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Public Hearing - Public Financing Authority - PFA - Resoluti
` JA O Page 1 of 1 Esparza, Patty From: Copeland, Karen Sent: Tuesday, June 30, 2009 9:28 AM To: Esparza, Patty Subject: sent on behalf of Mike Vigliotta Re Public Financing Authority Bonds From: Brian Quint [mailto:bquint@gtllp.com] Sent: Monday, June 29, 2009 10:33 AM To: Copeland, Karen Subject: Re: Sent on behalf•of Mike Vigliotta Re: City of Huntington Beach Pubic Financing Authority Bonds This issue was approved by Council but it was never sold or closed. As it was a refunding, the numbers just didn't work. Thus, no final documents. I suspect the refinancing will be re-examined and, if cost effective, my guess is we will start over and go. back to Council again. 7/7/2009 Page 1 of 1 Esparza, Patty From: Esparza, Patty Sent: Friday, June 26, 2009 4:48 PM To: Vigliotta, Mike Cc: Lugar, Robin; Flynn, Joan Subject: PFA- bond refinancing Importance: High Hi Mike— I believe Leonie previously forwarded an email to you dated 6/16/09 regarding: "Bond Refinancing" item for the Public Financing Authority that went to council 2/19/2008. Our office only has the blank, unexecuted copies of documents that went to council. I was told that after all the bonds were sold, we would receive all the completed documents from the outside bond counsel. Since It has been about 1 %2 yr. - shouldn't we have received these documents by now? Can you assist me in locating these documents for final filing in our office? Thanks very much for your help! Patty Esparza, CMC Senior Deputy City Clerk City of Huntington Beach 714-536-5260 w4please think of trees before you print 6/26/2009 Page lofZ From: K8ukihiU. Leonka Sent: Tuesday, June 18. 20OQ1010AM To: Esparzo. PaMy Cc: Flynn, Jnon� Vig|iotta. Mike Subject: RE: Pending items Good 1 believe that the"Bond Refinancing"was an item that Mike Vigliotta worked on and ask him to respond to your question by this email. As to e CIM matter, CIM and-Bank of America never Agreed on the loan terms ain�so, as far as I lZinow escrow that the estoppe c ificates provided ar6_65f-no further effect. Let rYfe-talk to Bob Hall and Siahtey,to confirmtKat this is an appropriate approach. LewnieMulvibOi ' Senior Depuq, City Attorney City of Huntington Beach PO Boxl9A 2O00 Main Street Huntington Beach, C.�N 920648 Tel /714l536-5620 Fax(714) 3)74-1_590 ]LMalrihi\}8@Surfciiy-llb'oqg PLEASE NOTE: The information contained in this e-niail message is intended only for the personal and confidential use of the designated necipimnt(o) named above. This message may beanattorney-client communication, and ae such, is privileged and confidential. |f the reader of this message isnot the intended recipient(o)or an agent responsible for delivering this message to the intended nonipient(s), you are hereby notified that your receipt of this message is in error, and that any review, dissemination, distribution or copying of this nneaaaQe is athoUy prohibited, If you have received this message in error, please notify our office immediately ed(714) 53S-5555 and delete this rnesseQefrom your connputer. From, Fspaoo, Patty Sent: Friday, June 12, 20093:I1 PM To: Mulvihill, Leonie Cc: Flynn, Joan Subject: Pending items Hi Leonie — I would like to get your input on a couple of items that I am holding in pending that we worked on previous|y. First is the "Bond Refinancing" item for the Public Financing Authority. | only have blank copies uf documents that were sent tnueby the outside bond counsel. |t has been about 1 1/2 yrs. (went to council 2/1Q/O8) shouldn't we have executed/recorded copies bynow? Who might have these? The second item is the C|M Loan Documents for The Strand with Bank of America (went to council 1/20/2009) I've never received any copies from escrow and I still have many incomplete documents Did this ever go through? I'm very perplexed with this item. Whatever information can gave give me to get these files updated and out of pending status would great be 6/|6/20A9 Council/Agency Meeting Held: a o OCR' Deferred/Continued to: ).App17 roved ® Conditionally Approved ® Denied Cit lerk' Signat Council Meeting Date: 2/19/2008 Department ID Number: FN 08-001 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION /PUBLIC FINANCING AUTHORITY SUBMITTED TO: Honorable Mayor and City Council Merfn�1s � ) SUBMITTED BY: Paul Emery, Interim City Administratvr,�', -� 7 PREPARED BY: Dan Villella, Finance Director Joan Flynn, City Clerk SUBJECT: Bond Refinancing S tatement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: Should the City of Huntington Beach and Huntington Beach Public Financing Authority (PFA) refinance prior debt issues in order to realize significant annual debt service savings? Funding Source: Approval of this Council action will result in a net present value savings of approximately $704,000 to the City's general fund. Recommended Action: Motion to: 1. Approve Resolution No. 17 A Resolution of the Huntington Beach Public Financing Authority Authorizing the Issuance and Sale of Lease Revenue Bonds to Refund the Authority's Outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project), and to Refund a Portion of the Authority's Outstanding Huntington Beach Public Financing Authority's Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project), and Approving Related Documents and Official Actions. 2. Approve Resolution No. 2008-10 A Resolution of the City of Huntington Beach Approving Proceedings by the Huntington Beach Public Financing Authority for the Issuance and Sale of Lease Revenue Bonds to Refund the Authority's Outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997, Series A,and to Refund a Portion of the Authority's Outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project), and Approving Related Documents and Official Actions. i 1 3. Approve Resolution No. 18 A Resolution Of The Huntington Beach Public Financing Authority Designating Time And Place Of Regular Meeting. 4. Approve and adopt the Minutes of the December 17, 2007, Annual Meeting of the Huntington Beach Public Financing Authority as written and on file with the Office of the Secretary. Alternative Action(s): Do not approve the resolutions and do not refinance the bonds. Analysis: The Huntington Beach Public Financing Authority ("Authority") is a joint exercise of powers entity that was formed by agreement between the City and the Redevelopment Agency of the City of Huntington Beach. The Authority has previously issued debt to finance public improvements and other capital purchases for the City of Huntington Beach. The Authority currently has four separate outstanding debt issues (1997, 2000, 2001 Series A, and 2001 Series B) totaling $66,250,000. A portion of this debt includes bonds issued by the Authority in 1997 (the "1997 Bonds"). The 1997 Bonds were used to finance a portion of the City's share of the costs of a countywide 800 Mhz coordinated communications system and a portion of the cost of public facilities installed as part of the City's Pier Plaza project. The Authority also issued bonds in 2000 to refinance the City's Emerald Cove Senior Housing Project and to finance several capital projects included in South Beach Phase I improvements, South Beach Phase II improvements, a new Beach Maintenance Facility, energy retrofitting of various facilities, the design cost of the City's Sports Complex, and water system improvements (the "2000 Bonds"). Because interest rates have dropped significantly, the City of Huntington Beach has an opportunity to achieve economic savings of approximately $704,000 by refinancing a portion of the Authority's existing debt. The City's financial adviser, Public Finance Management, has determined that refunding all or a portion of the issues listed below and issuing new debt will result in economic benefit to the City and the Authority. The outstanding 2001 debt issues are not being refinanced because the refinance would not result in a savings to the City. Bond Issue Original Amount Amount to be Economic Issuance Currently Refunded Benefit of Amount Outstanding Refinancing 1997 Lease Revenue $8,070,000 $2,945,000 $2,945,000 $165,000 Bonds 2000 Lease Revenue $18,310,000 $14,215,000 $11,535,000 $539,000 Bonds The City's economic benefit is the difference in the present value of cash flows for the new debt compared to the old debt. The savings takes into account all of the expenditures of the new debt. Staff is recommending that the existing debt be refunded by issuing new long-term debt not to exceed $17,000,000. Basically, this means that new debt will be issued to replace the old debt. A portion of the proceeds of the new debt will be deposited into an escrow account consisting of guaranteed securities. Upon issuance of the new debt, it is anticipated that (1) the 1997 Bonds will be deemed refunded and no longer outstanding; and (2) the outstanding 2000 Bonds that mature after September 2010 will be deemed refunded and no longer outstanding. REQUEST FOR CITY COUNCIL ACTION MEETING DATE: 2/19/2008 DEPARTMENT ID NUMBER: Staff is recommending that the bonds be sold through its underwriter, Citigroup Global Markets Incorporated. Citigroup will market the bonds to customers. By approving the attached resolutions, the City Council and the Authority will delegate the authority to designated officers of the City and the Authority to proceed with this transaction including the execution of all related documents in substantially the same form as attached hereto as Attachment 5. There will be no further action required by the City Council or the Authority. In addition, staff is recommending that the Authority change its regular meeting dates to the third Monday of December in each year at 6:00 p.m. Strategic Plan Goal: Financial - Fully understand the financial implications of financial decisions before they are made. Environmental Status: N/A Attachment(s): , e - e - No. Description 1. Resolution No. 17 A Resolution of the Huntington Beach Public Financing Authority dl 2. Resolution No. 2002-_IjDA Resolution of the City of Huntington Beach 3. Resolution No. 18 A Resolution Of The Huntington Beach Public Financing Authority Designating Time And Place Of Regular Meeting 4. Authority Minutes from December; 17,2007 5. Documents to be executed by designated officers of the City and Authority. -2- 2/6/2008 10:06 AM TTA H ' ENT ]"�"#-Ill HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY RESOLUTION NO. 17 RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF LEASE REVENUE BONDS TO REFUND THE AUTHORITY'S OUTSTANDING HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS, 1997 SERIES A (PUBLIC FACILITIES PROJECT), AND TO REFUND A PORTION OF THE AUTHORITY'S OUTSTANDING HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS, 2000 SERIES A (CAPITAL IMPROVEMENT FINANCING PROJECT), AND APPROVING RELATED DOCUMENTS AND OFFICIAL ACTIONS RESOLVED, by the Board of Directors (the "Board") of the Huntington Beach Public Financing Authority (the "Authority") as follows: WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of March 7, 1988, by and between the City of Huntington Beach (the "City") and the Redevelopment Agency of the City of Huntington Beach (the "Agency" and, with the City, the "Members"), and under the provisions of Articles 1 through 4 (commencing with section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act"), and is authorized pursuant to Article 4 of the Act to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, public entities, including the Members, and to provide financing for public capital improvements of public entities, including the Members; WHEREAS, the Authority has heretofore issued its $8,070,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project), of which $2,945,000 remains outstanding (the "1997 Bonds"); WHEREAS, the proceeds of the 1997 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public improvements (the "1997 Project"); WHEREAS, the Authority has also heretofore issued its $18,310,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project), of which$14,215,000 remains outstanding (the "2000 Bonds"); WHEREAS, the proceeds of the 2000 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public improvements (the "2000 Project"); WHEREAS, the City, working together with the Authority, proposes to undertake the refinancing of the 1997 Project and the 2000 Project, including the refunding-of the 1997 Bonds and the refunding of a portion of the 2000 Bonds; WHEREAS, for such purposes, the Authority has determined to issue its Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A, in the aggregate principal amount of not-to-exceed$17,000,000 (the "Bonds"); WHEREAS, the Bonds will be issued under the provisions of Article 4 (commencing with section 6584) of the Act (the "Bond Law") and an indenture of trust (the "Indenture"), by Public Financing Authority Reso. No. 17 and between the Authority and a trustee bank to be selective through a competitive process and approved by the City Treasurer,as trustee; WHEREAS, in order to provide for the repayment of the Bonds, the Authority will lease certain real property and improvements (the "Property") to the City pursuant to a lease agreement (the "Lease Agreement") under which the City will agree to make lease payments to the Authority from moneys in its General Fund and the City will budget-and appropriate sufficient amounts in each year to pay the full amount of principal of and interest on the Bonds; WHEREAS, as required pursuant to section 6586.5(a) of the California Government Code, a public hearing has been held by the City Council of the City in connection with the financing; WHEREAS, the firm of Citibank Global Markets Inc. (the "Underwriter") has proposed to purchase and underwrite the Bonds and has presented to the Authority a form of Bond Purchase Agreement for the Bonds, to be entered into among the Authority, the City and the Underwriter(the "Bond Purchase Agreement"); WHEREAS, a proposed form of official statement (the "Official Statement") describing the Bonds, to be used in connection with the marketing of the Bonds by the Underwriter, has been prepared and has been presented to the Authority; and WHEREAS, the Board has duly considered such transactions and wishes at this time to approve said transactions in the public interests of the Authority; NOW,THEREFORE, it is hereby ORDERED and DETERMINED; as follows: Section 1. Findings. The Board hereby finds that significant public benefits will arise from the financing in accordance with section 6586 of the California Government Code. Section 2. Issuance of Bonds; Approval of Indenture. The Board hereby authorizes the issuance of the Bonds under and pursuant to the Bond Law and the Indenture, for the purpose of providing funds to refinance the 1997 Project and the 2000 Project, to refund the 1997 Bonds and to refund a portion of the 2000 Bonds. The Authority hereby approves the Indenture, in substantially the form on file with the Secretary, together with any changes therein or additions thereto approved by the Chair, the Vice Chair or the Treasurer of the Authority (the "Designated Officers"), whose execution thereof shall be conclusive evidence of such approval. