides a certificate of occupancy for the Parking Structure, which occurred in 2005, and Bella Terra Associates has unilaterally agreed to an additional 15 year extension at the option of the City,but the term will end in any event if the City no longer owns the Parking Structure. Under the Operating Agreement, any revenues received by Bella Terra Associates, as the operator of the Parking Structure (the "Operator"), are deposited into the"Parking Fund" established by the City for the benefit of the City and the Operator. Each July 15 during the term of the Operating Agreement,the Operator is required to submit to the City a proposed budget with respect the projected income, projected expenses and projected Parking Structure Maintenance Special Tax to be levied in the next fiscal year (the "Proposed Budget"). Each Proposed Budget requires the written approval of the City, not to be unreasonably held or delayed. If the Proposed Budget is not approved, the budget from the previous fiscal year will govern the operating costs with respect to the Parking Structure until the new Proposed Budget is approved. Subject to the limitations set forth in the Rate and Method, the District then levies the Parking Structure Maintenance Special Tax estimated to be required for the operation and maintenance of the Parking Structure for the coming fiscal year. Income from the Parking Structure and collected Parking Structure Maintenance Special Taxes are deposited in the Parking Fund maintained by the City. Moneys on deposit in the Parking Fund are applied first to the maintenance and operation of the Parking Structure, second to the payment of the cost of repairing and replacement of the Parking Structure and third to the payment of the Operator's fee. The Parking Structure Maintenance Special Tax constitutes part of the Special Tax Requirement and is subordinate to the debt service on the Bonds and Administrative Expenses. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes." Under the REA, Bella Terra Associates and its successors or assigns are not permitted to prepay the Special Tax obligation with respect to any parcel unless the City is provided reasonable assurances that the Parking Structure Maintenance Special Tax collectible from the remainder of the Taxable Property not prepaid is sufficient to cover the reasonably estimated costs of operating and maintaining the Parking Structure. The liability of the City under the REA and the Operating Agreement is strictly limited to the proceeds of the Parking Structure Maintenance Special Tax, any revenues derived from the operation of the Parking Structure and any other moneys deposited in the Parking Fund. Cost of operating and maintaining the Parking Structure in excess of any proceeds of the Parking Structure Maintenance Special Tax (collected as a component of the Special Tax levy in the District) are to be borne by Bella Terra Associates. The Parking Structure Maintenance Special Tax is subordinate to the Net Taxes pledged to the repayment of the Bonds. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes." The OPA provides for the Redevelopment Agency (and the Successor to the Redevelopment Agency of the City of Huntington Beach,as successor to the Redevelopment Agency(the"Successor Agency")), solely 25 from net property tax increment revenue from the Development,to repay Bella Terra Associates a$15 million "Feasibility Gap" for the Development at a fixed interest rate of 6.9357% per annum (the "Feasibility Gap Payments"). The Feasibility Gap Payments are to be made by the Redevelopment Agency during a twenty year Reimbursement Term which began on the Operating Commencement Date, defined as November 1,2005 in the OPA. The Feasibility Gap Payments are to be made in amounts equal to a portion of the increase in tax increment revenues generated by the Development. At the end of the Reimbursement Term, any outstanding principal and interest due under the OPA shall be forgiven by Bella Terra Associates. As of April 1,2013, the outstanding balance due to Bella Terra Associates under the OPA was $14,185,106. The OPA has been recognized on the Successor Agency's recognized obligation payment schedule(the"ROPS"). However, the Successor Agency is unable to predict whether it will continue to be able to make payments to Bella Terra Associates under the OPA or in what amount. Such payments are not in any way pledged as security for the Bonds, and the OPA can be amended at any time by the Property and the Agency without any requirement for notice to or the consent of the Bondowners. 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 parcels within the District. Table 5 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied on the parcels of Developed Property 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, the City 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. Table 5 does not include the aggregate principal amount of the Bonds but does include the outstanding aggregate principal amount of the Refunded Bonds being refunded with the proceeds of the Bonds. 26 TABLE 5 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 DIRECT AND OVERLAPPING DEBT (as of March 1,2013) 2012-13 Assessed Valuation: $217,190,074 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 311113 Metropolitan Water District General Obligation Bonds 0.010% $ 17,083 Coast Community College District General Obligation Bonds 0.212 653,187 Huntington Beach Union High School District General Obligation Bonds 0.529 1,175,675 City of Huntington Beach Community Facilities District No.2003-1 100. 21,595,000(i) TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $23,440,945 OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 0.051% $ 108,903 Orange County Pension Obligations 0,051 179,110 Orange County Office of Education Certificates of Participation 0.051 8,137 Coast Community College District General Fund Obligations 0,212 42,963 Huntington Beach Union High School District Certificates of Participation 0.529 317,742 Ocean View School District Certificates of Participation 1.849 102,986 City of Huntington Beach General Fund Obligations 0.722 337,490 City of Huntington Beach Judgment Obligations 0.722 25,095 Municipal Water District of Orange County Water Facilities Corporation 0.061 6,117 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,128,543 Less: MWDOC Water Facilities Corporation(100%supported by revenues) 6,117 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,122,426 OVERLAPPING TAX INCREMENT DEBT: $2,055,618 GROSS COMBINED TOTAL DEBT $26,625,106(z) NET COMBINED TOTAL DEBT $26,618,989 Ratios to 2012-13 Assessed Valuation: Direct Debt($21,595,000)...............................................................9.94% Total Direct and Overlapping Tax and Assessment Debt................ 10.79% Gross Combined Total Debt............................................................ 12.26% Net Combined Total Debt............................................................... 12.26% Ratios to Redevelopment Incremental Valuation($193 164 035): 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. Estimated Assessed Value-to-Lien Ratios The assessed value of the Taxable Property within the District for Fiscal Year 2012-13 is $217,190,074. 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 _ approximately 9.84*-to-1. The estimated assessed value-to-lien ratio (excluding any direct and overlapping general obligation bond debt) is approximately 10.74*-to-1. Because a parcel's assessed value generally Preliminary,subject to change. 27 represents the lower of its acquisition cost and adjustments for inflation(but not more than 2% per year) and subsequent improvements on the parcel or its current market value, 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—Property Values." The following Table 6 summarizes the assessed value of the Taxable Property within the District for Fiscal Years 2007-08 through 2012-13. TABLE 6 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ASSESSED VALUES OF TAXABLE PROPERTY FISCAL YEAR 2007-08 THROUGH 2O12-13 Percentage Change in Assessed Value from Fiscal Year Assessed Value0) Previous Fiscal Year 2007-08 $204,921,699 N/A 2008-09 209,602,317 2.28% 2009-10 214,139,804 2.16 2010-11��� 213,671,522 -0.22 2011-12 214,950,818 0.60 2012-13 217,190,074 1.04 Only includes assessed values for parcels that were levied. (2) 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. Source: Orange County Secured Rolls,as compiled by Willdan Financial Services. 28 Table 7 below sets forth the estimated value-to-lien ratios for each of the parcels within District based upon the direct and overlapping debt information included in Table 5 with the estimated share of Bonds based upon each parcel's share of the Fiscal Year 2012-13 Special Tax. TABLE 7 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ESTIMATED FISCAL YEAR 2012-13 ASSESSED VALUE-TO-LIEN RATIOS BY PARCEL Fiscal Year Aggregate 2012-13 Fiscal Year Percentage Value-to- Assessed 2012-13 Special Share of Estimated Share Overlapping Total Combined Debt Parcel No. Property Owner Value Tax Levy Special Tax of Bonds1'n DebP Debt* Ratio* 142-073-21 Bella Terra Associates LLC $ 1,933,696 $ 23,516.46 1.04% $ 211,034.62 $ 16,434.91 S 227,469.53 8.50 142-073-23 Bella Terra Associates LLC 29,239,990 94,494.39 4.19 847,984.22 240,009.38 1,087,993.60 25.96 142-073-43 Bella Terra C LLC(" 10,903,828 160,061.92 7.10 1,436,391.44 92,674.03 1,529,055.47 7.13 142-073-45 Bella Terra Villas LLC(4) 4,673,611 133,599.20 5.93 1,198,907.40 39,722.05 1,238,629.45 3.77 142-073-46 Bella Terra Associates LLC 164,516,713 1,777,297.24 78.93 15,949,217.97 1,398,263.70 17,347,481.67 9.49 142-073-47 Bella Terra Associates LLC 2,295,417 17,141.94 0.76 153,829.34 19,509.25 173,338.59 13.24 142-073-48 Bella Terra Associates LLC 1,666,944 14,999.11 0.67 134,600,67 14,166.87 148,767.54 11.20 142-073-49 Bella Terra Associates LLC 1,594,743 19,213.20 0.81 163,443.67 13,554.07 176,997.74 9.01 142-073-50 Bella Terra Associates LLC 1,366,232 14,999.11 0.67 134,600.67 11,611.91 146,212.59 9.34 Total $217,190,074 $2,254,312.46 100,00% $ 20,230,000.00 $1,845,946.17 $22,075,946.17 9.84 * Preliminary,subject to change. Debt has been allocated based on the Fiscal Year 2012-13 Maximum Special Tax for each parcel. (Z' Includes the lien of the Metropolitan Water District GO Bonds,Coast Community College District GO Bonds,and Huntington Beach Union High School GO Bonds. See Table 5"Direct and Overlapping Debt as of March 1,2013"for a description of the overlapping liens. County records indicate that BTDJM Phase 11 Associates LLC is the owner of this parcel,however,subsequent information provided to the District indicate Bella Terra C LLC is the current owner of this parcel. (4) County records indicate that BTDJM Phase 11 Associates LLC is the owner of this parcel;however,subsequent information provided to the District indicates Bella Terra Villas LLC,an entity unrelated to Bella Terra Associates or Bella Terra C LLC,is the current owner of this parcel. This parcel is a 2.494 acre parcel which is required to be maintained as open space in connection with the development of a multi-family housing development which is not located in the District. See"THE COMMUNITY FACILITIES DISTRICT." Source: Detailed and Overlapping Debt Reports provided by California Municipal Statistics,Inc.and Orange County 2012-13 Secured Roll,as compiled by Willdan Financial Services. 29 Delinquency History Table 8 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 Owners have never been delinquent in the payment of Special Taxes. TABLES CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 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") Delinquent Delinquent DelinquenP) Delinquent 2008-09 $2,354,162.92 7 0 $0.00 0.00% 0 $0.00 0.00% 2009-10(" 2,387,515.55 7 0 0.00 0.00 0 0.00 0.00 2010-11 2,200,129.00 7 0 0.00 0.00 0 0.00 0.00 2011-12 2,301,759.64 7 0 0.00 0.00 0 0.00 0.00 2012-13 2,254,312.46 9(3) N/A N/A N/A 0 0.00 0.00 Amount does not include any penalties,interest or fees. (Z) Delinquency information as of October 5 for this Fiscal Year only. ' The additional parcels of Taxable Property in Fiscal Year 2012-13 was due to re-mapping within the District and did not result in any changes to the acreage of Taxable Property. Source: Orange County Tax Collector,as compiled by Willdan Financial Services. THE CITY OF HUNTINGTON BEACH 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. 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. See Appendix C hereto for general information regarding the City. SPECIAL RISK FACTORS The purchase of the Bonds involves significant risks and, therefore, the Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered,in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. The Bonds have not been rated by a rating agency. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures 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. See "— Property Values" and "— Limited Secondary Market"below. 30 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 individual property owners 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 fund of the City. Except with respect to the Net 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 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 Net Taxes and other amounts pledged under the Indenture. Insufficiency of Special Taxes The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against Taxable Property within the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds,will not be sufficient to pay debt service on the Bonds. Other funds which might be available include funds derived from the payment of penalties on delinquent Special Taxes and-funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular Taxable Property and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the Bonds,and certainly not a direct relationship. The Special Tax levied in any particular tax year on Taxable Property is based upon the revenue needs and application of the Rate and Method. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular Taxable Property to vary from the Special Tax that might otherwise be expected: (1) Failure of the owners of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property, subject to any limits imposed by the Law and the Maximum Special Tax amount; and 31 (2) Reduction in the amount of Taxable Property, for such reasons as acquisition of Taxable Property by a governmental agency and failure of the governmental agency to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. If for any reason property within the District becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Property within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due. Except as set forth above under"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Special Taxes"herein,the Indenture provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid for a period of five years or more,the property is subject to sale by the County. In the event that sales or foreclosures of property are necessary, there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Account is depleted. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales." 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 two miles 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. The District is approximately one-half mile from this 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, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition,the value of land 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. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a 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 32 with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability 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 property within the District, as set forth in the various tables 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 any owner(or operator)of any of the parcels within the District has such a current liability with respect to any such parcel. 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 any of the parcels 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 a parcel and the willingness or ability of the owner of any parcel to pay the Special Tax installments. Payment of the Special Tax is not a Personal Obligation of the Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the Taxable Property. If the value of 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 owner. Property Values The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes,the District's only remedy is to commence foreclosure proceedings against the delinquent parcel 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, tsunami or stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT Estimated Assessed Value-to-Lien Ratios." The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the County Assessor, generally not to exceed an increase of more than 2%per fiscal year. No assurance can be given that a parcel could actually be sold for its assessed value. Prospective purchasers of the Bonds should not assume that the land within the District could be sold for its assessed value at a foreclosure sale for delinquent Special Taxes. Additionally, value-to-lien ratios of individual parcels vary greatly. No assurance can be given that any bid will be received for a parcel 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." 33 Parity Taxes and Special Assessments Property within the District is subject to taxes and assessments imposed by public agencies also having jurisdiction over the land 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 lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by 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 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 property within the District. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such 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 a parcel 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 each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending of money thereon. The Act requires the subdivider(or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot,parcel,or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement,the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements,or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on, the Bonds are derived, are customarily billed to the properties within the District on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. 34 See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales,"for a discussion of the provisions which apply,and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See"— Bankruptcy and Foreclosure" below, for a discussion of the impact of ownership of Taxable Property by federal agencies regarding the payment of special taxes and assessment and limitations on the District's ability to foreclose on the lien of the Special Taxes in certain circumstances. 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 a 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 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 any of the parcels 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 real property 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 property 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 35 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 a parcel within the District 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 against a landowner in the District and if the court found that any of such landowners 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. 36 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 — "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT." 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. 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. 37 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 parcels of Taxable Property within the District 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. 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." 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 an extraordinary 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— 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 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. No assurance 38 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. 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 Willdan Financial Services,as disclosure dissemination agent, Bella Terra Associates has agreed to provide,or cause to be provided, to EMMA, on an annual basis certain information concerning the Development and the Property Owners. Bella Terra Associates has 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 notices of listed events to be provided by the District and APPENDIX F for a description of the specific nature of the annual reports to be filed by Bella Terra Associates and notices of listed events to be provided by Bella Terra Associates. Within the last five years, neither the City nor the District have failed to timely comply with their respective 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 form of the District Disclosure Agreement is set forth in APPENDIX E. Bella Terra Associates assumed the Prior Landowner's obligation to provide continuing disclosure when it acquired the Development from the Prior Landowner in 2005 (the "Prior Continuing Disclosure Agreement"). Bella Terra Associates filed information about material leases and financial statements in compliance with the Prior Continuing Disclosure Agreement but failed to file information about the sale of property to a non-affiliated entity (the parcel now owned by Bella Terra Villas) pursuant to the Prior Continuing Disclosure Agreement. Other than as disclosed in this Official Statement,the Bella Terra Associates has not failed to timely comply in 39 all material respects with its continuing disclosure obligations under Rule 15c2-12(b)(5). The full text of the form of the Property Owner Disclosure Agreement is set forth in APPENDIX F. 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 audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation 40 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. 41 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 Financial Advisor, 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. 42 The execution and delivery of this Official Statement by the Director of Finance 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.2003-1 By: 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. 2003-1 43 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX A CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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.2003-1 (Huntington Center)(herein CFD No.2003-1) shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The real property in CFD No. 2003-1, 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, 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.2003-1: 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.2003-1. 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.2003-1 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.2003-1. County means the County of Orange. Development Agreement means the Owner Participation Agreement (OPA) between the Redevelopment Agency of the City of Huntington Beach and Huntington Center Associates, LLC, dated October 2,2000. Exempt Land means(1)any real property within the boundaries of CFD No.2003-1 which generally serves the development subject to the Development Agreement and is owned by a governmental agency for public right-of-way purposes including,but not limited to parking structures, 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 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. 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 any Parcel of Taxable Property,the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on such Parcel. Maximum Special Tax shall not include the amounts payable under the Parking Structure Maintenance Special Tax. Outstanding Bonds means all Bonds that are then outstanding under the Indenture. Parking Structure Maintenance Special Tax means the portion of the Special Tax to be levied in an amount equal to the amount required in any Fiscal Year for CFD No.2003-1 necessary to pay all actual, documented maintenance costs, management fees and other operating expenses of the parking structure being financed by a portion of the Bond proceeds to the extent such costs, fees and operating expenses exceed revenues generated by such parking structure. The calculation and inclusion or exclusion of particular items of expense or income into such costs, fees, expenses and revenues shall be subject to and limited by the provisions of the following documents,which documents shall be in the form approved by the City Council in connection the issuance of the Bonds, and which documents, upon such approval, shall be deemed to be incorporated herein by this reference: (i)any covenants, conditions or restrictions encumbering such parking structure and/or the real property upon which it is to be constructed as of the date of issuance of the Bonds, (ii)the initial parking management agreement governing the operation and maintenance of such parking structure (the provisions of such initial parking management agreement to govern the determination of the Parking Structure Maintenance Special Tax for so long as the Special Tax lien remains in effect, A-2 notwithstanding any earlier expiration or termination of such agreement), and (iii)any amendments to the foregoing covenants,conditions or restrictions or agreements. 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. 2003-1, 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 Taxable Property within CFD No.2003-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No.2003-1 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, (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,and(v)to pay the Parking Structure Maintenance Special Tax. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No. 2003-1, which are not Exempt Land or exempt from the Special Tax pursuant to law,but in no circumstance shall the total amount of Taxable Property be less than 40.63 acres. 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. 2003-1 are Taxable Property. 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 Assessor's Parcels of Taxable Property in CFD No.2003-1 shall be the greater of(1)$65,050 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. 2003-1; 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 2004-2005, 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. A-3 E. LIMITATIONS No Special Taxes shall be levied on any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on Taxable Property commencing with Fiscal Year 2004-2005, 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). Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax may be levied and collected until such time as the City and the CFD No.2003-01 have divested all remaining ownership interests in the parking structure. Upon determination by the Administrator that such requirements have been met, the Special Tax lien shall be removed from all Parcels in CFD No.2003-1. 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 the City on behalf of CFD No.2003-1 may directly bill the special tax or any portion thereof, may collect special taxes or any portion thereof 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 delinquent Assessor's Parcels as permitted by the Act. Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax shall be directly billed in each instance and not billed with ad valorem property taxes. G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No. 2003-1, 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 any Taxable Property within CFD No. 2003-1 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, 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, 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 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: Amount of Current Special Taxes Paid means the amount of the Special Tax levied against the subject Assessor's Parcel that was paid to the County or the City by the owner of the subject Assessor's Parcel and would be applied to debt service payments on the Redemption Date and the Interest Payment Date immediately following the Redemption Date. Outstanding Bonds means all Bonds that are deemed to be outstanding under the Indenture the day immediately preceding the next Interest Payment Date. Redemption Date means the Interest Payment Date on which Bonds are proposed to be redeemed from the prepayments of the Special Tax. A-4 1. Prepayment in Full The Special Tax obligation applicable to such Assessor's Parcel may be fully prepaid and the obligation of such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner intending to prepay the Special Tax obligation on one or more Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. It shall be a condition precedent to prepayment that the owner intending to prepay the Special Tax must pay to the County all past due Special Tax on the Assessor's Parcel to be prepaid and provide proof of payment to the Administrator. Promptly following receipt of such notice,the Administrator shall notify the owner of such Assessor's Parcel(s)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 90 days prior to the next occurring date that Bonds may be redeemed from the proceeds of such prepayment pursuant to the Indenture. The Prepayment Amount(defined below) shall be calculated as summarized below(capitalized terms as defined above or below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Amount of Current Special Taxes Paid 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 intended to be prepaid, compute the Maximum Special Tax for such Assessor's Parcels for the current Fiscal Year. 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 for the current Fiscal Year. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section G 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 less the par amount of Bonds scheduled to mature on the Redemption Date by the applicable redemption premium(the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the Interest Payment Date immediately preceding the Redemption Date to the Redemption Date. 6. 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. 7. Add the amounts computed pursuant to Paragraph 5 and subtract the amount computed pursuant to Paragraph 6(the Defeasance Amount). A-5 8. Determine the administrative fees and expenses associated with 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). 9. 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. 10. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3, 4, 7 and 8, less (i)the amounts computed pursuant to Paragraph 9 and (ii)the Amount of Current Special Taxes Paid(the Prepayment Amount). 11. From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3, 4, 7 (if greater than zero), and 9 shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments (as appropriate). The amount computed pursuant to Paragraph 8 shall be retained by the Administrator. With respect to any Assessor's Parcel that is prepaid,the City Council shall(i)cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Parcel,(ii)notify the County that the Special Tax,if any,remaining on the secured tax roll for the Assessor's Parcel has been satisfied and that the County should remove such amounts from the secured tax roll, and (iii)refund the owner for any Special Tax payments made on the Assessor's Parcel after the date of prepayment. From and after the prepayment, the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing; no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Tax that may be levied on Taxable Property within CFD No.2003-1 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. 8 of Section H.1. F = the percent by which the owner of an Assessor's Parcel(s)is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No. 8 of Section H.1. A-6 The owner of 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, and (ii)the percentage by which the Maximum Special Tax shall be prepaid. The Administrator shall promptly provide the owner 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.2003-1 shall (i) distribute the funds remitted to it according to Paragraph 11 of Section H.1, and (ii)indicate in the records of CFD No. 2003-1 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 (i.e., 100%-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-7 (THIS PAGE IS INTENTIONALLY LEFT BLANK) i 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. 2003-1 (Huntington Center)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. 2003-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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 and Resolution No.2013-21 (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(t) 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 1,587,403,857 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�1 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 Unemployment(3) 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. (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 1,35 7,400 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 2012. Name of Business No.Employed %of Total Boeing 4,676 4.06% Quiksilver 1,594 1.38 Cambro MFG Co. 951 0.83 Ensign United State Drilling 925 0.80 Hyatt Regency Huntington Beach 641 0.56 C& D Aerospace 555 0.48 Huntington Beach Hospital 520 0.45 Rainbow Disposal 408 0.35 Huntington Beach Healthcare 381 0.34 Wal-Mart 379 0.33 Total of top 10 11,030 9.58 all others 104,070 90.42 Total employment(public and private) 115,100 100.00% Source: City of Huntington Beach,Comprehensive Annual Financial Report for Fiscal Year Ended September 30,2012. 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 PacifiCare 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 2008 through 2012. BUILDING PERMITS AND VALUATIONS City of Huntington Beach 2008-2012 2008 2009 2010 2011 2012 Valuation(In$000's) Residential $ 39,114 $26,788 $33,567 $44,375 $ 97,199 Nonresidential 66,477 31,221 42,546 102,623 51,319 Total Valuation(') $105,591 $58,009 $76,113 146,998 $148,518 New Dwelling Units(#) Single-Family 20 9 4 24 22 Multi-Family 0 0 16 45 698 Total: 20 9 20 69 720 Total may not add up due to rounding. Source: Construction Industry Research Board. BUILDING PERMITS AND VALUATIONS Orange County 2008-2012 2008 2009 2010 2011 2012 Valuation(In$000's) Residential $1,037,710 $ 855,193 $1,029,406 $1,236,970 $1,554,904 Nonresidential 1,439,121 952,485 1,115,928 1,300,021 1,271,035 Total Valuation(') $2,476,831 $1,807,678 $2,181,334 $2,536,992 $2,825,939 New Dwelling Units(#) Single-Family 1,295 1,376 1,553 1,898 2,438 Multi-Family 1,864 824 1,538 2,909 3,725 Total: 3,159 2,200 3,091 4,807 6,163 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 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 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 2007-20111.1 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 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. "Administration Fund"means that certain fund by that name established pursuant to the Indenture. "Administrative Expenses Cap"means $30,000 per Fiscal Year. "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. "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-collateralization is at one hundred two percent (102%), computed weekly, consisting of such securities as described in items (a) through (c) of this definition; (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. 2003-1 (Huntington Center)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 thereunder. "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. 2003-1 (Huntington Center)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 from the Treasurer, 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. "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. "Parking Fund"means the fund by that name established pursuant to the Operating Agreement. D-4 "Parking Structure Maintenance Special Tax" means that portion of the Special Taxes levied for the Parking Structure Maintenance Special Tax as defined in the Rate and Method of Apportionment. "Operator" means Huntington Center Associates, L.L.C., a Delaware limited liability company, its successors and assigns. "Operating Agreement" means the Operating Agreement for the Huntington Center Parking Structure, by and between the City and the Operator,dated as of March 1,2004. "Ordinance"means Ordinance No. 3631 adopted by the City Council, acting as the legislative body of the District on January 20,2004 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 thereof,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 pursuant to the Indenture 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. D-5 "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.2003-10 adopted by the City Council on February 3,2003,pursuant to which the City formed the District. `'Resolution of Issuance" means Resolution No.2013-21 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 special 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. "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. "Treasurer"means the Treasurer-Tax Collector of the County of Orange. "Term Bonds"means the Bonds maturing on September 1,20 "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 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 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 D-6 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 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 in the Indenture, 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 tin the Indenture, 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 thereof, 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,the Parking 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 Parking 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 date of the Indenture, 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 D-7 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. 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 of 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. D-8 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. 2003-1 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. 2003-1 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. 2003-1 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 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 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 the Indenture; (5) Parking Fund; (6) Rebate Fund;and (7) Surplus Fund. D-9 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. 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 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 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 Payments due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest,principal and Sinking Fund Payments 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 pursuant to the Indenture 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 D-10 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 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, 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 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. D-11 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 rebate requirements of the Indenture shall survive the defeasance and final payment of the Bonds. (d) Amendment Without Consent of Owners. The provisions of the Indenture described under the heading "Rebate Fund" 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 the Indenture described under the heading"Rebate Fund," and the covenants under the Indenture shall be deemed to be modified to that extent. Parking Fund. After making the deposits required pursuant to the Indenture, the Trustee shall transfer Special Taxes in the amount of the Parking Structure Maintenance Special Tax to the Director of Finance for deposit into the Parking Fund pursuant to the Operating Agreement. Moneys on deposit in the Parking Fund are not pledged to the repayment of the Bonds. Surplus Fund. 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, (iv)to the Parking Fund to the extent amounts on deposit in the Parking Fund are less than the Parking Structure Maintenance Special Tax, or(v)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 D-12 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 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 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 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 the Indenture. 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 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 D-13 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(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 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 shall 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. 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 the Indenture described under the heading "Covenants," 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. D-14 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. 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. Levy 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 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. 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 the Park Structure Maintenance Tax 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 properly 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 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 D-15 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 the Indenture. 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 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 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) Arbitraee. 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. D-16 (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 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. 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 D-17 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 of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the date of the Indenture, 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 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;or 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 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 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 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. D-18 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 thereof 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 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 under the Indenture. The obligations of the District D-19 under the Indenture described 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 thereof, 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. 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 thereof 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 thereof, but in its discretion the Trustee may, in D-20 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 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 parry 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 (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 or 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 provided in the Indenture, out of the Net Taxes pledged for such D-21 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 date of the Indenture, 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 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 thereof, 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. Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of immediately 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 D-22 (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 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 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. D-23 (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 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 of 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. 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 thereof, contained in the Indenture, or the application thereof 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 D-24 provision, or portion thereof, 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 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. 2003-1 (Huntington Center) (the"Issuer") and Willdan Financial Services, as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)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 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 Director of Finance 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, 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 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. E-1 "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. (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. E-2 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 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 each year; (vi) information regarding the percentage of delinquency,if any, in the collection of special taxes levied on property in the District, the number of parcels delinquent, amount delinquent compared to the total levy and the assessed value of each delinquent parcel as of May 1 each year in the form set forth in Table 8; (vii) an update to the assessed value-to-lien information set forth in Table 7 as of May 1 each year, except that the overlapping debt information is not required to be included in the assessed value-to-lien calculations; 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(vii), in the light of the circumstances under which they were made,not misleading. E-3 (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, 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 E-4 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. 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 E-5 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 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 E-6 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.2003-1 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 Facsimile : (213)615-6199 To the Dissemination Agent: Willdan Financial Services 27368 Via Industria, Suite 110 Temecula,CA 92590 Attention: Candace Heiser Telephone: (800)755-6864 Facsimile: (951)587-3510 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. E-7 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 land 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. 2003-1 By: Its: 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. 2003-1 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. 2003-1 (HUNTINGTON CENTER) Name of Bond Issue: $ CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: July_,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2003-1 (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 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES This Property Owner Continuing Disclosure Agreement, dated as of 1, 2013 (the "Disclosure Agreement"), is made and entered into by and between Bella Terra Associates, LLC, a Delaware limited liability company on behalf of itself and Bella Terra C (as defined herein) (the "Property Owner") and Willdan Financial Services(the"Dissemination Agent"), in connection with the issuance of$ City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) (the"District") and U.S. Bank National Association, as trustee. The Property Owner and the Dissemination Agent covenant and agree as follows: Section 1. Pumose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered 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 Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a fee simple 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. "Bella Terra C"means Bella Terra C LLC, a Delaware limited liability company. "City"means the City of Huntington Beach. "Disclosure Representative" means the President of by DIM Capital Partners, Inc., or his/her designee, or such other officer, employee or agent as the Property Owner shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent" shall mean Willdan Financial Services, 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 Property Owner,the City and the Dissemination Agent a written acceptance of such designation. F-1 "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 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 Property Owner's fiscal year for their financial accounting purposes. Currently the Property Owner is on a January 1 to December 31 Fiscal Year. "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 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 Property Owner 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 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 Property Owner shall provide the Annual Report to the Dissemination Agent. The Property Owner 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 Property Owner hereunder. The Dissemination Agent may conclusively rely upon such certification of the Property Owner, 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 F-2 Section 4(a) of this Disclosure Agreement. If the Property Owner'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 Property Owner is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Property Owner shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) 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) to the extent the Annual Report has been provided to the Dissemination Agent, file a report with the Property Owner and the City 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 Property Owner's Annual Report shall contain or incorporate by reference the following: (a) Audited annual financial statements, if available,unaudited financial statements if not. (b) Any delinquency in the payment of Special Taxes by the Property Owner or any Affiliate thereof, including but not limited to Bella Terra C. (c) Any pending litigation which would adversely affect the ability of the Property Owner or any Affiliate thereof,including but not limited to Bella Terra C,to pay Special Taxes levied on the Property. (d) Any material change in the ownership of the Property Owner or any Affiliate thereof owning Property,including but not limited to Bella Terra C. (e) A summary of leases in the District as of the Fiscal Year end in substantially the form set forth as Table 4 in the Official Statement. (f) The assumption of any obligations of the Property Owner pursuant to Section 6. In addition to any of the information expressly required to be provided as described above, the Property Owner 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 Property Owner 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 Property Owner 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 Property Owner shall give, or cause to be given,notice of the occurrence of any of the following events: F-3 (i) failure by the Property Owner or any Affiliate thereof, including but not limited to Bella Terra C, 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 Property Owner or any Affiliate thereof, including but not limited to Bella Terra C, on any loan with respect to any financing arrangements with respect to the Property, and (iv) The occurrence of an Event of Bankruptcy with respect to the Property Owner or any Affiliate of the Property Owner, including but not limited to Bella Terra C. Section 6. Assumption of Obligations. If the Property owned by the Property Owner, or any Affiliate of the Property Owner, is to be conveyed to a Person,the Property Owner 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 Property Owner 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 "Property Owner" 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 Property Owner shall no longer be required to comply with the requirements of this Disclosure Agreement; provided however that if, following a conveyance by the Property Owner of the character described in the first sentence of this Section 6, an Assumption Agreement (or replacement agreement inform equivalent to this Disclosure Agreement) is not executed (other than by reason of the willful misconduct of the Dissemination Agent), the Property Owner shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term"Property Owner" shall include, in addition to Property Owner,the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Property Owner'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 Property Owner and all Affiliates of the Property Owner 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 Property Owner 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 Property Owner 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 Willdan Financial Services. The Dissemination Agent may at any time resign by providing thirty days written notice to the City and the Property Owner, 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 Property Owner. If no appointment of a F-4 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 and the Property Owner 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 Property Owner 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 Property Owner 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 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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. F-5 Section 11. Default. In the event of a failure of the Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner and shall not be deemed to be acting in any fiduciary capacity for the Property Owner, the Bondholders, or any other party. The obligations of the District and the Property Owner 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 Property Owner(its successors and assigns),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 "PROPERTY OWNER" BELLA TERRA ASSOCIATES,LLC By: Its: "DISSEMINATION AGENT" WILLDAN FINANCIAL SERVICES By: Its: F-6 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.2003-1 (Huntington Center)2013 Special Tax Refunding Bonds Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that Bella Terra Associates, LLC, a Delaware limited liability company (the "Property Owner") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, by and between the Property Owner and Willdan Financial Services,as Dissemination Agent, dated as of 1,2013,executed and delivered for the benefit of the owners and beneficial owners of the above-referenced bonds. The Property Owner anticipates that the Annual Report will be filed by Dated: 20 BELLA TERRA ASSOCIATES,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance F-7 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX G 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 wvvw.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 G-1 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. 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. G-2 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 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. $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Dated: Delivery Date Due: September 1,as shown on inside front cover The City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds (the "Bonds")are being issued by the City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center)(the"District")to refund the District's outstanding 2004 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),pursuant to the Municipal Code of the City of Huntington Beach(the"City")and a Bond Indenture(the"Indenture"),dated as of August 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 taxable land 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 maybe 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 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. 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 August 20,2013. STIFEL Dated: July 30,2013 MATURITY SCHEDULE (Base CUSIPt:'446188) Maturity Date (September 1) Principal Amount Interest Rate Price CUSIPt 2014 $ 670,000 2.00% 101.074 DY7 2015 715,000 3.00 102.785 DZ4 2016 740,000 3.00 102.332 EA8 2017 765,000 4.00 104.155 EB6 2018 790,000 4.00 103.453 EC4 2019 820,000 4.00 102.422 ED2 2020 855,000 4.00 100.608 EEO 2021 890,000 4.00 98.781 EF7 2022 925,000 4.25 98.890 EG5 2023 965,000 4.50 99.202 EH3 2024 1,010,000 5.00 101.974C EJ9 2025 1,055,000 5.25 103.250F EK6 2026 1,115,000 5.25 102.392F EL4 2027 1,175,000 5.00 99.004 EM2 2028 1,235,000 5.00 97.929 ENO $2,655,000 5.25%Term Bonds due September 1,2030 Price: 98.889 CUSIP No.t EP5 $4,535,000 5.375%Term Bonds due September 1,2033 Price: 98.730 CUSIP No!EQ3 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 makes any representations as to the accuracy of CUSIP data herein. C Priced to first optional redemption date of September 1,2023 at par. F Priced to first optional redemption date of September 1,2018 at par. 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 FINANCIAL ADVISOR Public Financial Management,Inc. Los Angeles,California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula,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 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." 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. Bella Terra Associates,the owner of the majority of the Taxable Property in the District, has also agreed to provide certain on-going financial and operating data. See "CONTINUING DISCLOSURE." 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.......................................................................................................................................................I DistrictFormation.............................................................................................................................................2 ForwardLooking Statements............................................................................................................................3 Sourcesof Payment for the Bonds....................................................................................................................3 Descriptionof the Bonds..................................................................................................................................4 No Additional Bonds Except Refunding Bonds...............................................................................................4 TaxExemption..................................................................................................................................................5 ProfessionalsInvolved 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.................................................................................................................................9 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS..................................................................10 LimitedObligations........................................................................................................................................10 SpecialTaxes..................................................................................................................................................I I Debt Service Coverage from Maximum Special Taxes..................................................................................15 Covenant Not to Reduce Special Tax Rates Unless Certain Conditions are Met...........................................1.6 ExistingLiens.................................................................................................................................................16 No Obligation of the City Upon Delinquency................................................................................................16 Special Taxes Are Not Within Teeter Plan.....................................................................................................16 Proceeds of Foreclosure Sales........................................................................................................................16 ReserveAccount.............................................................................................................................................17 Priority of Bonds and Pledge of Net Taxes.....................................................................................................18 No Additional Bonds Except Refunding Bonds.............................................................................................18 THE COMMUNITY FACILITIES DISTRICT.................................................................................................18 General............................................................................................................................................................18 TheDevelopment............................................................................................................................................19 TheProperty Owners......................................................................................................................................21 Summary of Leases; Occupancy Rates...........................................................................................................23 Property Owner Financial Information...........................................................................................................25 The Operating Agreement,the REA and the OPA.........................................................................................26 Estimated Direct and Overlapping Indebtedness............................................................................................28 Estimated Assessed Value-to-Lien Ratios......................................................................................................29 DelinquencyHistory.......................................................................................................................................32 THE CITY OF HUNTINGTON BEACH..........................................................................................................32 SPECIALRISK FACTORS...............................................................................................................................32 Risks of Real Estate Secured Investments Generally.....................................................................................33 LimitedObligations........................................................................................................................................33 Insufficiencyof Special Taxes........................................................................................................................33 NaturalDisasters.............................................................................................................................................34 HazardousSubstances.....................................................................................................................................34 i TABLE OF CONTENTS (continued) Page Payment of the Special Tax is not a Personal Obligation of the Owners........................................................35 PropertyValues...............................................................................................................................................35 Parity Taxes and Special Assessments............................................................................................................36 Disclosures to Future Purchasers....................................................................................................................36 SpecialTax Delinquencies..............................................................................................................................36 FDIC/Federal Government Interests in Properties..........................................................................................37 Bankruptcyand Foreclosure...........................................................................................................................38 NoAcceleration Provision..............................................................................................................................39 LimitedSecondary Market.............................................................................................................................39 Proposition218...............................................................................................................................................39 Ballot Initiatives and Legislative Measures....................................................................................................40 Lossof Tax Exemption...................................................................................................................................40 IRS Audit of Tax-Exempt Bond Issues...........................................................................................................41 Limitationson Remedies................................................................................................................................41 CONTINUINGDISCLOSURE..........................................................................................................................41 TAXEXEMPTION............................................................................................................................................42 LEGALOPINION..............................................................................................................................................43 ABSENCEOF LITIGATION............................................................................................................................44 NORATING......................................................................................................................................................44 UNDERWRITING.............................................................................................................................................44 FINANCIAL INTERESTS.................................................................................................................................44 NEWLEGISLATION........................................................................................................................................44 ADDITIONALINFORMATION.......................................................................................................................44 APPENDIX A RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX................................A-1 APPENDIX B FORM OF OPINION OF BOND COUNSEL.......................................................................B-I 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 FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT...............E-I APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES........................................................................................................................F-I APPENDIX G BOOK-ENTRY-ONLY SYSTEM........................................................................................G-1 ii AERIAL PHOTOGRAPH Huntington Center COMMUNITY FACILITIES DISTRICT NO. 2003-1 City of Huntington Beach I �I� �� yn'� __ a�, + IIII • q!: 1 � .#°i1 1, r, f s1 eMxr u r• ty. '"�,� ' I"� mY 11 x 1 .� i .', + I .:�J r�fa awa"�a�p ero� - �� �•d ie Sk��� � �"�µ� "+m:, �.. IMtlt tit t 1e... 5 �•.n,, ��am �'�. ��� ."� � � to� ��� � �Yn� "'a �f �, �.�:.. � a��' b"k IFyw��_ a� �,,;1�, � ;��'; s 'i91 S � s " Y � � W' I P u j u Idl iVl ° "t �a"pw'ri '4' N a," V IIR Ir�l 'f� '` IIII ,� s � _ IIp16Vl "�� r� II quo �', �, �y ,mot i`!pVm III I .�„. ,ti_"" � 1211-u--------- - f +�,{ �C v '� �IR�F,_�',�. )Iw '� �r v VI I =f xVm �� �' �_,.. �IIIIV. I '� •: 9P;:`aml� ��•� .0 � !.�� I �#�# s,� _ �+� � :ul+I III .:v, �M I (THIS PAGE IS INTENTIONALLY LEFT BLANK) $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (the "District") of its City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,915,000(the"Bonds"). The proceeds of the Bonds, together with certain existing funds of the District, will be used to refund all of the outstanding City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 2004 Special Tax Bonds, originally issued in the aggregate principal amount of $25,000,000 and now outstanding in the principal amount of$21,595,000 (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 August 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 approximately 42 net taxable acres presently divided into nine taxable parcels (the"Taxable Property")which have been developed into a commercial, retail and entertainment center known as"Bella Terra" (the"Development'). The District is located on Edinger Avenue generally between Gothard Street and Beach Boulevard,just off of the 405 Freeway in the City. The Development includes the Bella Terra Mall and two adjacent parcels, one of which includes a Costco fuel station and one of which is open space. The Bella Terra Mall is a Tuscan themed open air lifestyle retail center with approximately 690,000 square feet of retail, restaurants, open-air courtyards and entertainment uses. The Bella Terra Mall includes four clustered major buildings on the interior of the Development site, several smaller buildings on the perimeter of the Development site and an outdoor amphitheater. See "THE COMMUNITY FACILITIES DISTRICT—The Development." 1 The Bella Terra Mall was originally developed in 1965 through 1969. In 1999, Huntington Center Associates,LLC, a Delaware limited liability company(the"Prior Landowner") acquired the Bella Terra Mall with the intention to rehabilitate and renovate the site. In connection with the renovation, the District was formed, and the Refunded Bonds were issued, to finance the land acquisition and construction of a six story, approximately 1,536 stall parking structure adjacent to the Bella Terra Mall(the"Parking Structure")and other public facilities related to the renovation of the Development. See "THE COMMUNITY FACILITIES DISTRICT—General." In August 2005, Bella Terra Associates, LLC, a Delaware limited liability company ("Bella Terra Associates"), acquired the Development from the Prior Landowner for $245 million. Bella Terra Associates and a related entity,Bella Terra LLC, a Delaware limited liability company ("Bella Terra C"),own all of the Taxable Property in the District, except one parcel of open space, and are sometimes referred to in this Official Statement as the"Property Owners." The Property Owners are single purpose entities related to DIM Capital Partners, Inc., San Jose, California, which manages Bella Terra Mall. The one parcel not owned by the Property Owners in the District is owned by Bella Terra Vistas LLC, an entity unrelated to the Property Owners, and such parcel is required to be maintained as open space in connection with the development of a multi-family housing development located on an adjacent parcel not in the District. See"THE COMMUNITY FACILITIES DISTRICT—The Property Owners." District Formation The District was formed on February 3, 2003. 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 Chapter 3.56 of the City's Municipal Code and, where applicable by reason of the provisions of the Municipal Code,the Act(collectively,the"Law"). Pursuant to the Law, on January 6, 2003,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 6, 2003, the City Council adopted a resolution stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 within the District for the purpose of financing the costs of the Parking Structure and certain other public facilities consisting of the acquisition of the right-of-way and the installation of the streets, traffic signals and street lighting, sewer and water lines, and storm drains and related improvements in connection with the development of the District (collectively, the "Public Facilities"). Subsequent to a noticed public hearing on February 3, 2003, the City Council adopted Resolution No. 2003-10 (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 February 3, 2003, Resolution No. 2003-11 ("Resolution to Incur Bonded Indebtedness")which determined the necessity to incur 2 bonded indebtedness in an amount not to exceed$30,000,000 within the District, called an election within the District on the propositions of forming the District, incurring bonded indebtedness not to exceed $30,000,000 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 qualified electors within the District, which were the record landowners within the District at the time of the election,at an election held on February 3,2003. On February 20, 2003, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No. 2003000186478 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by the Resolution No. 2004-1 adopted by the City Council on January 5, 2004. 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 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." 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 certain 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 Administrative Expenses up to the Administrative Expenses Cap of$30,000 per Fiscal Year. The Bonds are secured only by the Net Taxes collected within the District and amounts in the Special Tax Fund. Amounts in the Administration Fund, Rebate Fund, Surplus Fund and Parking 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 3 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 assessor's parcels 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 respect to the Bonds, the Bonds will be registered and transferred in accordance with the Indenture. See APPENDIX G—"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 G — "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 description 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. No Additional Bonds Except Refunding Bonds The District has covenanted in the.Indenture not to issue any additional bonds secured by the Net Taxes,except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. 4 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 Willdan Financial Services, Temecula, California, as Special Tax Consultant, Public Finance Management, Inc., Los Angeles, California, Financial Advisor 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, Bella Terra Associates will agree to provide or cause to be provided to EMMA certain annual information with respect to Bella Terra Associates and the Development and notice of certain listed events to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" herein. See APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District. See APPENDIX F hereto for a description of the specific nature of the annual reports to be filed by Bella Terra Associates and notices of listed events to be provided by Bella Terra Associates. See"CONTINUING DISCLOSURE." 5 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 Council, 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 funds on hand for the Refunded Bonds. Sources of Funds Principal Amount of Bonds $20,915,000.00 Plus: Net Original Issue Premium 56,195.60 Less: Underwriter's Discount (118,625.00) Plus: Prior Funds 3,347,784.47 Total Sources S 24.200.355.07 Uses of Funds: Escrow Fund to Redeem Refunded Bonds $22,423,437.50 Reserve Account of the Special Tax Fund 1,680,606.26 Administrative Expense Fund 1,971.64 Costs of Issuance Fund') 94,339.67 Total Uses 24.200355.07 (1) Includes legal fees,trustee fees,financial advisory fees,printing costs and other costs of delivery of the Bonds. 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 August 1, 2013, by and between the District and U.S. Bank National Association, as prior fiscal agent 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, 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 $20,915,000 are authorized to be issued by the District under and subject to the terms of the Indenture, the Act and other applicable laws of the State of California. Purpose of the Bonds The Bonds are being issued to provide funds to (i)pay 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 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 G—"BOOK-ENTRY-ONLY SYSTEM." Debt Service Schedule The Special Tax is to be levied against the Taxable 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." The following table shows the scheduled debt service on the Bonds assuming no optional or special mandatory redemptions. CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DEBT SERVICE SCHEDULE Period Ending Total September I Principal Interest Debt Service 2014 $ 670,000.00 $ 1,002,376.31 $ 1,672,376.31 2015 715,000.00 959,256.26 1,674,256.26 2016 740,000.00 937,806.26 1,677,806.26 2017 765,000.00 915,606.26 1,680,606.26 2018 790,000.00 885,006.26 1,675,006.26 2019 820,000.00 853,406.26 1,673,406.26 2020 855,000.00 820,606.26 1,675,606.26 2021 890,000.00 786,406.26 1,676,406.26 2022 925,000.00 750,806.26 1,675,806.26 2023 965,000.00 711,493.76 1,676,493.76 2024 1,010,000.00 668,068.76 1,678,068.76 2025 1,055,000.00 617,568.76 1,672,568.76 2026 1,115,000.00 562,181.26 1,677,181.26 2027 1,175,000.00 503,643.76 1,678,643.76 2028 1,235,000.00 444,893.76 1,679,893.76 2029 1,295,000.00 383,143.76 1,678,143.76 2030 1,360,000.00 315,156.26 1,675,156.26 2031 1,435,000.00 243,756.26 1,678,756.26 2032 1,510,000.00 166,625.00 1,676,625.00 2033 1,590,000.00 85,462.50 1,675,462.50 TOTAL: $20,915,000.00 $12,613,270.23 $33,528,270.23 Source: The Underwriter. 8 Redemption of the Bonds Optional Redemption. The Bonds maturing on and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing on September 1, 2024 and on and after September 1, 2027 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 on and after September 1,2023,as a whole or in part, and by lot, 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, 2025 and September 1, 2026 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 on and after September 1, 2018, as a whole or in part, and by lot, at a redemption price equal to the principal amount to be redeemed,together with accrued interest to the date of redemption,without premium. 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 the Indenture, plus amounts transferred from the Reserve Account, 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, 2030 and September 1, 2033 are hereinafter collectively referred to as "Term Bonds." The Term Bonds maturing on September 1, 2030 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1, 2029, 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 1,2030 Year (September 1) Principal Amount 2029 $1,295,000.00 2030(Maturity) 1,360,000.00 The Term Bonds maturing on September 1, 2033 shall be called before maturity and redeemed, from the Sinking Fund Payments that have been deposited into the Redemption Account, on September 1,2031, 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 1,2033 Year (September 1) Principal Amount 2031 $1,435,000.00 2032 1,510,000.00 2033 (Maturity) 1,590,000.00 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 available funds on the date of redemption. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Net Taxes are the primary security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses of up to $30,000 (the "Administrative Expenses Cap")) and from amounts held in the Special Tax Fund established under the Indenture. "Extraordinary Administrative Expenses" include 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 Bond Owner consent under the Indenture, or actual or threatened Bond Owner or property owner litigation arising out of the Bonds or the District. Extraordinary Administrative Expenses will be paid from collected Special Taxes prior to the payment of debt service on the Bonds. While the District does not anticipate requiring Extraordinary Administrative Expenses, events such as high delinquencies requiring the District to take foreclosure actions against property owners within the District may require the District to use Special Taxes to pay Extraordinary Administrative Expenses. See "— Special Taxes"and"SPECIAL RISK FACTORS" for a description of the risks which could affect Special Tax delinquencies within the District. 10 Special Tax revenues include the proceeds of the 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. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee in the Special Tax Fund, including amounts held in the Reserve Account therein held, for the exclusive benefit of the Owners of the Bonds,and foreclosure proceeds resulting from the sale of delinquent parcels if and when available. 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 General. Pursuant to the Law, the City Council adopted Resolution No. 2003-3 on January 6, 2003, stating its intention to establish the District and Resolution No. 2003-4 on January 6, 2003 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos. 2003-10,2003-11 and 2003-12 adopted by the City Council on February 3, 2003, the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 was determined necessary for the District and an election was called pursuant to the Law. See "—Rate and Method of Apportionment of Special Tax" immediately below. The Refunded Bonds were authorized to be issued by the Resolution No. 2004-1 adopted by the City Council on January 5,2004. All propositions were approved by the Prior Landowner, as the sole owner of the land within the District at the time of the election,at an election held on February 3,2003. On February 20, 2003, a Notice of Special Tax Lien was recorded as Instrument No. 2003000186478 in the office of the County Recorder for the District. Rate and Method of Apportionment of Special Tax. The District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to the Rate and Method,which the City Council and the qualified electors of the District have approved. The Rate and Method apportions the total amount of Special Taxes to be collected among the nine parcels of Taxable Property in the District as more particularly described herein. The District adopted the Rate and Method following public hearings and elections conducted pursuant to the provisions of the Law. The full text of the Rate and Method is set forth in APPENDIX A hereto. The Special Tax is levied on and collected from the owners of the property in the District as set forth in the Rate and Method. The Rate and Method provides that, on not less than 15 days prior to July 1, the Director of Finance, as the designated person to administer the Special Tax (the "Administrator"), shall determine which Assessor's Parcels in the District are Taxable Property. Taxable Property is defined as all of the Assessor's Parcels within the boundaries of the District, which are not Exempt Land, or otherwise exempt from the Special Tax pursuant to Law, but in no circumstance shall the total Taxable Property be less than 11 40.63 acres. Exempt Land is defined as (i)any real property within the boundaries of the District which generally serves the development subject to the Development Agreement (defined below) and is owned by a governmental agency for public right-of-way purposes including,but not limited to parking structures, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator, and (ii)any Assessor's Parcel for which the Special Tax has been paid in full. In connection with the rehabilitation and construction work related to the renovation of Bella Terra Mall and the construction of the public facilities in connection therewith, including the Parking Structure, the Redevelopment Agency of the City of Huntington Beach (the "Redevelopment Agency") and the Prior Landowner entered into an Owner Participation Agreement, dated October 2, 2000 (the "Original Owner Participation Agreement"). Subsequently, the Original Owner Participation Agreement was amended by the Redevelopment Agency and Bella Terra Associates through a First Implementation Agreement and a Second Implementation Agreement, the latter being executed and delivered in November, 2007 (collectively, as amended,the"OPA"). "Development Agreement"is defined in the Rate and Method as the OPA. There are nine parcels of Taxable Property within the District which have been fully built out. See "THE COMMUNITY FACILITIES DISTRICT." The Rate and Method provides that during each Fiscal Year, the City Council or its designee shall levy the Special Tax proportionally on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax for that Fiscal Year, as needed to satisfy the Special Tax Requirement. The Special Tax Requirement is defined as the amount required in any Fiscal Year necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the next succeeding Bond Year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Account for all Outstanding Bonds, (iii)to pay Administrative Expenses, (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,and(v)to pay the Parking Structure Maintenance Special Tax. In each Fiscal Year, the Maximum Special Tax for the Assessor's Parcels of Taxable Property in the District is the greater of(1)$65,050 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 District; 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. The Special Tax may be levied and collected on Taxable Property for each Fiscal Year 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 in accordance with the terms of the Indenture). There are currently 42.083 acres of Taxable Property within the District. Based on a Maximum Special Tax of $65,050 per Acre, the Maximum Special Taxes that may be levied each Fiscal Year is $2,737,499.15. Special Tax revenues received by the District and designated the Parking Structure Maintenance Tax (which are just a portion of the Special Tax that maybe levied under the Rate and Method) are not pledged to the repayment of the Bonds. The collection of the Parking Structure Maintenance Tax is subordinate to payment of debt service on the Bonds. See"—Collection of Special Taxes and Flow of Funds" below. 12 The Rate and Method allows for partial and/or full prepayment of the Special Tax obligation with respect to any parcel. If a prepayment of the Special Tax is made with respect to any parcel in the District,the net proceeds of any such prepayment, together with a transfer of a portion of the amount in the Reserve Account, will be used to redeem Bonds on the next Interest Payment Date following such prepayment for which notice of redemption can timely be given. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" for the detailed provisions of the Rate and Method pertaining to prepayments of Special Taxes, and "THE BONDS — Redemption of the Bonds — Special Mandatory Redemption from Special Tax Prepayments" herein. Any parcel in the District for which the Special Tax has been prepaid in full will thereafter be classified as Exempt Land under the Rate and Method. UNDER NO CIRCUMSTANCES MAY THE SPECIAL TAX ON ANY ASSESSOR'S PARCEL EXCEED THE MAXIMUM RATES AS SET FORTH IN APPENDIX A HERETO. See APPENDIX A— "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"hereto. In connection with the issuance of the Bonds, Willdan Financial Services, the District's Special Tax Consultant, will certify that the Maximum Special Tax that may be levied on assessor's parcels within the District will be at least equal to 110% of maximum annual debt service on the Bonds plus the Administrative Expense Cap. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the County Treasurer in the same manner and at the same time as ad valorem property taxes and transferred to the District by the County Treasurer. The Director of Finance will, 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 will 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; see "THE BONDS—Redemption of the Bonds— Special Mandatory Redemption for the Special Tax Prepayments")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 Indenture, in the following order of priority: 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 will be deposited in the Administration Fund until the earlier of(a) 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 I of such Fiscal Year,or(b)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; 13 Fourth: To Administration Fund for any Administrative Expenses previously deposited in the Administration Fund; Fifth: To the Director of Finance for deposit in the Parking Fund established pursuant to the Operating Agreement (defined herein) to deposit the Parking Structure Maintenance Special Tax (See "THE COMMUNITY FACILITIES DISTRICT — The Operating Agreement,the REA and the OPA"); Sixth: To the Rebate Fund established by the Indenture for payment to the United States pursuant to the Indenture;and Seventh: To the Director of Finance for deposit in the Surplus Fund any Net Taxes remaining after steps one through six above. Although the Special Taxes will constitute liens on the Taxable Property within the District, such taxes do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the District or the landowners in the District. See "SPECIAL RISK FACTORS — Parity Taxes and Special Assessments" herein. There is no assurance that the property owners in the District will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so. See the portion of this Official Statement entitled"SPECIAL RISK FACTORS." [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 14 Debt Service Coverage from Maximum Special Taxes Table 1 below demonstrates the projected Debt Service Coverage assuming the Special Taxes were levied at the Maximum Special Tax rate set forth in the Rate and Method. Such debt service coverage reflects the fact that there are only eight separate parcels owned by the Property Owners and one parcel owned by an entity unrelated to the Property Owners which is required to be maintained as open space. Due to the concentration of ownership, in the event of delinquencies with respect to one or more parcels, it is likely that most if not all parcels will be delinquent. See"—Existing Liens"below and"SPECIAL RISK FACTORS— Special Tax Delinquencies." TABLE 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ESTIMATED MAXIMUM TAXING CAPACITY Parking Structure Year Ending Maximum Administrative Bonds Debt Bond Debt Service Maintenance September 1, Special Tax") Expenses(2) Service Coverage(3) Special Tax() 2014 $2,737,499.15 $30,000.00 $1,672,376.31 1.62 $530,000.00 2015 2,737,499.15 30,000.00 1,674,256.26 1.62 540,600.00 2016 2,737,499.15 30,000.00 1,677,806.26 1.61 551,412.00 2017 2,737,499.15 30,000.00 1,680,606.26 1.61 562,440.24 2018 2,737,499.15 30,000.00 1,675,006.26 1.62 573,689.04 2019 2,737,499.15 30,000.00 1,673,406.26 1.62 585,162.83 2020 2,737,499.15 30,000.00 1,675,606.26 1.62 596,866.08 2021 2,737,499.15 30,000.00 1,676,406.26 1.62 608,803.40 2022 2,737,499.15 30,000.00 1,675,806.26 1.62 620,979.47 2023 2,737,499.15 30,000.00 1,676,493.76 1.61 633,399.06 2024 2,737,499.15 30,000.00 1,678,068,76 1.61 646,067.04 2025 2,737,499.15 30,000.00 1,672,568.76 1.62 658,988.38 2026 2,737,499.15 30,000.00 1,677,181.26 1.61 672,168.15 2027 2,737,499.15 30,000.00 1,678,643.76 1.61 685,611.51 2028 2,737,499.15 30,000.00 1,679,893.76 1.61 699,323.74 2029 2,737,499.15 30,000.00 1,678,143.76 1.61 713,310.22 2030 2,737,499.15 30,000.00 1,675,156.26 1.62 727,576.42 2031 2,737,499.15 30,000.00 1,678,756.26 1.61 742,127.95 2032 2,737,499.15 30,000.00 1,676,625.00 1.61 756,970.51 2033 2,737,499.15 30,000,00 1,675,462.50 1.62 772,109.92 (1) As determined pursuant to the steps listed in Section C of the Rate and Method,the Maximum Special Tax is calculated to be$65,050 per taxable acre and totals$2,737,499.15. (3> Equals the Administrative Expenses Cap. �'� Equals the Maximum Special Tax column, less the Administrative Expenses column, divided by Bonds Debt Service column. Debt service coverage includes Special Taxes from one 2.494 acre parcel (Parcel No. 142-073-045) which is required to be maintained as open space. Excluding such parcel from the debt service coverage calculation results in debt service coverage of approximately 1.51 times Administrative Expenses plus debt service on the Bonds. See "THE COMMUNITY FACILITIES DISTRICT—The Development." °� The Parking Structure Maintenance Special Tax constitutes part of the Special Tax and is used to pay the cost of operation and maintenance of the Parking Structure on a basis subordinate to the application of Special Taxes to debt service on the Bonds. Pursuant to Section 4 of the Operating Agreement(as defined herein),the Parking Structure Maintenance Special Tax is deposited into the Parking Fund thereunder only if sufficient moneys have been collected to fund the debt service on the Bonds and Administrative Expenses. See`THE COMMUNITY FACILITIES DISTRICT—The Operating Agreement, the REA and the OPA." Source: Bonds Debt Service provided by the Underwriter; Maximum Special Taxes and debt service coverage provided by Willdan Financial Services. 15 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 the Parking Structure Maintenance Tax 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 lots within the District are 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 than the District, 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 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. Proceeds of Foreclosure Sales The net proceeds received following a judicial foreclosure sale of land within the District resulting from a property owner's failure to pay the Special Tax when due are pledged to the payment of principal of and interest on the Bonds. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Collection of Special Taxes and Flow of Funds"herein. 16 Pursuant to Section 53356.1 of the Act, the District has covenanted 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. If foreclosure is necessary and other funds (including amounts in the Reserve Account of the Special Tax Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the District. See "SPECIAL RISK FACTORS — Bankruptcy and Foreclosure" herein. Moreover, no assurances can be given that the real property 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. See "SPECIAL RISK FACTORS—Property Values"herein. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion,the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that, in the case of a delinquency,the Special Tax will have the same lien priority as is provided for ad valorem taxes. 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 an 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 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 to the extent that 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. 17 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 Administrative Expenses, not in excess of the Administrative Expenses Cap, in the Administration Fund) for the payment of principal of, premium, if any, and interest on the Bonds. Extraordinary Administrative Expenses are paid from Net Taxes ahead of debt service on the Bonds in the event there are Extraordinary Administrative Expenses. 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,Rebate Fund and Surplus Fund are not pledged to the repayment of the Bonds. No Additional Bonds Except Refunding Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Net Taxes,except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. THE COMMUNITY FACILITIES DISTRICT General Location. The District consists of approximately 42.083 net taxable acres which have been primarily developed into a commercial, retail and entertainment center in the City known as "Bella Terra" (the "Bella Terra Mall"). The District is located on Edinger Avenue between Gothard Street and Beach Boulevard,just off of the 405 Freeway in the City. The District currently consists of nine County Assessor's parcels which are subject to the Special Tax levy, with additional separate parcels for the land on which the Parking Structure (defined below) is located and for certain easement areas (which additional parcels are not subject to the Special Tax levy). Formation. 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 Law. The District was formed to facilitate financing certain public infrastructure and facilities needed in the renovation of the Bella Terra Mall undertaken by the Prior Landowner. Pursuant to the Law,the City Council adopted Resolution No. 2003-3 on January 6, 2003, stating its intention to establish the District and Resolution No. 2003-4 on January 6, 2003 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos. 2003-10, 2003-11 and 2003-12 adopted by the City Council on February 3, 2003, the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 was determined necessary for the District and an election was called pursuant to the Law. The Prior Landowner, as the then sole owner of the land within the District,voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $30,000,000 to finance the Public Facilities and the levy of a special tax consistent with the Special Tax Formula on the land within the District to pay the principal and interest on the 18 Bonds, to pay administrative expenses of the District, to make any necessary replenishments to the Reserve Account and to pay the Parking Structure Maintenance Special Tax. On February 20, 2003, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No.2003000186478 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by Resolution 2004-1 adopted by the City Council, acting as the legislative body of the District,on January 5,2004. Public Facilities. The "Public Facilities" financed through the issuance of the Refunded Bonds included the land acquisition and construction of a six story, approximately 1,536 stall parking structure adjacent to the Bella Terra Mall (the "Parking Structure") and all work appurtenant thereto, infrastructure improvements along Edinger Avenue and Center Avenue, police substation improvements, and other miscellaneous fees,permits and costs. All of the Public Facilities were complete by 2005. The Development The property in the District includes nine parcels of Taxable Property totaling approximately 42 acres which constitute the "Development." The Development includes the Bella Terra Mall, the adjacent property on which a Costco fuel station is located and one approximately 2.5 acre parcel which is required to be maintained as open space in connection with the development of a multi-family housing development which is located near the Development but is not within the District. The Costco Warehouse itself is located on property immediately adjacent to the District on a site which used to be a Mervyn's, but is not within the boundaries of the District and not subject to the Special Tax. The Bella Terra Mall was originally developed in 1965 through 1969 with the construction of a Broadway Department store, a JC Penny Department Store, a Montgomery Ward Department Store, a JC Penny/Firestone Auto Center, and other mall shops and related businesses. The Prior Landowner purchased the Development on November 16, 1999 for approximately $48,500,000 with the intention of renovating the Bella Terra Mall. The District was formed, and the Refunded Bonds were issued, to finance the Parking Structure and other public facilities related to the renovation of the Development. The Bella Terra Associates purchased the Development for$245,000,000 in August,2005. See "—The Property Owners." The Bella Terra Mall is a Tuscan themed open air lifestyle retail center with approximately 690,000 square feet of retail, restaurant, open-air courtyards and entertainment uses. The Bella Terra Mall includes four clustered major buildings on the interior of the Development site, several smaller buildings on the perimeter of the Development site and an outdoor amphitheater. Larger tenants in the Bella Terra Mall include Whole Foods,The Cheesecake Factory,Barnes and Noble, Kohl's,REI,Bed Bath&Beyond,Huntington Surf and Sport, and Cost Plus World Market. The Bella Terra Mall also includes a 4,000-seat, 20-screen Century Theaters cineplex. Set forth below is Table 2 indicating the current Orange County Assessor's Parcels in the District,the size of the parcels and the current owners and tenants whose businesses are located on the parcels. 