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of the Indenture for and in the name of the Authority. The Authority hereby authorizes the delivery and performance of the Indenture. Section 3. Approval of Site and Facility Lease. The Board hereby approves a site and facility lease, by and between the City and the Authority (the "Site and Facility Lease"), pursuant to which the City will lease the Property to the Authority, to be leased back to the City pursuant to the Lease Agreement, in substantially the form on file with the Secretary, together with any changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of such approval. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of the Site and Facility Lease for and in the name of the Authority. The Authority hereby authorizes the delivery and performance of the Site and Facility Lease. Section 4. Approval- of Lease Agreement. The Board hereby approves the Lease Agreement, in substantially the form on file with the Secretary, together with any changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of such approval. The Designated Officers, each acting -2- Public Financing Authority Resolution No. 17 alone, are hereby authorized and directed for and in the name and on behalf of the Authority to execute,and the Secretary is herebyauthorized and directed to attest, the final form of the Lease Agreement for and in the name of theAuthority. The Authority hereby authorizes the delivery and performance of the Lease Agreement. Section 5. Approval of Escrow Agreements. (a) The Board hereby approves an escrow deposit and trust agreement, by and among the Authority, the City and U.S. Bank National Association, as escrow bank, relating to the refunding of the outstanding 1997 Bonds (the "1997 Escrow Agreement"), in substantially the form on file with the Secretary, together with any changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of the 1997 Escrow Agreement for and in the name of the Authority. The Board hereby authorizes the delivery and performance of the 1997 Escrow Agreement. (b) The Board hereby approves an escrow deposit and trust agreement, by and among the Authority, the City and The Bank of New York Trust Company, N.A., as escrow bank, relating to the refunding of the callable maturities of the outstanding 2000 Bonds (the "2000 Escrow Agreement"), in substantially the form on file with the Secretary, together with any changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of the 2000 Escrow Agreement for and in the name of the Authority. The Board hereby authorizes the delivery and performance of the 2000 Escrow Agreement. Section 6. Approval of Termination Agreement. The Board hereby approves a termination agreement, by and among the City, the Authority and U.S. Bank National Association, providing for the termination of the recorded documents relating to the 1997 Certificates (the "Termination Agreement"), in substantially the form on file with the Secretary, together with any changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the Authority to execute, and the Secretary is hereby authorized and directed to attest, the final form of the Termination Agreement for and in the name of the Authority. The Board hereby authorizes the delivery and performance of the Termination Agreement. Section 7. Sale of the Bonds. The Board hereby approves the sale of the Bonds by the Authority to the Underwriter pursuant to the Bond Purchase Agreement in substantially the form on file with the Secretary, together with such additions thereto and changes therein as a Designated Officer shall deem necessary, desirable or appropriate, the execution of which by the Authority shall be conclusive evidence of the approval of any such additions and changes. The Designated Officers, each acting alone, are hereby authorized and directed to execute the final form of the Bond Purchase Agreement for and in the name and on behalf of the Authority upon the submission of an offer by the Underwriter to purchase the Bonds, which offer is acceptable to a Designated Officer and consistent with the requirements of this Resolution. The amount of Underwriter's compensation for the Bonds shall not exceed $10.00 per $1,000 principal amount of the Bonds. Section 8. Official Statement. The Board hereby approves, and hereby deems nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 (the "Rule"), the preliminary official statement describing the Bonds (the "Preliminary Official Statement"), in -3- Public Financing Authority Resolution No. 17 substantially the form on file with the Secretary. The Designated Officers,each acting alone, are hereby authorized and directed to execute an appropriate certificate stating the Authority's determination that the Preliminary Official Statement is nearly final within the meaning of the Rule. Distribution of the Preliminary Official Statement in connection with the sale of the Bonds is hereby approved. The Designated Officers, each acting alone, are hereby authorized and directed to approve any changes in or additions to a final form of official statement (the "Final Official Statement"), and the execution thereof by any Designated.Officer shall be conclusive evidence of approval of any such changes and additions. The Authority hereby authorizes the distribution of the Final Official Statement by the Underwriter. The Final Official Statement shall be executed in the name and on behalf of the Authority by any Designated Officer. Section 9. Official Actions. The Chair, the Vice Chair, the Treasurer, the Secretary and all other officers of the Authority are each authorized and directed in the name and on behalf of the Authority to make any and all assignments, certificates, requisitions, agreements, notices, consents,instruments of conveyance,warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the documents approved pursuant to this Resolution. Whenever in this Resolution any officer of the Authority is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable. Section 10. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED by the Huntington Beach Public Financing Authority at a regular meeting thereof held on the 19th day of February, 2008 ATTEST: A A 67(- Jjr-4 Sec ar— MVy C i REVIE , D PPROVED: INITIATED AND APPROVED: City Administra Vinance Director APPROVED AS TO FORM: Authority Counsel M -4- Res. No. 17 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF HUNTINGTON BEACH ) I, JOAN FLYNN, the duly elected, qualified Secretary of the Huntington Beach Public Financing Authority, do hereby certify that the whole number of members of the Board of Directors of the Huntington Beach Public Financing Authority 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 Board at a regular meeting thereof held on February 19, 2008 and that it was so adopted by the following vote: AYES: Directors: Hansen, Hardy, Bohr, Cook, Coerper, Green Carchio NOES: Directors: None ABSENT: Directors: None ABSTAIN: Directors: None Se tary of the Board of ectors of the Huntington Beach Public Financing Authority i Y `�y �.: � �.Z § �� SkP 77 �i � � � � -�,� � � d � � � �:, CITY OF HUNTINGTON BEACH RESOLUTION NO. 2008-10 RESOLUTION APPROVING PROCEEDINGS BY THE HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY FOR THE ISSUANCE AND SALE OF LEASE REVENUE BONDS TO REFUND THE AUTHORITY'S OUTSTANDING HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS, 1997 SERIES A, AND TO REFUND A PORTION OF THE AUTHORITY'S OUTSTANDING HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS, 2000 SERIES A (CAPITAL IMPROVEMENT FINANCING PROJECT),AND APPROVING RELATED DOCUMENTS AND OFFICIAL ACTIONS RESOLVED, by the City Council (the "Council") of the City of Huntington Beach (the "City") as follows: WHEREAS, the Huntington Beach Public Financing Authority (the "Authority") has heretofore issued its $8,070,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project), of which $2,945,000 remains outstanding (the "1997 Bonds"); WHEREAS, the proceeds of the 1997 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public improvements (the "1997 Project"); WHEREAS, the Authority has also heretofore issued its $18,310,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project), of which$14,215,000 remains outstanding (the "2000 Bonds"); WHEREAS, the proceeds of the 2000 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public improvements (the "2000 Project"); WHEREAS, the City, working together with the Authority, proposes to undertake the refinancing of the 1997 Project and the 2000 Project, including the refunding of the 1997 Bonds and the refunding of a portion of the 2000 Bonds; WHEREAS, for such purposes, the Authority has determined to issue its Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A, in the aggregate principal amount of not to exceed$17,000,000 (the "Bonds"); WHEREAS, the Bonds will be issued under the provisions of Article 4 (commencing with section 6584) of the Act (the "Bond Law") and an indenture of trust (the "Indenture"),by and between the Authority and a trustee bank to be selective through a competitive process and approved by the City Treasurer,as trustee; WHEREAS, in order to provide for the repayment of the Bonds, the Authority will lease certain real property and improvements (the "Property") to the City pursuant to a lease agreement (the "Lease Agreement") under which the City will agree to make lease payments to the Authority from moneys in its General Fund and the City will budget and appropriate sufficient amounts in each year to pay the full amount of principal of and interest on the Bonds; Resolution No. 2008-10 WHEREAS, as required by section 6586.5(a) of the California Government Code, a public hearing has been held by this Council in connection with the financing; WHEREAS, the Council desires to make a finding of significant public benefit pursuant to section 6586.5(a)(2) of the California Government Code, and to approve of the financing and the transactions contemplated by the Bonds; WHEREAS, the firm of Citibank Global Markets Inc. (the "Underwriter") has proposed to purchase and underwrite the Bonds and has presented to the City a form of Bond Purchase Agreement for the Bonds, to be entered into among the Authority, the City and the Underwriter (the "Bond Purchase Agreement"); WHEREAS, a proposed form of official statement (the "Official Statement") describing the Bonds, to be used in connection with the marketing of the Bonds by the Underwriter, has been prepared and has been presented to the City; and WHEREAS,the Council has duly considered such transactions and wishes at this time to approve said transactions in the public interests of the City; NOW,THEREFORE, it is hereby ORDERED and DETERMINED,as follows: Section 1. Findings and Consent. The Council hereby finds that significant public benefits will arise from the financing, in accordance with section 6586 of the California Government Code. Section 2. Approval of Bonds. The Council hereby approves the issuance of the Bonds by the Authority for the purpose of providing funds to refinance the 1997 Project and the 2000 Project,to refund the 1997 Bonds and to refund a portion of the 2000 Bonds. Section 3. Approval of Site and Facility Lease. The Council hereby approves a site and facility lease, by and between the City and the Authority (the "Site and Facility Lease"), pursuant to which the City will lease the Property to the Authority, to be leased back to the City pursuant to the Lease Agreement, in substantially the form on file with the City Clerk, together with any nonsubstantive changes therein or additions thereto deemed advisable by the City Administrator, the Finance Director or the City Treasurer (the "Designated Officers"), whose execution thereof shall be conclusive evidence of such approval. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the Site and Facility Lease for and in the name of the City. The Council hereby authorizes the delivery and performance of the Site and Facility Lease. Section 4. Approval of Lease Agreement. The Council hereby approves the Lease Agreement, in substantially the form on file with the City Clerk, together with any nonsubstantive changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions, so long as the term of the Lease Agreement (not including extensions, as permitted therein) does not extend beyond September 1, 2030, and so long as the issuance of the Bonds provides net present value savings to the City. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the Cit to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the Lease Agreement for and in the name of the City. The Council hereby authorizes the delivery and performance of the Lease Agreement. Section 5. Approval of Escrow Agreements. (a) The Council hereby approves an escrow deposit and trust agreement,by and among the Authority, the City and U.S. Bank National Association, as escrow bank, relating to the -2- Resolution No. 2008-10 refunding of the outstanding 1997 Bonds (the "1997 Escrow Agreement"), in substantially the form on file with the City Clerk, together with any nonsubstantive changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the 1997 Escrow Agreement for and in the name of the City. The Council hereby authorizes the delivery and performance of the 1997 Escrow Agreement. (b) The Council hereby approves an escrow deposit and trust agreement,by and among the Authority, the City and The Bank of New York Trust Company, N.A., as escrow bank, relating to the refunding of the callable maturities of the outstanding 2000 Bonds (the "2000 Escrow Agreement"), in substantially the form on file with the City Clerk, together with any nonsubstantive changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the 2000 Escrow Agreement for and in the name of the City. The Council hereby authorizes the delivery and performance of the 2000 Escrow Agreement. Section 6. Approval of Termination Agreement. The Council hereby approves a termination agreement, by and among the City, the Authority and U.S. Bank National Association, providing for the termination of the recorded documents relating to the 1997 Certificates (the "Termination Agreement"), in substantially the form on file with the City Clerk, together with any nonsubstantive changes therein or additions thereto deemed advisable by any Designated Officer, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Designated Officers, each acting alone, are hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest, the final form of the Termination Agreement for and in the name of the City. The Council hereby authorizes the delivery and performance of the Termination Agreement. Section 7. Sale of the Bonds. The Council hereby approves the sale of the Bonds by the Authority to the Underwriter pursuant to the Bond Purchase Agreement in substantially the form on file with the Secretary, together with such nonsubstantive additions thereto and changes therein as a Designated Officer shall deem necessary, desirable or appropriate, the execution of which by the Authority shall be conclusive evidence of the approval of any such additions and changes. The Designated Officers, each acting alone, are hereby authorized and directed to execute the final form of the Bond Purchase Agreement for and in the name and on behalf of the Authority upon the submission of an offer by the Underwriter to purchase the Bonds,which offer is acceptable to a Designated Officer and consistent with the requirements of this Resolution. The Underwriter's compensation for the Bonds shall not exceed $10.00 per $1,000 of principal amount of the Bonds. Section 8. Official Statement. The Council hereby groves, and hereby deems nearly final within the meaning of Rule 15c2-12 of the Securities Exc ange Act of 1934 (the "Rule"), the preliminary official statement describing the Bonds (the "Preliminary Official Statement") in substantially the form on file with the City Clerk. The Designated Officers, each acting alone, are hereby authorized and directed to execute an appropriate certificate stating the City's determination that the Preliminary Official Statement is nearly final within the meaning of the Rule. Distribution of the Preliminary Official Statement in connection with the sale of the Bonds is hereby approved. The Designated Officers, each acting alone, are hereby authorized and directed to approve an nonsubstantive changes in or additions to a final form of official statement (the "Final Official Statement"), and the execution thereof by any Designated Officer shall be conclusive evidence of approval of any such changes and additions. The Council hereby -3- Resolution No. 2008-10 authorizes the distribution of the Final Official Statement by the Underwriter. The Final Official Statement shall be executed in the name and on behalf of the City by any Designated Officer. Section 9. Official Actions. The City Administrator, the Finance Director, the City Treasurer, the City Clerk and all other officers of the City are each authorized and directed in the name and on behalf of the City to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them might deem necessary or appropriate in order to consummate any of the transactions contemplated by the documents approved pursuant to this Resolution. Whenever in this Resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer shall be absent or unavailable. The Designated Officers are hereby authorized and directed to solicit proposals for municipal bond insurance for the Bonds and a reserve fund surety bond in lieu of cash funding a reserve fund for the Bonds. The Designated Officers are hereby authorized to determine if such municipal bond insurance and/or reserve fund surety bond is financially advantageous to the City and if it is determined that such municipal bond insurance and/or reserve fund surety bond is financially advantageous to the City and a commitment therefor is received, a Designated Officer are hereby authorized to accept such commitment and to revise the legal documents as may be appropriate to provide for such items. Section 10. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 19th day of February, 2008 ATTEST: Ci lerk Mayor REVIEW AND AP ROVED: INITIATED AND APPROVED: Ci Administrat finance Director APPROVED AS TO FORM: City Attorney My -4- Res. No. 2008-10 STATE OF CALIFORNIA COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) 1, 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 February 19, 2008 by the following vote: AYES: Hansen, Hardy, Bohr, Cook, Coerper, Green, Carchio NOES: None ABSENT: None ABSTAIN: None 6 CA/Clerk and ex-officio Jerk of the City Council of the City of Huntington Beach, California Y TT .Y � 3 YH e, P@ p did Y 3iV RESOLUTION NO. 18 A RESOLUTION OF THE HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY DESIGNATING TIME AND PLACE OF REGULAR MEETING WHEREAS,the City of Huntington Beach and the Redevelopment Agency of the City of Huntington Beach have heretofore entered into a Joint Exercise of Powers Agreement dated March 7, 1988 (the "Agreement"), establishing the Huntington Beach Public Financing Authority (the "Authority"), and pursuant to Section 2.04(a) of the Agreement, the board of Directors of the Authority is required to provide for the date, hour and place of holding regular meetings. NOW, THEREFORE, BE IT RESOLVED, DETERMINED AND ORDERED by the Board of Directors of the Huntington Beach Public Financing Authority that the Board shall hold a regular meeting on the third Monday of December of each year, at the hour of 6:00 p.m., at 2000 Main Street, Huntington Beach, California. The Secretary is directed to cause a certified copy of this resolution to be filed with the City Clerk of the City of Huntington Beach and with the Agency Clerk of the Redevelopment Agency of the City of Huntington Beach, pursuant to Section 2.04(a) of the Agreement. BE IT FURTHER RESOLVED that Public Finance Authority Resolution No. 9 and all other resolutions in conflict therewith are hereby repealed. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 19th day of February , 20 08 . ATTEST: 4 6�11,jjp S41etary Chair REVIE AND APPROVED: APPROVED AS TO FORM: a -� � Z4- o City Administr �i Authority Attorney a_ D� 18627 Res. No. 18 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF HUNTINGTON BEACH ) I, JOAN FLYNN, the duly elected, qualified Secretary of the Huntington Beach Public Financing Authority, do hereby certify that the whole number of members of the Board of Directors of the Huntington Beach Public Financing Authority 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 Board at a regular meeting thereof held on February 19, 2008 and that it was so adopted by the following vote: AYES: Directors: Hansen, Hardy, Bohr, Cook, Coerper, Green Carchio NOES: Directors: None ABSENT: Directors: None ABSTAIN: Directors: None SecWtary of the Board of EWectors of the Huntington Beach Public Financing Authority Quint &Thimmig LLP 01/25/08 O1/31/08 INDENTURE OF TRUST by and between the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY and as Trustee Dated as of April 1, 2008 Relating to Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A 08008.04 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY Section1.01. Definitions.................................................................................................................3 Section 1.02. Rules of Construction.................................................................................................9 Section 1.03. Authorization and Purpose of Bonds........................................................................ 10 Section1.04. Equal Security.......................................................................................................... 10 ARTICLE II ISSUANCE OF BONDS Section 2.01. Authorization of Bonds............................................................................................ 11 Section 2.02. Terms of the Bonds.................................................................................................. 11 Section 2.03. Transfer and Exchange of Bonds............................................................................... 12 Section 2.04. Book-Entry System................................................................................................... 12 Section 2.05. Registration Books................................................................................................... 14 Section 2.06. Form and Execution of Bonds.................................................................................. 14 Section2.07. Temporary Bonds.................................................................................................... 14 Section 2.08. Bonds Mutilated, Lost, Destroyed or Stolen.............................................................. 14 Section2.09. CUSIP Numbers...................................................................................................... 15 ARTICLE III APPLICATION OF PROCEEDS Section 3.02. Application of Proceeds of Sale of Bonds........................................:......................... 16 Section 3.02. Establishment and Application of Costs of Issuance Fund......................................... 16 Section 3.03. Validity of Bonds..................................................................................................... 16 ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption............................................................................................... 17 Section 4.02. Selection of Bonds for Redemption........................................................................... 18 Section 4.03. Notice of Redemption.............................................................................................. 18 Section 4.04. Partial Redemption of Bonds.................................................................................... 19 Section 4.05. Effect of Redemption................................................................................................ 19 Section 4.06. Purchase of Bonds.................................................................................................... 19 ARTICLE V REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Revenue Fund...................................................................20 Section 5.02. Allocation of Revenues............................................................................................20 Section 5.03. Application of Interest Account...............................................................................21 Section 5.04. Application of Principal Account.............................................................................21 Section 5.05. Application of Reserve Account...............................................................................21 Section 5.06. Application of Redemption Fund.............................................................................22 Section 5.07. Insurance and Condemnation Fund.........................................................................22 Section5.08. Investments.............................................................................................................23 ARTICLE VI PARTICULAR COVENANTS Section6.01. Punctual Payment....................................................................................................25 Section 6.02. Extension of Payment of Bonds................................................................................25 -i- Section 6.03. Against Encumbrances.............................................................................................25 Section 6.04. Power to Issue Bonds and Make Pledge and Assignment.........................................25 Section 6.05. Accounting Records................................................................................................25 Section 6.06. No Additional Obligations.......................................................................................25 Section6.07. Tax Covenants.........................................................................................................26 Section6.08. Rebate Fund............................................................................................................26 Section 6.09. Collection of Amounts Due Under Lease Agreement................................................27 Section 6.10. Continuing Disclosure.............................................................................................28 Section 6.11. Waiver of Laws........................................................................................................28 Section 6.12. Further Assurances..................................................................................................28 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES Section7.01. Events of Default......................................................................................................29 Section 7.02. Remedies Upon Event of Default..............................................................................29 Section 7.03. Application of Revenues and Other Funds After Default...........................................30 Section 7.04. Trustee to Represent Bond Owners...........................................................................30 Section 7.05. Bond Owners' Direction of Proceedings...................................................................31 Section 7.06. Limitation on Bond Owners' Right to Sue................................................................31 Section 7.07. Absolute Obligation of Authority.............................................................................31 Section 7.08. Termination of Proceedings.....................................................................................32 Section 7.09. Remedies Not Exclusive...........................................................................................32 Section 7.10. No Waiver of Default...............................................................................................32 Section 7.11. Parties Interested Herein..........................................................................................32 