19 TABLE 2 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 PARCELS,OWNERSHIP AND TENANTS (as of April 1,2013) Orange County Assessor's Parcel Size Parcel No. in Acres Current Owner Current Tenant(s) 142-073-021 0.439 Bella Terra Associates,LLC Romano's Macaroni Grill 142-073-023 1.704 Bella Terra Associates,LLC Burlington Coat Factory 142-073-043 2.988 Bella Terra C LLC Costco Fuel Station 142-073-045 2.494 Bella Terra Villas LLC(I) Open Space 142-073-047 0.320 Bella Terra Associates,LLC King's Fish Market 142-073-048 0.280 Bella Terra Associates,LLC Bank of America 142-073-049 0.340 Bella Terra Associates,LLC California Pizza Kitchen 142-073-050 0.280 Bella Terra Associates,LLC Islands 142-073-046 33.178 Bella Terra Associates,LLC All other tenants of Bella Terra Mall Total 42.083 (1) Bella Terra Villas LLC is a single purpose entity related to UDR,Inc.,the developer of a multi-family housing development located near the District known as"The Residences at Bella Terra." Bella Terra Villas LLC is not related to Bella Terra C LLC or Bella Terra Associates,LLC,both of which are under common ownership.See"—The Property Owners." Source: Bella Terra Associates. The property within the District has undergone multiple lot line adjustments and re-mapping since the formation of the District in connection with the completion of the renovations of Bella Terra Mall and reconfigurations and construction undertaken for the current and future tenants located therein, as well as the adjacent Costco. The information in Table 2 above is based on the most recent information available to the District and the Property Owners. An approximately 154,000 square foot Costco is located at 7562 Center Avenue near the District, adjacent to the Bella Terra Mall on property owned by Bella Terra Villas. This Costco opened for business in May, 2012 and includes a fuel station. While the Costco fuel station is located in the District and subject to the Special Tax, the Costco Warehouse itself is not located within the District and is not subject to the Special Tax. See "— Summary of Leases; Occupancy Rates" for additional information concerning the tenants and lease terms within the Bella Terra Mall. The District also includes one 2.494 acre parcel (Parcel No. 142-073-045) which is required to be maintained as open space (the"Open Space Parcel"). The Open Space Parcel is owned by Bella Terra Villas LLC ("Bella Terra Villas"), a single purpose entity related to UDR, Inc. ("UDR"), a publicly traded multi- family real estate investment trust traded on the New York Stock Exchange under the symbol "UDR." The Open Space Parcel is required by the City to be maintained as open space in connection with UDR's development of"The Residences at Bella Terra," an upscale apartment complex near the Development. The first phase of development with respect to The Residences at Bella Terra has been completed and the first occupants moved into The Residences at Bella Terra in mid-May 2013. The Residences at Bella Terra is not within the District and is not subject to the Special Tax. In the event Bella Terra Villas, or a future owner, becomes delinquent in the payment of Special Taxes with respect to the Open Space Parcel, the Special Tax burden would be spread among the other parcels in accordance with the Rate and Method. Excluding the Open Space Parcel from debt service coverage results in debt service coverage of approximately 1.51 times the Administrative Expenses Cap plus debt service on the Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Debt Service Coverage from Maximum Special Taxes." 20 The following information about the Property Owners (and their owners) and the Taxable Property within the District in the sections of the Official Statement under the subheadings "— The Property Owners," — Summary of Leases; Occupancy Rates" and "— Property Owners Financial Information" has been provided by Bella Terra Associates and has not been independently confirmed or verified by the City, the District or the Underwriter. Such information is included because it may be relevant to an informed evaluation of the security for the Bonds. The inclusion in this Official Statement of information related to the Property Owners should not be construed to suggest that the Bonds, or the Special Taxes that will be used to pay the Bonds, are recourse obligations of the Property Owners, Bella Terra Villas or any other subsequent property owner within the District. Neither the City nor the District nor the Underwriter can guarantee the accuracy or completeness of such information. The Property Owners As indicated above,the Open Space Parcel is owned by Bella Terra Villas, and entity unrelated to the other Property Owners within the District. Assessor's Parcel No. 142-073-43 (the parcel on which Costco fuel station is located) is owned by Bella Terra C LLC, a Delaware limited liability company ("Bella Terra C"). The other seven parcels of Taxable Property within the District are owned by Bella Terra Associates, LLC, a Delaware limited liability company (`Bella Terra Associates"). Both Bella Terra C and Bella Terra Associates are single purpose entities owned by common ownership. Bella Terra C is wholly owned by BTDJM Associates LLC, a Delaware limited liability company (`BTDJM Associates"). Bella Terra Associates is wholly owned by Bella Terra Borrower, LLC a Delaware limited liability company, which is in turn wholly owned by BTDJM Associates. Bella Terra C and Bella Terra Associates are sometimes referred to in this Official Statement as the "Property Owners." BTDJM Associate's members are(i)Bella Terra Holding, LLC (with an 87.75%interest),whose sole member is SRA Holding, LLC, whose sole member is PERS Holding Company Limited L.L.C; and(ii)Bella Terra Group Retail, LLC (with a 12.25% interest), whose members include (a) Bella Terra Retail Holdings Corp., a California Corporation owned by D. John Miller (21%), Eric Sahn (22%), Lindsay Parton (21%), Dieter Mees (15%), John Cappetta (15%) and various others (6%) and (b) various Class "A" members including John Miller(1.54%),Eric Satin(.62%), Lindsay Parton(.62%), Dieter Mees(5.02%), John Cappetta (3.09%) and various others(9.11%). BTDJM Associates is managed by Bella Terra Group Retail, LLC, a California limited liability company ("Bella Terra Group"), an entity controlled by DJM Capital Partners, Inc., San Jose, California ("DJM Capital Partners"). DJM Capital Partners manages Bella Terra Mall. DJM Capital Partners reports that it is a provider of value-added private equity investment, development and asset management services in the retail sector. Since 2003, DJM Capital Partners has executed acquisitions, financing and sale transactions in excess of $1.5 billion. Currently, DJM Capital Partners' west coast portfolio is valued at more than $650 million, consisting primarily of retail properties in coastal Southern California markets. Set forth below is a listing of recent retail developments in which DJM Capital Partners has been involved: 21 Size(`000) Year Project Location Type s f. Acquired Anchor Tenants La Habra Marketplace La Habra,CA Retail 375 2004 LA Fitness,Office Max,La Habra 16 Regal Cinemas Lakewood Square Lakewood,CA Retail 188 2004 Von's Supermarket,Chuck E.Cheese, Cost Plus World Markets,Michaels ._ Montalvo Square Ventura,CA Retail/Office 219 2003 Ralph's,LA Fitness Village Del Amo Torrance,CA Retail 181 2004 Sport Chalet,BevMo The following is a brief description of the key management personnel of DJM Capital Partners. D. John Miller, Chief Executive Officer. D. John Miller is the founder and chief executive officer of DJM Capital Partners, which was started in 1992. DJM Capital Partners has managed more than$1 billion in assets since its founding. Mr. Miller has over 30 years of experience in commercial real estate, working as a broker, investor,manager and developer,with expertise covering many products and market types. Mr. Miller began his career as a broker with Cornish & Carey Commercial Real Estate in Santa Clara, California, specializing in income property. Prior to starting DJM Capital Partners, Miller was a principal with the commercial real estate firm of MacMillan, Moore and Buchanan, Inc. in San Jose, California. While at the firm, Miller was general partner and asset manager of a partnership portfolio of income properties valued in excess of$50 million, and he brokered more than $300 million of investment sales. Mr. Miller formed DJM Capital Partners in the early 1990s to participate as a broker and principal in the wide-spread liquidation of commercial real estate in the United States, resulting from the savings and loan crisis of the time. From 1993 through 1995, he acquired over $75 million of bank-owned apartment and retail properties in California, subsequently selling the portfolio over a period at a significant return. Mr. Miller is a member of the Association of Silicon Valley Brokers, the Commonwealth Club of California, the California Association of Realtors,the Tri-County Apartment Association,UC Berkeley/South Bay Cal Business Alumni,and the Urban Land Institute. Mr.Miller is a California licensed real estate broker and holds a B.A. in Political Science from the University of California at Berkeley,where Mr.Miller graduated cum laude. Eric Sahn. Eric Sahn oversees all financial affairs and asset management for DJM Capital Partners. Mr. Sahn has over 27 years' experience in real estate investment and development. Sahn began his career at a private real estate investment and development firm in New York, where he managed over $700 million in acquisitions, development and financing for a variety of property types including hotels, office buildings, industrial/flex buildings, shopping centers and apartments. A specialist in urban, in-fill development, Mr. Sahn later worked for Avalon Bay Communities, a large national multi-family real estate investment trust, and as Vice President of Development for Legacy Partners. Sahn is a California licensed real estate broker and a Certified Property Manager(CPM)Candidate. Sahn holds a B.S. in Applied Mathematics and Economics from Brown University, where he graduated magna cum laude, and an MBA in Real Estate from the University of California at Berkeley. Lindsay Parton, President. As President of DJM Capital Partners, Lindsay Parton is responsible for directing Southern California property acquisitions and supervising all construction and development activities for DJM Capital Partners. Mr. Parton's team is responsible for all entitlements,governmental and community relations, architectural and land planning, construction management, marketing and positioning of development and redevelopment properties, from project inception through completion. Mr. Parton has over 30 years' experience in the construction development industry. Mr. Parton is founder and chairman of Parton & Edwards Construction, a Santa Barbara based company that has, since 1980, developed a broad range of residential and commercial properties throughout California, as well as institutional and public works projects in excess of$300 million. Mr.Parton holds a B.A. in economics from Westmont College in Santa Barbara. 22 Summary of Leases; Occupancy Rates Bella Terra Associates leases property within Bella Terra Mall to tenants. The following Table 3 sets forth the occupancy rates for the past five years based on the Property Owner's property leases for the leasable space within the District. As of April 1,2013,approximately 658,731 square feet out of a total leasable area of approximately 686,727 square feet within the Development, or approximately 95.9%, was subject to executed triple-net leases. The following Table 3 summarizes historical lease occupancy rates in the Development as of December 31 in the years 2008 through 2012. The following Table 4 sets forth the status of tenant leases within the District as of April 1, 2013,together with the number of leased square feet and the termination dates of the current triple-net leases. TABLE 3 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 LEASE OCCUPANCY RATES 2008 THROUGH 2O12 As of Leasable Area Leased Area December 31, (approximate)��� (approximate) Lease Occupancy Rate 2008 775037 656,951 84.76% 2009 774:962 657,465 84.84 2010 774,989 649,719 83.84 2011 685,805 677,814 98.83 2012 686,727 656,672 95.62 (1) Changes in leasable area are due to configurations of individual tenant spaces. 2008 through 2010 also include a Mervyn's building which has since been demolished. Mervyn's was located on a portion of the parcel on which the Costco fuel station is now located and on a portion of the parcel on which the Costco is now located,which is outside the District. Source: Bella Terra Associates. 23 TABLE 4 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 SUMMARY OF LEASES AND STATUS (as of April 1,2013) Square Lease Term/ Tenant"' Footage Use Expiration Date(z) Pei Wei#86 3,195 Restaurant/Food 12/31/2015 Chronic Tacos 1,334 Restaurant/Food 04/30/2021 Comer Bakery#209 3,025 Restaurant/Food 01/31/2016 King Seafood Company 7,887 Restaurant/Food 09/30/2021 Bank of America PCA7 8,240 Services 12/31/2015 Burlington Coat Factory 149,001 Retail 01/31/2025 Fantastic Sam's 1,516 Retail 06/30/2018 Ong Shao Dental,Inc 1,622 Services 02/28/2017 H&N Group Management 2,354 Corporate 04/30/2018 DJM/Holland Bella Terra 2,059 Corporate 09/30/2013 Ulta#166 9,981 Retail 02/28/2021 Cost Plus#270 18,300 Retail 01/31/2016 REI#88 22,500 Retail 07/31/2015 Kohl's Department St 97,394 Retail 02/03/2024 Justice Stores LLC. 4,402 Retail 05/31/2016 LensCrafters#5603 2,912 Retail 08/31/2017 Angl.Inc. 2,195 Retail 04/30/2019 Loma Jane USA 2,085 Retail 08/31/2022 No Rest for Bridget 2,248 Retail 01/31/2017 Huntington Surf and Sport 7,029 Retail 03/31/2016 OZ Accessories 746 Retail 12/31/2015 Cinemark 482 Century 77,269 Theater 11/17/2020 HatStop,etc. 807 Retail 10/31/2014 Rocky Mountain Chocolate Factory 990 Retail 09/30/2015 CorePower Yoga,LLC 7,809 Services 08/31/2017 Dental Oasis of Orange County 4,000 Services 11/30/2017 Atlantis Eye Care 3,643 Services 08/14/2021 Bed Bath&Beyond 40,555 Retail 05/31/2021 Time Warner Cable Services 1,204 Services 07/31/2013 Kabuki Restaurants 5,229 Restaurant/Food 10/31/2015 Johnny Rocket's 2,163 Restaurant/Food 10/31/2015 Wreath Equity,LLC 1,865 Services 10/31/2015 Western Federal Credit Union 2,254 Services 11/30/2017 Taco De Ojo 2,975 Restaurant/Food 10/31/2015 Pinkberry 911 Restaurant/Food 04/30/2017 Buffalo Wild Wings 5,587 Restaurant/Food 01/31/2022 LunaRossa 2,448 Restaurant/Food 01/31/2017 Diane's Beachwear 1,379 Retail 02/28/2019 Pizzarito 911 Restaurant/Food 04/30/2014 Princess Bride Diamonds 839 Retail 03/31/2021 Jamba Juice Company 1,443 Restaurant/Food 09/30/2015 Peet's#324 1,525 Restaurant/Food 09/30/2015 T-Mobile USA,Inc. 1,418 Retail 08/31/2015 GameStop#3354 1,534 Retail 08/31/2013 Bella Hue,Inc. 2,613 Services 11/30/2015 California Pizza Kitchen 5,994 Restaurant/Food 02/28/2020 Islands Huntington Beach 5,406 Restaurant/Food 03/31/2020 Cheesecake Factory 9,925 Restaurant/Food O1/31/2027 Barnes&Noble 42743 40,300 Retail 01/31/2015 Carter's Retail 4,516 Retail 02/28/2019 OC Skincare,Inc. 1,713 Services 04/30/2016 Jos.A.Bank Clothiers 4,200 Retail 12/31/2015 Ucatan,Inc. 2,220 Retail 06/30/2016 Massage Envy Limited 3,735 Services 12/31/2019 Staples,Inc.#0152 19,012 Retail 01/31/2015 See's Candy 458 1,496 Retail 12/31/2015 Whole Foods Market 31,530 Retail 09/30/2030 Romano's Macaroni Grill 7,288 Restaurant/Food 01/31/2022 TOTAL EXECUTED LEASES 658,731 Does not include the executed ground lease with Costco Wholesale Corporation which is not within the boundaries of the District and is not subject to the Special Tax. (2) Does not include extension options. - Source: Bella Terra Associates. 24 No assurance can be given that all executed leases will continue for their current terms or that tenants will exercise any applicable renewal options. Property Owner Financial Information Bella Terra Associates, LLC is a single purpose entity that owns all of the Taxable Property in the District (except for Assessor Parcel No. 142-073-43 that is owned by Bella Terra C LLC, an entity related to Bella Terra Associates, LLC, and Assessor Parcel No. 142-073-45 which is owned by Bella Terra Villas, an entity unrelated to Bella Terra Associates, LLC). According to unaudited consolidated financial statements for the fiscal year ended December 31, 2012 filed on EMMA by Bella Terra Associates on behalf of itself and its related entities, including Bella Terra C, Bella Terra Associates' consolidated net income (excluding depreciation and amortization) was approximately $7.68 million on total revenues of approximately $26.7 million. In comparison, Bella Terra Associates reported consolidated net income of$3.4 million on total revenues of approximately $23.4 million for the fiscal year ended December 31, 2011. The increase in revenue in 2012 over 2011 included, among other things, approximately $2 million in additional lease revenue from leases executed with respect to Costco (although Costco is not within the District), Luna Rossa,Buffalo Wild Wings and Hat Stop Etc. Additionally, expenses were lowered by approximately $1.4 million in 2012 over 2011 as a result of the payoff of the Second Mortgage Loan(defined below)in June 2011. Bella Terra Associates acquired the Bella Terra Mall in August 2005 from the Prior Landowner for $260 million. In connection with the acquisition of the Bella Terra Mall, Bella Terra Associates entered into a Loan Agreement with GMAC Commercial Mortgage Corporation, a California corporation ("GMAC Commercial"), dated as of August 15, 2005 (the "First Mortgage Loan"), and a Loan Agreement (Second Mortgage), by and between GMAC and Bella Terra Associates, dated as of August 15, 2005 (the "Second Mortgage Loan"). Bella Terra Associates borrowed an aggregate principal amount of $188 million under the First Mortgage Loan. The First Mortgage Loan is secured by two promissory notes executed and delivered by Bella Terra Associates in the aggregate principal amount of$188 million (the"First Mortgage Promissory Notes") and a Deed of Trust, Assignment of Rents And Leases, Security Instrument and Fixture Filing (First Mortgage), executed by Bella Terra Associates, dated as of August 15, 2005 (the"First Mortgage Loan Deed of Trust"). At the time Bella Terra Associates entered into the First Mortgage Loan, it also entered into the Second Mortgage Loan for $17 million which was subordinate to the First Mortgage Loan and has subsequently been paid off. Unless extended, the maturity date of the First Mortgage Deed of Trust is September 1, 2015 (the "First Mortgage Loan Maturity Date"). Interest is fixed on the entire balance of the First Mortgage Loan and is 5.20%per annum on the first$160 million of the First Mortgage Loan and approximately 5.837%thereafter. Interest only payments on the First Mortgage Loan balance are due monthly on the first day of each month commencing October 1, 2005 until the First Mortgage Loan Maturity Date. All unpaid interest and principal outstanding on the First Mortgage Loan is due on the First Mortgage Loan Maturity Date. Bella Terra Associates has represented to the District that it is current with respect to all amounts due under the First Mortgage Loan. Under the Law,the lien securing the First Mortgage Loan is subordinate to the lien of Special Taxes. The First Mortgage Loan includes the establishment of a"Lockbox Account" pursuant to a Lockbox Agreement whereby all rents collected on the leases within Bella Terra Mall are deposited into the Lockbox Account held by Bella Terra Associates and disbursed in accordance with the First Mortgage Loan and the Lockbox Agreement. On the closing date with respect to the First Mortgage Loan(the"Closing Date"),Bella Terra Associates was required to deposit into a Tax Escrow Account established under the First Mortgage Loan and held by GMAC Commercial estimated taxes, including Special Taxes, on the Bella Terra Mall for the 12 months following the Closing Date. Thereafter, Bella Terra Associates is required to deposit each 25 month into the Tax Escrow Account one-twelfth of the estimated annual taxes, including Special Taxes, on Bella Terra Mall. GMAC pays such taxes,including Special Taxes,out of the Tax Escrow Account. In connection with the construction of the Costco Warehouse at 7562 Center Avenue and the adjacent Costco fuel station, Bella Terra C LLC, a Delaware limited liability company, an entity related to Bella Terra Associates, LLC, borrowed$17.25 million pursuant to a Loan Agreement, by and between Bella Terra C and NLI Commercial Mortgage Fund, LLC, a Delaware limited liability ("NLI Commercial"), as lender, dated as of April 13, 2012 (the "Costco Mortgage Loan"). The Costco Mortgage Loan is secured by the property on which the Costco Warehouse is located, which is not in the District, including the ground lease between Costco Wholesale Corporation and Bella Terra C. The Costco Mortgage Loan is also secured by Assessor Parcel Nos. 142-073-43 in the District, which include the Costco fuel station, open space and parking for Costco. Interest on the Costco Mortgage Loan is fixed at 4.45% and matures May 10, 2022 (the "Costco Mortgage Loan Maturity Date"). The Costco Mortgage Loan is amortized, and monthly payments of principal and interest in the amount of$90,709 are due on the tenth day of each month commencing June 10, 2012. Taxes on the property secured by the Costco Mortgage Loan are not escrowed unless there has been a default under the Costco Mortgage Loan. Bella Terra C has represented to the District that it is current with respects to all amounts due under the Costco Mortgage Loan. Under the Law, the lien securing the Costco Mortgage Loan is subordinate to the lien of Special Taxes. The Property Owners are not personally obligated to pay the Special Tax. Rather the Special Tax is an obligation only against the Taxable Property in the District. See"SPECIAL RISK FACTORS—Payment of the Special Tax is not a Personal Obligation of the Owners." The Operating Agreement,the REA and the OPA In connection with the construction of the Parking Structure, and in order to provide for the operation and maintenance of the Parking Structure once it was completed, the City and the Prior Landowner entered into(i)a Parking and Reciprocal Easement Agreement and Option to Purchase, dated as of March 1, 2004 (the "REA"), and (ii)an Operating Agreement for Huntington Center Parking Structure, dated as of January 15, 2004 (the"Operating Agreement"). In connection with the rehabilitation and construction work related to the renovation of Bella Terra Mall and the construction of the Public Facilities including the Parking Structure,the Redevelopment Agency and the Prior Landowner entered into an Owner Participation Agreement, dated October 2, 2000 (the "Original Owner Participation Agreement"). Subsequently, the Original Owner Participation Agreement was amended by the Redevelopment Agency and Bella Terra Associates through a First Implementation Agreement and a Second Implementation Agreement, the latter being executed and delivered in November,2007(collectively,as amended,the"OPA"). In connection with the acquisition of the Bella Terra Mall,Bella Terra Associates,the Redevelopment Agency and the Prior Landowner entered into an Assignment and Assumption Agreement, dated as of August 8, 2005 (the "Assignment and Assumption"), pursuant to which Bella Terra Associates assumed the rights and obligations of the Prior Landowner under the REA, the OPA and the Operating Agreement. The REA, the OPA and the Operating Agreement are subject to amendment by the City, on its behalf and as successor to the Redevelopment Agency, and the Property Owners at any time without any requirement for notice to or the consent of the Bondowners. The REA provides for various easements related to the construction and use of the Parking Structure. The REA grants the Property Owners an exclusive easement with respect to 5% of the parking spaces (the "Reserve Spaces") in the Parking Structure. Other easements were granted by the City and the Prior Landowner for utilities necessary for the operation of the Parking Structure and that otherwise serve the Development,for common structural support and security,and for ingress and egress. 26 The REA provides that Bella Terra Associates is to rebuild or repair the Parking Structure in the case of any future damage or destruction. Any proceeds of any governmental condemnation of the Parking Structure will be used first to replace any public parking lots as a result of such condemnation, and second to redeem Bonds under the optional redemption provisions of the Indenture. The REA provides that the City is to operate and maintain the Parking Structure from the proceeds of the portion of the Special Tax constituting the Parking Structure Maintenance Tax to be levied for such purpose. The City may delegate its operating responsibilities and has done so pursuant to the Operating Agreement described below. Pursuant to the REA, Bella Terra Associates is required to provide for capital replacement and repairs to the Parking Structure, subject to the receipt of any applicable insurance proceeds. The REA grants the Property Owners an option to purchase the Parking Structure, at its then fair market value, following the date that the Bonds have been fully paid and retired. The Operating Agreement provides for the operation of the Parking Structure. The Operating Agreement provides for an annual fee of$1,500 to Bella Terra Associates, subject to cost of living increases, for their services in operating the Parking Structure. The term of the Operating Agreement extends to the date that is 15 years from the date when the City provides a certificate of occupancy for the Parking Structure, which occurred in 2005, and Bella Terra Associates has unilaterally agreed to an additional 15 year extension at the option of the City,but the term will end in any event if the City no longer owns the Parking Structure. Under the Operating Agreement, any revenues received by Bella Terra Associates, as the operator of the Parking Structure (the "Operator"), are deposited into the "Parking Fund" established by the City for the benefit of the City and the Operator. Each July 15 during the term of the Operating Agreement,the Operator is required to submit to the City a proposed budget with respect the projected income, projected expenses and projected Parking Structure Maintenance Special Tax to be levied in the next fiscal year (the "Proposed Budget"). Each Proposed Budget reg4ires the written approval of the City, not to be unreasonably held or delayed. If the Proposed Budget is not approved, the budget from the previous fiscal year will govern the operating costs with respect to the Parking Structure until the new Proposed Budget is approved. Subject to the limitations set forth in the Rate and Method, the District then levies the Parking Structure Maintenance Special Tax estimated to be required for the operation and maintenance of the Parking Structure for the coming fiscal year. Income from the Parking Structure and collected Parking Structure Maintenance Special Taxes are deposited in the Parking Fund maintained by the City. Moneys on deposit in the Parking Fund are applied first to the maintenance and operation of the Parking Structure, second to the payment of the cost of repairing and replacement of the Parking Structure and third to the payment of the Operator's fee. The Parking Structure Maintenance Special Tax constitutes part of the Special Tax Requirement and is subordinate to the debt service on the Bonds and Administrative Expenses. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS— Special Taxes." Under the REA, Bella Terra Associates and its successors or assigns are not permitted to prepay the Special Tax obligation with respect to any parcel unless the City is provided reasonable assurances that the Parking Structure Maintenance Special Tax collectible from the remainder of the Taxable Property not prepaid is sufficient to cover the reasonably estimated costs of operating and maintaining the Parking Structure. The liability of the City under the REA and the Operating Agreement is strictly limited to the proceeds of the Parking Structure Maintenance Special Tax, any revenues derived from the operation of the Parking Structure and any other moneys deposited in the Parking Fund. Cost of operating and maintaining the Parking Structure in excess of any proceeds of the Parking Structure Maintenance Special Tax (collected as a component of the Special Tax levy in the District) are to be borne by Bella Terra Associates. The Parking Structure Maintenance Special Tax is subordinate to the Net Taxes pledged to the repayment of the Bonds. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes." 27 The OPA provides for the Redevelopment Agency (and the Successor to the Redevelopment Agency of the City of Huntington Beach, as successor to the Redevelopment Agency(the"Successor Agency")), solely from net property tax increment revenue from the Development,to repay Bella Terra Associates a$15 million "Feasibility Gap" for the Development at a fixed interest rate of 6.9357% per annum (the "Feasibility Gap Payments"). The Feasibility Gap Payments are to be made by the Redevelopment Agency during a twenty year Reimbursement Term which began on the Operating Commencement Date, defined as November 1,2005 in the OPA. The Feasibility Gap Payments are to be made in amounts equal to a portion of the increase in tax increment revenues generated by the Development. At the end of the Reimbursement Term, any outstanding principal and interest due under the OPA shall be forgiven by Bella Terra Associates. As of April 1,2013,the outstanding balance due to Bella Terra Associates under the OPA was $14,185,106. The OPA has been recognized on the Successor Agency's recognized obligation payment schedule (the "ROPS"). However, the Successor Agency is unable to predict whether it will continue to be able to make payments to Bella Terra Associates under the OPA or in what amount. Such payments are not in any way pledged as security for the Bonds,and the OPA can be amended at any time by the Property and the Agency without any requirement for notice to or the consent of the Bondowners. 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 parcels within the District. Table 5 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied on the parcels of Developed Property 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, the City 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. Table 5 does not include the aggregate principal amount of the Bonds but does include the outstanding aggregate principal amount of the Refunded Bonds being refunded with the proceeds of the Bonds. 28 TABLE 5 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 DIRECT AND OVERLAPPING DEBT (as of March 1,2013) 2012-13 Assessed Valuation: $217,190,074 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 3/1/13 Metropolitan Water District General Obligation Bonds 0.010% $ 17,083 Coast Community College District General Obligation Bonds 0.212 653,187 Huntington Beach Union High School District General Obligation Bonds 0.529 1,175,675 City of Huntington Beach Community Facilities District No.2003-1 100. 21,595,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $23,440,945 OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 0.051% $ 108,903 Orange County Pension Obligations 0.051 179,110 Orange County Office of Education Certificates of Participation 0.051 8,137 Coast Community College District General Fund Obligations 0.212 42,963 Huntington Beach Union High School District Certificates of Participation 0.529 317,742 Ocean View School District Certificates of Participation 1.849 102,986 City of Huntington Beach General Fund Obligations 0.722 337,490 City of Huntington Beach Judgment Obligations 0.722 25,095 Municipal Water District of Orange County Water Facilities Corporation 0.061 6,117 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,128,543 Less: MWDOC Water Facilities Corporation(100%supported by revenues) 6.117 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,122,426 OVERLAPPING TAX INCREMENT DEBT: $2,055,618 GROSS COMBINED TOTAL DEBT $26,625,106(2) NET COMBINED TOTAL DEBT $26,618,989 Ratios to 2012-13 Assessed Valuation: Direct Debt($21,595,000)...............................................................9.94% Total Direct and Overlapping Tax and Assessment Debt................ 10.79% Gross Combined Total Debt............................................................ 12.26% Net Combined Total Debt............................................................... 12.26% Ratios to Redevelopment Incremental Valuation($193 164 035): 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. Estimated Assessed Value-to-Lien Ratios The assessed value of the Taxable Property within the District for Fiscal Year 2012-13 is $217,190,074. 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 approximately 9.54-to-1. The estimated assessed value-to-lien ratio (excluding any direct and overlapping general obligation bond debt) is approximately 10.38-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 subsequent improvements on the parcel or its current market value, it may not be indicative of the parcel's 29 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—Property Values." The following Table 6 summarizes the assessed value of the Taxable Property within the District for Fiscal Years 2007-08 through 2012-13. TABLE 6 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ASSESSED VALUES OF TAXABLE PROPERTY FISCAL YEAR 2007-08 THROUGH 2O12-13 Percentage Change in Assessed Value from Fiscal Year Assessed Value(l) Previous Fiscal Year 2007-08 $204,921,699 N/A 2008-09 209,602,317 2.28% 2009-10 214,139,804 2.16 2010-11(2) 213,671,522 -0.22 2011-12 214,950,818 0.60 2012-13 217,190,074 1.04 Only includes assessed values for parcels that were levied. (2) 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. Source: Orange County Secured Rolls,as compiled by Willdan Financial Services. 30 Table 7 below sets forth the estimated value-to-lien ratios for each of the parcels within District based upon the direct and overlapping debt information included in Table 5 with the estimated share of Bonds based upon each parcel's share of the Fiscal Year 2012-13 Special Tax. TABLE 7 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ESTIMATED FISCAL YEAR 2012-13 ASSESSED VALUE-TO-LIEN RATIOS BY PARCEL Fiscal Year 2012-13 Fiscal Year Percentage Aggregate Assessed 2012-13 Special Share of Estimated Share Overlapping Total Combined Value-to- Parcel No. Property Owner Value Tax Levy Special Trcv of Bonds"' DeW-" Debt Debt Ratio 142-073-21 Bella Terra Associates LLC $ 1,933,696 $ 23,516.46 1.04% $ 218,180.38 $ 16,434.91 $ 234,615.29 8.24 142-073-23 Bella Terra Associates LLC 28,238,990 94,494.38 4.19 876,697.48 240,009.38 1,116,706.86 25.29 142-073-43 Bella Terra C LLC(" 10,903,828 160,061.92 7.10 1,485,018.18 92,674.03 1,577,692.21 6.91 142-073-45 Bella Terra Villas LLC(4) 4,673,611 133,599.20 5.93 1,239,503.12 39,722.05 1,279,225.17 3.65 142-073-46 Bella Terra Associates LLC 164,516,713 1,777,297.24 78.93 16,489,268.11 1,399,263.70 17,887,531.81 9.20 142-073-47 Bella Terra Associates LLC 2,295,417 17,141.84 0.76 159,038.09 19,509.25 178,547.34 12.86 142-073-48 Bella Terra Associates LLC 1,666,844 14,999.11 0.67 139,159.33 14,166.87 153,325.20 10.87 142-073-49 Bella Terra Associates LLC 1,594,743 18,213.20 0.91 168,977.97 13,554.07 182,532.04 8.74 142-073-50 Bella Terra Associates LLC 1,366,232 14,999.11 0.67 139,158.34 11,611.91 150,770.25 9.06 Total $217,190,074 $2,254,312.46 100.00% $ 20,915,000.00 $1,845,946.17 $22,760,946.17 9.54 (1) Debt has been allocated based on the Fiscal Year 2012-13 Maximum Special Tax for each parcel. (2) Includes the lien of the Metropolitan Water District GO Bonds,Coast Community College District GO Bonds,and Huntington Beach Union High School GO Bonds. See Table 5"Direct and Overlapping Debt as of March 1,2013"for a description of the overlapping liens. (" County records indicate that BTDJM Phase Il Associates LLC is the owner of this parcel,however,subsequent information provided to the District indicate Bella Terra C LLC is the current owner of this parcel. (4) County records indicate that BTDJM Phase ll Associates LLC is the owner of this parcel;however,subsequent information provided to the District indicates Bella Terra Villas LLC,an entity unrelated to Bella Terra Associates or Bella Terra C LLC,is the current owner of this parcel. This parcel is a 2.494 acre parcel which is required to be maintained as open space in connection with the development of a multi-family housing development which is not located in the District. See"THE COMMUNITY FACILITIES DISTRICT." Source: Detailed and Overlapping Debt Reports provided by California Municipal Statistics,Inc.and Orange County 2012-13 Secured Roll,as compiled by Willdan Financial Services. 31 Delinquency History Table 8 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 Owners have never been delinquent in the payment of Special Taxes. TABLE 8 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 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`') Delinquent Delinquent DelinquenP) Delinquent 2008-09 $2,354,162.92 7 0 $0.00 0.00% 0 $0.00 0.00% 2009-101" 2,387,515.55 7 0 0.00 0.00 0 0.00 0.00 2010-11 2,200,129.00 7 0 0.00 0.00 0 0.00 0.00 2011-12 2,301,759.64 7 0 0.00 0.00 0 0.00 0.00 2012-13 2,254,312.46 9(3) N/A N/A N/A 0 0.00 0.00 Amount does not include any penalties,interest or fees. �2) Delinquency information as of October 5 for this Fiscal Year only. ' The additional parcels of Taxable Property in Fiscal Year 2012-13 was due to re-mapping within the District and did not result in any changes to the acreage of Taxable Property. Source: Orange County Tax Collector,as compiled by Willdan Financial Services. THE CITY OF HUNTINGTON BEACH 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. 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. See Appendix C hereto for general information regarding the City. SPECIAL RISK FACTORS The purchase of the Bonds involves significant risks and, therefore, the Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. The Bonds have not been rated by a rating agency. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures 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. See "— Property Values" and "— Limited Secondary Market"below. 32 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 individual property owners 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 fund of the City. Except with respect to the Net 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 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 Net Taxes and other amounts pledged under the Indenture. Insufficiency of Special Taxes The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against Taxable Property within the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds,will not be sufficient to pay debt service on the Bonds. Other funds which might be available include funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular Taxable Property and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the Bonds,and certainly not a direct relationship. The Special Tax levied in any particular tax year on Taxable Property is based upon the revenue needs and application of the Rate and Method. Thus, in addition to annual variations of the revenue needs from the Special Tax,the following are some of the factors which might cause the levy of the Special Tax on any particular Taxable Property to vary from the Special Tax that might otherwise be expected: (1) Failure of the owners of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property, subject to any limits imposed by the Law and the Maximum Special Tax amount; and 33 (2) Reduction in the amount of Taxable Property, for such reasons as acquisition of Taxable Property by a governmental agency and failure of the governmental agency to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. If for any reason property within the District becomes exempt from taxation by reason of ownership by a non-taxable entity such as the federal government or another public agency, subject to the limitations of the maximum authorized rates, the Special Tax will be reallocated to the remaining Taxable Property within the District. This would result in the owners of such property paying a greater amount of the Special Tax and could have an adverse impact upon the ability and willingness of the owners of such property to pay the Special Tax when due. Except as set forth above under "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS —Special Taxes"herein,the Indenture provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid for a period of five years or more,the property is subject to sale by the County. In the event that sales or foreclosures of property are necessary,there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Account is depleted. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales." 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 two miles 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. The District is approximately one-half mile from this 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, a substantial portion of the property owners may be unable or unwilling to pay the Special Taxes when due. In addition,the value of land 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. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a 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 34 with creating or handling the hazardous substance. The effect, therefore, should any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability 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 property within the District, as set forth in the various tables 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 any owner(or operator)of any of the parcels within the District has such a current liability with respect to any such parcel. 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 any of the parcels 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 a parcel and the willingness or ability of the owner of any parcel to pay the Special Tax installments. Payment of the Special Tax is not a Personal Obligation of the Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather,the Special Tax is an obligation which is secured only by a lien against the Taxable Property. If the value of 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 owner. Property Values The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes, the District's only remedy is to commence foreclosure proceedings against the delinquent parcel 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, tsunami or stricter land use regulations, delays in development or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT—Estimated Assessed Value-to-Lien Ratios." The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the County Assessor, generally not to exceed an increase of more than 2%per fiscal year. No assurance can be given that a parcel could actually be sold for its assessed value. Prospective purchasers of the Bonds should not assume that the land within the District could be sold for its assessed value at a foreclosure sale for delinquent Special Taxes. Additionally, value-to-lien ratios of individual parcels vary greatly. No assurance can be given that any bid will be received for a parcel 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." 35 Parity Taxes and Special Assessments Property within the District is subject to taxes and assessments imposed by public agencies also having jurisdiction over the land 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 lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by 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 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 property within the District. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes, ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such 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 a parcel 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 each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending of money thereon. The Act requires the subdivider(or its agent or representative) of a subdivision to notify a prospective purchaser or long-term lessor of any lot,parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section I IO2.6b requires that in the case of transfers other than those covered by the above requirement,the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on,the Bonds are derived, are customarily billed to the properties within the District on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. 36 See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales,"for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See "—Bankruptcy and Foreclosure" below, for a discussion of the impact of ownership of Taxable Property by federal agencies regarding the payment of special taxes and assessment and limitations on the District's ability to foreclose on the lien of the Special Taxes in certain circumstances. 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 a 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 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 any of the parcels 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 real property 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 property 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 37 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 a parcel within the District 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 against a landowner in the District and if the court found that any of such landowners 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. 38 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 — "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT." 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. 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. 39 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 parcels of Taxable Property within the District 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. 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." 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 an extraordinary 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— 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 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. No assurance 40 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. 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, Bella Terra Associates has agreed to provide, or cause to be provided, to EMMA, on an annual basis certain information concerning the Development and the Property Owners. Bella Terra Associates has 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 notices of listed events to be provided by the District and APPENDIX F for a description of the specific nature of the annual reports to be filed by Bella Terra Associates and notices of listed events to be provided by Bella Terra Associates. Within the last five years, neither the City nor the District have failed to timely comply with their respective prior continuing disclosure obligations under Rule 15c2-12(b)(5) in all material respects. Notwithstanding the foregoing, in 2009, the City filed Comprehensive Annual Financial Reports for several of its community facilities districts, including the District,one week late. The full text of the form of the District Disclosure Agreement is set forth in APPENDIX E. Bella Terra Associates assumed the Prior Landowner's obligation to provide continuing disclosure when it acquired the Development from the Prior Landowner in 2005 (the "Prior Continuing Disclosure Agreement"). Bella Terra Associates filed information about material leases and financial statements in compliance with the Prior Continuing Disclosure Agreement but failed to file information about the sale of property to a non-affiliated entity(the parcel now owned by Bella Terra Villas)pursuant to the Prior Continuing Disclosure Agreement. Other than as disclosed in this Official Statement, the Bella Terra 41 Associates has not failed to timely comply in all material respects with its continuing disclosure obligations under Rule 15c2-12(b)(5). The full text of the form of the Property Owner Disclosure Agreement is set forth in APPENDIX F. 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 audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation 42 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 OT14ER 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. 43 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 $20,852,570.60 (being $20,915,000.00 aggregate principal amount thereof, plus net original issue premium of$56,195.60, and less underwriter's discount of$118,625.00). 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 Financial Advisor, 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. 44 The execution and delivery of this Official Statement by the Director of Finance 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 CONDAUNITY FACILITIES DISTRICT NO.2003-1 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.2003-1 45 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX A CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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.2003-1 (Huntington Center)(herein CFD No. 2003-1)shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The real property in CFD No.2003-1, 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, 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.2003-1: 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.2003-1. 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 oneor more series,issued by the City for CFD No.2003-1 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.2003-1. County means the County of Orange. Development Agreement means the Owner Participation Agreement (OPA) between the Redevelopment Agency of the City of Huntington Beach and Huntington Center Associates, LLC, dated October 2,2000. Exempt Land means(1)any real property within the boundaries of CFD No.2003-1 which generally serves the development subject to the Development Agreement and is owned by a governmental agency for public right-of-way purposes including,but not limited to parking structures,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 has been paid in full. Fiscal Agent means the fiscal agent who is a parry to the Indenture,if so approved. Fiscal Year means the period commencing on July I and ending on the following June 30,in any year in which the Bonds are outstanding. 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 any Parcel of Taxable Property,the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on such Parcel. Maximum Special Tax shall not include the amounts payable under the Parking Structure Maintenance Special Tax. Outstanding Bonds means all Bonds that are then outstanding under the Indenture. Parking Structure Maintenance Special Tax means the portion of the Special Tax to be levied in an amount equal to the amount required in any Fiscal Year for CFD No.2003-1 necessary to pay all actual, documented maintenance costs, management fees and other operating expenses of the parking structure being financed by a portion of the Bond proceeds to the extent such costs, fees and operating expenses exceed revenues generated by such parking structure. The calculation and inclusion or exclusion of particular items of expense or income into such costs, fees, expenses and revenues shall be subject to and limited by the provisions of the following documents,which documents shall be in the form approved by the City Council in connection the issuance of the Bonds, and which documents, upon such approval, shall be deemed to be incorporated herein by this reference: (i)any covenants, conditions or restrictions encumbering such parking structure and/or the real property upon which it is to be constructed as of the date of issuance of the Bonds, (ii)the initial parking management agreement governing the operation and maintenance of such parking structure (the provisions of such initial parking management agreement to govern the determination of the Parking Structure Maintenance Special Tax for so long as the Special Tax lien remains in effect, A-2 notwithstanding any earlier expiration or termination of such agreement), and (iii)any amendments to the foregoing covenants,conditions or restrictions or agreements. 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.2003-1, 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 Taxable Property within CFD No.2003-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No.2003-1 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, (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, and(v)to pay the Parking Structure Maintenance Special Tax. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No. 2003-1, which are not Exempt Land or exempt from the Special Tax pursuant to law, but in no circumstance shall the total amount of Taxable Property be less than 40.63 acres. 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. 2003-1 are Taxable Property. 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 Assessor's Parcels of Taxable Property in CFD No.2003-1 shall be the greater of(1)$65,050 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.2003-1; 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 2004-2005, 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. A-3 E. LIMITATIONS No Special Taxes shall be levied on any Parcel after such Parcel becomes Exempt Land. The Special Tax may be levied and collected on Taxable Property commencing with Fiscal Year 2004-2005, 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). Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax may be levied and collected until such time as the City and the CFD No.2003-01 have divested all remaining ownership interests in the parking structure. Upon determination by the Administrator that such requirements have been met, the Special Tax lien shall be removed from all Parcels in CFD No.2003-1. 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 the City on behalf of CFD No.2003-1 may directly bill the special tax or any portion thereof, may collect special taxes or any portion thereof 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 delinquent Assessor's Parcels as permitted by the Act. Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax shall be directly billed in each instance and not billed with ad valorem property taxes. G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No.2003-1, 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 any Taxable Property within CFD No.2003-1 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, 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, 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 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: Amount of Current Special Taxes Paid means the amount of the Special Tax levied against the subject Assessor's Parcel that was paid to the County or the City by the owner of the subject Assessor's Parcel and would be applied to debt service payments on the Redemption Date and the Interest Payment Date immediately following the Redemption Date. Outstanding Bonds means all Bonds that are deemed to be outstanding under the Indenture the day immediately preceding the next Interest Payment Date. Redemption Date means the Interest Payment Date on which Bonds are proposed to be redeemed from the prepayments of the Special Tax. A-4 1. Prepayment in Full The Special Tax obligation applicable to such Assessor's Parcel may be fully prepaid and the obligation of such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner intending to prepay the Special Tax obligation on one or more Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. It shall be a condition precedent to prepayment that the owner intending to prepay the Special Tax must pay to the County all past due Special Tax on the Assessor's Parcel to be prepaid and provide proof of payment to the Administrator. Promptly following receipt of such notice,the Administrator shall notify the owner of such Assessor's Parcel(s)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 90 days prior to the next occurring date that Bonds may be redeemed from the proceeds of such prepayment pursuant to the Indenture. The Prepayment Amount(defined below) shall be calculated as summarized below(capitalized terms as defined above or below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Amount of Current Special Taxes Paid Total: Equals Prepayment Amount As of the proposed date of prepayment, the Prepayment Amount (defined below) shall be calculated as follows: Paragranh No. 1. For Assessor's Parcels of Taxable Property intended to be prepaid, compute the Maximum Special Tax for such Assessor's Parcels for the current Fiscal Year. 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 for the current Fiscal Year. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section G 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 less the par amount of Bonds scheduled to mature on the Redemption Date by the applicable redemption premium(the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the Interest Payment Date immediately preceding the Redemption Date to the Redemption Date. 6. 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. 7. Add the amounts computed pursuant to Paragraph 5 and subtract the amount computed pursuant to Paragraph 6(the Defeasance Amount). A-5 8. Determine the administrative fees and expenses associated with 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). 9. 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. 10. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3, 4, 7 and 8, less (i)the amounts computed pursuant to Paragraph 9 and (ii)the Amount of Current Special Taxes Paid(the Prepayment Amount). 11. From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3, 4, 7 (if greater than zero), and 9 shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments (as appropriate). The amount computed pursuant to Paragraph 8 shall be retained by the Administrator. With respect to any Assessor's Parcel that is prepaid,the City Council shall (i)cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Parcel,(ii)notify the County that the Special Tax,if any,remaining on the secured tax roll for the Assessor's Parcel has been satisfied and that the County should remove such amounts from the secured tax roll, and (iii)refund the owner for any Special Tax payments made on the Assessor's Parcel after the date of prepayment. From and after the prepayment, the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing;no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Tax that may be levied on Taxable Property within CFD No.2003-1 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. 8 of Section H.1. F = the percent by which the owner of an Assessor's Parcel(s)is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No. 8 of Section H.1. A-6 The owner of 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, and (ii)the percentage by which the Maximum Special Tax shall be prepaid. The Administrator shall promptly provide the owner 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.2003-1 shall (i)distribute the funds remitted to it according to Paragraph 11 of Section H.1, and (ii)indicate in the records of CFD No.2003-1 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 (i.e., 100%-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-7 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX B FORM OF OPINION OF BOND COUNSEL August 20,2013 City Council of the City of Huntington Beach Huntington Beach, California Re: $20,91 S,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)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. 2003-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,915,000 (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 and Resolution No.2013-21 (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 August 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 (i) 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 1,587,403,857 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�1 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('1 Unemployment Area Labor Force Employment') 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 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 1,3 57,400 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 2012. Name of Business No.Employed %of Total Boeing 4,676 4.06% Quiksilver 1,594 1.38 Cambro MFG Co. 951 0.83 Ensign United State Drilling 925 0.80 Hyatt Regency Huntington Beach 641 0.56 C&D Aerospace 555 0.48 Huntington Beach Hospital 520 0.45 Rainbow Disposal 408 0.35 Huntington Beach Healthcare 381 0.34 Wal-Mart 379 0.33 Total of top 10 11,030 9.58 all others 104,070 90.42 Total employment(public and private) 115,100 100.00% Source: City of Huntington Beach,Comprehensive Annual Financial Report for Fiscal Year Ended September 30,2012. 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 PacifiCare 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 2008 through 2012. BUILDING PERMITS AND VALUATIONS City of Huntington Beach 2008-2012 2008 2009 2010 2011 2012 Valuation(In$000's) Residential $ 39,114 $26,788 $33,567 $44,375 $ 97,199 Nonresidential 66,477 31,221 42,546 102,623 51,319 Total Valuation(') $105,591 $58,009 $76,113 146,998 $148,518 New Dwelling Units(#) Single-Family 20 9 4 24 22 Multi-Family 0 0 16 45 698 Total: 20 9 20 69 720 Total may not add up due to rounding. Source: Construction Industry Research Board. BUILDING PERMITS AND VALUATIONS Orange County 2008-2012 2008 2009 2010 2011 2012 Valuation(In$000's) Residential $1,037,710 $ 855,193 $1,029,406 $1,236,970 $1,554,904 Nonresidential 1,439,121 952,485 1,115,928 1,300,021 1,271,035 Total Valuation(') $2,476,831 $1,807,678 $2,181,334 $2,536,992 $2,825,939 New Dwelling Units(#) Single-Family 1,295 1,376 1,553 1,898 2,438 Multi-Family 1,864 824 1,538 2,909 3,725 Total: 3,159 2,200 3,091 4,807 6,163 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 is shown in the following tables. TAXABLE SALES Huntington Beach 2007-2011 Retail Retail and Food Total Outlets Year Perndts Taxable Transactions Total Perndts 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 Perndts Taxable Transactions Total Perndts 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 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. "Administration Fund"means that certain fund by that name established pursuant to the Indenture. "Administrative Expenses Cap"means$30,000 per Fiscal Year. "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. "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-1 (e) Certificates of deposit, savings accounts, deposit accounts or money market deposits where the banks rating's fall within the top 2 rating 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 items (a) through (c) of this definition; (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. 2003-1 (Huntington Center)2013 Special Tax Refunding Bonds issued in the original principal amount of$20,915,000. "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 August 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: 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. 2003-1 (Huntington Center)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 August 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 from the Treasurer, 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 August 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. "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. "Parking Fund"means the fund by that name established pursuant to the Operating Agreement. "Parking Structure Maintenance Special Tax" means that portion of the Special Taxes levied for the Parking Structure Maintenance Special Tax as defined in the Rate and Method of Apportionment. D-4 "Operator" means Huntington Center Associates, L.L.C., a Delaware limited liability company, its successors and assigns. "Operating Agreement" means the Operating Agreement for the Huntington Center Parking Structure, by and between the City and the Operator,dated as of March 1,2004. "Ordinance"means Ordinance No. 3631 adopted by the City Council,acting as the legislative body of the District on January 20,2004 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 thereof,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 pursuant to the Indenture 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 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. D-5 "Resolution of Formation" means, Resolution No.2003-10 adopted by the City Council on February 3,2003,pursuant to which the City formed the District. "Resolution of Issuance" means Resolution No.2013-21 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 special 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. "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. "Treasurer"means the Treasurer-Tax Collector of the County of Orange. "Term Bonds"means the Bonds maturing on September 1,2030 and September 1,2033. "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 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 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 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 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 in the Indenture, 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 tin the Indenture,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 thereof, 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,the Parking 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 Parking 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 date of the Indenture,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 of 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. 2003-1 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. 2003-1 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. 2003-1 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 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 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 the Indenture; (5) Parking Fund; (6) Rebate Fund; and (7) 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. 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. D-9 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 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 Payments due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest,principal and Sinking Fund Payments 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 pursuant to the Indenture 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 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 D-10 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 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 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. D-11 (c) Survival of Defeasance and Final Payment. Notwithstanding anything in the Indenture to the contrary,the obligation to comply with the rebate requirements of the Indenture shall survive the defeasance and final payment of the Bonds. (d) Amendment Without Consent of Owners. The provisions of the Indenture described under the heading "Rebate Fund" 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 the Indenture described under the heading"Rebate.Fund,"and the covenants under the Indenture shall be deemed to be modified to that extent. Parking Fund. After making the deposits required pursuant to the Indenture, the Trustee shall transfer Special Taxes in the amount of the Parking Structure Maintenance Special Tax to the Director of Finance for deposit into the Parking Fund pursuant to the Operating Agreement. Moneys on deposit in the Parking Fund are not pledged to the repayment of the Bonds. Surplus Fund. 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, (iv)to the Parking Fund to the extent amounts on deposit in the Parking Fund are less than the Parking Structure Maintenance Special Tax, or(v)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 D-12 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 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 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 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 the Indenture. 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 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(c)of the definition thereof D-13 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 shall 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. 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 the Indenture described under the heading "Covenants," 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. 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. Levy 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 the Indenture. The receipt of such notice by the District shall in no way affect the obligations of D-14 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. 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 the Park Structure Maintenance Tax 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 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 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 the Indenture. 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 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. D-15 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. 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) Arbitraee. 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 D-16 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 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. 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 of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute in effect after the date of the Indenture, 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; D-17 (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; or 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 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 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 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 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 D-18 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 thereof 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 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 under the Indenture. The obligations of the District under the Indenture described 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. D-19 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 thereof, 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. 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 thereof 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 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 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 D-20 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 (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 or 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 provided in the Indenture, 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. D-21 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 date of the Indenture, 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 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 thereof, 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. Any Outstanding Bond shall be deemed to have been paid within the meaning expressed in the first paragraph of immediately 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 thereof 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 D-22 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 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 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 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 D-23 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 of 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. 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 thereof, contained in the Indenture, or the application thereof 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 thereof, 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-24 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement (the "Disclosure Agreement"), dated as of August 1, 2013, is executed and delivered by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the"Issuer") and Willdan Financial Services, as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)2013 Special Tax Refunding Bonds (the"Bonds"). The Bonds are being issued pursuant to Resolution No. 2013-21 that certain Bond Indenture (the "Indenture"), dated as of August 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 Director of Finance 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, 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 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. E-1 "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 I 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. E-2 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 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 each year; (vi) information regarding the percentage of delinquency,if any, in the collection of special taxes levied on property in the District, the number of parcels delinquent, amount delinquent compared to the total levy and the assessed value of each delinquent parcel as of May 1 each year in the form set forth in Table 8; (vii) an update to the assessed value-to-lien information set forth in Table 7 as of May 1 each year, except that the overlapping debt information is not required to be included in the assessed value-to-lien calculations; 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 (vii), in the light of the circumstances under which they were made,not misleading. E-3 (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, 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 E-4 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 Ai4ent. 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. 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 E-5 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 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 E-6 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.2003-1 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 Facsimile : (213)615-6199 To the Dissemination Agent: Willdan Financial Services 27368 Via Industria, Suite 110 Temecula, CA 92590 Attention: Candace Heiser Telephone: (800)755-6864 Facsimile: (951)587-3510 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. E-7 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 land 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.2003-1 By: Its: 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.2003-1 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. 2003-1 (HUNTINGTON CENTER) Name of Bond Issue: $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: August 20,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. 2003-1 (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 August 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 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES This Property Owner Continuing Disclosure Agreement, dated as of August 1, 2013 (the"Disclosure Agreement"), is made and entered into by and between Bella Terra Associates, LLC, a Delaware limited liability company on behalf of itself and Bella Terra C (as defined herein) (the "Property Owner") and U.S. Bank National Association (the "Dissemination Agent"), in connection with the issuance of$20,915,000 City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to a Bond Indenture,dated as of August 1, 2013 (the "Bond Indenture"), between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the "District") and U.S. Bank National Association, as trustee. The Property Owner and the Dissemination Agent covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered 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 Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a fee simple 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. "Bella Terra C"means Bella Terra C LLC,a Delaware limited liability company. `'City"means the City of Huntington Beach. "Disclosure Representative" means the President of by DJM Capital Partners, Inc., or his/her designee, or such other officer, employee or agent as the Property Owner 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 Property Owner, the City and the Dissemination Agent a written acceptance of such designation. F-1 "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 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 Property Owner's fiscal year for their financial accounting purposes. Currently the Property Owner is on a January 1 to December 31 Fiscal Year. "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 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 Property Owner 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 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 Property Owner shall provide the Annual Report to the Dissemination Agent. The Property Owner 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 Property Owner hereunder. The Dissemination Agent may conclusively rely upon such certification of the Property Owner, 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 F-2 Section 4(a) of this Disclosure Agreement. If the Property Owner'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 Property Owner is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Property Owner shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) 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) to the extent the Annual Report has been provided to the Dissemination Agent, file a report with the Property Owner and the City 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 Property Owner's Annual Report shall contain or incorporate by reference the following: (a) Audited annual financial statements, if available,unaudited financial statements if not. (b) Any delinquency in the payment of Special Taxes by the Property Owner or any Affiliate thereof, including but not limited to Bella Terra C. (c) Any pending litigation which would adversely affect the ability of the Property Owner or any Affiliate thereof,including but not limited to Bella Terra C,to pay Special Taxes levied on the Property. (d) Any material change in the ownership of the Property Owner or any Affiliate thereof owning Property, including but not limited to Bella Terra C. (e) A summary of leases in the District as of the Fiscal Year end in substantially the form set forth as Table 4 in the Official Statement. (f) The assumption of any obligations of the Property Owner pursuant to Section 6. In addition to any of the information expressly required to be provided as described above, the Property Owner 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 Property Owner 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 Property Owner 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 Property Owner shall give, or cause to be given,notice of the occurrence of any of the following events: F-3 (i) failure by the Property Owner or any Affiliate thereof, including but not limited to Bella Terra C, 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 Property Owner or any Affiliate thereof, including but not limited to Bella Terra C, on any loan with respect to any financing arrangements with respect to the Property, and (iv) The occurrence of an Event of Bankruptcy with respect to the Property Owner or any Affiliate of the Property Owner, including but not limited to Bella Terra C. Section 6. Assumption of Obligations. If the Property owned by the Property Owner, or any Affiliate of the Property Owner, is to be conveyed to a Person,the Property Owner 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 Property Owner 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 "Property Owner" 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 Property Owner shall no longer be required to comply with the requirements of this Disclosure Agreement;provided however that if,following a conveyance by the Property Owner 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 Property Owner shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term"Property Owner" shall include, in addition to Property Owner, the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Property Owner'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 Property Owner and all Affiliates of the Property Owner 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 Property Owner 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 Property Owner 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 U.S.Bank National Association. The Dissemination Agent may at any time resign by providing thirty days written notice to the City and the Property Owner, 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 Property Owner. If no appointment of a F-4 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 and the Property Owner 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 Property Owner 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 Property Owner 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 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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. F-5 Section 11. Default. In the event of a failure of the Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner and shall not be deemed to be acting in any fiduciary capacity for the Property Owner, the Bondholders, or any other party. The obligations of the District and the Property Owner 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 Property Owner(its successors and assigns),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. "PROPERTY OWNER" BELLA TERRA ASSOCIATES,LLC By: Its: "DISSEMINATION AGENT" U.S.BANK NATIONAL ASSOCIATION By: Its: F-6 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. 2003-1 (Huntington Center)2013 Special Tax Refunding Bonds Date of Issuance: August 20,2013 NOTICE IS HEREBY GIVEN that Bella Terra Associates, LLC, a Delaware limited liability company (the"Property Owner") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, by and between the Property Owner and U.S. Bank National Association, as Dissemination Agent, dated as of August 1, 2013, executed and delivered for the benefit of the owners and beneficial owners of the above-referenced bonds. The Property Owner anticipates that the Annual Report will be filed by Dated: 20 BELLA TERRA ASSOCIATES,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance F-7 (THIS PAGE IS INTENTIONALLY LEFT BLANK) APPENDIX G BOOK-ENTRY-ONLY SYSTEM The information in this section concerning DTC and DTC's hook-entry only system has been ohtained from sources that the District believes to he 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 heneficial 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 heneficial ownership interests in the Bonds and other related transactions by and hetween DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC to the District which the District believes to he 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 he. 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 G-1 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. 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. G-2 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (the "District") the District's 2013 Special Tax Refunding Bonds in definitive form, in the aggregate principal amount of$20,915,000. 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 30, 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: August 20,2013 STIFEL,NICOLAUS & COMPANY, INCORPORATED By: A oriz epresen e DOCSO C/1636194/022273-0006 U.S.BAND 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 under this Bylaw without the necessity of further action by the Board. I further certify that Martin Meza of U.S. Bank National Association, has been duly elected and qualified and now holds the office listed herein, and that the signature of such officer is authentic: Martin Meza Vice President WILL SIGN: IN WITNESS WHEREOF, I have hereunto set my hand to be affixed hereto this 20tn day of August,2013. U.S.Bank National ssociation By:Ashraf urdaa ice Pre 'de $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. Bank National Association, (the `Bank"), which is acting (A) as trustee (the "Trustee") under that certain Bond Indenture, dated as of August 1, 2013 (the`Bond Indenture"), by and between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the "Issuer")and the Bank, and(B) as escrow bank(the"Escrow Bank")under the Escrow Agreement, dated as of August 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. (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: August 20, 2013 U.S.BANK NATIONAL ASSOCIATION By Authorized Of ice) DOCSOC/1636194/022273.0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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 August 1, 2013, by and between the City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) and the Trustee, for the above-captioned bonds (the "Bonds"), acknowledges receipt from Stifel, Nicolaus & Company, Incorporated, as Underwriter (the "Underwriter") of $20,852,570.60, representing the "Purchase Price" of the Bonds, which the Underwriter has represented to,be computed as follows: Principal Amount $20,915,000.00 Plus Net Original Issue Premium 56,195.60 Less Underwriter's Discount (118,625.00) TOTAL PURCHASE PRICE 20,852,570.60 The Trustee agrees to deposit and transfer the aforesaid amounts in accordance with the Instructions to Trustee, executed by the Director of Finance of the City of Huntington Beach, dated the date hereof. Dated: August 20,2013 U.S.BANK NATIONAL ASSOCIATION,as Trustee By: Authoriz d Officer DOCSOC/1636194/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS ESCROW BANK'S RECEIPT The undersigned, on behalf of U.S. Bank National Association, as escrow bank(the"Escrow Bank")under that certain Escrow Agreement dated as of August 1, 2013 (the"Escrow Agreement"), by and between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) and the Escrow Bank, acknowledges receipt of the cash deposit to the Escrow Fund referenced in the Escrow Agreement. Dated: August 20,2013 U.S.BANK NATIONAL ASSOCIATION,as Escrow Bank By: 1 Authoriz d Officer DOCSOC/1636194/022273-0006 CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES This Property Owner Continuing Disclosure Agreement, dated as of August 1, 2013 (the "Disclosure Agreement"), is made and entered into by and between Bella Terra Associates, LLC, a Delaware limited liability company on behalf of itself and Bella Terra C (as defined herein) (the"Property Owner") and U.S. Bank National Association(the"Dissemination Agent"), in connection with the issuance of$20,915,000 City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds(the"Bonds"). The Bonds are being issued pursuant to a Bond Indenture,dated as of August 1, 2013 (the `Bond Indenture"), between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the "District") and U.S. Bank National Association, as trustee. The Property Owner and the Dissemination Agent covenant and agree as follows: Section 1. Purpose of the Disclosure Ageement. This Disclosure Agreement is being executed and delivered 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 15c2-1.2(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 Property Owner pursuant to, and as described in,Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a fee simple 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. "Bella Terra C"means Bella Terra C LLC, a Delaware limited liability company. "City"means the City of Huntington Beach. "Disclosure Representative" means the President of by DJM Capital Partners, Inc., or his/her designee, or such other officer, employee or agent as the Property Owner 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 Property Owner, the City and the Dissemination Agent a written acceptance of such designation. "Emma"shall mean the Electronic Municipal Market Access system of the MSRB. DOCSOC/16367810/022273-0006 "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 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 Property Owner's fiscal year for their financial accounting purposes. Currently the Property Owner is on a January 1 to December 31 Fiscal Year. "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 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 Property Owner 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 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 Property Owner shall provide the Annual Report to the Dissemination Agent. The Property Owner 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 Property Owner hereunder. The Dissemination Agent may conclusively rely upon such certification of the Property Owner, 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 Property Owner's fiscal year changes,it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). 2 DOCSOC/1636781v 1/022273-0006 (b) If the Property Owner is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Property Owner shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) 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) to the extent the Annual Report has been provided to the Dissemination Agent,file a report with the Property Owner and the City 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 Property Owner's Annual Report shall contain or incorporate by reference the following: (a) Audited annual financial statements,if available,unaudited financial statements if not. (b) Any delinquency in the payment of Special Taxes by the Property Owner or any Affiliate thereof,including but not limited to Bella Terra C. (c) Any pending litigation which would adversely affect the ability of the Property Owner or any Affiliate thereof,including but not limited to Bella Terra C,to pay Special Taxes levied on the Property. (d) Any material change in the ownership of the Property Owner or any Affiliate thereof owning Property,including but not limited to Bella Terra C. (e) A summary of leases in the District as of the Fiscal Year end in substantially the form set forth as Table 4 in the Official Statement. (f) The assumption of any obligations of the Property Owner pursuant to Section 6. In addition to any of the information expressly required to be provided as described above, the Property Owner 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 Property Owner 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 Property Owner 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 Property Owner shall give, or cause to be given, notice of the occurrence of any of the following events: (i) failure by the Property Owner or any Affiliate thereof, including but not limited to Bella Terra C, 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, 3 DOCSOC/1636781 v l/022273-0006 (iii) default by the Property Owner or any Affiliate thereof, including but not limited to Bella Terra C, on any loan with respect to any financing arrangements with respect to the Property, and (iv) The occurrence of an Event of Bankruptcy with respect to the Property Owner or any Affiliate of the Property Owner,including but not limited to Bella Terra C. Section 6. Assumption of Obligations. If the Property owned by the Property Owner, or any Affiliate of the Property Owner,is to be conveyed to a Person,the Property Owner 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 Property Owner 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 "Property Owner" 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 Property Owner shall no longer be required to comply with the requirements of this Disclosure Agreement; provided however that if,following a conveyance by the Property Owner 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 Property Owner shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term`'Property Owner"shall include, in addition to Property Owner, the Person to whom the Property has been conveyed. Section 7. Termination of Resorting Obligation. The Property Owner'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 Property Owner and all Affiliates of the Property Owner 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 Property Owner 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 Property Owner 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 U.S.Bank National Association. The Dissemination Agent may at any time resign by providing thirty days written notice to the City and the Property Owner, 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 Property Owner. 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 and the Property Owner 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 Property Owner with written notice of the identity of any successor Dissemination Agent appointed or engaged by the City. 4 DOCSOC/1636781 v l/022273-0006 Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Property Owner 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 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Bond 5 DOCSOC/1636781 vl/022273-0006 Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Property Owner 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 Property j Owner 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 Property Owner and shall not be deemed to be acting in any fiduciary capacity for the Property Owner, the Bondholders, or any other party. The obligations of the District and the Property Owner 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 Property Owner(its successors and assigns),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. "PROPERTY OWNER" BELLA TERRA ASSOCIATES, LLC By: Its: Vice President "DISSEMINATION AGENT" U.S.BANK NATIONAL ASSOCIATION By: Its: 6 DOCS OC/1636781v 1/022273-0006 Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Property Owner 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 Property Owner 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 ovincurred 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 Property Owner and shall not be deemed to be acting in any fiduciary capacity for the Property Owner, the Bondholders, or any other party. The obligations of the District and the Property Owner 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 Property Owner(its successors and assigns),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. "PROPERTY OWNER" BELLA TERRA ASSOCIATES,LLC By: Its: "DISSEMINATION AGENT" U.S.BANK NATIONAL ASSOCIATION By: its: Vice President 6 DOCSOC/1636781 vl/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.2003-1 (Huntington Center)2013 Special Tax Refunding Bonds Date of Issuance: August 20,2013 NOTICE IS HEREBY GIVEN that Bella Terra Associates, LLC, a Delaware limited liability company(the"Property Owner")has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, by and between the Property Owner and U.S.Bank National Association, as Dissemination Agent, dated as of August 1,2013, executed and delivered for the benefit of the owners and beneficial owners of the above-referenced bonds. The Property Owner anticipates that the Annual Report will be filed by Dated: ,20 BELLA TERRA ASSOCIATES,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance 7 DOCSOC/1636781v1/022273-0006 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS 10b-5 CERTIFICATE OF PROPERTY OWNER The undersigned (the "Property Owner"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (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 Property Owner. (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 Property Owner, the Property Owner's organization, activities, properties and financial condition, and the Property Owner's development within the District. (4) The sections in the Preliminary Official Statement entitled "THE COMMUNITY FACILITIES DISTRICT — The Development, "THE COMMUNITY FACILITIES DISTRICT — The Property Owners," "THE COMMUNITY FACILITIES DISTRICT — The Summary of Leases; Occupancy Rates" and "THE COMMUNITY FACILITIES DISTRICT — The Operating Agreement, the REA and the OPA," to the extent they include information about the Property Owner, the Property Owner's organization, activities, properties and financial condition, and the Property Owner's development within the District, contain no untrue statement of a material fact and do 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 Property Owner is obligated to provide continuing disclosure pursuant to the Landowner Continuing Disclosure Agreement attached as Exhibit A. No events occurred in the past five years such that the Property Owner was obligated under the Landowner Continuing Disclosure Agreement in the past five years to provide either (A) a Semi-Annual Report or an Annual Report that contained information described in Section 4(b)(i)-(ii) and (iv)- (vii) or(B) a report of a Listed Event described in Section 5(a)(ii)-(viii). The Property Owner filed information about material leases in compliance with Section 4(b)(iii) but failed to file information about the sale of property to a non=affiliated entity pursuant to Section 4(b)(iii)and Section 5(a)(i). (6) The Property Owner 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 Property Owner 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 Property Owner in the District. (8) The Property Owner and the following affiliated entities 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: Bella Terra Group Retail, LLC DJM Capital Partners, Inc. BTDJM Associates LLC Bella Terra Borrower (9) There is no litigation or administrative proceeding of any nature in which the Property Owner has been served, or is pending or threatened which, if successful, would materially adversely affect the Property Owner's ability to own and operate the property leased by the Property Owner 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 Property Owner Continuing Disclosure Agreement executed by the Property Owner. 