ARTICLE VIII THE TRUSTEE Section 8.01. Duties, Immunities and Liabilities of Trustee............................................................33 Section 8.02. Merger or Consolidation..........................................................................................34 Section8.03. Liability of Trustee...................................................................................................34 Section 8.04. Right to Rely on Documents....................................................................................36 Section 8.05. Preservation and Inspection of Documents.................................I..............I..............37 Section 8.06. Compensation and Indemnification..........................................................................37 ARTICLE IX MODIFICATION OR AMENDMENT OF THIS INDENTURE Section 9.01. Amendments Permitted............................................................................................38 Section 9.02. Effect of Supplemental Indenture..............................................................................39 Section 9.03. Endorsement of Bonds; Preparation of New Bonds...................................................39 Section 9.04. Amendment of Particular Bonds...............................................................................39 ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture............................................................................................40 Section 10.02. Discharge of Liability on Bonds...............................................................................40 Section 10.03. Deposit of Money or Securities with Trustee............................................................40 Section 10.04. Unclaimed Funds.....................................................................................................41 ARTICLE XI MISCELLANEOUS Section 11.01. Liability of Authority Limited to Revenues...............................................................42 Section 11.02. Limitation of Rights to Parties and Bond Owners......................................................42 Section 11.03. Funds and Accounts................................................................................................42 -ii- Section 11.04. Waiver of Notice; Requirement of Mailed Notice.....................................................42 Section 11.05. Destruction of Bonds................................................................................:...............42 Section 11.06. Severability of Invalid Provisions.............................................................................42 Section11.07. Notices....................................................................................................................43 Section 11.08. Evidence of Rights of Bond Owners.........................................................................43 Section 11.09. Disqualified Bonds...................................................................................................44 Section 11.10. Money Held for Particular Bonds.............................................................................44 Section 11.11. Waiver of Personal Liability.....................................................................................44 Section 11.12. Successor Is Deemed Included in All References to Predecessor...............................44 Section 11.13. Execution in Several Counterparts............................................................................44 Section 11.14. Governing Law.......................................................................................................45 EXHIBIT A FORM OF BOND -iii- INDENTURE OF TRUST THIS INDENTURE OF TRUST (this "Indenture"), made and entered into and dated as of April 1, 2008, by and between the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority"), and , a national banking association organized and existing under and by virtue of the laws of the United States of America with a corporate trust office in Los Angeles, California, and being qualified to accept and administer the trusts hereby created (the "Trustee"); RECITALS : WHEREAS, the Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of March _, 1988, by and between the City of Huntington Beach (the "City") and the Community Redevelopment Commission of the City of Huntington Beach (the "Commission" and, with the City, the "Members"), and under the provisions of Articles 1 through 4 (commencing with section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act"), and is authorized pursuant to Article 4 of the Act (the "Bond Law") to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, public entities, including the Members, and to provide financing for public capital improvements of public entities, including the Members; WHEREAS, the Authority has heretofore issued its $8,070,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project), of which $2,945,000 remains outstanding (the "1997 Bonds"); WHEREAS, the proceeds of the 1997 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public capital improvements (the "1997 Project"); WHEREAS, the Authority has also heretofore issued its $18,310,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project), of which $14,215,000 remains outstanding (the "2000 Bonds"); WHEREAS, the proceeds of the 2000 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public capital improvements (the "2000 Project"); WHEREAS, the City, working together with the Authority, proposes to undertake the refinancing of the 1997 Project and the 2000 Project, including the refunding of the 1997 Bonds and the refunding of a portion of the 2000 Bonds; WHEREAS, for such purposes, the Authority has determined to issue its Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A, in the aggregate principal amount of $ (the "Bonds"); WHEREAS, the Bonds will be issued under the provisions of Article 4 (commencing with section 6584) of the Act (the "Bond Law") and this Indenture; WHEREAS, in order to provide for the repayment of the Bonds, the Authority will lease certain real property and improvements (the "Property") to the City pursuant to a lease agreement, dated as of April 1, 2008 (the "Lease Agreement"), under which the City will agree to make lease payments to the Authority from moneys in its General Fund and the City will budget and appropriate sufficient amounts in each year to pay the full amount of principal of and interest on the Bonds; WHEREAS, in order to provide for the authentication and delivery of the Bonds, to establish and declare the terms and conditions upon which the Bonds are to be issued and to secure the payment of the principal thereof, premium, if any, and interest thereon, the Authority has authorized the execution and delivery of this Indenture; and WHEREAS, the Authority has determined that all acts and proceedings required by law necessary to make the Bonds, when executed by the Authority, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal special obligations of the Authority, and to constitute this Indenture a valid and binding agreement for the uses and purposes herein set forth in accordance with its terms, have been done and taken, and the execution and delivery of the Indenture have been in all respects duly authorized; NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment of the Bonds at any time issued and Outstanding under this Indenture, according to their terms, and to secure the performance and observance of all the covenants and conditions therein and herein set forth, and to declare the terms and conditions upon and subject to which the Bonds are to be issued and delivered, and in consideration of the premises and of the mutual covenants herein contained 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 Authority does covenant and agree with the Trustee, for the benefit of the respective Owners from time to time of the Bonds, as follows: -2- ARTICLE 1 DEFINITIONS; AUTHORIZATION AND PURPOSE OF BONDS; EQUAL SECURITY Section 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Section 1.01 shall for all purposes of this Indenture, of any Supplemental Indenture, of the Lease Agreement, of the Bonds and of any certificate, opinion, request or other documents herein mentioned have the meanings herein specified. "Authority" means the Huntington Beach Public Financing Authority, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State, and any successor thereto. "Authorized Representative" means: (a) with respect to the Authority, its Chair, Vice Chair or Treasurer or any other person designated as an Authorized Representative of the Authority by a Written Certificate of the Authority signed by its Executive Director, and filed with the City, and the Trustee; and (b) with respect to the City, its City Administrator, Finance Director, City Treasurer, or any other person designated as an Authorized Representative of the City by a Written Certificate of the City signed by its City Administrator and filed with the Authority and the Trustee. "Bond Counsel"means (a) Quint & Thimmig LLP, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Authority of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code. "Bond Year" means each twelve-month period extending from September 2 in one calendar year to September 1 of the succeeding calendar year, both dates inclusive; provided that the first Bond Year with respect to the Bonds shall commence on the Closing Date and end on September 1,2008 "Bonds" means the $ aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A, authorized by and at any time Outstanding pursuant to this Indenture. "Business Day" means a day (other than a Saturday or a Sunday) on which banks are not required or authorized to remain closed in the city in which the Office of the Trustee is located. "City" means the City of Huntington Beach, a chartered city and municipal corporation organized and existing under and by virtue of its charter and the laws of the State. "Closing Date" means the date of delivery of the Bonds to the Original Purchaser. "Code" means the Internal Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under such Code. "Continuing Disclosure Certificate" means that certain Continuing Disclosure Certificate executed by the City and the Authority and dated the date of execution and -3- delivery of the Bonds, as originally executed and as it may be amended from time to time in accordance with the terms thereof. "Costs of Issuance" means all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, including but not limited to all compensation, fees and expenses (including but not limited to fees and expenses for legal counsel) of the Authority or the City, initial fees and expenses of the Trustee (including but not limited to fees and expenses for legal counsel), compensation to any financial consultants or underwriters, legal fees and expenses, filing and recording costs, rating agency fees, costs of preparation and reproduction of documents, out-of-pocket expenses of the Authority or the City, Authority and City staff costs and costs of printing. "Costs of Issuance Fund" means the fund by that name established and held by the Trustee pursuant to Section 3.02. "Debt Service" means, during any period of computation, the amount obtained for such period by totaling the following amounts: (a) the principal amount of all Outstanding Bonds coming due and payable by their terms in such period; and (b) the interest which would be due during such period on the aggregate principal amount of Bonds which would be Outstanding in such period if the Bonds are retired as scheduled, but deducting and excluding from such aggregate amount the amount of Bonds no longer Outstanding. "Defeasance Obligations" means (a) cash (insured at all times by the Federal Deposit Insurance Corporation); (b) obligations of, or obligations guaranteed as to principal and interest by, the United States or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States, including: (i) United States treasury obligations; (ii) all direct or fully guaranteed obligations; (iii) certificates of beneficial ownership of the Farmers Home Administration; (iv) participation certificates of the General Services Administration; (v) guaranteed Title XI financings of the U.S. Maritime Administration; (vi) Government National Mortgage Association obligations; and (vii) State and Local Government Series. "Event of Default,"with respect to this Indenture, means any of the events specified in Section 7.01 and, with respect to the Lease Agreement, means any of the events specified in Section 9.1 of the Lease Agreement. "Facility" means the improvements more particularly described in Exhibit B to the Lease Agreement. "Federal Securities" means: (a) any direct general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), the payment of principal of and interest on which are unconditionally and fully guaranteed by the United States of America; (b) obligations of any agency or department of the United States of America which represent the full faith and credit of the United States of America or the timely payment of the principal of and interest on which are secured or guaranteed by the full faith and credit of the United States of America; and (c) any obligations issued by the State of California or any political subdivision thereof the payment of and interest and premium (if any) on which are fully secured by Federal Securities described in the preceding clauses (a) or (b), as verified by an independent certified public accountant, and rated "AAA" and "Aaa" by S&P and Moody's, respectively. "Fiscal Year" means any twelve-month period extending from October 1 in one calendar year to September 30 of the succeeding calendar year, both dates inclusive, or any -4- other twelve-month period selected and designated by the Authority or the City, as applicable, as its official fiscal year period. "Fitch" means Fitch, Inc., New York,New York, or its successors. "Indenture" means this Indenture of Trust, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture pursuant to the provisions hereof. "Independent Accountant" means any certified public accountant or firm of certified public accountants appointed and paid by the Authority or the City, and who, or each of whom (a) is in fact independent and not under domination of the Authority or the City; (b) does not have any substantial interest, direct or indirect, in the Authority