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:..June 17 , 2013 BELLA TERRA ASSOCIATES, LLC By: ItS: Vice President BELLA TERRA C LLC By: Its: Vice President EXHIBIT A LANDOWNER CONTINUING DISCLOSURE AGREEMENT LANDOWNER CONTINUING ]DISCLOSURE AGREEMENT This Landowner Continuing Disclosure Agreement,dated as of March 1, 2004 (the "Disclosure Agreement"), is made and entered into by and between Huntington Center Associates, LLC, a Delaware limited liability company (the "Landowner"), and U.S. Bank National Association, as dissemination agent (the "Dissemination Agent") in connection with the issuance by the City of Huntington Beach, California (the "Issuer") of its Community Facilities District No. 2003-01 (Huntington Center) 2004 Special Tax Bonds (the "Bonds"). The Bonds are issued pursuant to the Mello-Roos Community Facilities Act of 1982, as amended (the "Act") and a Fiscal Agent Agreement,dated as of March 1,2004,by and between the Issuer and U.S. Bank National Association as Fiscal Agent (the "Fiscal Agent Agreement"). The Landowner and the Dissemination Agent covenant and agree as follows: SECTION 1 P=ose of the Disclosure Agreement. This Disclosure Agreement is i being executed and delivered for the benefit of the Bond Owners and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule. SECTION 2. Definitions. In addition to the definitions set forth in the Fiscal Agent Agreement or parenthetically defined herein, which apply to any capitalized terms 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,259/o or more of the outstanding voting securities of such other Person,(b) any Person 25%or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other Person, i and (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person; 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" means any Annual Report provided pursuant to, and as described I in, Sections 3 and 4 of this Disclosure Agreement. �n . "Annual Report Date"means the date that is four months and one day after the end II of the Landowner's fiscal year, which fiscal year currently ends on December 31. The first Annual Report Date shall be May 1,2005. l x 'Assumption Agreement' means an agreement between a Successor, or an-:Affiliate thereof, and the Dissemination Agent containing-- terms substantially similar to this Disclosure Agreement, whereby such;Successor or- Affiliate agrees to provide Annual Reports, Semi-Annual Reports and notices of Listed Events with respect to.the portion, of the Property owned by such Major-Landowner and its Affiliates. "Bond Counsel" means an attoiney or a firm of attorneys whose experience in matters relating to the issuance of obligations by the states and their political subdivisions and the tax-exempt status of the interest thereon is recognized nationally. "Community Facilities District" means City of Huntington Beach Community Facilities District No.2003-01 (Huntington Center). i I F9 "Development Plan" means, with respect to the Landowner or a Successor, the specific improvements such Person intends to make, or cause to be made, to the portion of the Property owned by such Person in order for such portion of the Property to reach the Planned Development Stage, the time frame in which such improvements are intended to be made and the estimated costs of such improvements. As of the date hereof, the Development Plan for the Property owned by the Landowner and its Affiliates is described in the Official Statement under the caption "THE PROJECT, THE LANDOWNER AND THE DEVELOPER -The Project." "Dissemination Agent" means U.S. Bank National Association, acting in its capacity as the Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Landowner and which has filed with the Issuer a written acceptance of such designation. "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 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 and the same shall remain undismissed for a period of sixty days,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. "Financing Plan"means, with respect to the Landowner or a Successor, the method by which such Person intends to finance its Development Plan, including specific sources of funding for such Development Plan. As of the date hereof, the Financing Plan for the Landowner and its Affiliates is described in the Official Statement under the caption "THE PROJECT, TH8 LANDOWNER AND THE DEVELOPER -Financing Plan." "Financial.Statements"means, with respect to the Landowner or a Successor, ,the full financial statements, special purpose financial statements, project operating statements or other reports reflecting the financial position of each entity, enterprise, fund, account or other person (other than a financial institution acting as a lender in the ordinary course of business) identified in such Person's Development Plan or its Financing Plan as a source of funding for such Person's Development Plan, which statements shall be prepared in accordance with tax-based accounting principles,and which statements may be audited or unaudited; provided that, if such financial statements or reports are otherwise prepared as audited financial statements or reports, then "Financial Statements" means such audited financial statements or reports. "Independent Financial Consultant" means a financial consultant or special tax consultant or firm of such consultants generally recognized to be well qualified in the financial consulting or special tax consulting field, appointed and paid by the Landowner, who is not controlled by either the Issuer or Landowner, does not have any substantial interest (direct or indirect) in the Issuer or Landowner and is not a member, officer or employee of the Issuer or Landowner,but who may-be regularly retained to make annual or other reports to the Issuer or Landowner. F-10 j i i "Listed Event" means any of the events listed in Section 5(a) of this Disclosure Agreement. "National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. The Nationally Recognized Municipal Securities Information Repository for purposes of the Rule- are identified in the Securities and Exchange Commission website located at www.sec.gov/consumer/nrmsir.htm. "Official Statement" means the Official Statement, dated March 30, 2004, relating to the Bonds. "Participating Underwriter" means UBS Financial Services Inc. "Person" means an individual, a corporation, a partnership, an association, a joint stock company, a trust, a limited liability company, any unincorporated organization or a i government or political subdivision thereof. "Property" means the parcels within the boundaries of the Community Facilities District subject to Special Taxes. f "Repository" means each National Repository and.each State Repository. "Rule" means Rule 150-12(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. "Semi-Annual Report means any Semi.-Annual Report provided pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Semi-Annual Report Date" means the date that is ten months and one day after the end of Landowner's fiscal year,which fiscal year currently ends on December 31. The first Semi Annual Report Date shall be November 1,2004. "State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized as such by the Securities and Exchange Commission. As of the date. of this Disclosure I Agreement, there is no State Repository. ' "Successor" means any Person,other than the Landowner,who owns any portion of the Property. SECTION 3. Provision of Annual Re,•ports and Semi-Annual Reports. (a) Not later than five (5)business days prior to each Annual Report Date, the Landowner shall provide to the Dissemination Agent an Annual Report which is consistent with the requirements of Section 4 hereof and which is in a form suitable for filing with the Repositories. The Annual Report may be submitted as a single document or as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement; provided that the Financial Statements of the Landowner (if required) may be submitted separately from the balance of the Annual ' Report and later than the date required above for the filing of the Annual Report if the audited Financial Statements are not available by that date. Not later than five business days after its receipt of the foregoing material from the Landowner, the Dissemination Agent shall provide a copy thereof to each Repository and the Participating Underwriter. F-11 I The Landowner 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 Landowner and shall have no duty or obligation to review such Annual Report. (b) Not later than five (5) business days prior to each Semi-Annual Report Date, the Landowner shall provide to the Dissemination Agent a Semi-Annual Report which is consistent the requirements of Section 4 hereof and which is in a form suitable for filing i with the Repositories. The Semi-Annual Report may be submitted as a single document or C as separate documents comprising a package and may cross-reference other information as provided in Section 4 of this Disclosure Agreement. Not latex than five (5) business days i after its receipt of the foregoing material from the Landowner, the Dissemination Agent shall provide a copy thereof to each Repository and the Participating Underwriter. The Landowner shall provide a written certification with each Semi-Annual Report furnished to f the Dissemination Agent to the effect that such Semi-Annual Report constitutes the Semi- Annual Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon such certification of the Landowner and shall have no duty or obligation to review such Annual Report. (c) If the Dissemination Agent has not received a copy of the Annual Report by the date required in Subsection (a) or if the Dissemination Agent has not received a copy of the Semi-Annual Report by the date required in Subsection (b),.the Dissemination Agent shall notify the Landowner of such failure to receive the applicable report. If the Dissemination Agent is unable to verify that an Annual Report has been provided to the Repositories and the Participating Underwriter by the date required in Subsection (a),or if the Dissemination Agent is unable to verify that a Semi-Annual Report has been provided to the Repositories and the Participating Underwriter by the date required in Subsection (b),the Dissemination Agent shall send a notice to the Municipal Securities Rulemaking Board (WSRB") and to the State Repository, if any, 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 and the Semi-Annual Report,the name and address of each National Repository and each State Repository, if any; (ii) provide any Annual Report and any Semi-Annual Report received by it to each Repository and to the Participating Underwriter, as provided herein; and (iii) if it has provided the applicable report pursuant to (ii) above, file a report with the Issuer and the Landowner certifying that it provided the Annual Report or the Semi-Annual Report, as the case may be, pursuant to this Disclosure Agreement,stating the date it was provided and listing all the Repositories to which II it was provided. SECTION 4. Content of Annual Reports and Semi-Annual Reports. (a) The. Landowner's Annual Report shall contain or incorporate by reference Financial Statements for itself and each Successor for the prior fiscal year if required; provided, that, if such information is required from the Landowner as to a Successor,the Landowner shall only be required to provide such information that it has actual knowledge of after reasonable inquiry. If audited Financial Statements are required to be provided, and such audited Financial Statements are not available by the time the Annual Report is required to be filed F-12 I - pursuant to Section 3(a), the Annual Report shall contain unaudited Financial. Statements, if prepared,and the audited Financial Statements shall be filed in the same manner as, or as an amendment or supplement to, the Annual Report when they become available. Such Financial Statements shall be for the most recently ended fiscal year for the entity covered thereby hereunder. If the annual financial information or operating data provided in an Annual Report or a Semi-Annual Report is amended pursuant to the provisions hereof, the first Annual j Report or Semi-Annual Report 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. As required by the Rule, if an amendment is made to the provisions hereof �i 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 ,i 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. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be provided in the manner as for a Listed. Event under Section 5(c). (b) The Landowner's Annual Report and Semi-Annual Report shall contain or incorporate by reference the following information with respect to itself and each Successor: I: (i) If information regarding such Person has not previously been included in an Annual Report, a Semi-Annual Report or the Official Statement, the Development Plan of such Person; or, if information regarding such Person has previously been included in an Annual Report, a Semi-Annual Report or the Official Statement, a description of the progress made in the implementation of the Development Plan of such Person since the date of such information and a description of any significant changes in such Development Plan and the causes or rationale for such changes. (ii) if information regarding such Person has not previously been ! included in an Annual Report, a Semi-Annual Report or the Official Statement, the Financing Plan of such Person; or; if information regarding such Person: has previously been included in an Annual Report, a Semi-Annual Report or the:Official Statement, a description of any significant changes in the Financing Plan of such Person.and the causes or rationale for such-changes. i (iii) A description of any sales of all or any portion of such' Person's Property and of any material leases of space within any of the buildings located on such Persons portion of the Property during the period covered by such Annual Report or Semi-Annual Report, including the identification of each buyer or lessee and the area that was sold or leased and the length of the applicable lease. (As used herein, "material lease" means a lease of more than 5,000 square feet.) (iv) With respect to any portion of the Property owned by such Person and any of its Affiliates, a statement as to whether any taxes or assessment installments applicable to, such portion of the Property are delinquent. a F-13 i i (v) A description of any change in the ownership structure of such Person and/or the financial condition of-such Person or any of its Affiliates if such change in ownership structure and/or financial condition could materially interfere with such Person's ability to complete its Development Plan. . (vi) Any amendments to land use entitlements for any portion of the Property owned by such Person that could have a material adverse affect on such Person's most recently disclosed Financing Plan or Development Plan or on the ability of such Person,or any Affiliate of such Person, to pay installments of Special Taxes when due. (vii) Any precondition to commencement or continuation of development on any portion of the Property owned by such Person imposed by a governmental entity after the date of issuance of the Bonds which has not been previously disclosed and which could have a material adverse affect,or any change in the status of any such precondition that was previously disclosed in the Official Statement, an Annual Report or a Semi-Annual Report,which could have a material adverse affect, on such Person's most recently disclosed Financing Plan or Development Plan or on the ability of such Person, or any Affiliate of such Person, to pay installments of Special Taxes when due. (viii) Any previously undisclosed legislative, administrative or judicial challenges to development on any portion of the Property owned by such Person, or any material change in the status of any such challenge that was previously disclosed in the Official Statement, an Annual Report or a Semi-Annual Report, that could have a material adverse affect on such Person's most recently disclosed Financing Plan or Development Plan or on the ability of such Person, or any Affiliate of such Person,to pay installments of Special Taxes when due. (ix) An update of the status of any previously reported Listed Event described in Section 5. (c) In addition to any of the information expressly required to be provided under Subsections (a) and (b) of this Section,.the Landowner 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. Persons that are Affiliates of each other may file either separate Annual Reports and Semi-Annual Reports or combined Annual Reports and Semi-Annual Reports covering all such entities. Any or all of the items listed above may be included by specific reference to other documents which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official ; statement,it must be available from the MSRB. The Landowner shall clearly identify each such other document so included by reference. SECTIONS. deporting of Significant Events. (a) The following events are Listed i Events for purposes of this Agreement: (i) Any conveyance by a Person of any portion of the Property owned by such Person to an entity that is not an Affiliate of such Person; F-14 i (ii) Any failure of a Person, or any Affiliate of such Person, to pay when due taxes or Special Taxes with respect to any portion of the Property owned by such Person or Affiliate; (iii) Any refusal to-provide funds pursuant to or any termination of, or any event of default under, any line of credit, loan or other arrangement to provide funds to the Landowner or a Successor or any other loss of a source of funds that could have a material adverse affect on such Person's most recently disclosed Financing Plan or Development Plan or on the ability of such Person,or any Affiliate of such Person,to pay installments of Special Taxes when due; (iv) The occurrence of an Event of Bankruptcy with respect to a the Landowner or a Successor or any Affiliate of such Person that owns any portion of the Property; (v) Any amendments to land use entitlements for any portion of the i Property, if material to the most recently disclosed Development Plan for such portion of the Property; (vi) The filing of any lawsuit against the Landowner or a Successor which, in the reasonable judgment of such Person, will adversely affect the completion of. the development of Property owned by such Person, or litigation which if decided against such Person,in the reasonable judgment of such Person, would materially adversely affect the financial condition of such Person. (vii) The assumption of any obligations by a Successor pursuant to Section 6 hereof; and (viii) A change in the fiscal year of the Landowner or a Successor. (b) Whenever the Landowner obtains knowledge of the occurrence of a Listed Event, the Landowner shall promptly (i) determine whether such event would be material under applicable federal securities laws and (ii) if the Landowner determines that such event would be material under applicable federal securities laws,notify the Dissemination Agent and the Issuer in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to Subsection (c) and shall be in a format suitable for reporting to the MSRB and the.State Repository, if any. • I i.: (c) If the Dissemination Agent has been instructed by the Landowner to report the occurrence of a Listed Evert; the Dissemination Agent shall file a notice of such occurrence with the MSRB, the State Repository and the Participating Underwriter. SECTION 6. Assumntiori of Obligations_ If a portion of the Property is conveyed, the obligations of the Landowner'or a Successor hereunder with respect to such portion of the Property may be assumed by:the applicable Successor or by an Affiliate thereof. In order to effect such assumption;. the applicable Successor or Affiliate shall enter into an !! Assumption Agreement- SECTION 7_ Termination of Reporting Obligation. The Landowner.'s obligations hereunder shall terminate(except'as provided in Section 12) upon the earlier to occur of (a) the legal defeasance, prior redemption or payment in full of all the Bonds, (b) .the date on which those portions of the Rule which require this written undertaking are held to be invalid by a court of competent jurisdiction in a non-appealable action, have been repealed retroactively or otherwise do not apply to the Bonds. The Landowner's obligations F-15 I hereunder shall terminate with respect to any portion of the Property on the date such obligations have been assumed by one or more Successors or Affiliates thereof pursuant to j an Assumption Agreement. The Landowner's obligations under this Disclosure Agreement ; with respect to a Person that purchased Property from the Landowner shall terminate upon the earlier to occur of (y) the date on which the Landowner's obligations with respect to such Person are assumed under an Assumption Agreement entered into pursuant to Section 6 or (z) the date on which all Special Taxes applicable to the portion of the Property owned by such Person and its Affiliates are prepaid in full; provided however, until the occurrence of either of the events described in clauses (y) through (z), the Landowner's obligations hereunder with respect to each Successor, if any, shall remain in full force and effect. Upon the occurrence of any such termination prior to the final maturity of the Bonds, the Landowner shall cause the Dissemination Agent to give notice of such termination in the same manner as for a Listed Event under Section 5(c). Notwithstanding the foregoing, the Landowner shall have no obligation to provide Semi-Annual Reports pursuant to Section 3 subsequent to the date on which it provides an Annual Report or a Semi-Annual Report which indicates that the then-applicable Development Plan for each portion of the Property has been fully implemented. SECTION 8. Dissemination Agent. The Landowner may, from time to time, discharge the Dissemination Agent with or without appointing a successor Dissemination Agent. The Dissemination Agent may resign by providing thirty(30)days' written notice to the Landowner and the Issuer. If at any time there is no other designated Dissemination Agent, the Landowner shall be the Dissemination Agent. If the Dissemination Agent is an entity other than the Landowner,the Landowner shall be responsible for paying the fees and expenses of such Dissemination Agent for its services provided hereunder. SECTION 9. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Landowner and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the Landowner, so long as such amendment does not adversely affect the rights or obligations of the Dissemination Agent), and any provision of this Disclosure Agreement may be waived,provided that(a) if the amendment or waiver relates to Sections 3(a),4 or 5(a)hereof, such amendment or waiver is made in connection with a change in legal requirements, change in law or change in the identity, nature, or status of the Landowner or the type of business conducted; (b) the undertakings herein, as proposed to be amended or waived,would,in the opinion of Bond Counsel approved by the Issuer and the Participating Underwriter, 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; and (c) the amendment or waiver either(i) is approved by the Bond Owners in the same manner as provided in the Fiscal Agent Agreement for amendments to the Fiscal Agent Agreement with the consent of Bond Owners, or (ii) does not, in the opinion of the Issuer or Bond Counsel, materially impair the interests of the Bond Owners or Beneficial Owners of the Bonds. j SECTION 10. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the Landowner 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 Semi-Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the Landowner chooses to include any information in any Annual Report or Semi-Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Landowner shall have no obligation under this Agreement to update such information or include it in any future Annual Report or Semi-Annual Report or notice of occurrence of a Listed Event. i F-16 i i SECTION 11. Default In the event of a failure of the Landowner or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Dissemination Agent may (and,at the written request of the Participating Underwriter or the Owners of at least 25%of the aggregate principal amount of Outstanding Bonds, and upon being indemnified to its reasonable satisfaction against the costs, expenses and liabilities to be incurred in compliance with such request, shall), or the Participating Underwriter or any Bond 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 Landowner or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an event of default under the Fiscal Agent Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the Landowner 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 not have any responsibility for the content of any Annual Report, Semi-Annual Report or notice of a Listed Event. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Landowner agrees to indemnify and save the Dissemination Agent, including its officers, directors, employees and agents (each, an "Indemnified Party"), harmless against an 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 reasonable costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding losses, expenses and liabilities due to such Indemnified Party's negligence or willful misconduct. The ;.F obligations of the Landowner under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. The Dissemination Agent will not, without the Landowner's prior written consent, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification may be sought hereunder unless such settlement, compromise or consent includes an unconditional release of the Landowner and its Affiliates from all liability arising out of any such claim, action or proceedings. A request by the Dissemination Agent for the Landowner written consent .� shall be answered within a reasonable amount of time to allow the Dissemination Agent to 'I act in a timely manner. If any claim, action or proceeding is settled with the consent of the Landowner or if there is a judgment (other than a stipulated final judgment without the approval of the Landowner) for the plaintiff in any such claim, action or proceeding, with or without the consent of the Landowner, the Landowner agrees to indemnify and hold harmless the Dissemination Agent to the extent described herein. SECTION 13. Notice . Any notices or communications to or among any of the parties to this Disclosure Agreement may be given as follows: Issuer: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attention: Director of Economic Development With a copy to: City Attorney P-17 Dissemination Agent: U.S. Bank National Association 633 West Fifth Street, 24th Floor Los Angeles, California 90071 Attn: Corporate Trust Department i Landowner: Huntington Center Associates, LLC c/o The Ezralow Company 23622 Calabasas Road,#100 Calabasas,CA 91302 With a copy to: Snyder Huntington Development, LLC JH Snyder Development is 5757 Wilshire Boulevard, Penthouse 30 Los Angeles, CA 90036 Participating Underwriter: UBS Financial Services Inc. Municipal Securities Group 777 South Figueroa Street, 50th Floor Los Angeles, CA 90017 SECTION 14. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Issuer, the Dissemination Agent, the Landowner, the Participating Underwriter and Bond Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. r SECTION 15. Assignability. The Landowner shall not assign this Disclosure Agreement or any right or obligation hereunder except to. the extent permitted to do so under the provisions of Section 6 hereof. The Dissemination Agent may, with prior written notice to the Landowner and the Issuer, assign this Disclosure Agreement and the Dissemination Agent's rights and obligations hereunder to a successor Dissemination Agent. SECTION 16. 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. 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. Governing Law. The validity, interpretation and performance of this Disclosure Agreement shall be governed by the laws of the State of California. I. 1 F18 i ( SECTION 19. 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. HUNTINGTON CENTER ASSOCIATES, LLC, a Delaware limited liability company By: Huntington Management Ent.,LLC, a Delaware limited liability company, its Manager By: BMLF/Huntington, LLC, a Delaware limited liability company, its Manager 1 1 By: Bryan Ezralow,Trustee of the Bryan Ezralow 1994 Trust,its Manager U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent I By: Its: Authorized Officer I ii F-19 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAIQNG BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Person: Huntington Center Associates, LLC, Name of Bond Issue: Community Facilities District No. 2003-01 (Huntington Center) 2004 Special Tax Bonds Date of Issuance: April 15, 2004 NOTICE IS HEREBY GIVEN that Huntington Center Associates, LLC has not provided [an Annual Report] [a Semi-Annual Report] with respect to the above-named Bonds as required by Section 3 of the Landowner Continuing Disclosure Agreement, dated as of March 1,2004. Huntington Center Associates, LLC anticipates that the required report will be filed by Dated: U.S. BANK NATIONAL ASSOCIATION, as Dissemination Agent By: cc: Huntington Center Associates, LLC 'I .i �i F-20 i. $20,195,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS CLOSING CERTIFICATE OF PROPERTY OWNER The undersigned (the "Property Owner"), in connection with the issuance, sale and delivery by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (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 Property Owner. (2) The Property Owner is duly authorized to execute, deliver and perform its Property Owner Continuing Disclosure Agreement. (3) The Property Owner has duly executed and delivered the Property Owner Continuing Disclosure Agreement. (4) The Property Owner 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 Property Owner. (6) The representations and warranties made by the Property Owner in the 10b-5 Certificate of Property Owner 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. D OC S O C/1636477v 1/022273-0006 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: August 19, 2013 BELLA TERRA ASSOCIATES, LLC, a Delaware limited liability company By: Its: VICE PRESIDENT BELLA TERRA C LLC, a Delaware limited liability company By: Its: VICE PRESIDENT DOCSOC/16364770/022273-0006 STRADLING YOCCA CARLSON & WAUTH ORANGECOUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO (776)393-1950 ATTORNEYS AT LAW SAN DIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (858)925-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)2113-2240 TELEPHONE(949)725-4000 SANTA BARBARA FACSIMILE(949)725-4100 (805)73"WO SANTA MONICA (424)214-7000 SACRAMENTO (918)449-2350 August 20, 2013 City Council of the City of Huntington Beach Huntington Beach, California Re: $20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)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.2003-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,915,000 (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 I of Division 2 of Title 5 of the Government Code of the State of California),the Municipal Code of the City and Resolution No.2013-21 (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 August 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/1637136v1/022273-0006 City Council of the City of Huntington Beach August 20,2013 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 DOCSOC/1637136v1/022273-0006 City Council of the City of Huntington Beach August 20,2013 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/1 637136v 1/022273-0006 City Council of the City of Huntington Beach August 20, 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, DOCSOC/1637136v1/022273-0006 STRADLING YOCCA CARLSON & RAUTH ORANGECOUNTY (949)72&4000 A PROFESSIONAL CORPORATION RENO (775)393-195C ATTORNEYS AT LAW SAN DIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (858)926-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)2M2240 TELEPHONE(949)725-4000 SANTA BARBARA FACSIMILE(949)725-4100 (805)730-6800 SANTA MONICA (424)214-7000 SACRAMENTO (916)449-2350 August 20,2013 U.S.Bank National Association Los Angeles,California Re: $20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center), 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, DOCSOC/1637139v1/022273-0006 STRADLING YOCCA CARLSON & RAUTH ORANGE COUNTY (949)725-4000 A PROFESSIONAL CORPORATION RENO (775)393-1950 ATTORNEYS AT LAW SAN DIEGO 660 NEWPORT CENTER DRIVE,SUITE 1600 (858)925-3000 NEWPORT BEACH,CA 92660-6422 SAN FRANCISCO (415)283.2240 TELEPHONE(949)725-4000 SANTA BAR13ARA. FACSIMILE(949)725-4100 (805)730-WW SANTA MONICA (424)214.7000 SACRAMENTO (916)449.23W August 20,2013 Stifel,Nicolaus,& Company, Incorporated San Francisco, California Re: S20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) (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$20,915,000, 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 30, 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 August 1, 2013, (the "Bond Indenture"), by and between U.S. Bank National Association, as Trustee, and the District, (iii) the Official Statement dated July 30, 2013 relating to the Bonds (the "Official Statement"), (iv) the Continuing Disclosure Agreement dated as of August 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 DOCS OC/1637143 v 1/022273-0006 Stifel,Nicolaus &Company, Incorporated August 20,2013 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 from 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/1637143v1/022273-0006 Stifel,Nicolaus&Company,Incorporated August 20,2013 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, DOCSOC/1 637143v 1/022273-0006 STRADLING YOCCA CARLSON & RAUTH ORANGECOUNTY (949)726-4000 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)725-4000 SANTA BARBARA FACSIMILE(949)725-4100 (805)73MSOO SANTA MONICA (424)214-7000 SACRAMENTO (916)440,2350 August 20, 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. 2003-1 (Huntington Center)2004 Special Tax Bonds Ladies and Gentlemen: Acting in our capacity as Bond Counsel for the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the "District"), we have examined the proceedings for the issuance by the District of$20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds which are being issued on the date hereof pursuant to that certain Bond Indenture dated as of August 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 August 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 March 1, 2004 (the "Prior Fiscal Agent Agreement"), by and between the District and U.S. Bank National Association and (iv)the Verification Report of Grant Thornton LLP dated August 20, 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. 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 pledge of Special Tax Revenues (as defined in the Prior Fiscal Agent Agreement) and other funds provided for in the Prior Fiscal Agent Agreement and all other obligations of the City and the District under the Prior Fiscal Agent Agreement with respect to the Refunded Bonds shall cease and terminate, except as set forth in Section 9.03 of the Prior Fiscal Agent Agreement. DOCSOC/1637142v2/022273-0006 U.S.Bank National Association Stifel,Nicolaus& Company,Incorporated August 20, 2013 Page 2 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 person or entity, nor may copies be delivered or furnished to any other parry, 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 Refunded 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, DOC S OC/1637142v2/022273-0006 ---------- ..... U.S. Bank National Association Stifel,Nicolaus&Company,Incorporated August 20,2013 Page 2 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 person or entity, nor may copies be delivered or famished 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 Refunded 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, Yo DOCSOC/1637142v2/022273-0006 OFFICE OF ot;,pYgTIRBT�, , CITY ATTORNEY `r Mike Vi l iofta,C)rierAs•sisrctn!CiT Attorney Patd)'Alessandro,Assistant City Attorney P.O.Box 190 Scott Field,Assistant City Atforne `.t°f� 2000 Main Street Neat Moore,Sr.Deputy City Attorney ?UNrt�� John Fu ii De ut City Attorney n., Huntington Beach,California 92648 ) n y y Telephone: (714)536-5555 Daniel k Ohl,Deputt Cii,Anarncy Jennifer McGrath Facsimile: (7I4)374-1590 City Attomey I I August 20, 2013 j 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: $20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) (the "Issuer"), 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 30, 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; (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; and (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 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. Respectfully submitted, Jennifer McGrath City Attorney i JONES |A8| | | 650 California Street | l8th Floor ` San Francisco,CA94108 t,4l5.J9l.57O0 f.4l5�J9l.57O4 August 2O. 2O13 8bfel, Niom|ouo& Company, Incorporated . One Ferry Building, Suite 275 ! San Francisco, CA94111 Re: $20\915.000 City of Huntington Beach Community Facilities No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds Ladies and Gentlemen: !We have acted as your counsel in connection with your purchase of the referenced � bonds (the ^Bnndo^\ pursuant to that certain Bond Purchase Agreement, dated July 30. 2013 (the "Purchase Contract"), between City of Huntington Beach Cnnnnnunib/ Facilities No. 2003-1 (Huntington Center) (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 August 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 omended, and that the Indenture is exempt from qualification under the Trust Indenture Act nf1939. aoamended. | We are not passing upon and do not assume any responsibility for the aoourooy, omnnp|ebaneoo or fairness of the statements contained in the Official Statement and nnoko no representation that we have independently verified the 000urouy, completeness or fairness of any such statements. Hmvvever, to 000iot you in your investigation concerning the Official Gtcdennent, we have reviewed certain documents and have participated in conferences in which � the omnbanto 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 itemo, which we expressly exclude from the scope of this sentence: any financial and ototiodiuo| data, fmre000to' nunnbero, eotimabeo, 000unnptimno, expressions of opinion, and )nfmrnnodmn concerning the Depository Trust Company and the book-entry system for the Bmndo, that is contained or incorporated by � reference in the Official Gbstennent, and the appendices tmthe Official Statement) as of the date of the Official Statement or the dote hereof contains any untrue statement of o 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. ^ pnopsvwowm L^wounpunxrMm w*wJonese||.com 8Ufel. Nicolaum & Company, Incorporated Augumt2O. 2O13 , Page 2 The preceding paragraph is not an opinkzn, but is in the nature of negative obmanxaUVnm based on mydoin limited activities performed by specific |oxvyeny in our firm in our nzhy 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 enoVrnpomm all activities necessary for compliance with applicable securities |oxvm. In oddition, in performing those oudvbiem, we relied on third party nypnamantoUonm, xvonontiem, oedUfiooUonm and Vpinionm, including and prirnoh|y. ! representations, warranties and mydifioobVnm made by the Issuer. The preceding paragraph is � otherwise subject to the conditions set forth herein. This letter is furnished by um solely for your benefit and may not be relied upon by any other person or entity. We dimo|oirn 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 dote hereof. Respectfully submitted, � A Professional Law Corporation ! � � i | � � ' ` x PROFESSIONAL LAW CORPORATION � � � A NEW DORSEY- CENTURY DORS Y & WHITNEY LLP of seRvIcs 1912 1 2012 August 20,2013 City of Huntington Beach Community.Facilities District No,2003-1 (Huntington Center) 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.2003-1 (Huntington Center)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 August 1,2013 (the"Indenture"),by and between the City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center)and the Trustee, as trustee, and the Escrow Agreement,referred to below,each related to 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 to 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. 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. DORSEY & WHITNEY LLP - WWW.DORSEY.COM - T 714.800.1400 - F 714.800.1499 600 ANTON BOULEVARD SUITE 2000 - COSTA MESA, CALIFORNIA 92626-7655 USA CANADA EUROPE ASIA-PACIFIC )), 00RSEY` 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 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. Very truly yours, DORSEY&WHITNEY LLP �I $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 30, 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 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: August 20,2013 WILLDAN FIN S ICES By: Authorized Of er D OC S O C/163 6194/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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 a Continuing Disclosure Agreement dated as of August 1, 2013 (the "Continuing Disclosure Agreement"), by and between the Issuer 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: 1. The Dissemination Agent has the full power and authority to enter into and perform its duties under the Continuing Disclosure Agreement. 2. The Continuing Disclosure Agreement 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. 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 Agreement or contesting the powers of the Dissemination Agent or its authority to enter into and perform its obligations under the Continuing Disclosure Agreement. DOCSOC/1636194v2/022273-0006 All capitalized terms used herein without definition shall have the meanings assigned to such terms in the Purchase Agreement. Dated: August 20,2013 WILLDAN FIN E S By Authorized Officer 2 DOCSOC/1636194/022273-0006 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DISCLOSURE BRING-DOWN CERTIFICATE I am an authorized representative of Harrell & Company Advisors, LLC and hereby certify that the information set forth in Certificate Regarding Continuing Disclosure dated July 31, 2013, attached hereto as Exhibit A,is true and correct as of the date hereof. Dated: August 20, 2013 HARRELL&COMPANY ADVISORS,LLC By: 47�fl"J-Lk�qA� Au riz d Officer DOCSOC/1636194/022273-0006 EXHIBIT A 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 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 $20,915,000 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DISCLOSURE BRING-DOWN CERTIFICATE I am an authorized representative of Willdan Financial Services and hereby certify that the information set forth in Certificate Regarding Continuing Disclosure dated July 31, 2013, attached hereto as Exhibit A,is true and correct as of the date hereof. Dated: August 20,2013 WU-LDAN FINAN By: Authorize fficer DOCSOC/1636194/022273-0006 EXHIBIT A $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 I (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, 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 By: Authorized Officer 1 DOCS OC/1633116/022273-0006 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 DOCS OC16331161022273-0006 Cash Flow Verification Report City of Huntington Beach Community Facilities District No 2003-1, California (Huntington Center) August 20, 2013 .Contents Letter Exhibit A Schedule of Sources and Uses of Funds Exhibit B Escrow Account Cash Flow Exhibit B-1 Debt Service Payment on the Refunded Bonds Appendix I Applicable schedules provided by Stifel, Nicolaus&Company, Inc. 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 GrantThornton.com linkd.in/GrantThorntonUS City of Huntington Beach iwitter.com/GrantThorntonUS Community Fatalities District No. 2003-1 2000 Main Street Huntington Beach, California Straddling Yocca Carlson&Rauth, a Professional Corporation 660 North Center Drive,Suite 1600 Newport Beach, California U.S.Bank National Association 633 West Fifth Street,24th Floor Los Angeles, California Stifel,Nicolaus&Company,Inc. One Ferry Building San Francisco, California $20,915,000 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds Dated August 20,2013 We have performed the procedures described in this report,which were agreed to by the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center), 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 2004 Special Tax Bonds (the"Refunded Bonds')as summarized 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. Grant Thornton LLP U.S.member fine of Grant Thornton International Ltd Page 2 Principal pr'nCipal Maturities Redemption Redemption Issue Issued Dated Refunded Refunded Date Price 9-1-13 to 9-1-15,9-1-17, 9-1-23 and 2004 $25,000,000 April 15,20014 $21,595,000 9-1-33 9-1-13 101% 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,interest and redemption premium on the Refunded Bonds assuming the Refunded Bonds maturing on and after September 1,2014 will be redeemed on September 1,2013 at 101 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$22,423,437.50 to be deposited into the escrow account on August 20, 2013,will be sufficient to pay,when due,the principal,interest and redemption premium related to the Refunded Bonds assuming the Refunded Bonds maturing on and after September 1,2014 will be redeemed on September 1, 2013 at 101 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 we performed additional procedures,other matters might have come to our attention that would have been reported to you. 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 speed parties. Minneapolis,Minnesota August 20,2013 Exhibit A City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) SCHEDULE OF SOURCES AND USES OF FUNDS August 20,2013 SOURCES: Principal amount of the Bonds $20,915,000.00 Net original issue premium 56,195.60 Debt Service Reserve Fund 1814,311.57 Debt Service Fund 1:188,187.50 Cash On-Hand at City 343,313.76 Admin Expense Fund 1,971.64 $24,318,980.07 USES: Cash deposit to escrow account $22,423,437.50 Deposit to Debt Service Reserve Fund 1,680,606.26 Costs of issuance 90,000.00 Underwriters discount 118,625.00 Contingency 4,339.67 Admin Expense Fund 1,971.64 $24,318,980.07 Exhibit B City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) ESCROW ACCOUNT CASH FLOW Debt service payment on Refunded Bonds Cash Dates (Exhibit B-1) balance Cash deposit on August 20, 2013 $22,423,437.50 09-01-13 $22,423,437.50 0.00 $22,423,437.50 Exhibit 13-1 City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) DEBT SERVICE PAYMENT ON THE REFUNDED BONDS Interest Debt service Date Principal rate Interest Premium payment 09-01-13 $21,595,000 (1) $618,187.50 $210,250.00 $22,423,437.50 (1) Actual maturity dates,principal amounts and interest rates are as follows: Maturity Principal Interest date amount rate 09-01-13 $570,000 4.800% 09-01-14 595,000 4.900% 09-01-15 625,000 5.000% 09-01-17 1,355,000 5.300% 09-01-23 5,060,000 5.800% 09-01-33 13,390,000 5.850% $21,595,000 APPENDIX I Applicable schedules provided by Stifel, Nicolaus & Company, Inc. SOURCES AND USES OF FUNDS City of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.2003-1(Huntington Center) Refunding of 2004 Special Tax Bonds ss*s*ss*ss+s**ss**+s+s*sa**s***+*as*s+s+*+a***a*s*ssa*++*aaaa*aa***sa++sas*asassas****a++s*+***s+**s Proposed Final Pricing *s*s*►s*s»�*s�***ss+s+s****s*:ssss+*****+*s**ssss*+s*ss+**+**a**ass++s***::ssss*ss*ss****sss+ss*ssss Dated Date 08/20/2013 Delivery Date 08/20/2013 Sources: Bond Proceeds: Par Amount 20,915,000.00 Net Premium 56,195.60 20,971,195.65 Other Sources of Funds: Debt Service Reserve Fund 1,814,311.57 Debt Service Fund 1,188,187.50 Cash On-Hand at City 343,313.76 Admin Expense Fund 1,971.64 3,347,784.47 24,318,980.07 Uses: Project Fund Deposits: Admin Expense Fund 1,971.64 Refunding Escrow Deposits: Cash Deposit 22,423,437.50 Other Fund Deposits: Debt Service Reserve Fund 1,680,606.26 Delivery Date Expenses: Cast of Issuance 90,000.00 Underwriter's Discount 118,625.00 208,625.00 Other Uses of Funds: Additional Proceeds 4,339.67 24,318,980.07 Jul 30,2013 11:52 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 1 SUAMARY OF BONDS REFUNDED City of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.2003-1(Huntington Center) Refunding of 2004 Special Tax Bonds Proposed Final Pricing Maturity Interest Par Call Call Bond Date Rate Amount Date Price Community Facilities District No.2003-1,2003_1: SERIAL 09/01/2013 4.800% 570,000.00 09/01/2014 4.900% 595,000.00 09/01/2013 101.000 09/01/2015 5.000% 625,000.00 09/01/2013 101.000 TERM2017 09/01/2017 5.300% 1,355,000.00 09/01/2013 101.000 TERM2023 09/01/2023 5.800% 5,060,000.00 09/01/2013 101.000 TERM2033 09/01/2033 5.850% 13,390,000.00 09/01/2013 101.000 21,595,000.00 Jul 30,2013 11:52 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 8 ESCROW REQUEREMENTS City of Huntington Beach Special Tax Refunding Bonds,Series 2013 Community Facilities District No.2003-1(Huntington Center) Refunding of 2004 Special Tax Bonds Proposed Final Pricing Dated Date 08/20/2013 Delivery Date 08/20/2013 Period Principal Redemption Ending Principal Interest Redeemed Premium Total 09/012013 570,000.00 618,187.50 21,025,000.00 210,250.00 22,423,437.50 570,000.00 618,187.50 21,025,000.00 210,250.00 22,423,437.50 Jul 30,2013 11:52 am Prepared by Stifel,Nicolaus&Company,Inc.(TJ) Page 9 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.farrell(@surfcity-hb.org Fax: (714) 374-1571 Joyce Zacks,Deputy City Treasurer (714) 536-5990 jzacks(@surfcity hb.org Kellee Fritzal,Deputy Dirvaor (714) 374-1519 kfritzal(@surfcity--hb.org Dahle Bulosan,Accounting Manager (714) 536-5648 dbulo s an@ ss urfcity-hb.org Sunny Han,SeniorAdministrative Analyst (714) 536-5907 Sunny.Hannaesurfc -hb.org CITY ATTO RNEY City of Huntington Beach 2000 Main Street P.O.Box 190 Huntington Beach,CA 92648 Mike Vighotta,Deputy City Attorney (714) 536-5555 mvigliottaQsurfcity hb.org Fax: (714) 374-1590 BOND COUNSEL STRADLING YOCCA C.ARLSON&RAUTH 660 North Center Drive Suite 1600 Newport Beach,CA 92660 Brian Forbath (949) 725-4193 bforbath esycrT com Fax: (949) 725-4100 Bradley RNeal (949) 725-4164 bnegQsycr.com Fax: (949) 823-5164 DOC SOC/1608792v l/022273-0006 FINANCIAL ADVISOR PUBLIC FINANCIAL MANAGEMENT,INC. 601 S.Figueroa Street,Suite 4500 Los Angeles,CA 90017 Craig Hoshijima (213)489-4075 hoshijitnac(@Vfin.com Fax: (213) 489-4085 Usama Mahmud (213) 489-4075 mahmuduna,gfin.com Fax: (213)489-4085 UNDERWRITER STIFEL,NICOLAUS&COMPANY,INC. One Ferry Building San Francisco, CA 94111 Sara Oberlies Brown,Managing Director (213)443-5004 sbrownkstifel.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 t acobnsyllc.com UNDERWRITER'S COUNSEL JONES HALL 650 California Street, 18th Floor San Francisco, CA 94108 Chris Lynch (415)391-5780 clvnch@joneshall.corn TRUSTEE COMMUNITY FACILITY DISTRICTS 1990-1(Goldenwest/ Ellis),2001-1(Grand Coast Resort),2003-1(Huntington Center) US BANK TRUST NATIONAL ASSOCIATION 633 West 5,h Street,24th Floor Los Angeles,CA 90071 June Borjo (213) 670-6009 Martin Meza (213)650-6062 Martin.Mez a@us bank.corn TRUSTEE'S COUNSEL DORSEY & WHITNEY LLP 600 Anton Boulevard Suite 2000 Costa Mesa, CA 92626-7655 P: 714-800-1457 F: 714-800-1499 wong.dennis@dorsey.com DOCSOC/1608792v 1/022273-0006 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:gonzalo.urey@bnymellon.com Fax:(213)630-6215 Valere Jones-Shaw,Associate (213) 630-6247 Client Service Manager:(Primary Client Contact post-closing) Valere.j ones-shaw@bnvmellon.com Fanny Chen,Vice President Phone:(213)630-6407 Relationship Manager: E-Mail:fanny.chenna bnymellon.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 bmedina(awilidan.com (951)587-3500 Candace Heiser,Analyst (951)587-3561 cheiser&ailldan.com Fax: (951) 587-3510 TRUSTEE'S COUNSEL TBA RATING AGENCIES TBA PRINTER TBA DOCSOC/1608792v 1/022273-0006 EMAIL ADDRESSES: For 1990-1(Goldenwest/Ellis),2001-1(Grand Coast Resort),2003-1(Huntington Center) (The difference is the Trustees) Loriann.farrell@surfcity-hb.org;jzacksgsurfcily-hb.org;kfritzal@surfcity-hb.org; dbulosan@surfcity-hb.org; Sunny Han@surfci hb.org;mvi lig ottaksurkily- .org; bforbath@sycr.com;bneal esycr.com;hoshij_nnac&fin.com;mahmudu@pfin.com; sbrown@stifel.com;tjacob@syllc.com;cinch agioneshall.com; Martin.Mezagusbank.com; bmedina@willdan.com; cheiser@willdan.com;wong.dennisAdorsey.com City of Huntington Beach Community Facilities District No.2000-1 (Grand Coast Resort)2013 Special Tax Refunding Bonds City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)2013 Special Tax Refunding Bonds Sgnny.Han@su.thdiy-h—b.org For 2002-1(McDonnell Center Business Park) Loriann.farrell@surfcity-hb.org;jzacks@surfcity-hb.org;kfritzal@surfcity-hb.org;_ dbulosanna surfci -hb org• Sunny Han@surfci -hb orgi mvi lg iotta2surfcity-hb org- bforbathgsycr.com• bnealAsycr.com;hoshijimacgl2f n.com; mahmudu&fm.com; sbrowngstifel.com•tjacobAU11c.com; clynch@joneshall.com;Martin.Mezagusbank.com; bmedina@Lwilldan.com. cheiser@willdan.com; gonzalo.urey bnvmellon.com;Valere.ones- sham<2bnymellon.co=fanny.chen gbnymellon.com;rhea.ricard@bnymellon.com DOCSOC/1608792v 1/022273-0006 Resolution No. 2013-21 BOND DOCUMENTS PRESENTED TO AND APPROVED BY CITY COUNCIL AT THE DUNE 3's 2013 MEETING Resolution No. 201 -21 Exhibits Community Facilities District No. 2003-1 (Huntington Center) ® Bond Indenture ® Escrow Agreement ® Preliminary Official statement ® Bond Purchase Agreement Stradling Yocca Carlson&Rauth Draft Dated May 20, 2013 BONDINDENTURE Between CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) and U.S. BANK NATIONAL ASSOCIATION, as Trustee Relating To CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Dated as of 1,2013 D O C S O C/1620231 v4/022273-0006 Table of Contents Page ARTICLE I DEFINITIONS Section1.1 Definitions.....................................................................................................................2 ARTICLE lI 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 .......................................................................... 10 Section 2.5 Place and Form of Payment........................................................................................ 10 Section2.6 Form of Bonds ............................................................................................................I I Section 2.7 Execution and Authentication..................................................................................... 11 Section2.8 Bond Register..............................................................................................................12 Section 2.9 Registration of Exchange or Transfer.........................................................................12 Section 2.10 Mutilated, Lost, Destroyed or Stolen Bonds...............................................................12 Section2.11 Validity of Bonds........................................................................................................13 Section 2.12 Book-Entry System..................................................................................................... 13 ARTICLE III CREATION OF FUNDS AND APPLICATION OF PROCEEDS AND NET TAXES Section3.1 Creation of Funds........................................................................................................14 Section 3.2 Disposition of Bond Proceeds.....................................................................................15 Section 3.3 Deposits to and Disbursements from Special Tax Fund............................................. 15 Section 3.4 Administration Fund................................................................................................... 16 Section 3.5 Debt Service Account of the Special Tax Fund.......................................................... 16 Section 3.6 Redemption Account of the Special Tax Fund........................................................... 16 Section 3.7 Reserve Account of the Special Tax Fund..................................................................17 Section3.8 Rebate Fund................................................................................................................ 18 Section 3.9 Costs of Issuance Fund............................................................................................... 19 Section3.10 Parking Fund............................................................................................................... 19 Section3.11 Surplus Fund...............................................................................................................19 Section3.12 Investments.................................................................................................................19 ARTICLE IV REDEMPTION OF BONDS Section4.1 Redemption of Bonds .................................................................................................21 Section 4.2 Selection of Bonds for Redemption............................................................................23 Section 4.3 Notice of Redemption.................................................................................................23 Section 4.4 Partial Redemption of Bonds.............................:........................................................24 Section 4.5 Effect of Notice and Availability of Redemption Money...........................................24 i DOCSOC/1620231 v4/022273-0006 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..........................29 Section 6.3 Notation of Bonds; Delivery of Amended Bonds.......................................................30 ARTICLE VII TRUSTEE Section7.1 Trustee.........................................................................................................................30 Section 7.2 Removal of Trustee.....................................................................................................31 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 Section 8.1 Events of Default........................................................................................................32 Section 8.2 Remedies of Owners...................................................................................................33 ARTICLE IX DEFEASANCE Section9.1 Defeasance..................................................................................................................34 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............................:........................................................................36 Section 10.4 Provisions Constitute Contract....................................................................................36 Section 10.5 Future Contracts..........................................................................................................36 Section 10.6 Further Assurances......................................................................................................36 Section10.7 Severability.................................................................................................................37 Section10.8 Notices........................................................................................................................37 ii DOCSOC/1620231v4/022273-0006 Table of Contents (continued) Page Section 10.9 Action on Next Business Day...........................................................................:.........37 EXHIBIT A FORM OF BOND.....................................................................................................A-1 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE...............................................................................................................B-1 DOC S OC/1620231 v4/022273-0006 BONDINDENTURE THIS BOND INDENTURE ("Indenture") dated as of 1, 2013, by and between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (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. 2003-1 (Huntington Center)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. 2003-1 (Huntington Center) 2004 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of$25,000,000 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 April 1, 2004 (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. 2003-1 (Huntington Center) 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 Iuntington 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/1620231v4/022273-0006 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. "Administration Fund" means that certain fund by that name established pursuant to Section 3.4 hereof. "Administrative Expenses Cap" means $30,000 per Fiscal Year. "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 DOCSOC/1620231 v4/022273-0006 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/1620231v4/022273-0006 "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. 2003-1 (Huntington Center) 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 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: 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/1620231v4/022273-0006 "Dissemination Agent"means Willdan Financial Services, and any successor thereto. "District" means City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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 DOCSOC/1620231 v4/022273-0006 (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. "Parking Fund" means the fund by that name established pursuant to the Operating Agreement. "Parking Structure Maintenance Special Tax" means that portion of the Special Taxes levied for the Parking Structure Maintenance Special Tax as defined in the Rate and Method of Apportionment. "Operator" means Huntington Center Associates, L.L.C., a Delaware limited liability company, its successors and assigns. "Operating Agreement" means the Operating Agreement for the Huntington Center Parking Structure, by and between the City and the Operator, dated as of March 1, 2004. "Ordinance" means Ordinance No. 3631 adopted by the City Council, acting as the legislative body of the District on January 20, 2004 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 6 D OC S OC/1620231 v4/022273-0006 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. "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. 2003-10 adopted by the City Council on February 3, 2003, 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. 7 DOCSOC/1620231 v4/022273-0006 "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 special 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 3.11. "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. "Treasurer"means the Treasurer-Tax Collector of the County of Orange. "Term Bonds" means the Bonds maturing on September 1, 20_. "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 8 DOC SOC/1620231 v4/022273-0006 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 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,the Parking 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 Parking 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. 9 DOC S OC/1620231 v4/022273-0006 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. 2003-1 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 1 Principal Interest Rate 2014 $ % 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 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 10 D O C S O C/1620231 v 4/0222 73-0006 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, 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. 11 DOCSOC/1620231v4/022273-0006 Section 2.8 Bond Re Oster.ster. 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 Re,,istration 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 12 DOCSOC/1620231 v4/022273-0006 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-Ent1y 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 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, 13 DOC SOC/1620231v4/022273-0006 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. 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. 2003-1 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. 2003-1 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. 2003-1 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 3.12 hereof. 14 DOCSOC/1620231 v4/022273-0006 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 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) Parking Fund; (6) Rebate Fund; and 15 DOC S OC/162023 l v4/022273-0006 (7) 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 Payments due on the Bonds on said Interest Payment Date. Moneys in the Debt Service Account shall be used for the payment of the interest, principal and Sinking Fund Payments 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 16 DOCSOC/1620231 v4/022273-0006 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 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 17 D OC S O C/1620231 v4/022273-0006 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. (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 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. 18 DOCSOC/1620231v4/022273-0006 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 Parking Fund. After making the deposits required pursuant to Sections 3.3 through 3.7 hereof, the Trustee shall transfer Special Taxes in the amount of the Parking Structure Maintenance Special Tax to the Director of Finance for deposit into the Parking Fund pursuant to the Operating Agreement. Moneys on deposit in the Parking Fund are not pledged to the repayment of the Bonds. Section 3.11 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, (iv)to the Parking Fund to the extent amounts on deposit in the Parking Fund are less than the Parking Structure Maintenance Special Tax, or(v)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 3.12 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 19 DOC SOC/1620231 v4/022273-0006 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 '.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 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 20 DOCSOC/1620231 v4/022273-0006 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: 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: 21 DOCSOC/1620231v4/022273-0006 Term Bonds Due on September 1,20_ Year (September I) 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: 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. 22 D OC S OC/1620231 v4/022273-0006 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 provided, however, that a notice of a redemption with respect to a redemption pursuant to Section 4.1(a) may be conditioned on there being on deposit on the redemption date sufficient money to pay the redemption price of the Bonds to be redeemed. 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 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. 23 DOCSOC/1620231v4/022273-0006 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: (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 24 DOCSOC/1620231v4/022273-0006 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. N Levy 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 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 25 DOC S OC/1620231 v4/022273-0006 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 the Park Structure Maintenance Tax 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. (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 26 D OC S OC/1620231 v4/022273-0006 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 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. 27 DOCSOC/1620231v4/022273-0006 (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. 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; 28 D OC S OC/1620231 v4/022273-0006 (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. 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. 29 DOCSOC/1620231v4/022273-0006 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. 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. 30 DOCSOC/1620231v4/022273-0006 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 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. 31 DOC SOC/1620231 v4/022273-0006 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. 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; 32 DOC SOC/1620231 v4/022273-0006 (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. 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. 33 DOCSOC/1620231 v4/022273-0006 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. 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 34 DOCSOC/1620231v4/022273-0006 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. 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 35 DOCSOC/1620231v4/022273-0006 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 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. 36 DOCSOC/162023 I v4/022273-0006 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. 2003-1. Section 10.9 Action on Next Business DU. 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 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 DOCSOC/1620231v4/022273-0006 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. 2003-1 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. 2003-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2003-1 U.S. BANK NATIONAL ASSOCIATION, as Trustee By: Authorized Officer S-1 DOC SOC/1620231 v4/022273-0006 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 VAL UE 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. 2003-1 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. 2003-1 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 DOCSOC/1620231v4/022273-0006 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. 2003-1 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/1620231 v4/022273-0006 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, 2C_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 DOC SOC/1620231 v4/022273-0006 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. 2003-1 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 D OC S OC/1620231 v4/022273-0006 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. 2003-1 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. 2003-1 ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2003-1 [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 DOCSOC/1620231v4/022273-0006 [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. 2003-1 [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/1620231v4/022273-0006 EXHIBIT B FORM OF REQUISITION FOR DISBURSEMENT OF COSTS OF ISSUANCE CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 2013 SPECIAL TAX REFUNDING BONDS The undersigned, a duly authorized representative of City of Huntington Beach Community Facilities District No. 2003-1 (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. 2003-1 By: Authorized Officer B-1 DOCSOC/1620231 v4/022273-0006 EXHIBIT A Payee Amount Due Purpose of Expenditure B-2 DOC S OC/1620231 v4/022273-0006 Stradling Yocca Carlson &Rauth Draft dated May 20, 2013 ESCROW AGREEMENT By and Between CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank Dated as of 1,2013 Relating to CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DOC S OC/1623952v2/022273-0006 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. 2003- 1 (Huntington Center) (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 April 1, 2004 (the"Prior Fiscal Agent Agreement"). WITNESSETH.- WHEREAS, pursuant to the Prior Fiscal Agent Agreement,the District has previously issued its 2004 Special Tax Bonds (the "Refunded Bonds") in the aggregate principal amount of $25,000,000, which are currently outstanding in the aggregate principal amount of$21,595,000; and WHEREAS, the District has determined to issue its 2013 Special Tax Refunding Bonds in the aggregate principal amount of$ (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 101% 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; 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 SOC/162395 2v2/022273-0006 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 DOC SOC/1623952v2/022273-0006 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 D OC S OC/1623 95 2v2/0222 73-0006 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/1623952v2/022273-0006 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 DOC SOC/1623952v2/022273-0006 SECTION 16. Assignment. 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. 2003-1 (Huntington Center) ATTEST: City Clerk of the City of Huntington Beach, acting on behalf of City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) [SIGNATURES CONTINUED ON NEXT PAGE.] S-1 DOCSOC/1623952v2/022273-0006 [SIGNATURE PAGE CONTINUED.] U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By: Authorized Officer S-2 DOC SOC/1623952v2/022273-0006 SCHEDULE A FEDERAL SECURITIES Type Principal Interest Rate Maturity Date Cash Receipt from SLGS SLG $ % September 1, 2013 $ A-1 DOCSOC/1623952v2/022273-0006 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 $21,595,000 $ $ $ 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 DOC S OC/1623952v2/022273-0006 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. 2003-1 (HUNTINGTON CENTER) 2004 SPECIAL TAX BONDS (the"Refunded Bonds") Ladies and Gentlemen: As Fiscal Agent under that certain Fiscal Agent Agreement dated as of April 1, 2004, 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. 2003-1 (Huntington Center) 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/1623952v2/022273-0006 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. 2003-1 (Huntington Center) Receipt acknowledged and consented to: U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank and Fiscal Agent By: Authorized Officer C-2 DOC SOC/1623952v2/022273-0006 EXHIBIT X CONDITIONAL NOTICE OF FULL REDEMPTION to the Holders of City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 2004 Special Tax Bonds CUSIP#s: NOTICE IS HEREBY GIVEN, pursuant to the terms of the Fiscal Agent Agreement (the "Fiscal Agent Agreement") as of April 1,2004,between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center), 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 $21,595,000.00,have been called for redemption in full on September 1,2013 (the"Redemption Date")at a price of 101% 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 1st 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/cort)oratetrust and click on the"Bondholder Information"link. IMPORTANT NOTICE Under Section 3406(a)(1) of the Internal Revenue Code, the paying agent making payment 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.jzov. * 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/1623952v2/022273-0006 Dated: ,2013 By: U.S. Bank National Association,as Fiscal Agent C-2 D OC S O C/1623 95 2v2/022273-0006 EXHIBIT Y NOTICE OF DEFEASANCE OF OUTSTANDING CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2004 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 April 1, 2004, between the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)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/1623952v2/022273-0006 c Stradling Yocca Carlson&Rauth Y Draft dated May 20,2013 c 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 n 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 Y ° 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. n ° $20,230,000* y •o CITY OF HUNTINGTON BEACH w t COMMUNITY FACILITIES DISTRICT NO.2003-1 .� (HUNTINGTON CENTER) R g 2013 SPECIAL TAX REFUNDING BONDS Dated: Delivery Date Due: September 1,as shown on inside front cover 4 The City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 2013 Special Tax Refunding Bonds (the ° `Bonds")are being issued by the City of Huntington Beach Community Facilities District No.2003-1(the"District")to refund the District's outstanding u 2004 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 c Bonds. See"THE REFUNDING PLAN"herein. The Bonds are authorized to be issued pursuant to the Mello-Roos Community Facilities Act of 1982, n as amended(Sections 53311 et seq.of the Government Code of the State of California),pursuant 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 Association,as trustee(the"Trustee"). R � 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 taxable land within the District and from certain other funds pledged under the Indenture,all as further described .4 .� 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 o within the District. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS" and APPENDIX A— "RATE AND METHOD OF c 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 0 Trust Company,New York,New York("DTC"). Individual purchases of the Bonds may be made in principal amounts of$5,000 and integral multiples R 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 B nominee of DTC or as otherwise described herein. Interest on the Bonds will be payable commencing March 1,2014 and semiannually thereafter on each O 3 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 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 • n 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 a o DISTRICT PAYABLE SOLELY FROM NET TAXES AND OTHER AMOUNTS HELD UNDER THE INDENTURE AS MORE FULLY ° DESCRIBED HEREIN. B R The Bonds are subject to optional redemption, special mandatory redemption from Special Tax prepayments,and mandatory sinking fund o 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 c 'o investment quality of the Bonds. P •= 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 ° r bc w issue. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. iQ b U c ° MATURITY SCHEDULE 5 (See Inside Cover Page) c :� c e 3 ° 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 5 ❑ &Rauth,a Professional Corporation,is serving as Disclosure Counsel to the District with respect to the Bonds. Certain legal matters will be passed on d 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 'C 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. b R STIFEL ^a o Dated: —2013 Preliminary,subject to change. c O o R C H a DOC SOC/I 616646v6/022273-0006 MATURITY SCHEDULE (Base CUSIW: ) Maturity Date Price or (September 1) Principal Amount Interest Rate Yield CUSIP, $ %Term Bonds due September 1,2033 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. DOCSOC/1616646v6/022273-0006 CITY OF I UNTINGTON 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 FINANCIAL ADVISOR Public Financial Management,Inc. Los Angeles,California SPECIAL TAX CONSULTANT Willdan Financial Services Temecula, California TRUSTEE/ESCROW BANK U.S.Bank National Association Los Angeles, California VERIFICATION AGENT Grant Thornton,LLP Minneapolis,Minnesota D OC S OC/1616646v6/022273-0006 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 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." 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. DOCSOC/1616646v6/022273-0006 TABLE OF CONTENTS Page INTRODUCTION................................................................................................................................................I TheDistrict.......................................................................................................................................................I DistrictFormation.............................................................................................................................................2 ForwardLooking Statements............................................................................................................................3 Sourcesof Payment for the Bonds....................................................................................................................3 Descriptionof the Bonds..................................................................................................................................4 NoAdditional Bonds........................................................................................................................................4 TaxExemption..................................................................................................................................................4 Professionals Involved in the Offering.............................................................................................................5 ContinuingDisclosure......................................................................................................................................5 BondOwners' Risks.........................................................................................................................................5 OtherInformation.............................................................................................................................................6 ESTIMATED SOURCES AND USES OF FUNDS............................................................................................6 THEREFUNDING PLAN...................................................................................................................................6 THEBONDS........................................................................................................................................................7 Authorityfor Issuance......................................................................................................................................7 Purposeof the Bonds........................................................................................................................................7 GeneralProvisions............................................................................................................................................7 DebtService Schedule......................................................................................................................................7 Redemptionof the Bonds.................................................................................................................................8 SECURITY AND SOURCES OF PAYMENT FOR THE BONDS..................................................................10 LimitedObligations........................................................................................................................................10 SpecialTaxes..................................................................................................................................................10 Debt Service Coverage from Maximum Special Taxes..................................................................................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.....................................................................................................15 Proceeds of Foreclosure Sales........................................................................................................................15 ReserveAccount.............................................................................................................................................16 Priority of Bonds and Pledge of Net Taxes.....................................................................................................16 NoAdditional Bonds......................................................................................................................................17 THE COMMUNITY FACILITIES DISTRICT.................................................................................................17 General............................................................................................................................................................17 TheDevelopment............................................................................................................................................18 TheProperty Owners......................................................................................................................................20 Summary of Leases;Occupancy Rates...........................................................................................................21 The Operating Agreement,the REA and the OPA.........................................................................................25 Estimated Direct and Overlapping Indebtedness............................................................................................27 THE CITY OF HUNTINGTON BEACH..........................................................................................................31 SPECIALRISK FACTORS...............................................................................................................................31 Risks of Real Estate Secured Investments Generally.....................................................................................32 LimitedObligations........................................................................................................................................32 Insufficiency of Special Taxes........................................................................................................................32 NaturalDisasters.............................................................................................................................................33 HazardousSubstances.....................................................................................................................................33 Payment of the Special Tax is not a Personal Obligation of the Owners........................................................34 PropertyValues...............................................................................................................................................34 Parity Taxes and Special Assessments ...........................................................................................................35 i DOC SOC/1616646v6/022273-0006 TABLE OF CONTENTS (continued) Page Disclosures to Future Purchasers....................................................................................................................35 SpecialTax Delinquencies..............................................................................................................................35 FDIC/Federal Government Interests in Properties..........................................................................................36 Bankruptcyand Foreclosure...........................................................................................................................37 No Acceleration Provision..............................................................................................................................38 LimitedSecondary Market.............................................................................................................................38 Proposition218...............................................................................................................................................38 Ballot Initiatives and Legislative Measures....................................................................................................39 Lossof Tax Exemption...................................................................................................................................39 IRS Audit of Tax-Exempt Bond Issues..........................................................................................................40 Limitationson Remedies................................................................................................................................40 CONTINUING DISCLOSURE..........................................................................................................................40 TAXEXEMPTION............................................................................................................................................41 LEGALOPINION..............................................................................................................................................42 ABSENCEOF LITIGATION............................................................................................................................42 NORATING......................................................................................................................................................43 UNDERWRITING.............................................................................................................................................43 FINANCIALINTERESTS.................................................................................................................................43 NEWLEGISLATION........................................................................................................................................43 ADDITIONALINFORMATION.......................................................................................................................43 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 FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT...............E-1 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES........................................................................................................................F-1 APPENDIX G BOOK-ENTRY-ONLY SYSTEM........................................................................................G-1 ii DOC SOC/1616646v6/022273-0006 [INSERT REGIONAL MAP] DOC SO C/1616646v6/022273-0006 [INSERT AERIAL MAP] DOC SOC/1616646v6/022273-0006 $20,230,000" CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (the "District") of its City of Huntington Beach Community Facilities District No. 2003-1 2013 Special Tax Refunding Bonds in the aggregate principal amount of$20,230,000* (the"Bonds"). The proceeds of the Bonds, together with certain existing funds of the District, will be used to refund all of the outstanding City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 2004 Special Tax Bonds, originally issued in the aggregate principal amount of $25,000,000 and now outstanding in the principal amount of$21,595,000 (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 approximately 42 net taxable acres presently divided into nine taxable parcels (the"Taxable Property")which have been developed into a commercial,retail and entertainment center known as"Bella Terra" (the "Development"). The District is located on Edinger Avenue generally between Gothard Street and Beach Boulevard,just off of the 405 Freeway in the City. The Development includes the Bella Terra Mall and two adjacent parcels, one of which includes a Costco fuel station and one of which is open space. The Bella Terra Mall is a Tuscan themed open air lifestyle retail center with approximately 690,000 square feet of retail, restaurant, open-air courtyards and entertainment. The Bella Terra Mall includes four clustered major buildings on the interior of the Development site, several smaller buildings on the perimeter of the Development site and an outdoor amphitheater. See "THE COMMUNITY FACILITIES DISTRICT— The Development." Preliminary,subject to change. 1 DOCSOC/1616646v6/022273-0006 The Bella Terra Mall was originally developed in 1965 through 1969. In 1999, Huntington Center Associates,LLC, a Delaware limited liability company(the"Prior Landowner")acquired the Bella Terra Mall with the intention to rehabilitate and renovate the site. In connection with the renovation, the District was formed, and the Refunded Bonds were issued, to finance the land acquisition and construction of a six story, approximately 1,536 stall parking structure adjacent to the Bella Terra Mall(the"Parking Structure")and other public facilities related to the renovation of the Development. See "THE COMMUNITY FACILITIES DISTRICT—General." In August 2005, Bella Terra Associates, LLC, a Delaware limited liability company (`Bella Terra Associates") acquired the Development from the Prior Landowner for $260 million. Bella Terra Associates and a related entity,Bella Terra C LLC, a Delaware limited liability company(`Bella Terra C")own all of the Taxable Property in the District,except one parcel of open space,and are sometimes referred to in this Official Statement as the"Property Owners." The Property Owners are single purpose entities related to DJM Capital Partners,Inc., San Jose, California,which manages Bella Terra Mall. See"THE COMMUNITY FACILITIES DISTRICT—The Property Owners." District Formation The District was formed on February 3, 2003. 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 provisions of the Municipal Code, the Mello-Roos Community Facilities Act of 1982, as amended (collectively,the"Law"). Pursuant to the Law, on January 6, 2003, 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 6, 2003, the City Council adopted a resolution stating its intention to incur bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 within the District for the purpose of financing the costs of certain public facilities consisting of the acquisition of the right-of-way and the installation of the streets, traffic signals and street lighting, sewer and water lines, and storm drains and related improvements in connection with the development of the District(collectively,the"Public Facilities"). Subsequent to a noticed public hearing on February 3,2003,the City Council adopted Resolution No. 2003-10 (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 February 3, 2003 Resolution No. 2003-11 ("Resolution to Incur Bonded Indebtedness") which determined the necessity to incur bonded indebtedness in an amount not to exceed $30,000,000 within the District, called an election within the District on the propositions of forming the District, incurring bonded indebtedness not to exceed $30,000,000 as set forth in the Resolution to Incur 2 DOCSOC/I616646v6/022273-0006 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 qualified electors within the District, which were the record landowners within the District at the time of the election, at an election held on February 3,2003. On February 20, 2003, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No. 2003000186478 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by the Resolution No.2004-1 adopted by the City Council on January 5,2004. 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 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." 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 certain 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 Administrative Expenses up to the Administrative Expenses Cap of $30,000 plus Extraordinary Administrative Expenses (defined herein). 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 3 DOCSOCl1616646v61022273-0006 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 assessor's parcels 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 G—"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 G—`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. No Additional Bonds The District has covenanted in the Indenture not to issue any additional bonds secured by the Net Taxes, except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. 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 4 D OC S OC/1616646v6/022273-0006 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 Willdan Financial Services, Temecula, California, as Special Tax Consultant, Public Finance Management, Inc., Los Angeles, California, Financial Advisor 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 Bella Terra Associates will agree to provide or cause to be provided, to ENEMA certain annual information with respect to the Bella Terra Associates and the Development and notice of certain listed events to assist the Underwriter in complying with the Rule. See "CONTINUING DISCLOSURE" herein. See APPENDIX E hereto for a description of the specific nature of the annual reports to be filed by the District and notices of listed events to be provided by the District. See APPENDIX F hereto for a description of the specific nature of the annual reports to be filed by the Bella Terra Associates and notices of listed events to be provided by the Bella Terra Associates. Within the last five years,neither the City nor the District nor the Bella Terra Associates has failed to timely comply with their respective 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. 5 DOCSOC/I616646v6/022273-0006 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 funds on hand for the Refunded Bonds. Sources of Funds Principal Amount of Bonds $ [Less/Plus]: Original Issue [Discount/Premium] Less: Underwriter's Discount Plus: Prior Funds Total Sources Uses of Funds: Escrow Fund to Redeem Refunded Bonds $ Reserve Account of the Special Tax Fund Costs of Issuance Fund') Administrative Expense Fund Total Uses Includes legal fees,trustee fees,financial advisory fees,printing costs and other costs of delivery of the Bonds. 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 U.S. Bank National Association,as prior fiscal agent 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. 6 DOCSOC/1616646v6/022273-0006 Grant Thornton, LLP, 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 $20,230,000* are authorized to be issued by the District under and subject to the terms of the Indenture, the Act and other applicable laws of the State of California. 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 purchased in book-entry form only in denominations of $5,000 and any integral multiple thereof. See APPENDIX G—"BOOK-ENTRY-ONLY SYSTEM." Debt Service Schedule The Special Tax is to be levied against the Taxable 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." Preliminary,subject to change. 7 D OC S OC/1616646v6/022273-0006 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS DEBT SERVICE SCHEDULE Period Ending Total September 1 Principal Interest Debt Service 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Source: The Underwriter. Redemption of the Bonds Optional Redemption.* The Bonds maturing on and prior to September 1, 2023 are not subject to optional redemption. The Bonds maturing after September 1, 2023 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 on and after September 1, 2023, 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, without premium: Preliminary,subject to change. 8 DOC SOC/1616646v6/022273-0006 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 the Indenture, plus amounts transferred from the Reserve Account,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, 2033 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 1,2033 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 Preliminary,subject to change. 9 DOC SOC/1616646v6/022273-0006 show that he or she failed to receive notice of such redemption. Any notice of redemption may condition such redemption upon the receipt of available funds on the date of redemption. SECURITY AND SOURCES OF PAYMENT FOR THE BONDS Limited Obligations The Bonds are special, limited obligations of the District payable only from amounts pledged under the Indenture and from no other sources. The Net Taxes are the primary security for the repayment of the Bonds. Under the Indenture, the District has pledged to repay the Bonds from the Net Taxes (which are Special Tax revenues remaining after the payment of the annual Administrative Expenses of up to $30,000 (the "Administrative Expenses Cap") plus Extraordinary Administrative Expenses) and from amounts held in the Special Tax Fund established under the Indenture. "Extraordinary Administrative Expenses" include 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 Bond Owner consent under the Indenture, or actual or threatened Bond Owner or property owner litigation arising out of the Bonds or the District. Extraordinary Administrative Expenses will be paid from collected Special Taxes prior to the payment of debt service on the Bonds. While the District does not anticipate requiring Extraordinary Administrative Expenses, events such as high delinquencies requiring the District to take foreclosure actions against property owners within the District may require the District to receive Extraordinary Administrative Expenses. See "— Special Taxes" and "SPECIAL RISK FACTORS" for a description of the risks which could affect Special Tax delinquencies within the District. Special Tax revenues include the proceeds of the 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. In the event that the Special Tax revenues are not received when due, the only sources of funds available to pay the debt service on the Bonds are amounts held by the Trustee, the Special Tax Fund, including amounts held in the Reserve Account therein held, for the exclusive benefit of the Owners of the Bonds,and foreclosure proceeds resulting from the sale of delinquent parcels if and when available. 