or the City; and (c) is not connected with the Authority or the City as an officer or employee of the Authority or the City but who may be regularly retained to make annual or other audits of the books of or reports to the Authority or the City. "Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 30 Montgomery Street, 10th Floor, Jersey City, NJ 07302, Attention: Editor; Mergent/FIS, Inc., 5250 77 Center Drive, Suite 150 Charlotte, NC 28217, Attention: Called Bond Dept.; Kenny S&P, 55 Water Street, New York, NY 10041, Attention: Notification Department; and, in accordance with then current guidelines of the Securities and Exchange Commission; or to such other addresses and/or such other national information services providing information with respect to the redemption of bonds as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. "Insurance and Condemnation Fund" means the fund by that name established and held by the Trustee pursuant to Section 5.07. "Interest Account" means the account by that name established in the Revenue Fund pursuant to Section 5.02. "Interest Payment Date" means each March 1 and September 1, commencing September 1,2008. "Lease Agreement" means that certain Lease Agreement, dated as of April 1, 2008, by and between the Authority and the City, as originally executed and as it may from time to time be supplemented, modified or amended in accordance with the terms thereof and of this Indenture. "Lease Payment Date" means, with respect to any Interest Payment Date, commencing with the June 1, 2008, Interest Payment Date, the fifteenth (15th) calendar day of the month preceding such Interest Payment Date. "Lease Payments" means the aggregate amount of all the payments required to be paid by the City pursuant to Section 4.3 of the Lease Agreement. "Moody's" means Moody's Investors Service, New York, New York, or its successors. "Net Proceeds" means amounts derived by the City from any policy of casualty insurance with respect to any portion of the Property, or the proceeds of any taking of the Property or any portion thereof in eminent domain proceedings (including sale under threat of such proceedings), to the extent remaining after payment therefrom of all expenses incurred in the collection and administration thereof. -5- "1997 Bonds" means the Authority's $8,070,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project), of which $2,945,000 remains outstanding on the Closing Date. "1997 Escrow Agreement" means that certain escrow deposit and trust agreement, dated as of the Closing Date,by and between the City and the 1997 Escrow Bank, relating to the refunding of the 1997 Bonds. "1997 Escrow Bank"means U.S. Bank National Association, as escrow bank under the 2000 Escrow Agreement. "1997 Escrow Fund" means the fund by that name held by the 1997 Escrow Bank under the 2000 Escrow Agreement. "Office" means, with respect to the Trustee, the corporate trust office of the Trustee located in Los Angeles, California, except that with respect to presentation of Bonds for payment or for registration of transfer and exchange, such term shall mean the office or agency of the Trustee at which, at any particular time, its corporate agency business shall be conducted. "Original Purchaser" means the original purchaser of the Bonds upon their delivery by the Trustee on the Closing Date. "Outstanding," when used as of any particular time with reference to Bonds, means (subject to the provisions of Section 11.09) all Bonds theretofore, or thereupon being, authenticated and delivered by the Trustee under this Indenture except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds with respect to which all liability of the Authority shall have been discharged in accordance with Section 10.02, including Bonds (or portions thereof) described in Section 11.09; and (c) Bonds for the transfer or exchange of or in lieu of or in substitution for which other Bonds shall have been authenticated and delivered by the Trustee pursuant to this Indenture. "Owner," whenever used herein with respect to a Bond, means the person in whose name the ownership of such Bond is registered on the Registration Books. "Participating Underwriter" shall have the meaning ascribed thereto in the Continuing Disclosure Certificate. "Permitted Encumbrances" means, as of any particular time: (a) liens for general ad valorem taxes and assessments,if any, not then delinquent, or which the City may, pursuant to provisions of Article V of the Lease Agreement, permit to remain unpaid; (b) the Site and Facility Lease; (c) the Lease Agreement; (d) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (e) easements, rights-of-way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Closing Date and which the City certifies in writing will not materially impair the use of the Property; and (f) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the date of recordation of the Lease Agreement and to which the Authority and the City agree in writing do not reduce the value of the Property. "Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested -6- therein and are consistent with the City's investment policies, but only to the extent that the same are acquired at Fair Market Value (provided the Trustee may rely upon the Request of the Authority directing investment hereunder as a determination that such investment is a Permitted Investment): (a) 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. (b) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including: (i) Export-Import Bank; (ii) Farm Credit System Financial Assistance Corporation, (iii) Farmers Home Administration; (iv) General Services Administration; (v) U.S. Maritime Administration; (vi) Small Business Administration; (vii) Government National Mortgage Association (GNMA); (viii) U.S. Department of Housing & Urban Development (PHA's); and (ix) Federal Housing Administration; (c) senior debt obligations rated "Aaa" by Moody's and "AAA" by S&P issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation; (d) U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks, including the Trustee and its affiliates, which have a rating on their short term certificates of deposit on the date of purchase of "P-1" by Moody's and "A-1" or "A-1+" by S&P and maturing no more than 360 days after the date of purchase, provided that ratings on holding companies are not considered as the rating of the bank; (e) commercial paper which is rated at the time of purchase in the single highest classification, "P-1"by Moody's and "A-1+" by S&P, and which matures not more than 270 days after the date of purchase; (f) investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P, including any money market fund for which the Trustee or an affiliate receives fees for investment advisory or other services to the fund; (g) pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice; and (i) which are rated, based upon an irrevocable escrow account or fund (the "escrow"), in the highest rating category of Moody's and S&P or any successors thereto; or (ii)(A) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph (a) above, which escrow may be applied only to the payment of such principal of and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (B) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates thereof or on the redemption date or dates specified in the irrevocable instructions referred to above, as appropriate; -7- (h) forward delivery agreements or forward purchase and sale agreements, having as an underlying investment property those investments which are listed in paragraphs (a), (b) or (c) above; and (i) the Local Agency Investment Fund of the State, created pursuant to section 16429.1 of the California Government Code, to the extent the Trustee is authorized to register such investment in its name. "Principal Account" means the account by that name established in the Revenue Fund pursuant to Section 5.02. "Property" means, collectively, the Site and the Facility. "Qualified Reserve Fund Credit Instrument" means a surety bond issued to the Trustee by an insurance company rated in the highest category by Moody's and S&P and, if rated by A.M. Best & Company, rated in the highest rating category by A.M. Best & Company. "Rating Category" means, with respect to any Permitted Investment, one of the generic categories of rating by Fitch, Moody's and S&P applicable to such Permitted Investment, without regard to any refinement or graduation of such rating category by a plus or minus sign or a numeral. "Record Date" means, with respect to any Interest Payment Date, the fifteenth (15th) calendar day of the month preceding such Interest Payment Date, whether or not such day is a Business Day. "Redemption Fund" means the fund by that name established pursuant to Section 5.06. "Refunded 2000 Bonds" means the 2000 Bonds maturing on September 1, 2012, through September 1,2015, September 1,2020, September 1,2025, and September 1,2030. "Registration Books" means the records maintained by the Trustee pursuant to Section 2.05 for the registration and transfer of ownership of the Bonds. "Regulations" means the regulations of the United States Department of Treasury issued under the Code. "Reserve Account" means the account by that name in the Revenue Fund established pursuant to Section 5.02. "Reserve Requirement" means a fixed amount equal to the least of (a) maximum annual debt service on the Bonds, (b) 125%of average annual debt service on the Bonds, and (c) 10% of the par amount of the Bonds. The Reserve Requirement is$ "Revenue Fund" means the fund by that name established and held by the Trustee pursuant to Section 5.01. "Revenues" means (a) all Lease Payments, prepayments, insurance proceeds, condemnation proceeds, and (b) subject to the provisions of Section 5.08 hereof, all interest, profits or other income derived from the investment of amounts in any fund or account established pursuant to this Indenture. "S&P" means Standard &, Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., New York,New York, or its successors. -8- "Securities Depositories"means The Depository Trust Company, 55 Water Street, 50th Floor, New York, NY 10041-0099, Attention: Call Notification Department, Fax (212) 855- 7232; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the Authority may designate in a Written Certificate of the Authority delivered to the Trustee. "Site" means that certain real property more particularly described in Exhibit A to the Site and Facility Lease and in Exhibit A to the Lease Agreement. "Site and Facility Lease" means the Site and Facility Lease, dated as of April 1, 2008, by and between the City, as lessor, and the Authority, as lessee, together with any duly authorized and executed amendments thereto. "State"means the State of California. "Supplemental Indenture"means any indenture hereafter duly authorized and entered into between the Authority and the Trustee, supplementing, modifying or amending this Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized hereunder. "Tax Certificate" means the certificate of the Authority dated the Closing Date, with respect to tax matters. "Term Bonds" means the Bonds maturing on September 1, "Trustee" means , a national banking association organized and existing under the laws of the United States of America, or its successor, as Trustee hereunder as provided in Section 8.01. 2000 Bonds" means the Authority's $18,310,000 Huntington Beach Public Financing Authority Lease Revenue Bonds,2000 Series A (Capital Improvement Financing Project), of which $14,215,000 remains outstanding on the Closing Date. "2000 Escrow Agreement" means that certain escrow deposit and trust agreement, dated as of the Closing Date,by and between the City and the 2000 Escrow Bank, relating to the refunding of the Refunded 2000 Bonds. "2000 Escrow Bank" means The Bank of New York Trust Company, N.A., as escrow bank under the 2000 Escrow Agreement. "2000 Escrow Fund" means the fund by that name held by the 2000 Escrow Bank under the 2000 Escrow Agreement. "Written Certificate," "Written Request" and "Written Requisition" of the Authority or the City mean, respectively, a written certificate, request or requisition signed in the name of the Authority or the City by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. Section 1.02. Rules of Construction. All references in this Indenture to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Indenture; and the words "herein," "hereof," "hereunder," and other -9- words of similar import refer to this Indenture as a whole and not to any particular Article, Section or subdivision hereof Section 1.03. Authorization and Purpose of Bonds. The Authority has reviewed all proceedings heretofore taken relative to the authorization of the Bonds and has found, as a result of such review, and hereby finds and determines that all things, conditions, and acts required by law to exist, happen and/or be performed precedent to and in the issuance of the Bonds do exist,have happened and have been performed in due time, form and manner as required by law, and the Authority is now authorized under each and every requirement of law, to issue the Bonds in the manner and form provided in this Indenture. Accordingly, the Authority hereby authorizes the issuance of the Bonds pursuant to this Indenture for the purposes described herein. Section 1.04. Equal Security. In consideration of the acceptance of the Bonds by the Owners thereof, this Indenture shall be deemed to be and shall constitute a contract between the Authority and the Owners from time to time of the Bonds; and the covenants and agreements herein set forth to be performed on behalf of the Authority shall be for the equal and proportionate benefit, security and protection of all Owners of the Bonds without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof or the time of sale, execution or delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or herein. -10- ARTICLE II ISSUANCE OF BONDS Section 2.01. Authorization of Bonds. The Authority hereby authorizes the issuance of the Bonds, which shall constitute special obligations of the Authority, for the purpose of providing funds to refund the 1997 Certificates and the Refunded 2000 Bonds. The Bonds are hereby designated the "Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A." The aggregate principal amount of Bonds initially issued and Outstanding under this Indenture shall equal dollars ($ ). At any time after the