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 General. Pursuant to the Law, the City Council adopted Resolution No. 2003-3 on January 6, 2003, stating its intention to establish the District and Resolution No. 2003-4 on January 6,2003 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos.2003-10,2003-11 and 2003-12 adopted by 10 DOC S OC/1616646v6/022273-0006 the City Council on February 3, 2003, the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 was determined necessary for the District and an election was called pursuant to the Law. See "THE COMMUNITY FACILITIES DISTRICT — Rate and Method of Apportionment of Special Tax." The Refunded Bonds were authorized to be issued by the Resolution No. 2004-1 adopted by the City Council on January 5, 2004. All propositions were approved by the Prior Landowner, as the sole owner of the land within the District at the time of the election, at an election held on February 3,2003. On February 20, 2003, a Notice of Special Tax Lien was recorded as Instrument No. 2003000186478 in the office of the County Recorder for the District. Rate and Method of Apportionment of Special Tax. The District is legally authorized and has covenanted to cause the levy of the Special Taxes in an amount determined according to the Rate and Method,which the City Council and the qualified electors of the District have approved. The Rate and Method apportions the total amount of Special Taxes to be collected among the nine parcels of Taxable Property in the District as more particularly described herein. The District adopted the Rate and Method following public hearings and elections conducted pursuant to the provisions of the Law. The full text of the Rate and Method is set forth in APPENDIX A hereto. The Special Tax is levied on and collected from the owners of the property in the District as set forth in the Rate and Method. The Rate and Method provides that, on or about each July 1st, the Director of Administrative Services of the City or such other person as is designated by the City Administrator to administer the Special Tax(the "Administrator") shall determine which Assessor's Parcels in the District are Taxable Property. The Director of Finance of the City is the"Administrator." Taxable Property is defined as all of the Assessor's Parcels within the boundaries of the District, which are not Exempt Land, or otherwise exempt from the Special Tax pursuant to Law, but in no circumstance shall the total Taxable Property be less than 40.63 acres. Exempt Land is defined as (i)any real property within the boundaries of the District which generally serves the development subject to the Development Agreement (defined below) and is owned by a governmental agency for public right-of-way purposes including,but not limited to parking structures, streets, public walkway corridors, and slopes as determined in each Fiscal Year by the Administrator, and (ii)any Assessor's Parcel for which the Special Tax has been paid in full. In connection with the rehabilitation and construction work related to the renovation of Bella Terra Mall and the construction of the public facilities in connection therewith, including the Parking Structure, the Redevelopment Agency of the City of Huntington Beach (the "Redevelopment Agency") and the Prior Landowner entered into an Owner Participation Agreement, dated October 2, 2000 (the "Original Owner Participation Agreement"). Subsequently, the Original Owner Participation Agreement was amended by the Redevelopment Agency and Bella Terra Associates through a First Implementation Agreement and a Second Implementation Agreement, the latter being executed and delivered in November, 2007 (collectively, as amended,the"OPA"). "Development Agreement" is defined in the Rate and Method as the OPA. There are eight parcels of Taxable Property within the District which have been fully built out. See "THE COMMUNITY FACILITIES DISTRICT." The Rate and Method provides that during each Fiscal Year, the City Council or its designee shall levy the Special Tax proportionally on each Assessor's Parcel of Taxable Property at up to 100% of the Maximum Special Tax for that Fiscal Year, as needed to satisfy the Special Tax Requirement. The Special Tax Requirement is defined as the amount required in any Fiscal Year necessary: (i)to pay the annual scheduled debt service on the Outstanding Bonds due in the next succeeding Bond Year which commences in such Fiscal Year, (ii)to pay any amounts required to establish or replenish the Reserve Account for all Outstanding Bonds, (iii)to pay Administrative Expenses, (iv) to pay costs of any credit enhancement 11, DOCSOC/1616646v6/022273-0006 (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, and(v)to pay the Parking Structure Maintenance Special Tax. Special Taxes levied to pay the Parking Structure Maintenance Tax are not pledged to the repayment of the Bonds. However,the collection of the Parking Structure Maintenance Tax is subordinate to payment of debt service on the Bonds. See"—Collection of Special Taxes and Flow of Funds"below. In each Fiscal Year,the Maximum Special Tax for the Assessor's Parcels of Taxable Property in CFD No.2003-1 is the greater of(1)$65,050 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. 2003-1; 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. The Special Tax may be levied and collected on Taxable Property for each Fiscal Year 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 in accordance with the terms of the Indenture). There are currently 42.083 acres of Taxable Property within the District. Based on a Maximum Special Tax of $65,050 per Acre, the Maximum Special Taxes that may be levied each Fiscal Year is $2,737,499.15. Special Taxes levied to pay the Parking Structure Maintenance Special Tax are not pledged to the repayment of the Bonds. However, the collection of the Parking Structure Maintenance Special Tax is subordinate to payment of debt service on the Bonds. See"—Collection of Special Taxes and Flow of Funds" below. The Rate and Method allows for partial and/or full prepayment of the Special Tax obligation with respect to any parcel. If a prepayment of the Special Tax is made with respect to any parcel in the District,the net proceeds of any such prepayment, together with a transfer of a portion of the amount in the Reserve Account, will be used to redeem Bonds on the next Interest Payment Date following such prepayment for which notice of redemption can timely be given. See APPENDIX A—"RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX" for the detailed provisions of the Rate and Method pertaining to prepayments of Special Taxes, and "THE BONDS—Redemption of the Bonds—Special Mandatory Redemption from Special Tax Prepayments" herein. Any parcel in the District for which the Special Tax has been prepaid in full will thereafter be classified as Exempt Land under the Rate and Method. UNDER NO CIRCUMSTANCES MAY THE SPECIAL TAX ON ANY ASSESSOR'S PARCEL EXCEED THE MAXIMUM RATES AS SET FORTH IN APPENDIX A HERETO. See APPENDIX A — "RATE AND METHOD OF APPORTIONMENT OF SPECIAL TAX"hereto. In connection with the issuance of the Bonds, Willdan Financial Services, the District's Special Tax Consultant, will certify that the Maximum Special Tax that may be levied on assessor's parcels within the District will be at least equal to 110%of maximum annual debt service on the Bonds plus the Administrative Expense Requirement. Actual collections of the Special Tax will depend on the amount of Special Tax delinquencies. 12 DOCSOC/1616646v6/022273-0006 Collection of Special Taxes and Flow of Funds. The Special Taxes will be levied and collected by the County Treasurer in the same manner and at the same time as ad valorem property taxes and transferred to the District by the County Treasurer. The Director of Finance will,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 will 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; See"THE BONDS—Redemption of the Bonds— Special Mandatory Redemption for the Special Tax Prepayments)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 Indenture, in the following order of priority: First: To 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 will be deposited in the Administration Fund until the earlier of (a) 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(b) 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 Administration Fund for any Administrative Expenses not paid pursuant to the first order of priority above; Fifth: To the Parking Fund established pursuant to the Operating Agreement (defined herein) to deposit the Parking Structure Maintenance Special Tax; Sixth: To the Rebate Fund established by the Indenture for payment to the United States pursuant to the Indenture; and Seventh: To the Surplus Fund any Net Taxes remaining after steps one through six above. Although the Special Taxes will constitute liens on taxed parcels within the District,such taxes do not constitute a personal indebtedness of the owners of property within the District. Moreover, other liens for taxes and assessments already exist on the property located within the District and others could come into existence in the future in certain situations without the consent or knowledge of the District or the landowners in the District. See "SPECIAL RISK FACTORS—Parity Taxes and Special Assessments"herein. There is no assurance that the property owners in the District will be financially able to pay the annual Special Taxes or that they will pay such taxes even if financially able to do so. See the portion of this Official Statement entitled"SPECIAL RISK FACTORS." 13 DOCSOC/I616646v6/022273-0006 Debt Service Coverage from Maximum Special Taxes Table 1 below demonstrates the projected Debt Service Coverage assuming the Special Taxes were levied at the Maximum Special Tax rate set forth in the Rate and Method. Such debt service coverage includes only eight separate parcels owned by the Property Owners and one parcel owned by an entity unrelated to the Property Owners which is required to be maintained as open space. In the event of delinquencies with respect to one or more parcels, it is likely that most if not all parcels will be delinquent. See "SPECIAL RISK FACTORS—Special Tax Delinquencies." TABLE 1 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ESTIMATED MAXIMUM TAXING CAPACITY Parking Structure Year Ending Maximum Administrative Bonds Debt Bond Debt Service Maintenance September 1, Special Tar() E.xpenses(2) Service Coverage(s) Special Tax(4) 2014 $2,737,499.15 $30,000.00 $1,571,893.00 1.72 $530,000.00 2015 2,737,499.15 30,000.00 1,574,037.50 1.72 540,600.00 2016 2,737,499.15 30,000.00 1,578,937.50 1.71 551,412.00 2017 2,737,499.15 30,000.00 1,578,437.50 1.72 562,440.24 2018 2,737,499.15 30,000.00 1,577,637.50 1.72 573,689.04 2019 2,737,499.15 30,000.00 1,572,512.50 1.72 585,162.83 2020 2,737,499.15 30,000.00 L572,912.50 1.72 596,866.08 2021 2,737,499.15 30,000.00 1,577,562.50 1.72 608,803.40 2022 2,737,499.15 30,000.00 L574,125.00 1.72 620,979.47 - 2023 2,737,499.15 30,000.00 1,572,625.00 1.72 633,399.06 2024 2,737,499.15 30,000.00 1,577,750.00 1.72 646,067.04 2025 2,737,499.15 30,000.00 1,569,250.00 1.73 658,988.38 2026 2,737,499.15 30;000.00 1,573,750.00 1.72 672,168.15 2027 2,737,499.15 30,000.00 1,575,500.00 1.72 685,611.51 2028 2,737,499.15 30,000.00 L574,500.00 1.72 699,323.74 2029 2,737,499.15 30,000.00 1,575,750.00 1.72 713,310.22 2030 2,737,499.15 30,000.00 1,574,000.00 1.72 727,576.42 2031 2,737,499.15 30,000.00 1,574,250.00 1.72 742,127.95 2032 2,737,499.15 30,000.00 1,571,250.00 1.72 756,970.51 2033 2,737,499.15 30,000.00 1,575,000.00 1.72 772,109.92 * Preliminary,subject to change. D As determined pursuant to the steps listed in Section C of the Rate and Method,the Maximum Special Tax is calculated to be$65,050 per taxable acre and totals$2,737,499.15. (2) Equals the Administrative Expenses Cap. (3) Equals the Maximum Special Tax column, less the Administrative Expenses column, divided by Bonds Debt Service column. Debt service coverage includes Special Taxes from one 2.494 acre parcel (Parcel No. 142-073-045) which is required to be maintained as open space. Excluding such parcel from the debt service coverage calculation results in debt service coverage of approximately 1.63 times Administrative Expenses plus debt service on the Bonds. See "THE COMMUNITY FACILITIES DISTRICT—The Development." 4) The Parking Structure Maintenance Special Tax constitutes part of the Special Tax Requirement and is subordinate to the debt service on the Bonds and Administrative Expenses. Pursuant to Section 4 of the Operating Agreement (as defined herein), the Parking Structure Maintenance Special Tax is deposited into the Parking Fund thereunder only if sufficient moneys have been collected to fund the debt service on the Bonds and Administrative Expenses. See`THE COMMUNITY FACILITIES DISTRICT—The Operating Agreement,the REA and the OPA." Source: Bonds Debt Service provided by the Underwriter; Maximum Special Taxes and debt service coverage provided by Willdan Financial Services. 14 DOC SOC/1616646v6/022273-0006 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 lots within the District are 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 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. Proceeds of Foreclosure Sales The net proceeds received following a judicial foreclosure sale of land within the District resulting from a property owner's failure to pay the Special Tax when due are pledged to the payment of principal of and interest on the Bonds. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes—Collection of Special Taaes and Flow of Funds"herein. Pursuant to Section 53356.1 of the Act,the District has covenanted that it will order, and cause to be commenced,within ninety(90)days following the date a delinquency in the payment of a Special Tax occurs, and thereafter diligently prosecute to judgment (unless such delinquency is theretofore brought current), an 15 DOC SOC/1616646v6/022273-0006 action in the superior court to foreclose the lien of any Special Tax or installment thereof not paid when due. Notwithstanding the foregoing,the District is not required commence or pursue such proceedings with respect to any property owned by a single property owner who is delinquent in the payment of Special Taxes in an amount less than$5,000 if both(i)the aggregate amount of such delinquent Special Taxes does not exceed 5% of the total Special Taxes due and payable for the Fiscal Year in question and(ii)the balance on deposit in the Reserve Account of the Special Tax Fund is not less than the Reserve Requirement. If foreclosure is necessary and other funds (including amounts in the Reserve Account of the Special Tax Fund) have been exhausted, debt service payments on the Bonds could be delayed until the foreclosure proceedings have ended with the receipt of any foreclosure sale proceeds. Judicial foreclosure actions are subject to the normal delays associated with court cases and may be further slowed by bankruptcy actions, involvement by agencies of the federal government and other factors beyond the control of the District. See "SPECIAL RISK FACTORS—Bankruptcy and Foreclosure" herein. Moreover, no assurances can be given that the real property 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. See "SPECIAL RISK FACTORS—Land Values" herein. Although the Act authorizes the District to cause such an action to be commenced and diligently pursued to completion, the Act does not impose on the District or the City any obligation to purchase or acquire any lot or parcel of property sold at a foreclosure sale if there is no other purchaser at such sale. The Act provides that,in the case of a delinquency,the Special Tax will have the same lien priority as is provided for ad valorem taxes. 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 to the extent that 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 Extraordinary Administrative Expenses, if any, the Administrative Expenses, not in excess of the Administrative Expenses Cap, 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 as any 16 DOCSOC/1616646v6/022273-0006 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 Net Taxes, except for bonds issued for the purpose of defeasing all or a portion of outstanding Bonds. THE.COMMUNITY FACILITIES DISTRICT General Location. The District consists of approximately 42.083 net taxable acres which have been developed into a commercial,retail and entertainment center in the City known as"Bella Terra" (the"Bella Terra Mall"). The District is located on Edinger Avenue between Gothard Street and Beach Boulevard, just off of the 405 Freeway in the City. The District currently consists of nine County Assessor's parcels which are subject to the Special Tax levy, with additional separate parcels for the land on which the Parking Structure (defined below)is located and for certain easement areas(which additional parcels are subject to the Special Tax levy). Formation. 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 Mello-Roos Community Facilities Act of 1982, as amended(collectively,the"Law"). The District was formed to facilitate financing certain public infrastructure and facilities needed in the renovation of the Bella Terra Mall undertaken by the Prior Landowner. Pursuant to the Law, the City Council adopted Resolution No.2003-3 on January 6, 2003, stating its intention to establish the District and Resolution No.2003-4 on January 6, 2003 declaring the necessity for the District to incur bonded indebtedness. Pursuant to Resolution Nos. 2003-10, 2003-I1 and 2003-12 adopted by the City Council on February 3, 2003, the District was formed, bonded indebtedness in an aggregate principal amount not to exceed $30,000,000 was determined necessary for the District and an election was called pursuant to the Law. The Prior Landowner, as the then sole owner of the land within the District,voted in favor of the incurrence of bonded indebtedness in a principal amount not to exceed $30,000,000 to finance the Public Facilities and the levy of a special tax consistent with the Special Tax Formula on the land within the District to pay the principal and interest on the Bonds, to pay administrative expenses of the District, to make any necessary replenishments to the Reserve Account and to pay the Parking Structure Maintenance Special Tax. On February 20, 2003, a Notice of Special Tax Lien with respect to the District was recorded as Instrument No.2003000186478 in the Office of the Orange County Recorder. The Refunded Bonds were authorized to be issued by Resolution 2004-1 adopted by the City Council,acting as the legislative body of the District, on January 5,2004. Public Facilities. The "Public Facilities" financed through the issuance of the Refunded Bonds included the land acquisition and construction of a six story, approximately 1,536 stall parking structure adjacent to the Bella Terra Mall (the "Parking Structure") and all work appurtenant thereto, infrastructure 17 DOC SOC/1616646v6/022273-0006 improvements along Edinger Avenue and Center Avenue, police substation improvements, and other miscellaneous fees,permits and costs. All of the Public Facilities were complete by 2005. The Development The property in the District includes nine taxable parcels totaling approximately 42 acres which constitute the "Development." The Development includes the Bella Terra Mall, the adjacent property on which a Costco fuel station is located and one 2.494 acre parcel which is required to be maintained as open space in connection with the development of a multi-family housing development which is located near the Development but is not within the District. The Costco Warehouse itself is located on property immediately adjacent to the District on a site which used to be a Mervyn's, but is not within the boundaries of the District and not subject to the Special Tax. The Bella Terra Mall was originally developed in 1965 through 1969 with the construction of a Broadway Department store, a JC Penny Department Store, a Montgomery Ward Department Store, a JC Penny/Firestone Auto Center, and other mall shops and related businesses. The Prior Landowner purchased the Development on November 16, 1999 for approximately $48,500,000 with the intention of renovating the Bella Terra Mall. The District was formed, and the Refunded Bonds were issued, to finance the Parking Structure and other public facilities related to the renovation of the Development. The Bella Terra Associates purchased the Development for $260,000,000 in August, 2005. See "—The Property Owners." The Bella Terra Mall is a Tuscan themed open air lifestyle retail center with approximately 690,000 square feet of retail, restaurant, open-air courtyards and entertainment uses. The Bella Terra Mall includes four clustered major buildings on the interior of the Development site, several smaller buildings on the perimeter of the Development site and an outdoor amphitheater. Larger tenants in the Bella Terra Mall include Whole Foods, The Cheesecake Factory, Barnes and Noble, Kohl's, REI, Bed Bath& Beyond,Huntington Surf and Sport, and Cost Plus World Market. The Bella Terra Mall also includes a 4,000-seat, 20-screen Century Theaters cineplex. Set forth below is Table 2 indicating the current Orange County Assessor's Parcels in the District,the size of the parcels and the current owners and tenants whose businesses are located on the parcels. 18 DOC SOC/16 16646v6/022273-0006 TABLE 2 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 PARCELS,OWNERSHIP AND TENANTS (as of April 1,2013) Orange County Assessor's Parcel Size Parcel No. in Acres Current Owner Current Tenant(s) 142-073-021 0.439 Bella Terra Associates,LLC Roman's Macaroni Grill 142-073-023 1.704 Bella Terra Associates,LLC Burlington Coat Factory 142-073-043 2.988 Bella Terra C LLC Costco Fuel Station 142-073-045 2.494 Bella Terra Villas LLC(I) Open Space 142-073-047 0.320 Bella Terra Associates,LLC King's Fish Market 142-073-048 0.280 Bella Terra Associates,LLC Bank of America 142-073-049 0.340 Bella Terra Associates,LLC California Pizza Kitchen 142-073-050 0.280 Bella Terra Associates,LLC Islands 142-073-046 33.178 Bella Terra Associates,LLC All other tenants of Bella Terra Mall Total 42.083 (1) Bella Terra Villas LLC is a single purpose entity related to UDR,Inc.,the developer of a multi-family housing development located near the District known as"The Residences at Bella Terra." Bella Terra Villas LLC is not related to Bella Terra C LLC or Bella Terra Associates,LLC,both of which are under common ownership.See"—The Property Owners." Source: Bella Terra Associates. The property within the District has undergone multiple lot line adjustments and re-mapping since the formation of the District in connection with the completion of the renovations of Bella Terra Mall and reconfigurations and construction undertaken for the current and future tenants located therein, as well as the adjacent Costco. The information in Table 2 above are based on the most recent information available to the District and the Property Owners. An approximately 154,000 square foot Costco is located at 7562 Center Avenue near the District, adjacent to the Bella Terra Mall. This Costco opened for business in May, 2012 and includes a fuel station. While the Costco fuel station is located in the District and subject to the Special Tax, the Costco Warehouse itself is not located within the District and is not subject to the Special Tax. See "— Summary of Leases; Occupancy Rates" for additional information concerning the tenants and lease terms within the Bella Terra Mall. The District also includes one 2.494 acre parcel (Parcel No. 142-073-045) which is required to be maintained as open space (the"Open Space Parcel"). The Open Space Parcel is owned by Bella Terra Villas LLC ("Bella Terra Villas"), a single purpose entity related to UDR, Inc. ("UDR"), a publicly traded multi- family real estate investment trust traded on the New York Stock Exchange under the symbol "UDR." The Open Space Parcel is required by the City to be maintained as open space in connection with UDR's development of"The Residences at Bella Terra," an upscale apartment complex near the Development. The first phase of development with respect to The Residences at Bella Terra has been completed and the first occupants at moved into The Residences at Bella Terra in mid-May 2013. The Residences at Bella Terra is not within the District. In the event BTDJM Phase II, or a future owner, becomes delinquent in the payment of Special Taxes with respect to the Open Space Parcel,the Special Tax burden would be spread among the other parcels in accordance with the Rate and Method. Excluding the Open Space Parcel from debt service coverage results in debt service coverage of approximately 1.63 times Administrative Expenses plus debt service on the Bonds. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Debt Service Coverage from Maximum Special Taxes." 19 DOCSOC/1616646v6/022273-0006 The Property Owners Assessor's Parcel No. 142-073-43 (the parcel on which Costco fuel station is located) is owned by Bella Terra C LLC, a Delaware limited liability company("Bella Terra C"). The Open Space Parcel is owned by Bella Terra Villas, and entity unrelated to the other Property Owners within the District. The other seven taxable parcels within the District are owned by Bella Terra Associates, LLC, a Delaware limited liability company("Bella Terra Associates"). Both Bella Terra C and Bella Terra Associates are single purpose entities owned by common ownership. Bella Terra C is wholly owned by BTDJM Associates LLC, a Delaware limited liability company ("BTDJM Associates"). Bella Terra Associates is wholly owned by Bella Terra Borrower,LLC a Delaware limited liability company,which is in turn wholly owned by BTDJM Associates. Bella Terra C and Bella Terra Associates are sometimes referred to in this Official Statement as the "Property Owners." BTDJM Associate's members are(i)Bella Terra Holding, LLC (with an 87.75%interest), whose sole member is SRA Holding, LLC, whose sole member is PERS Holding Company Limited L.L.C; and(ii)Bella Terra Group Retail, LLC (with a 12.25% interest), whose members include (a) Bella Terra Retail Holdings Corp., a California Corporation owned by D. John Miller (21%), Eric Sahn (22%), Lindsay Parton (21%), Dieter Mees (15%), John Cappetta (15%) and various others (6%) and (b) various Class "A" members including John Miller(1.54%), Eric Sahn(.62%),Lindsay Parton(.62%), Dieter Mees(5.02%), John Cappetta (3.09%)and various others(9.11%). BTDJM Associates is managed by Bella Terra Group Retail, LLC, a California limited liability company ("Bella Terra Group"), an entity controlled by DJM Capital Partners, Inc., San Jose, California ("DJM Capital Partners"). DJM Capital Partners manages Bella Terra Mall. DJM Capital Partners is a provider of value-added private equity investment, development and asset management services in the retail sector. Since 2003, DJM Capital Partners has executed acquisitions, financing and sale transactions in excess of$1.5 billion. Currently, DJM Capital Partners' west coast portfolio is valued more than $650 million, consisting primarily of Core/Core Plus retail properties in coastal Southern California markets. Set forth below is a listing of recent retail developments in which DJM Capital Partners has been involved: Size(`000) Year Project Location Type sf. Acquired Anchor Tenants La Habra Marketplace La Habra,CA Retail 376 2004 LA Fitness,Office Max,La Habra 16 Regal Cinemas Lakewood Square Lakewood,CA Retail 188 2004 Von's Supermarket,Chuck E.Cheese, Cost Plus World Markets,Michaels Montalvo Square Ventura,CA Retail/Office 219 2003 Ralph's,LA Fitness Village Del Arno Torrance,CA Retail 179 2004 Sport Chalet,BevMo The following is a brief description of the key management personnel of DJM Capital Partners. D. John Miller, Chief Executive Officer. D. John Miller is the founder and chief executive officer of DJM Capital Partners, which was started in 1992. DJM Capital Partners has managed more than $1 billion in assets since its founding. Mr. Miller has over 30 years of experience in commercial real estate, working as a broker, investor,manager and developer, with expertise covering many products and market types. Mr. Miller began his career as a broker with Cornish & Carey Commercial Real Estate in Santa Clara, California, specializing in income property. Prior to starting DJM Capital Partners, Miller was a principal with the commercial real estate firm of MacMillan, Moore and Buchanan, Inc. in San Jose, California. While at the firm, Miller was general partner and asset manager of a partnership portfolio of income properties valued in excess of$50 million, and he brokered more than $300 million of investment sales. Mr. Miller formed DJM 20 DOCSOC/1616646v6/022273-0006 Capital Partners in the early 1990s to participate as a broker and principal in the wide-spread liquidation of commercial real estate in the United States, resulting from the savings and loan crisis of the time. From 1993 through 1995, he acquired over $75 million of bank-owned apartment and retail properties in California, subsequently selling the portfolio over a period at a significant return. Mr. Miller is a member of the Association of Silicon Valley Brokers, the Commonwealth Club of California, the California Association of Realtors,the Tri-County Apartment Association, UC Berkeley/South Bay Cal Business Alumni, and the Urban Land Institute. Mr.Miller is a California licensed real estate broker and holds a B.A. in Political Science from the University of California at Berkeley,where Mr.Miller graduated cum laude. Eric Sahn. Eric Sahn oversees all financial affairs and asset management for DJM Capital Partners. Mr. Sahn has over 27 years' experience in real estate investment and development. Sahn began his career at a private real estate investment and development firm in New York, where he managed over $700 million in acquisitions, development and fmancing for a variety of property types including hotels, office buildings, industrial/flex buildings, shopping centers and apartments. A specialist in urban, in-fill development, Mr. Sahn later worked for Avalon Bay Communities, a large national multi-family real estate investment trust, and as Vice President of Development for Legacy Partners. Sahn is a California licensed real estate broker and a Certified Property Manager(CPM)Candidate. Sahn holds a B.S. in Applied Mathematics and Economics from Brown University, where he graduated magna cum laude, and an MBA in Real Estate from the University of California at Berkeley. Lindsay Parton, President. As President of DJM Capital Partners, Lindsay Parton is responsible for directing Southern California property acquisitions and supervising all construction and development activities for DJM Capital Partners. Mr. Parton's team is responsible for all entitlements, governmental and community relations, architectural and land planning, construction management, marketing and positioning of development and redevelopment properties, from project inception through completion. Mr. Parton has over 30 years' experience in the construction development industry. Mr. Parton is founder and chairman of Parton & Edwards Construction, a Santa Barbara based company that has, since 1980, developed a broad range of residential and commercial properties throughout California, as well as institutional and public works projects in excess of$300 million. Mr. Parton holds a B.A. in economics from Westmont College in Santa Barbara. Summary of Leases; Occupancy Rates Bella Terra Associates leases property within Bella Terra Mall to tenants. The following Table 3 sets forth the occupancy rates for the past five years based on the Property Owner's property leases for the leasable space within the District. As of April 1,2013, approximately 95.5%of the total leasable area of the District is subject to executed leases. The following Table 4 sets forth the status of tenant leases within the District as of April 1,2013,together with the number of leased square feet and the termination dates of the current leases. 21 DOC S OC/1616646v6/022273-0006 TABLE 3 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 LEASE OCCUPANCY RATES 2008 THROUGH 2O12 As of Leasable Area Leased Area December 31, (approximate)(1) (approximate) Lease Occupancy Rate 2008 775,037 656,951 84.76% 2009 774,962 657,465 84.84 2010 774,989 649,719 83.84 2011 685,805 677,814 98.83 2012 686,727 656,672 95.62 (1) Changes in leasable area are due to configurations of individual tenant spaces. 2008 through 2010 also include a Mervyn's building which has since been demolished. Mervyn's was located on a portion of the parcel on which the Costco fuel station is now located and on a portion of the parcel on which the Costco is now located,which is outside the District. Source: Bella Terra Associates. 22 DOC SOC/1616646v6/022273-0006 TABLE 4 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 SUMMARY OF LEASES AND STATUS (as of April 1,2013) Square Percentage of Total Lease Term/ Tenant(l) Footage Gross Leasing Area Use Expiration Date() Pei Wei#86 3,195 Restaurant/Food 12/31/2015 Chronic Tacos 1,334 Restaurant/Food 04/30/2021 Comer Bakery#209 3,025 Restaurant/Food 01/31/2016 King Seafood Company 7,887 Restaurant/Food 09/30/2021 Bank of America PCA7 8,240 Services 12/31/2015 Burlington Coat Factory 149,001 Retail 01/312025 Fantastic Sam's 1,516 Retail 06/30/2018 Ong Shao Dental,Inc 1,622 Services 02/28/2017 H&N Group Management 2,354 Corporate 04/302018 DJM/Holland Bella Terra 2,059 Corporate 09/302013 Ulta 9166 9,981 Retail 02/28/2021 Cost Plus#270 18.300 Retail 01/31/2016 REI#88 22,500 Retail 07/31/2015 Kohl's Department St 97,394 Retail 02/03/2024 Justice Stores LLC. 4,402 Retail 05/31/2016 LensCrafters#5603 2,912 Retail 08/31/2017 Angl.Inc. 2,195 Retail 04/30/2019 Loma Jane USA 2,085 Retail 08/31/2022 No Rest for Bridget 2,248 Retail 01/312017 Huntington Surf and Sport 7,029 Retail 03/31/2016 OZ Accessories 746 Retail 12/31/2015 Cinemark 482 Century 77,269 Theater 11/17/2020 Hat Stop,etc. 807 Retail 10/31/2014 Rocky Mountain Chocolate Factory 990 Retail 09/30/2015 CorePower Yoga,LLC 7,809 Services 08/31/2017 Dental Oasis of Orange County 4,000 Services 11/30/2017 Atlantis Eye Care 3,643 Services 08/14/2021 Bed Bath&Beyond 40,555 Retail 05/31/2021 Time Warner Cable Services 1,204 Services 07/31/2013 Kabuki Restaurants 5,229 Restaurant/Food 10/31/2015 Johnny Rocket's 2,163 Restaurant/Food 10/31/2015 Wreath Equity,LLC 1,865 Services 10/31/2015 Western Federal Credit Union 2,254 Services 11/30/2017 Taco De Ojo 2,975 Restaurant/Food 10/31/2015 Pinkberry 911 Restaurant/Food 04/30/2017 Buffalo Wild Wings 5,587 Restaurant/Food 01/31/2022 Luna Rossa 2,448 Restaurant/Food 01/31/2017 Diane's Beachwear 1,379 Retail 02/28/2019 Pizzanto 911 Restaurant/Food 04/30/2014 Princess Bride Diamonds 839 Retail 03/31/2021 Jamba Juice Company 1,443 Restaurant/Food 09/30/2015 Peet's#324 1,525 Restaurant/Food 09/30/2015 T-Mobile USA,Inc. 1,418 Retail 09/31/2015 GameStop#3354 1,534 Retail 08/31/2013 Bella Hue,Inc. 2,613 Services 11/30/2015 California Pizza Kitchen 5,994 Restaurant/Food 02/28/2020 Islands Huntington Beach 5,406 Restaurant/Food 03/31/2020 Cheesecake Factory 9,925 Restaurant/Food 01/31/2027 Barnes&Noble 42743 40,300 Retail 01/31/2015 Carter's Retail 4,516 Retail 02/28/2019 OC Skincare,Inc. 1,713 Services 04/30/2016 Jos.A.Bank Clothiers 4,200 Retail 12/31/2015 Ucatan,Inc. 2,220 Retail 06/302016 Massage Envy Limited 3,735 Services 12/31/2019 Staples,Inc.#0152 19,012 Retail 01/31/2015 See's Candy#58 1,496 Retail 12/31/2015 Whole Foods Market 31,530 Retail 09/30/2030 Romano's Macaroni Grill 7,288 Restaurant/Food 01/31/2022 TOTAL EXECUTED LEASES 658,731 95.418 Does not include the executed ground lease with Costco Wholesale Corporation which is not within the boundaries of the District and is not subject to the Special Tax. (2) Does not include extension options. Source: Bella Terra Associates. 23 DO C S OC/1616646v6/022273-0006 No assurance can be given that all executed leases will continue for their current terms or exercise any applicable renewal options. Property Owner Financial Information. Bella Terra Associates, LLC is a single purpose entity that owns all of the Taxable Property in the District (except for Assessor Parcel Nos. 142-073-43 and 142-073-45 that are owned by Bella Terra C LLC, an entity related to Bella Terra Associates, LLC). According to unaudited consolidated financial statements for the fiscal year ended December 31, 2012 filed on EMMA by Bella Terra Associates on behalf of itself and its related entities, including Bella Terra C, Bella Terra Associates' consolidated net income was approximately $7.68 million on total revenues of approximately $26.7 million. In comparison, Bella Terra Associates reported a net loss of$1.6 million on total revenues of approximately$23.4 million for the fiscal year ended December 31,2011. Bella Terra Associates acquired the Bella Terra Mall in August 2005 from the Prior Landowner for $260 million. In connection with the acquisition of the Bella Terra Mall, Bella Terra Associates entered into a Loan Agreement with GMAC Commercial Mortgage Corporation, a California corporation ("GMAC Commercial"), dated as of August 15, 2005 (the "First Mortgage Loan"), and a Loan Agreement (Second Mortgage), by and between GMAC and Bella Terra Associates, dated as of August 15, 2005 (the "Second Mortgage Loan"). Bella Terra Associates borrowed an aggregate principal amount of $188 million under the First Mortgage Loan. The First Mortgage Loan is secured by two promissory notes executed and delivered by Bella Terra Associates in the aggregate principal amount of$188 million (the "First Mortgage Promissory Notes") and a Deed of Trust, Assignment of Rents And Leases, Security Instrument and Fixture Filing (First Mortgage), executed by Bella Terra Associates, dated as of August 15, 2005 (the "First Mortgage Loan Deed of Trust"). At the time Bella Terra Associates entered into the First Mortgage Loan, it also entered into the Second Mortgage Loan for $17 million which was subordinate to the First Mortgage Loan and has subsequently been paid off. Unless extended, the maturity date of the First Mortgage Deed of Trust is September 1, 2015 (the "First Mortgage Loan Maturity Date"). Interest is fixed on the entire balance of the First Mortgage Loan and is 5.20%per annum on the first$160 million of the First Mortgage Loan and approximately 5.25%thereafter. Interest only payments on the First Mortgage Loan balance are due monthly on the first day of each month commencing October 1, 2005 until the First Mortgage Loan Maturity Date. All unpaid interest and principal outstanding on the First Mortgage Loan is due on the First Mortgage Loan Maturity Date. Bella Terra Associates has represented to the District that it is current with respect to all amounts due under the First Mortgage Loan. Under the Law, the lien pursuant to the First Mortgage Loan is subordinate to the lien of Special Taxes. The First Mortgage Loan includes the establishment of a"Lockbox Account" pursuant to a Lockbox Agreement whereby all rents collected on the leases within Bella Terra Mall are deposited into the Lockbox Account and disbursed in accordance with the First Mortgage Loan and the Lockbox Agreement. On the closing date with respect to the First Mortgage Loan(the"Closing Date"),Bella Terra Associates was required to deposit into a Tax Escrow Account established under the First Mortgage Loan and held by GMAC Commercial estimated taxes, including Special Taxes,on the Bella Terra Mall for the 12 months following the Closing Date. Thereafter, Bella Terra Associates is required to deposit each month into the Tax Escrow Account one-twelfth of the estimated annual taxes, including Special Taxes, on Bella Terra Mall. GMAC pays such taxes,including Special Taxes,out of the Tax Escrow Account. In connection with the construction of the Costco Warehouse at 7562 Center Avenue and the adjacent Costco fuel station, Bella Terra C LLC, a Delaware limited liability company, an entity related to Bella Terra Associates, LLC, borrowed$17.25 million pursuant to a Loan Agreement,by and between Bella Terra C and NLI Commercial Mortgage Fund, LLC, a Delaware limited liability ("NLI Commercial"), as lender, dated as of April 13, 2012 (the "Costco Mortgage Loan"). The Costco Mortgage Loan is secured by the property on 24 DOC SOC/1616646v6/022273-0006 which the Costco Warehouse is located, which is not in the District, including the ground lease between Costco Wholesale Corporation and Bella Terra C. The Costco Mortgage Loan is also secured by Assessor Parcel Nos. 142-073-43 and 142-073-45 in the District, which include the Costco fuel station, open space and parking for Costco. Interest on the Costco Mortgage Loan is fixed at 4.45% and matures May 10, 2022 (the "Costco Mortgage Loan Maturity Date"). The Costco Mortgage Loan is amortized, and monthly payments of principal and interest in the amount of$90,709 are due on the tenth day of each month commencing June 10, 2012. Taxes on the property secured by the Costco Mortgage Loan are not escrowed until there has been a default under the Costco Mortgage Loan. Bella Terra C has represented to the District that it is current with respects to all amounts due under the Costco Mortgage Loan. Under the Law, the lien pursuant to the Costco Mortgage Loan is subordinate to the lien of Special Taxes. The Property Owners are not personally obligated to pay the Special Tax. Rather the Special Tax is an obligation only against the taxable parcels of property in the District subject to the Special Tax. See "SPECIAL RISK FACTORS—Payment of the Special Tax is not a Personal Obligation of the Owners." The Operating Agreement,the REA and the OPA In connection with the construction of the Parking Structure, and in order to provide for the operation and maintenance of the Parking Structure once it was completed, the City and the Prior Landowner entered into(i)a Parking and Reciprocal Easement Agreement and Option to Purchase, dated as of March 1, 2004 (the "REA"), and (ii)an Operating Agreement for Huntington Center Parking Structure, dated as of January 15, 2004 (the"Operating Agreement'). In connection with the rehabilitation and construction work related to the renovation of Bella Terra Mall and the construction of the Public Facilities including the Parking Structure,the Redevelopment Agency and the Prior Landowner entered into an Owner Participation Agreement, dated October 2, 2000 (the "Original Owner Participation Agreement'). Subsequently, the Original Owner Participation Agreement was amended by the Redevelopment Agency and Bella Terra Associates through a First Implementation Agreement and a Second Implementation Agreement, the latter being executed and delivered in November,2007(collectively,as amended,the"OPA"). In connection with the acquisition of the Bella Terra Mall, Bella Terra Associates,the Redevelopment Agency and the Prior Landowner entered into an Assignment and Assumption Agreement, dated as of August 8,2005 (the"Assignment and Assumption'),pursuant to which Bella Terra Associates assumed the rights and obligations of the Prior Landowner under the REA, the OPA and the Operating Agreement. The REA, the OPA and the Operating Agreement are subject to amendment by the City and the Property Owners at any time without any requirement for notice to or the consent of the Bondowners. The REA provides for various easements related to the construction and use of the Parking Structure. The REA grants the Property Owners an exclusive easement with respect to 5% of the parking spaces (the "Reserve Spaces") in the Parking Structure. Other easements were granted by the City and the Prior Landowner for utilities necessary for the operation of the Parking Structure and that otherwise serve the Development,for common structural support and security,and for ingress and egress. The REA provides that Bella Terra Associates is to rebuild or repair the Parking Structure in the case of any future damage or destruction. Any proceeds of any governmental condemnation of the Parking Structure will be used first to replace any public parking lost as a result of such condemnation, and second to redeem Bonds under the optional redemption provisions of the Indenture. The REA provides that the City is to operate and maintain the Parking Structure from the proceeds of the portion of the Special Tax constituting the Parking Structure Maintenance Tax to be levied for such purpose. The City may delegate its operating responsibilities and has done so pursuant to the Operating Agreement described below. Pursuant to the REA, Bella Terra Associates is required to provide for capital replacement and repairs to the Parking Structure, subject to the receipt of any applicable insurance proceeds. 25 DOC SOC/1616646v6/022273-0006 The REA grants the Property Owners an option to purchase the Parking Structure,at its then fair market value, following the date that the Bonds have been fully paid and retired. The Operating Agreement provides for the operation of the Parking Structure. The Operating Agreement provides for an annual fee of$1,500 to Bella Terra Associates, subject to cost of living increases, for their services in operating the Parking Structure. The term of the Operating Agreement extends to the date that is 15 years from the date when the City provides a certificate of occupancy for the Parking Structure, which occurred in 2005, and Bella Terra Associates has unilaterally agreed to an additional 15 year extension at the option of the City,but the term will end in any event if the City no longer owns the Parking Structure. Under the Operating Agreement, any revenues received by Bella Terra Associates,.as the operator of the Parking Structure (the "Operator"), are deposited into the "Parking Fund" established by the City for the benefit of the City and the Operator. Each July 15 during the term of the Operating Agreement,the Operator is required to submit to the City a proposed budget with respect the projected income, projected expenses and projected Parking Structure Maintenance Special Tax to be levied in the next fiscal year (the "Proposed Budget"). Each Proposed Budget requires the written approval of the City, not to be unreasonably held or delayed. If the Proposed Budget is not approved, the budget from the previous fiscal year will govern the operating costs with respect to the Parking Structure until the new Proposed Budget is approved. Subject to the limitations set forth in the Rate and Method, the District then levies the Parking Structure Maintenance Special Tax estimated to be required for the operation and maintenance of the Parking Structure for the coming fiscal year. Income from the Parking Structure and collected Parking Structure Maintenance Special Taxes are deposited in the Parking Fund maintained by the City. Moneys on deposit in the Parking Fund are applied first to the maintenance and operation of the Parking Structure, second to the payment of the cost of repairing and replacement of the Parking Structure and third to the payment of the Operator's fee. The Parking Structure Maintenance Special Tax constitutes part of the Special Tax Requirement and is subordinate to the debt service on the Bonds and Administrative Expenses. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes." Under the REA, Bella Terra Associates and its successors or assigns are not permitted to prepay the Special Tax obligation with respect to any parcel unless the City is provided reasonable assurances that the Parking Structure Maintenance Special Tax collectible from the remainder of the taxable parcels not prepaid is sufficient to cover the reasonably estimated costs of operating and maintaining the Parking Structure. The liability of the City under the REA and the Operating Agreement is strictly limited to the proceeds of the Parking Structure Maintenance Special Tax, any revenues derived from the operation of the Parking Structure and any other moneys deposited in the Parking Fund. Cost of operating and maintaining the Parking Structure in excess of any proceeds of the Parking Structure Maintenance Special Tax (collected as a component of the Special Tax levy in the District) are to be borne by Bella Terra Associates. The Parking Structure Maintenance Special Tax is subordinate to the Net Taxes pledged to the repayment of the Bonds. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Special Taxes." The OPA provides for the Redevelopment Agency(and the Successor to the Redevelopment Agency of the City of Huntington Beach,as successor to the Redevelopment Agency(the"Successor Agency")), solely from net property tax increment revenue from the Development, to repay Bella Terra Associates a$15 million "Feasibility Gap" for the Development at an fixed interest rate of 6.9357% per annum (the "Feasibility Gap Payments"). The Feasibility Gap Payments are to be made by the Redevelopment Agency during a twenty year Reimbursement Term which began on the Operating Commencement Date, defined as November 1, 2005 in the OPA. The Feasibility Gap Payments are to be made in amounts equal to a portion of the increase in tax increment revenues generated by the Development. At the end of the Reimbursement Term, any outstanding principal and interest due under the OPA shall be forgiven by Bella Terra Associates. As of April 1,2013,.the outstanding balance due to Bella Terra Associates under the OPA was $13,709,675. The OPA has been recognized on the Successor Agency's recognized obligation payment schedule (the"ROPS"). However, the Successor Agency is unable to predict whether it will continue to be able to make payments to Bella Terra 26 DOC SOC/I616646v6/022273-0006 Associates under the OPA or in what amount. Such payments are not in any way pledged as security for the Bonds, and the OPA can be amended at any time by the Property and the Agency without any requirement for notice to or the consent of the Bondowners. 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 parcels within the District. Table 5 below sets forth the existing authorized indebtedness payable from taxes and assessments that may be levied on the parcels of Developed Property 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, the City and the Underwriter believe the information is current as of its date, but makes 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 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 5 does not include the aggregate principal amount of the Bonds but does include the outstanding aggregate principal amount of the Refunded Bonds being refunded with the proceeds of the Bonds. 27 D OC S OC/1616646v6/022273-0006 TABLE 5 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 DIRECT AND OVERLAPPING DEBT (as of March 1,2013) 2012-13 Assessed Valuation: $217,190,074 (Land and Improvements) DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: %Applicable Debt 3/1/13 Metropolitan Water District General Obligation Bonds 0.010% $ 17,083 Coast Community College District General Obligation Bonds 0.212 653,187 Huntington Beach Union High School District General Obligation Bonds 0.529 1,175,675 City of Huntington Beach Community Facilities District No.2003-1 100. 21,595,000 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $23,440,945 OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 0.051% $ 108,903 Orange County Pension Obligations 0.051 179,110 Orange County Office of Education Certificates of Participation 0.051 8,137 Coast Community College District General Fund Obligations 0.212 42,963 Huntington Beach Union High School District Certificates of Participation 0.529 317,742 Ocean View School District Certificates of Participation 1.849 102,986 City of Huntington Beach General Fund Obligations 0.722 337,490 City of Huntington Beach Judgment Obligations 0.722 25,095 Municipal Water District of Orange County Water Facilities Corporation 0.061 6.117 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $1,128,543 Less: MWDOC Water Facilities Corporation(100%supported by revenues) 6,117 TOTAL NET OVERLAPPING GENERAL FUND DEBT $1,122,426 OVERLAPPING TAX INCREMENT DEBT: $2,055,618 GROSS COMBINED TOTAL DEBT $26,625,106«� NET COMBINED TOTAL DEBT $26,618,989 Ratios to 2012-13 Assessed Valuation: Direct Debt($21,595,000) 9.94% ............................................................... Total Direct and Overlapping Tax and Assessment Debt................ 10.79% Gross Combined Total Debt............................................................ 12.26% Net Combined Total Debt............................................................... 12.26% Ratios to Redevelopment Incremental Valuation 6193.164.035): Total Overlapping Tax Increment Debt............................................. 1.06% (1) Excludes the Bonds but includes 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 Ratios The assessed value of the taxable parcels within the District for Fiscal Year 2012-13 is $217,190,074. 