execution of this Indenture, the Authority may execute and the Trustee shall authenticate and, upon the Written Request of the Authority, deliver the Bonds. This Indenture constitutes a continuing agreement with the Trustee and the Owners from time to time of the Bonds to secure the full payment of the principal of and interest and premium (if any) on all the Bonds, subject to the covenants, provisions and conditions herein contained. Section 2.02. Terms of the Bonds. The Bonds shall be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof, so long as no Bond shall have more than one maturity date. The Bonds shall mature on September 1 in each of the years and in the amounts, and shall bear interest (calculated on the basis of a 360- day year of twelve 30-day months) at the rates,as follows: Maturity Date Principal Interest Maturity Date Principal Interest (,September 1) Amount Rate (September 1) Amount Rate Interest on the Bonds shall be payable semiannually on each Interest Payment Date, to the person whose name appears on the Registration Books as the Owner thereof as of the Record Date immediately preceding each such Interest Payment Date, such interest to be paid by check of the Trustee mailed on such Interest Payment Date by first class mail to the Owners at the respective addresses of such Owners as they appear on the Registration Books; provided however, that payment of interest may be by wire transfer in immediately available funds to an account in the United States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who shall furnish written wire instructions to the Trustee at least five (5) days before the applicable Record Date. Principal of any Bond and any premium upon redemption shall be paid by check of the Trustee upon presentation and surrender thereof at the Office of the Trustee, except as provided in Section 2.04. Principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of America. Each Bond shall be dated as of the Closing Date and shall bear interest from the Interest Payment Date next preceding the date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in -11- which event it shall bear interest from such Interest Payment Date, or (b) unless it is authenticated on or before August 15, 2008, in which event it shall bear interest from the Closing Date;provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Section 2.03. Transfer and Exchange of Bonds. Any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Transfer of any Bond shall not be permitted by the Trustee during the period established by the Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption pursuant to Article IV. Whenever any Bond or Bonds shall be surrendered for transfer, the Authority shall execute and the Trustee shall authenticate and shall deliver a new Bond or Bonds for a like aggregate principal amount and of like maturity. The Trustee may require the Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. The cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Authority. Any Bond may be exchanged at the Office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations and of like maturity. Exchange of any Bond shall not be permitted during the period established by the Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption pursuant to Article IV. The Trustee may require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. The cost of printing Bonds and any services rendered or expenses incurred by the Trustee in connection with any transfer shall be paid by the Authority. Section 2.04. Book-Entry System. Notwithstanding any provision of this Indenture to the contrary: (a) The Bonds shall be initially issued registered in the name of "Cede & Co.," as nominee of The Depository Trust Company, the depository designated by the Original Purchaser, and shall be evidenced by one certificate maturing on each of the maturity dates set forth in Section 2.02 hereof to be in a denomination corresponding to the total principal therein designated to mature on such date. Registered ownership of such Bonds, or any portions thereof, may not thereafter be transferred except: (i) to any successor of The Depository Trust Company or its nominee, or of any substitute depository designated pursuant to paragraph (ii) of this subsection (a) ("substitute depository"); provided that any successor of The Depository Trust Company or substitute depository shall be qualified under any applicable laws to provide the service proposed to be provided by it, (ii) to any substitute depository designated in a written request of the Authority, upon (A) the resignation of The Depository Trust Company or its successor (or any substitute depository or its successor) from its functions as depository or (B) a determination by the Authority that The Depository Trust Company or its successor is no longer able to carry out its functions as depository; provided that any such substitute depository shall be qualified under any applicable laws to provide the services proposed to be provided by it; or -12- (iii) to any person as provided below, upon (A) the resignation of The Depository Trust Company or its successor (or any substitute depository or its successor) from its functions as depository or (B) a determination by the Authority that The Depository Trust Company or its successor is no longer able to carry out its functions as depository; provided that no substitute depository which is not objected to by the Authority and the Trustee can be obtained. (b) In the case of any transfer pursuant to paragraph (i) or paragraph (ii) of subsection (a) of this Section 2.04, upon receipt of all Outstanding Bonds by the Trustee, together with a written request of an Authorized Representative of the Authority to the Trustee, a single new Bond shall be issued, authenticated and delivered for each maturity of such Bond then outstanding, registered in the name of such successor or such substitute depository or their nominees, as the case may be, all as specified in such written request of an Authorized Representative of the Authority. In the case of any transfer pursuant to paragraph (iii) of subsection (a) of this Section 2.04, upon receipt of all Outstanding Bonds by the Trustee together with a written request of an Authorized Representative of the Authority, new Bonds shall be issued, authenticated and delivered in such denominations and registered in the names of such persons as are requested in a written request of the Authority provided the Trustee shall not be required to deliver such new Bonds within a period less than sixty (60) days from the date of receipt of such a written request of an Authorized Representative of the Authority. (c) In the case of partial redemption or an advance refunding of any Bonds evidencing all of the principal maturing in a particular year, The Depository Trust Company shall, at the Authority's expense, deliver the Bonds to the Trustee for cancellation and re-registration to reflect the amounts of such reduction in principal. (d) The Authority and the Trustee shall be entitled to treat the person in whose name any Bond is registered as the absolute Owner thereof for all purposes of this Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the Authority; and the Authority and the Trustee shall have no responsibility for transmitting payments to, communication with, notifying or otherwise dealing with any beneficial owners of the Bonds. Neither the Authority nor the Trustee will have any responsibility or obligations, legal or otherwise, to the beneficial owners or to any other party including The Depository Trust Company or its successor (or substitute depository or its successor), except for the registered owner of any Bond. (e) So long as all outstanding Bonds are registered in the name of Cede & Co. or its registered assign, the Authority-and the Trustee shall reasonably cooperate with Cede & Co., as sole registered Owner, or its registered assign in effecting payment of the principal and redemption premium, if any, and interest due with respect to the Bonds by arranging for payment in such manner that funds for such payments are properly identified and are made immediately available on the date they are due. (f) So long as all Outstanding Bonds are registered in the name of Cede & Co. or its registered assigns (hereinafter, for purposes of this paragraph (f), the "Owner"): (i) All notices and payments addressed to the Owners shall contain the Bonds' CUSIP number. (ii) Notices to the Owner shall be forwarded in the manner set forth in the form of blanket issuer letter of representations (prepared by The Depository Trust Company) executed by the Authority and received and accepted by The Depository Trust Company. -13- Section 2.05. Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the Bonds, which shall at all reasonable times upon reasonable prior notice be open to inspection during regular business hours by the Authority and the City; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the Bonds as hereinbefore provided. Section 2.06. Form and Execution of Bonds. The Bonds shall be signed in the name and on behalf of the Authority with the facsimile signature of its Chair, Vice Chair or Executive Director and attested with the facsimile signature of its Secretary, and shall be delivered to the Trustee for authentication by it. In case any officer of the Authority who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed shall have been authenticated or delivered by the Trustee or issued by the Authority, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issue, shall be as binding upon the Authority as though the individual who signed the same had continued to be such officer of the Authority. Also, any Bond may be signed on behalf of the Authority by any individual who on the actual date of the execution of such Bond shall be the proper officer although on the nominal date of such Bond such individual shall not have been such officer. Only such of the Bonds as shall bear thereon a certificate of authentication in substantially the form set forth in Exhibit A, manually executed by the Trustee, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Trustee shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. Section 2.07. Temporary Bonds. The Bonds may be issued in temporary form exchangeable for definitive Bonds when ready for delivery. Any temporary Bonds may be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Authority, shall be in fully registered form without coupons and may contain such reference to any of the provisions of this Indenture as may be appropriate. Every temporary Bond shall be executed by the Authority and authenticated by the Trustee upon the same conditions and in substantially the same manner as the definitive Bonds. If the Authority issues temporary Bonds it will execute and deliver definitive Bonds as promptly thereafter as practicable, and thereupon the temporary Bonds may be surrendered, for cancellation, at the Office of the Trustee and the Trustee shall authenticate and deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of authorized denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits under this Indenture as definitive Bonds authenticated and delivered hereunder. Section 2.08. Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Authority, at the expense of the Owner of said Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor 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 canceled by it and delivered to, or upon the order of, the Authority. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Authority and the Trustee and, if such evidence be satisfactory to them an indemnity satisfactory to them shall be given, the Authority, at the expense of the Owner of such lost, destroyed or stolen Bond, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so lost, destroyed or stolen (or if any such -14- Bond shall have matured or shall have been called for redemption, instead of issuing a substitute Bond, the Trustee may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Trustee). The Authority may require payment by the Owner of a sum not exceeding the actual cost of preparing each new Bond issued under this Section 2.08 and of,the expenses which may be incurred by the Authority and the Trustee in the premises. Any Bond issued under the provisions of this Section 2.08 in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Authority whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be entitled to the benefits of this Indenture with all other Bonds secured by this Indenture. Section 2.09. CUSIP Numbers. The Trustee, the Authority and the City shall not be liable for any defect or inaccuracy in the CUSIP number that appears on any Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the Owners and that neither the Trustee, the Authority nor the City shall be liable for any inaccuracies in such numbers. -15- ARTICLE III APPLICATION OF PROCEEDS Section 3.01. Application of Proceeds of Sale of Bonds. (a) Upon the receipt of payment for the Bonds on the Closing Date of $ being the principal amount of the Bonds of $ , less an underwriter's discount of $ , plus a net original issue premium of $ , the Trustee shall apply the proceeds of sale thereof as follows: (i) The Trustee shall deposit the amount of $ _in the Costs of Issuance Fund; (ii) The Trustee shall deposit the amount of $-----_____in the Reserve Account; (iii) The Trustee shall transfer the amount of $ to the 1997 Escrow Bank for deposit in the 1997 Escrow Fund; and. (iv) The Trustee shall transfer the amount of $ to the 2000 Escrow Bank for deposit in the 2000 Escrow Fund. (b) The Trustee may, in its sole discretion, establish such funds or accounts in its records to facilitate the foregoing transfers and deposits. Section 3.02. Establishment and Application of Costs of Issuance Fund. The Trustee shall establish, maintain and hold in trust a separate fund designated as the "Costs of Issuance Fund." The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee to pay the Costs of Issuance upon submission of Written Requisitions of the Authority stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against said fund. Each such Written Requisition shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. On August 6, 2008, or upon the earlier Written Request of the Authority, all amounts remaining in the Costs of Issuance Fund shall be transferred by the Trustee to the Revenue Fund to be used for the payment of interest on the Bonds. Section 3.03. Validity of Bonds. The validity of the authorization and issuance of the Bonds is not dependent on and shall not be affected in any way by any proceedings taken by the Authority or the Trustee with respect to or in connection with the Lease Agreement. The recital contained in the Bonds that the same are issued pursuant to the Constitution and laws of the State shall be conclusive evidence of their validity and of compliance with the provisions of law in their issuance. -16- ARTICLE IV REDEMPTION OF BONDS Section 4.01. Terms of Redemption. (a) Optional Redemption. The Bonds maturing on or before September 1, , are not subject to optional redemption prior to their respective stated maturities. The Bonds maturing on or after September 1, , other than the Term Bonds, shall be subject to optional redemption, in whole or in part, upon forty-five (45) days written notice to the Trustee by the City of its intention to optionally prepay a portion of the Lease Payments, on any date on or after September 1, , from any available source of funds of the City, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Any such redemption shall be in such order of maturity as the City shall designate in the above-mentioned written notice (and, if no specific order of redemption is designated by the City, pro rata among maturities). (b) Sinking Fund Redemption. The Term Bonds shall also be subject to mandatory sinking fund redemption in part by lot on September 1, , and on each September 1, , thereafter, to and including September 1, , from sinking fund payments derived from scheduled Lease Payments made by the City at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of the Term Bonds have been redeemed pursuant to subsection (a) above, the total amount of all future sinking fund payments shall be reduced by the aggregate principal amount of Term Bonds so redeemed, to be allocated among the sinking fund payments as are thereafter payable on a pro rata basis in integral multiples of $5,000 to the extent possible and in inverse order thereafter. The City shall provide the Trustee with a revised schedule. Sinking Fund Redemption Date Principal Amount to be (September 1) Redeemed or Purchased Maturity In lieu of redemption of Term Bonds pursuant to this subsection (b), amounts on deposit as sinking fund payments may also be used and withdrawn by the Trustee, at the written direction of the Authority, at any time for the purchase of Term Bonds otherwise required to be redeemed on the following September 1 at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Authority may in its discretion determine. The par amount of any of the Term Bonds so purchased by the Authority and surrendered to the Trustee for cancellation in any twelve-month period ending on March 1 in any year shall be credited towards and shall reduce the par amount of the Term Bonds otherwise required to be redeemed on the following September 1 pursuant to this subsection (b). (c) Special Mandatory Redemption From Insurance or Condemnation Proceeds. The Bonds shall also be subject to redemption as a whole, or in part on any date, to the extent the -17- Trustee has received hazard insurance proceeds or condemnation proceeds not used to repair or replace any portion of the Property damaged or destroyed and elected by the City, to be used for such purpose as provided in Section 5.07, at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. Section 4.02. Selection of Bonds for Redemption. Whenever provision is made in this Indenture for the redemption of less than all of the Bonds of a particular maturity, the Trustee shall select the Bonds to be redeemed from all Bonds of such maturity or such given portion thereof not previously called for redemption, by lot in any manner which the Trustee in its sole discretion shall deem appropriate. For purposes of such selection, the Trustee shall treat each Bond as consisting of separate $5,000 portions and each such portion shall be subject to redemption as if such portion were a separate Bond. If less than all the Outstanding Bonds are called for redemption from proceeds of eminent domain or insurance at any one time, the Authority shall specify to the Trustee a principal amount in each maturity to be redeemed which, to the extent practicable, results in approximately equal annual debt service on the Bonds Outstanding following such redemption. If less than all Outstanding Bonds are called for redemption from proceeds of eminent domain or insurance at any one time, the Authority shall designate the maturity or maturities of the Bonds to be redeemed. Section 4.03. Notice of Redemption. Notice of redemption shall be mailed by first class mail, postage prepaid, not less than thirty (30) nor more than sixty (60) days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books, and to the Securities Depositories and to the Information Services by means acceptable to such institutions. Each notice of redemption shall state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all Bonds within a maturity are called for redemption) Bond numbers of the Bonds to be redeemed, the maturity or.maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon shall cease to accrue, and shall require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein shall affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Each such Written Requisition shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Notice of redemption of Bonds shall be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. Notwithstanding the foregoing, in the case of any optional redemption of the Bonds under Section 4.01(a) above, the notice of redemption shall state that the redemption is conditioned upon receipt by the Trustee of sufficient moneys to redeem the Bonds on the anticipated redemption date, and that the optional redemption shall not occur if, by no later than the scheduled redemption date, sufficient moneys to redeem the Bonds have not been deposited with the Trustee. In the event that the Trustee does not receive sufficient funds by the scheduled optional redemption date to so redeem the Bonds to be optionally redeemed, such event shall not constitute an Event of Default, the Trustee shall send written notice to the Owners, to the Securities Depositories and to one or more of the Information Services to the effect that the redemption did not occur as anticipated, and the Bonds for which notice of optional redemption was given shall remain Outstanding for all purposes of this Indenture. -18- The Authority shall have the right to rescind any optional or special mandatory redemption by written notice to the Trustee on or prior to the date fixed for redemption. The Trustee shall mail notice of rescission of redemption in the same manner notice of redemption was originally provided. Section 4.04. Partial Redemption of Bonds. Upon surrender of any Bonds redeemed in part only, the Authority shall execute and the Trustee shall authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered and of the same interest rate and maturity. Section 4.05. Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption being held by the Trustee, on the redemption date designated in such notice, the Bonds (or portions thereof) so called for redemption shall become due and payable, interest on the Bonds so called for redemption shall cease to accrue, said Bonds (or portions thereof) shall cease to be entitled to any benefit or security under this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds redeemed pursuant to the provisions of this Article shall be canceled by the Trustee upon surrender thereof and destroyed. Section 4.06. Purchase of Bonds. In lieu of redemption of Bonds as provided in this Article IV, amounts held by the Trustee for such redemption may also be used on any Interest Payment Date, upon receipt by the Trustee at least sixty (60) days prior to the next scheduled Interest Payment Date of the written request of an Authorized Representative of the Authority, for the purchase of Bonds at public or private sale as and when and at such prices (including brokerage, accrued interest and other charges) as the Authority may in its discretion direct, but not to exceed the redemption price which would be payable if such Bonds were redeemed. The aggregate principal amount of Bonds of the same maturity purchased in lieu of redemption pursuant to this Section 4.06 shall not exceed the aggregate principal amount of Bonds of such maturity which would otherwise be subject to such redemption. Any Bonds so purchased shall be surrendered to the Trustee for cancellation. -19- ARTICLE V REVENUES; FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST Section 5.01. Pledge and Assignment; Revenue Fund. (a) Subject only to the provisions of this Indenture permitting the application thereof for the purposes and on the terms and conditions set forth herein, all of the Revenues and any other amounts (including proceeds of the sale of the Bonds) held in any fund or account established pursuant to this Indenture are hereby pledged to secure the payment of the principal of, premium, if any, and interest on the Bonds in accordance with their terms and the provisions of this Indenture. Said pledge shall constitute a first lien on and security interest in such assets and shall attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act. (b) The Authority hereby transfers in trust, grants a security interest in and assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the rights of the Authority in the Lease Agreement (except for certain rights to indemnification set forth therein), and in the Site and Facility Lease, (except for certain rights to indemnification set forth therein). The Trustee shall be entitled to and shall collect and receive all of the Revenues, and any Revenues collected or received by the Authority shall be deemed to be held, and to have been collected or received, by the Authority as the agent of the Trustee and shall forthwith be paid by the Authority to the Trustee. The Trustee also shall be entitled to and shall, subject to the provisions of Article VIII, take all steps, actions and proceedings which the Trustee determines to be reasonably necessary in its judgment to enforce, either jointly with the Authority or separately, all of the rights of the Authority, all of the obligations of the City under the Lease Agreement. The assignment of the Lease Agreement and the Site and Facility Lease to the Trustee is solely in its capacity as Trustee under this Indenture and the duties, powers and liabilities of the Trustee in acting thereunder shall be subject to the provisions of this Indenture, including, without limitation, the provisions of Article VIII hereof. The Trustee shall not be responsible for any representations, warranties, covenants or obligations of the Authority. (c) The Trustee agrees to provide written notice to the City at least five Business Days prior to each Lease Payment Date of the amount, if any, on deposit in the Revenue Fund which shall serve as a credit against, and shall relieve the City of making, the Lease Payments due from the City on such Lease Payment Date. Subject to Section 5.08, all Revenues shall be promptly deposited by the Trustee upon receipt thereof in a special fund designated as the "Revenue Fund" which the Trustee shall establish, maintain and hold in trust; except that all moneys received by the Trustee and required hereunder or under the Lease Agreement to be deposited in the Redemption Fund or the Insurance and Condemnation Fund shall be promptly deposited in such Funds. Within the Revenue Fund there shall be established an Interest Account, a Principal Account and a Reserve Account. All Revenues deposited with the Trustee shall be held, disbursed, allocated and applied by the Trustee only as provided in this Indenture. Section 5.02. Allocation of Revenues. Not later than the Business Day preceding each Interest Payment Date, the Trustee shall transfer from the Revenue Fund and deposit into the following respective accounts (each of which the Trustee shall establish and maintain within the Revenue Fund), the following amounts in the following order of priority, the -20- requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority: (a) The Trustee shall deposit in the Interest Account an amount required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such Interest Payment Date on all Bonds then Outstanding. (b) The Trustee shall deposit in the Principal Account an amount, if any, required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the Bonds coming due at maturity or upon sinking fund redemption and payable on such Interest Payment Date. (c) The Trustee shall deposit in the Reserve Account an amount, if any, required to cause the amount on deposit in the Reserve Account to be equal to the Reserve Requirement. (d) If the then applicable Interest Payment Date is March 1, all remaining moneys shall be held by the Trustee in the Revenue Fund and applied for the next succeeding September 1 Interest Payment Date deposits. If the then applicable Interest Payment Date is September 1, all remaining moneys shall be transferred to the City for deposit to the General Fund of the City. Section 5.03. Application of Interest Account. All amounts in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying interest on the Bonds as it shall become due and payable (including accrued interest on any Bonds purchased or redeemed prior to maturity pursuant to this Indenture). Section 5.04. Application of Principal Account. All amounts in the Principal Account shall be used and withdrawn by the Trustee solely to pay the principal amount of the Bonds at their respective maturity dates. Section 5.05. Application of Reserve Account. (a) Amounts in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of making transfers to the Interest Account and the Principal Account in such order of priority, in the event of any deficiency at any time in any of such accounts or for the retirement of all the Bonds then Outstanding, except that so long as the Authority is not in default hereunder, any amount in the Reserve Account in excess of the Reserve Requirement (as determined by the Trustee based upon a valuation of investments held in such account) shall be withdrawn from the Reserve Account semiannually on or before the Business Day preceding each February 1 and August 1 by the Trustee and