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 approximately 9.84'-to-1. The estimated assessed value-to-lien ratio (excluding and direct and overlapping general obligation bond debt) is approximately 10.74`-to-1. Because a parcel's assessed value generally represents the lower of its acquisition Preliminary,subject to change. 28 DOC SOC/1616646v6/022273-0006 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 6 below summarizes the assessed value of the Taxable Property within the District for Fiscal Years 2007-08 through 2012-13. TABLE 6 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ASSESSED VALUES OF TAXABLE PROPERTY FISCAL YEAR 2007-08 THROUGH 2O12-13 Percentage Change in Assessed Value from Fiscal Year Assessed Value(l) Previous Fiscal Year 2007-08 $ 204,921,699 N/A 2008-09 209,602,317 2.28% 2009-10 214,139,804 2.16 2010-11"' 213,671,522 -0.22 2011-12 214,950,818 0.60 2012-13 217,190,074 1.04 Only includes assessed values for parcels that were levied. (2) 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. Source: Orange County Secured Rolls,as compiled by Willdan Financial Services. 29 DOC SOC/1616646v6/022273-0006 Table 7 below sets forth the estimated value-to-lien ratios for each of the parcels within District based upon the direct and overlapping debt information included in Table 1. TABLE 7 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 ESTIMATED FISCAL YEAR 2012-13 ASSESSED VALUE-TO-LIEN RATIOS BY PARCEL Fiscal Year Aggregate 2012-13 Fiscal Year Percentage Value-to- Assessed 2012-13 Special Share of Estimated Share Overlapping Total Combined Debt Parcel No. Property Owner Value Tax Levy Special Tax of'Bonds*lrl DebP Debt` Ratio* 142-073-21 Bella Terra Associates LLC $ 1,933,696 $ 23,516.46 1.04% $ 21 1,034.62 $ 16,434.91 $ 227,469.53 9.50 142-073-23 Bella Terra Associates LLC 29,239,990 94,494.39 4.19 947,994.22 240,009.39 1,087,993.60 25.96 142-073-43 Bella Terra C LLC(" 10,903,828 160,061.92 7.10 1,436,391.44 92,674.03 1,529,055.47 7.13 142-07345 Bella Terra Villas LLC(4) 4,673,611 133,599.20 5.93 1,199,907.40 39,722.05 1,239,629.45 3.77 142-073-46 Bella Terra Associates LLC 164,516,713 1,777,297.24 78.83 15,949,217.97 1,399,263.70 17,347,491.67 9.49 142-073-47 Bella Terra Associates LLC 2,295,417 17,141.94 0.76 153,929.34 19,509.25 173,339.59 13.24 142-073-49 Bella Terra Associates LLC 1,666,844 14,999.11 0.67 134,600.67 14,166.97 148,767.54 11.20 142-073-49 Bella Terra Associates LLC 1,594,743 19,213.20 0.81 163,443.67 13,554.07 176,997.74 9.01 142-073-50 Bella Terra Associates LLC 1,366,232 14,999.11 0.67 134,600.67 11,611.91 146,212.59 9.34 Total $217,190,074 $2,254,312.46 100.00% $ 20,230,000.00 $1,845,946.17 $22,075,946.17 9.84 * Preliminary,subject to change. Ib Debt has been allocated based on the Fiscal Year 2012-13 Maximum Special Tax for each parcel. (2) Includes the lien of the Metropolitan Water District GO Bonds,Coast Community College District GO Bonds,and Huntington Beach Union High School GO Bonds. See Table 5"Direct and Overlapping Debt as of March 1,2013"for a description of the overlapping liens. (3) County records indicate that BTDJM Phase 11 Associates LLC is the owner of this parcel,however,subsequent information provided to the District indicate Bella Terra C LLC is the current owner of this parcel. (4) County records indicate that BTD.IM Phase II Associates LLC is the owner of this parcel; however,subsequent information provided to the District indicates Bella Terra Villas LLC,an entity unrelated to Bella Terra Associates or Bella Terra C LLC,is the current owner of this parcel. This parcel is a 2.494 acre parcel which is required to be maintained as open space in connection with the development of a multi-family housing development which is not located in the District. See"THE COMMUNITY FACILITIES DISTRICT." Source: Detailed and Overlapping Debt Reports provided by California Municipal Statistics,Inc.and Orange County 2012-13 Secured Roll,as compiled by Willdan Financial Services, 30 DOCSOC/I616646v6/022273-0006 Delinquency History Table 8 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 Owners have been never delinquent in the payment of Special Taxes. TABLE 8 CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 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 DelinquenO Delinquent 2008-09 $2,354,162.92 7 0 $0.00 0.00% 0 $0.00 0.00% 2009-10(" 2,387,515.55 7 0 0.00 0.00 0 0.00 0.00 2010-11 2,200,129.00 7 0 0.00 0.00 0 0.00 0.00 2011-12 2,301,759.64 7 0 0.00 0.00 0 0.00 0.00 2012-13 2,254,312.46 9 N/A N/A N/A 0 0.00 0.00 11) Amount does not include any penalties,interest or fees. (2) Delinquency information as of October 5 for this Fiscal Year only. l3) The additional parcels of Taxable Property in Fiscal Year 2012-13 was due to re-mapping within the District and did not result in any changes to the acreage of Taxable Property. Source: Orange County Tax Collector,as compiled by Willdan Financial Services. THE CITY OF HUNTINGTON BEACH 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. 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 "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Limited Liability"herein. See Appendix E hereto for general information regarding the City. SPECIAL RISK FACTORS The purchase of the Bonds involves significant risks and, therefore, the Bonds are not suitable investments for many investors. The following is a discussion of certain risk factors which should be considered, in addition to other matters set forth herein, in evaluating the investment quality of the Bonds. The Bonds have not been rated by a rating agency. This discussion does not purport to be comprehensive or definitive and does not purport to be a complete statement of all factors which may be considered as risks in evaluating the credit quality of the Bonds. The occurrence of one or more of the events discussed herein could adversely affect the ability or willingness of property owners in the District to pay their Special Taxes when due. Such failures 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 31 DOC S O C/1616646v6/022273-0006 herein could adversely affect the value of the property in the District. See"—Land Values" and"—Limited Secondary Market"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 individual property owners 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 fund of the City. 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 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. Insufficiency of Special Taxes The principal source of payment of principal of and interest on the Bonds is the proceeds of the annual levy and collection of the Special Tax against Taxable Property within the District. The annual levy of the Special Tax is subject to the maximum tax rates authorized. The levy cannot be made at a higher rate even if the failure to do so means that the estimated proceeds of the levy and collection of the Special Tax, together with other available funds,will not be sufficient to pay debt service on the Bonds. Other funds which might be available include funds derived from the payment of penalties on delinquent Special Taxes and funds derived from the tax sale or foreclosure and sale of parcels on which levies of the Special Tax are delinquent. The levy of the Special Tax will rarely, if ever, result in a uniform relationship between the value of particular Taxable Property and the amount of the levy of the Special Tax against such parcels. Thus, there will rarely, if ever, be a uniform relationship between the value of such parcels and the proportionate share of debt service on the Bonds,and certainly not a direct relationship. The Special Tax levied in any particular tax year on a Taxable Property is based upon the revenue needs and application of the Rate and Method. Thus, in addition to annual variations of the revenue needs from the Special Tax, the following are some of the factors which might cause the levy of the Special Tax on any particular Taxable Property to vary from the Special Tax that might otherwise be expected: 32 DOC S OC/1616646v6/022273-0006 (1) Failure of the owners of Taxable Property to pay the Special Tax and delays in the collection of or inability to collect the Special Tax by tax sale or foreclosure and sale of the delinquent parcels,thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. (2) Reduction in the amount of Taxable Property, for such reasons as acquisition of Taxable Property by a governmental agency and failure of the governmental agency to pay the Special Tax based upon a claim of exemption or, in the case of the federal government or an agency thereof, immunity from taxation, thereby resulting in an increased tax burden on the remaining parcels of Taxable Property. Except as set forth above under"SECURITY AND SOURCES OF PAYMENT FOR THE BONDS —Special Taxes" herein,the Indenture provides that the Special Tax is to be collected in the same manner as ordinary ad valorem property taxes are collected and, except as provided in the special covenant for foreclosure described in "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales" and in the Act, is subject to the same penalties and the same procedure, sale and lien priority in case of delinquency as is provided for ad valorem property taxes. Pursuant to these procedures, if taxes are unpaid for a period of five years or more,the property is subject to sale by the County. In the event that sales or foreclosures of property are necessary,there could be a delay in payments to owners of the Bonds pending such sales or the prosecution of foreclosure proceedings and receipt by the District of the proceeds of sale if the Reserve Account is depleted. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS—Proceeds of Foreclosure Sales." 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 two miles 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. The District is approximately one-half mile from this 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 land 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. Hazardous Substances The presence of hazardous substances on a parcel may result in a reduction in the value of a 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 any of the taxed parcels be affected by a hazardous substance, is to reduce the marketability and value of the parcel by the costs of 33 DOC S OC/1616646v6/022273-0006 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 property within the District, as set forth in the various tables 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 any owner(or operator)of any of the parcels within the District has such a current liability with respect to any such parcel. 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 any of the parcels 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 a parcel and the willingness or ability of the owner of any parcel to pay the Special Tax installments. Payment of the Special Tax is not a Personal Obligation of the Owners An owner of Taxable Property is not personally obligated to pay the Special Tax. Rather, the Special Tax is an obligation which is secured only by a lien against the Taxable Property. If the value of a taxable parcel 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 owner. Property Values The value of the property within the District is a critical factor in determining the investment quality of the Bonds. If a property owner is delinquent in the payment of Special Taxes,the District's only remedy is to commence foreclosure proceedings against the delinquent parcel 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, delays in development or other events will adversely impact the security underlying the Special Taxes. See "THE COMMUNITY FACILITIES DISTRICT—Assessed Value-to-Lien Ratios." The assessed values set forth in this Official Statement do not represent market values arrived at through an appraisal process and generally reflect only the sales price of a parcel when acquired by its current owner, adjusted annually by an amount determined by the County Assessor, generally not to exceed an increase of more than 2%per fiscal year. No assurance can be given that a parcel could actually be sold for its assessed value. Prospective purchasers of the Bonds should not assume that the land within the District could be sold for its assessed value at a foreclosure sale for delinquent Special Taxes. Additionally, value-to-lien ratios of individual parcels vary greatly. No assurance can be given that any bid will be received for a parcel 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." 34 DOC SOC/1616646v6/022273-0006 Parity Taxes and Special Assessments Property within the District is subject to taxes and assessments imposed by public agencies also having jurisdiction over the land 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 lots and parcels of land on which they will be annually imposed until they are paid. Such lien is on a parity with all special taxes and special assessments levied by 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 property except,possibly,for liens or security interests held by the Federal Deposit Insurance Corporation. See"—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 property within the District. In addition, the landowners within the District may, without the consent or knowledge of the District, petition other public agencies to issue public indebtedness secured by special taxes,,ad valorem taxes or assessments. Any such special taxes, ad valorem taxes or assessments may have a lien on such 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 a parcel 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 each parcel. While title companies normally refer to such notices in title reports, there can be no guarantee that such reference will be made or, if made, that a prospective purchaser or lender will consider such Special Tax obligation in the purchase of a property within the District or lending of money thereon. The Act requires the subdivider(or its agent or representative)of a subdivision to notify a prospective purchaser or long-term lessor of any lot,parcel, or unit subject to a Mello-Roos special tax of the existence and maximum amount of such special tax using a statutorily prescribed form. California Civil Code Section 1102.6b requires that in the case of transfers other than those covered by the above requirement,the seller must at least make a good faith effort to notify the prospective purchaser of the special tax lien in a format prescribed by statute. Failure by an owner of the property to comply with the above requirements, or failure by a purchaser or lessor to consider or understand the nature and existence of the Special Tax, could adversely affect the willingness and ability of the purchaser or lessor to pay the Special Tax when due. Special Tax Delinquencies Under provisions of the Act, the Special Taxes, from which funds necessary for the payment of principal of, and interest on,the Bonds are derived, are customarily billed to the properties within the District on the ad valorem property tax bills sent to owners of such properties. The Act currently provides that such Special Tax installments are due and payable, and bear the same penalties and interest for non-payment, as do ad valorem property tax installments. 35 DOC SOC/1616646v6/022273-0006 See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS — Proceeds of Foreclosure Sales," for a discussion of the provisions which apply, and procedures which the District is obligated to follow under the Indenture, in the event of delinquencies in the payment of Special Taxes. See"—Bankruptcy and Foreclosure" below, for a discussion of the policy of the Federal Deposit Insurance Corporation(the "FDIC") regarding the payment of special taxes and assessment and limitations on the District's ability to foreclose on the lien of the Special Taxes in certain circumstances. 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 a 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 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 any of the parcels 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 real property 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 property 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 36 DOC S OC/1616646v6/022273-0006 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 a parcel within the District 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 against a landowner in the District and if the court found that any of such landowners 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 procuring 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. 37 DOC SOC/1616646v6/022273-0006 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 — "FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT." 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. 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. 38 DOC S OC/1616646v6/022273-0006 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 parcels of Taxable Property within the District 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 fmding 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." Ballot Initiatives and Legislative Measures Articles XIIIA, XIIIB, 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 or on the ability of the landowners within the District to complete the remaining proposed development. 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 39 DOC SOC/1616646v6/022273-0006 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. 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 Willdan Financial Services, as disclosure dissemination agent, Bella Terra Associates has agreed to provide, or cause to be provided, to EMMA, on an annual basis certain information concerning the Development and the Property Owners. Bella Terra Associates has 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 notices of listed events to be provided by the District and APPENDIX F for a description of the specific nature of the annual reports to be filed by Bella Terra Associates and notices of listed events to be provided by Bella Terra Associates. Within the last five years, neither the City nor the District nor Bella Terra Associates have failed to timely comply with their respective prior continuing disclosure obligations under Rule 15c2-12(b)(5) in all material respects. The full text of the form of the District Disclosure Agreement is set forth in APPENDIX E and the full text of the form of the Property Owner Disclosure Agreement is set forth in APPENDIX F. 40 DOCSOC/1616646v6/022273-0006 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 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. 41 DOC SOC/1616646v6/022273-0006 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. 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 42 DOCSOC/1616646v6/022273-0006 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 cover page thereof. 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 Financial Advisor, 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. 43 DOC SOC/1616646v6/022273-0006 The execution and delivery of this Official Statement by the Director of Finance 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.2003-1 By: 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.2003-1 44 DOCSOC/1616646v6/022273-0006 APPENDIX A CITY OF 14UNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO.2003-1 (HUNTINGTON CENTER) 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.2003-1 (Huntington Center)(herein CFD No.2003-1) shall be levied and collected according to the tax liability determined by the Administrator through the application of the procedures described below. The real property in CFD No.2003-1, 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, 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. 2003-1: 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.2003-1. 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/1616646v6/022273-0006 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.2003-1 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.2003-1. County means the County of Orange. Development Agreement means the Owner Participation Agreement (OPA) between the Redevelopment Agency of the City of Huntington Beach and Huntington Center Associates, LLC, dated October 2,2000. Exempt Land means(1)any real property within the boundaries of CFD No.2003-1 which generally serves the development subject to the Development Agreement and is owned by a governmental agency for public right-of-way purposes including, but not limited to parking structures, 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 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. 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 any Parcel of Taxable Property,the maximum Special Tax, determined in accordance with Section C, that can be levied in any Fiscal Year on such Parcel. Maximum Special Tax shall not include the amounts payable under the Parking Structure Maintenance Special Tax. Outstanding Bonds means all Bonds that are then outstanding under the Indenture. Parking Structure Maintenance Special Tax means the portion of the Special Tax to be levied in an amount equal to the amount required in any Fiscal Year for CFD No.2003-1 necessary to pay all actual, documented maintenance costs, management fees and other operating expenses of the parking structure being financed by a portion of the Bond proceeds to the extent such costs, fees and operating expenses exceed revenues generated by such parking structure. The calculation and inclusion or exclusion of particular items of expense or income into such costs, fees, expenses and revenues shall be subject to and limited by the provisions of the following documents,which documents shall be in the form approved by the City Council in connection the issuance of the Bonds, and which documents, upon such approval, shall be deemed to be incorporated herein by this reference: (i)any covenants, conditions or restrictions encumbering such parking structure and/ or the real property upon which it is to be constructed as of the date of issuance of the Bonds, (ii)the initial parking management agreement governing the operation and maintenance of such parking structure (the provisions of such initial parking management agreement to govern the determination of the Parking Structure Maintenance Special Tax for so long as the Special Tax lien remains in effect, A-2 DOC SOC/1 616646v6/022273-0006 notwithstanding any earlier expiration or termination of such agreement), and (iii)any amendments to the foregoing covenants,conditions or restrictions or agreements. 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.2003-1,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 Taxable Property within CFD No.2003-1. Special Tax Requirement means the amount required in any Fiscal Year for CFD No.2003-1 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, (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, and(v)to pay the Parking Structure Maintenance Special Tax. Taxable Property means all of the Assessor's Parcels within the boundaries of CFD No. 2003-1, which are not Exempt Land or exempt from the Special Tax pursuant to law, but in no circumstance shall the total amount of Taxable Property be less than 40.63 acres. 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.2003-1 are Taxable Property. 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 Assessor's Parcels of Taxable Property in CFD No.2003-1 shall be the greater of(1)$65,050 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.2003-1; 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 2004-2005, 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. A-3 DOC SOC/1616646v6/022273-0006 E. LIMITATIONS No Special Taxes shall be levied on any Parcel after such Parcel becomes Exempt Land, The Special Tax may be levied and collected on Taxable Property commencing with Fiscal Year 2004-2005, 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). Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax may be levied and collected until such time as the City and the CFD No.2003-01 have divested all remaining ownership interests in the parking structure. Upon determination by the Administrator that such requirements have been met, the Special Tax lien shall be removed from all Parcels in CFD No.2003-1. 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 the City on behalf of CFD No.2003-1 may directly bill the special tax or any portion thereof, may collect special taxes or any portion thereof 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 delinquent Assessor's Parcels as permitted by the Act. Notwithstanding the foregoing, the Parking Structure Maintenance Special Tax shall be directly billed in each instance and not billed with ad valorem property taxes. G. APPEALS The City Council shall establish as part of the proceedings and administration of CFD No.2003-1, 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 any Taxable Property within CFD No.2003-1 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, 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,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 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: Amount of Current Special Taxes Paid means the amount of the Special Tax levied against the subject Assessor's Parcel that was paid to the County or the City by the owner of the subject Assessor's Parcel and would be applied to debt service payments on the Redemption Date and the Interest Payment Date immediately following the Redemption Date. Outstanding Bonds means all Bonds that are deemed to be outstanding under the Indenture the day immediately preceding the next Interest Payment Date. Redemption Date means the Interest Payment Date on which Bonds are proposed to be redeemed from the prepayments of the Special Tax. A-4 DOC SOC/1616646v6/022273-0006 1. Prepayment in Full The Special Tax obligation applicable to such Assessor's Parcel may be fully prepaid and the obligation of such Assessor's Parcel to pay the Special Tax permanently satisfied as described herein. The owner intending to prepay the Special Tax obligation on one or more Assessor's Parcel(s) shall provide the Administrator with written notice of intent to prepay. It shall be a condition precedent to prepayment that the owner intending to prepay the Special Tax must pay to the County all past due Special Tax on the Assessor's Parcel to be prepaid and provide proof of payment to the Administrator. Promptly following receipt of such notice,the Administrator shall notify the owner of such Assessor's Parcel(s)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 90 days prior to the next occurring date that Bonds may be redeemed from the proceeds of such prepayment pursuant to the Indenture. The Prepayment Amount(defined below) shall be calculated as summarized below (capitalized terms as defined above or below): Bond Redemption Amount Plus Redemption Premium Plus Defeasance Amount Plus Administrative Fees and Expenses Less Reserve Fund Credit Less Amount of Current Special Taxes Paid 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 intended to be prepaid, compute the Maximum Special Tax for such Assessor's Parcels for the current Fiscal Year. 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 for the current Fiscal Year. 3. Multiply the quotient computed pursuant to Paragraph 2 by the Outstanding Bonds as defined in this Section G 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 less the par amount of Bonds scheduled to mature on the Redemption Date by the applicable redemption premium(the Redemption Premium). 5. Compute the amount needed to pay interest on the Bond Redemption Amount from the Interest Payment Date immediately preceding the Redemption Date to the Redemption Date. 6. 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. 7. Add the amounts computed pursuant to Paragraph 5 and subtract the amount computed pursuant to Paragraph 6(the Defeasance Amount). A-5 DOC S O C/1616646v6/022273-0006 8. Determine the administrative fees and expenses associated with 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). 9. 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. 10. The Special Tax prepayment is equal to the sum of the amounts computed pursuant to Paragraphs 3, 4, 7 and 8, less (i)the amounts computed pursuant to Paragraph 9 and (ii)the Amount of Current Special Taxes Paid(the Prepayment Amount). 11. From the Prepayment Amount, the amounts computed pursuant to Paragraphs 3, 4, 7 (if greater than zero), and 9 shall be deposited into the appropriate fund as established under the Indenture and be used to redeem Outstanding Bonds or make debt service payments (as appropriate). The amount computed pursuant to Paragraph 8 shall be retained by the Administrator. With respect to any Assessor's Parcel that is prepaid,the City Council shall (i)cause a suitable notice to be recorded in compliance with the Act,to indicate the prepayment of the Special Tax and the release of the Special Tax lien on such Assessor's Parcel, (ii)notify the County that the Special Tax, if any,remaining on the secured tax roll for the Assessor's Parcel has been satisfied and that the County should remove such amounts from the secured tax roll, and (iii)refund the owner for any Special Tax payments made on the Assessor's Parcel after the date of prepayment. From and after the prepayment, the obligation of such Assessor's Parcel to pay the Special Tax shall cease. Notwithstanding the foregoing; no Special Tax prepayment shall be allowed unless the amount of the Maximum Special Tax that may be levied on Taxable Property within CFD No.2003-1 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.8 of Section H.1. F = the percent by which the owner of an Assessor's Parcel(s)is partially prepaying the Maximum Special Tax. G = the amounts determined in Paragraph No.8 of Section H.1. A-6 DOC S OC/1616646v6/022273-0006 The owner of 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, and(ii)the percentage by which the Maximum Special Tax shall be prepaid. The Administrator shall promptly provide the owner 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.2003-1 shall (i)distribute the funds remitted to it according to Paragraph 11 of Section H.1, and (ii)indicate in the records of CFD No.2003-1 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 (i.e., 100%-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-'7 DOCSOC/1616646v6/022273-0006 APPENDIX B FORM OF OPINION OF BOND COUNSEL [Closing Date] City Council of the City of Huntington Beach Huntington Beach,California Re: S City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)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. 2003-1 (the "District") and the authorization and issuance of the District's City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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 DOCSOC/1616646v6/022273-0006 (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 DOC S OC/1616646v6/022273-0006 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/1616646v6/022273-0006 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 DOCSOC/1616646v6/022273-0006 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 2001-20131" 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 31008,855 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 1,495,533,3 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 DOC SOC/1616646v6/022273-0006 PER CAPITA PERSONAL INCOMO) 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 Employment�2) 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 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 DO C SO C/1616646v6/022273-0006 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 2011. The following table presents the largest employers in the City and the County during calendar year 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/1616646v6/022273-0006 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. 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'l 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 DOCSOC/1616646v6/022273-0006 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$00Ws) 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 1,1 15,928 1,300.021 Total Valuation(') $3,7971466 $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 D OC S OC/1616646v6/022273-0006 Taxable Sales The history of taxable transactions in the City and the County from 2007 through 2011 is shown in the following tables. 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. 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 34,828,607 201 W) 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/1616646v6/022273-0006 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE [TO COME] D-1 DOC SOC/1616646v6/022273-0006 APPENDIX E FORM OF CONTINUING DISCLOSURE AGREEMENT OF THE DISTRICT This Continuing Disclosure Agreement(the"Disclosure Agreement"), dated as of 20131 is executed and delivered by City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) (the"Issuer")and Willdan Financial Services, as dissemination agent, in connection with the issuance and delivery by the Issuer of the City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center)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 Director of Finance 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, 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 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. E-1 DOC SOC/1616646v6/022273-0006 "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. (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. E-2 DOC S OC/1616646v6/0222 73-0006 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 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 each year; (vi) information regarding the percentage of delinquency, if any, in the collection of special taxes levied on property in the District, the number of parcels delinquent, amount delinquent compared to the total levy and the assessed value of each delinquent parcel as of May 1 each year in the form set forth in Table 8; (vii) an update to the assessed value-to-lien information set forth in Table 7 as of May l each year, except that the overlapping debt information is not required to be included in the assessed value-to-lien calculations;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(vii),in the light of the circumstances under which they were made,not misleading. E-3 DOC SOC/1616646v6/022273-0006 (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, 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 defmitive agreement to E-4 DOCSOC/I616646v6/022273-0006 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. 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 E-5 DOC S OC/1616646v6/022273-0006 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 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 E-6 DOC SOC/1616646v6/022273-0006 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. 2003-1 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 To the Dissemination Agent: Willdan Financial Services 27368 Via Industria,Suite 110 Temecula,CA 92590 Attention: Candace Heiser Telephone: (800)755-6864 Facsimile: (951)587-3510 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. E-7 DOC S OC/1616646v 6/022273-0006 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 land 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.2003-1 By: Its: 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.2003-1 WILLDAN FINANCIAL SERVICES,as Dissemination Agent By: Its: Authorized Officer E-8 DOCSOC/1616646v6/022273-0006 EXHIBIT A NOTICE TO THE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) Name of Bond Issue: $ CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that City of Huntington Beach Community Facilities District No. ' 2003-1 (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 DOC S OC/1616646v6/022273-0006 APPENDIX F FORM OF CONTINUING DISCLOSURE AGREEMENT OF BELLA TERRA ASSOCIATES This Property Owner Continuing Disclosure Agreement, dated as of 1, 2013 (the "Disclosure Agreement"), is made and entered into by and between Bella Terra Associates, LLC, a Delaware limited liability company(the"Property Owner")and Willdan Financial Services(the"Dissemination Agent"), in connection with the issuance of $ City of Huntington Beach Community Facilities District No.2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) (the"District") and U.S. Bank National Association, as trustee. The Property Owner and the Dissemination Agent covenant and agree as follows: Section 1. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered 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 Property Owner pursuant to, and as described in, Sections 3 and 4 of this Disclosure Agreement. "Assumption Agreement" means an agreement between the holder of a fee simple 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 President of by DJM Capital Partners, Inc., or his/her designee, or such other officer, employee or agent as the Property Owner shall designate in writing to the Dissemination Agent and the City from time to time. "Dissemination Agent"shall mean Willdan Financial Services, 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 Property Owner,the City and the Dissemination Agent a written acceptance of such designation. "Emma"shall mean the Electronic Municipal Market Access system of the MSRB. F-1 D OC SOC/1616646v 6/022273-0006 "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 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 Property Owner's fiscal year for their financial accounting purposes. Currently the Property Owner is on a January 1 to December 31 Fiscal Year. "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 Property Owner 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 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 Property Owner shall provide the Annual Report to the Dissemination Agent. The Property Owner 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 Property Owner hereunder. The Dissemination Agent may conclusively rely upon such certification of the Property Owner, 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 Property Owner's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(c). F-2 DOCSOC/I616646v6/022273-0006 (b) If the Property Owner is unable to provide to the Repository an Annual Report by the date required in subsection (a), the Property Owner shall send a notice to the MSRB in substantially the form attached as Exhibit A. (c) 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) to the extent the Annual Report has been provided to the Dissemination Agent, file a report with the Property Owner and the City 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 Property Owner's Annual Report shall contain or incorporate by reference the following: (a) Audited annual financial statements, if available,unaudited financial statements if not. (b) Any delinquency in the payment of Special Taxes by the Property Owner or any Affiliate thereof. (c) Any pending litigation which would adversely affect the ability of the Property Owner to pay Special Taxes levied on the Property. (d) Any material change in the ownership of the Property Owner. (e) A summary of leases in the District as of the Fiscal Year end in substantially the form set forth as Table 4 in the Official Statement. (f) The assumption of any obligations of the Property Owner pursuant to Section 6. In addition to any of the information expressly required to be provided as described above, the Property Owner 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 Property Owner 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 Property Owner 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 Property Owner shall give, or cause to be given,notice of the occurrence of any of the following events: (i) failure by the Property Owner 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, F-3 DOCS OC/1616646v6/022273-0006 (iii) default by the Property Owner or any Affiliate thereof on any loan with respect to any financing arrangements with respect to the Property,and (iv) The occurrence of an Event of Bankruptcy with respect to the Property Owner, or any Affiliate of the Property Owner. Section 6. Assumption of Obligations. If the Property owned by the Property Owner, or any Affiliate of the Property Owner, is to be conveyed to a Person,the Property Owner 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 Property Owner 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 "Property Owner" 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 Property Owner shall no longer be required to comply with the requirements of this Disclosure Agreement;provided however that if, following a conveyance by the Property Owner 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 Property Owner shall continue to comply with the requirements of this Disclosure Agreement and, for purposes of Section 3, the term"Property Owner" shall include, in addition to Property Owner, the Person to whom the Property has been conveyed. Section 7. Termination of Reporting Obligation. The Property Owner'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 Property Owner and all Affiliates of the Property Owner 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 Property Owner 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 Property Owner 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 Willdan Financial Services. The Dissemination Agent may at any time resign by providing thirty days written notice to the City and the Property Owner, 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 Property Owner. 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 and the Property Owner 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 Property Owner with written notice of the identity of any successor Dissemination Agent appointed or engaged by the City. F-4 DOC SOC/1616646v6/022273-0006 Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the Property Owner 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 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner 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 Property Owner to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed a default under the Bond F-5 DOC SOC/1616646v6/022273-0006 Indenture, and the sole remedy under this Disclosure Agreement in the event of any failure of the Property Owner 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 Property Owner 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 Property Owner and shall not be deemed to be acting in any fiduciary capacity for the Property Owner, the Bondholders, or any other party. The obligations of the District and the Property Owner 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 Property Owner(its successors and assigns), 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: 12013 "PROPERTY OWNER" BELLA TERRA ASSOCATES,LLC By: Its: BELLA TERRA C LLC By: Its: "DISSEMINATION AGENT" WILLDAN FINANCIAL SERVICES By: Its: F-6 DOC S OC/1616646v6/022273-0006 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.2003-1 (Huntington Center)2013 Special Tax Refunding Bonds Date of Issuance: ,2013 NOTICE IS HEREBY GIVEN that Bella Terra Associates, LLC, a Delaware limited liability company(the "Property Owner") has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Agreement, by and between the Property Owner and Willdan Financial Services,as Dissemination Agent,dated as of 1,2013,executed and delivered for the benefit of the owners and beneficial owners of the above-referenced bonds. The Property Owner anticipates that the Annual Report will be filed by Dated: 120 BELLA TERRA ASSOCATES,LLC By: Its: cc: City of Huntington Beach 2000 Main Street Huntington Beach,California 92648 Attention: Director of Finance F-7 DOC SOC/1616646v6/022273-0006 APPENDIX G 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 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. 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 G-1 DOCSOC/I616646v6/022273-0006 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. 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. G-2 D OC S OC/1616646v6/022273-0006 Jones Hall,A Professional Law Corporation 4-15-13 BOND PURCHASE AGREEMENT CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 2013 SPECIAL TAX REFUNDING BONDS , 2013 City of Huntington Beach Community Facilities District No. 2003-1 (Huntington Center) 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. 2003-1 (Huntington Center) (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. 2003-10, adopted by the City Council on February 3, 2003 (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 February 3, 2003, and (iii) Ordinance No. enacted by the City Council on , 2003 (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. The Bonds will be issued pursuant to the terms of a Bond Indenture, dated as of 17 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. 2003-1 (Huntington Center) 2004 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 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 issuance of the Bonds, and in order to assist the Underwriter in complying with the Rule, the Issuer will execute a Continuing Disclosure Agreement dated as of 1, 2013 (the "Continuing Disclosure Agreement"), by and between the Issuer and 2 Willdan Financial Services, as dissemination agent (the "Dissemination Agent"). The form of the Continuing Disclosure Agreement is 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 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 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. 3 (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 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. 4 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. (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 5 (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. 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 6 (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 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 7 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 Q) 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. 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 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 8 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 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 9 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 and the 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: (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; 10 (C) the Escrow Agreement and the 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; and (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 financial and statistical data included 11 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. (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. (xvii) A defeasance opinion of Bond Counsel with respect to the Prior Bonds. (xviii) 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. (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) 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 12 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 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. 13 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. 2003-1 (HUNTINGTON CENTER) By: Authorized Representative Time: 14 EXHIBIT A CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 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 to be incorrect or incomplete in any material respect or would cause the information in the Final Official Statement 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. 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 A-1 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. 2003-1 (HUNTINGTON CENTER) By: Authorized Representative A-2 EXHIBIT B CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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. 2003-1 (HUNTINGTON CENTER) By: Authorized Representative C-1 EXHIBIT D CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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. 2003-1 (HUNTINGTON CENTER) 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 a Continuing Disclosure Agreement dated as of 1, 2013 (the "Continuing Disclosure Agreement'), by and between the Issuer 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: (1) The Dissemination Agent has the full power and authority to enter into and perform its duties under the Continuing Disclosure Agreement. (2) The Continuing Disclosure Agreement has been duly authorized, executed and delivered by the Dissemination Agent, and is a legal, valid and binding agreement of the Dissemination Agent enforceable upon the Dissemination Agent in accordance with its 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 Agreement or contesting the powers of the Dissemination Agent or its authority to enter into and perform its obligations under the Continuing Disclosure Agreement. Dated: [closing date] WILLDAN FINANCIAL SERVICES By Authorized Officer F-1 EXHIBIT G CITY OF HUNTINGTON BEACH COMMUNITY FACILITIES DISTRICT NO. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (HUNTINGTON CENTER) 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. 2003-1 (Huntington Center) (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 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 Preliminary Official Statement, there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, H-1 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 Res. No. 2013-21 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 t Clerk and ex-offici ,.Clerk of the City Council of the City of Huntington Beach, California