deposited in the Interest Account. All amounts in the Reserve Account on the Business Day preceding the final Interest Payment Date shall be withdrawn from the Reserve Account and shall be transferred either (i) to the Interest Account and the Principal Account, in such order, to the extent required to make the deposits then required to be made pursuant to this Section 5.05 or, (ii) if the Authority shall have caused to be transferred to the Trustee an amount sufficient to make the deposits required by this Section 5.05, then, at the Written Request of the Authority, to the Authority for deposit by the Authority into the Revenue Fund. The Trustee may conclusively presume that there has been no change in the Reserve Requirement unless notified in writing by the Authority. -21- (b) At any time, moneys on deposit in the Reserve Account may be substituted by the Authority with a Qualified Reserve Fund Credit Instrument, in an amount equal to the Reserve Requirement, upon presentation to the Trustee of such Qualified Reserve Fund Credit Instrument. Upon such substitution, the Trustee shall transfer amounts on deposit in the Reserve Account to the Revenue Fund up to an amount equal to the maximum limits or principal amount, as applicable, of such letter of credit, surety bond, bond insurance policy or other form of guarantee. Section 5.06. Application of Redemption Fund. The Trustee shall establish and maintain the Redemption Fund, amounts in which shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and premium on the Bonds to be redeemed pursuant to Sections 4.01(a) or (b); provided, however, that at any time prior to the selection of Bonds for redemption, the Trustee may apply such amounts to the purchase of Bonds at public or private sale, in accordance with Section 4.06. Section 5.07. Insurance and Condemnation Fund. (a) Establishment of Fund. Upon the receipt of any proceeds of insurance or eminent domain with respect to any portion of the Property, the Trustee shall establish and maintain an Insurance and Condemnation Fund, to be held and applied as hereinafter set forth in this Section 5.07. (b) Application of Insurance Proceeds. Any Net Proceeds of insurance against accident to or destruction of the Property collected by the City in the event of any such accident or destruction shall be paid to the Trustee by the City pursuant to Section 6.1 of the Lease Agreement and deposited by the Trustee promptly upon receipt thereof in the Insurance and Condemnation Fund. If the City fails to determine and notify the Trustee in writing of its determination, within forty-five (45) days following the date of such deposit, to replace, repair, restore, modify or improve the Property, then such Net Proceeds shall be promptly transferred by the Trustee to the Redemption Fund and applied to the redemption of Bonds pursuant to Section 4.01(c) to the extent that such Net Proceeds permit. All proceeds deposited in the Insurance and Condemnation Fund and not so transferred to the Redemption Fund shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Property by the City, upon receipt of Written Requisitions of the City, as agent for the Authority, which: (i) states with respect to each payment to be made (A) the requisition number, (B) the name and address of the person to whom payment is due, (C) the amount to be paid and (D) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal; and (ii) specifies in reasonable detail the nature of the obligation. Each such Written Requisition shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Any balance of the proceeds remaining after such work has been completed as certified by the City to the Trustee shall after payment of amounts due the Trustee be paid to the City. (c) Application of Eminent Domain Proceeds. If all or any part of the Property shall be taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain) the Net Proceeds therefrom shall be deposited with the Trustee in the Insurance and Condemnation Fund pursuant to Section 6.1 of the Lease Agreement and shall be applied and disbursed by the Trustee as follows: (i) If the City has not given written notice to the Trustee, within forty-five (45) days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for the replacement of the -22- Property or such portion thereof, the Trustee shall transfer such Net Proceeds to the Redemption Fund to be applied towards the redemption of the Bonds pursuant to Section 4.01(c). (ii) If the City has given written notice to the Trustee, within forty-five (45) days following the date on which such Net Proceeds are deposited with the Trustee, of its determination that such Net Proceeds are needed for replacement of the Property or such portion thereof, the Trustee shall pay to the City, or to its order, from said proceeds such amounts as the City may expend for such repair or rehabilitation, upon the filing of Written Requisitions of the City as agent for the Authority in the form and containing the provisions set forth in subsection (b) of this Section 5.07. Each such Written Requisition shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Section 5.08. Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to this Indenture shall be invested by the Trustee solely in Permitted Investments. Such investments shall be directed by the Authority pursuant to a Written Request of the Authority filed with the Trustee at least two (2) Business Days in advance of the making of such investments (which Written Request shall certify that the investments constitute Permitted Investments). In the absence of any such directions from the Authority, the Trustee shall invest any such moneys in Permitted Investments described in clause (0 of the definition thereof. Permitted Investments purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. The Authority shall take the liquidity needs of the moneys held hereunder into account in making investments. All interest or gain derived from the investment of amounts in any of the funds or accounts established hereunder shall be deposited in the Revenue Fund, except that interest or gain derived from the investment of the amount in the Reserve Account shall be retained therein to the extent required to maintain the Reserve Requirement. To the extent that any investment agreement requires the payment of fees, such fees shall be paid from available moneys in the Revenue Fund after the deposit of moneys described in Section 5.02 (a) through (c) above. For purposes of acquiring any investments hereunder, the Trustee may commingle funds held by it hereunder. The Trustee or any of its affiliates may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee or its affiliates may act as sponsor or depository with respect to any Permitted Investment. To the extent that any Permitted Investment purchased by the Trustee are registrable securities such Permitted Investment shall be registered in the name of the Trustee on behalf of the Owners. The Trustee shall incur no liability for losses arising from any investments made pursuant to this Section 5.08. The Authority acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Authority the right to receive brokerage confirmations of security transactions as they occur, the Authority specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Authority periodic cash transaction statements which include detail for all investment transactions made by the Trustee hereunder. Such investments shall be valued by the Trustee not less often than quarterly, at the market value thereof, exclusive of accrued interest. Deficiencies in the amount on deposit in any fund or account resulting from a decline in market value shall be restored no later than the succeeding valuation date. Investments purchased with funds on deposit in the Reserve Account shall have a term to maturity of not greater than five years. -23- The Trustee may utilize securities pricing services that may be available to it making such valuations, including those within its accounting system with respect to the Bonds, and conclusively rely thereon. -24- ARTICLE VI PARTICULAR COVENANTS Section 6.01. Punctual Pam. The Authority shall punctually pay or cause to be paid the principal of and interest and premium (if any) on all the Bonds in strict conformity with the terms of the Bonds and of this Indenture, according to the true intent and meaning thereof, but only out of Revenues and other assets pledged for such payment as provided in this Indenture. Section 6.02. Extension of Payment of Bonds. The Authority shall not directly or indirectly extend or assent to the extension of the maturity of any of the Bonds or the time of payment of any claims for interest by the purchase of such Bonds or by any other arrangement, and in case the maturity of any of the Bonds or the time of payment of any such claims for interest shall be extended, such Bonds or claims for interest shall not be entitled, in case of any default hereunder, to the benefits of this Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest thereon which shall not have been so extended. Nothing in this Section 6.02 shall be deemed to limit the right of the Authority to issue Bonds for the purpose of refunding any Outstanding Bonds, and such issuance shall not be deemed to constitute an extension of maturity of the Bonds. Section 6.03. Against Encumbrances. The Authority shall not create, or permit the creation of, any pledge, lien, charge or other encumbrance upon the Revenues and other assets pledged or assigned under this Indenture while any of the Bonds are Outstanding, except the pledge and assignment created by this Indenture. Subject to this limitation, the Authority expressly reserves the right to enter into one or more other indentures for any of its corporate purposes, and reserves the right to issue other obligations for such purposes. Nothing in this section shall in any way limit the City's ability to encumber its assets in accordance with the Lease Agreement. Section 6.04. Power to Issue Bonds and Make Pledge and Assignment. The Authority is duly authorized pursuant to law to issue the Bonds and to enter into this Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned, respectively, under this Indenture in the manner and to the extent provided in this Indenture. The Bonds and the provisions of this Indenture are and will be the legal, valid and binding special obligations of the Authority in accordance with their terms, and the Authority and the Trustee shall at all times, subject to the provisions of Article VIII and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the Bond Owners under this Indenture against all claims and demands of all persons whomsoever. Section 6.05. Accounting Records. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of Bonds, the Revenues, the Lease Agreement and all funds and accounts established pursuant to this Indenture. Such books of record and account shall be available for inspection by the Authority and the City, during business hours and under reasonable circumstances. Section 6.06. No Additional Obligations. The Authority covenants that no additional bonds, notes or other indebtedness shall be issued or incurred which are payable out of the Revenues in whole or in part. -25- Section 6.07. Tax Covenants. The Authority covenants to and for the benefit of the Owners that, notwithstanding any other provisions of this Indenture (other than Section 11.01 hereof), it will: (a) neither make or use nor cause to be made or used any investment or other use of the proceeds of the Bonds or the moneys and investments held in the funds and accounts established under this Indenture which would cause the Bonds to be arbitrage bonds under section 103(b) and section 148 of the Code and the Regulations issued under section 148 of the Code or which would otherwise cause the interest payable on the Bonds to be includable in gross income for federal income tax purposes; (b) not take or cause to be taken any other action or actions, or fail to take any action or actions, which would cause the interest payable on the Bonds to be includable in gross income for federal income tax purposes; (c) at all tunes do and perform all acts and things permitted by law and necessary or desirable in order to assure that interest paid by the Authority on the Bonds will be excluded from the gross income, for federal income tax purposes, of the Owners pursuant to section 103 of the Code; and (d) not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Regulations. In furtherance of the covenants in' this Section 6.07, the Authority shall execute, deliver and comply with the provisions of the Tax Certificate, which is by this reference incorporated into this Indenture and made a part of this Indenture as if set forth in this Indenture in full including all of the defined terms therein, and by its acceptance of this Indenture the Trustee acknowledges receipt of the Tax Certificate and acknowledges its incorporation in this Indenture by this reference. The Trustee agrees it will invest funds held under this Indenture in accordance with the terms of this Indenture (this covenant shall extend throughout the term of the Bonds, to all funds and accounts created under this Indenture and all moneys on deposit to the credit of any fund or account). Section 6.08. Rebate Fund. (a) The Trustee shall establish and maintain, when required, a fund separate from any other fund established and maintained hereunder designated as the Rebate Fund. Within the Rebate Fund, the Trustee shall maintain such accounts as shall be necessary to comply with instructions of the Authority given pursuant to the terms and conditions of the Tax Certificate. Subject to the transfer provisions provided in paragraph (e) below, all money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement (as defined in the Tax Certificate), for payment to the federal government of the United States of America. Neither the Authority nor the Owner of any Bonds shall have any rights in or claim to such money. All amounts deposited into or on deposit in the Rebate Fund shall be governed by this Section 6.08, by Section 6.07 and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the directions of the Authority including supplying all necessary information in the manner provided in the Tax Certificate, and shall have no liability or responsibility to enforce compliance by the Authority with the terms of the Tax Certificate or any other tax covenants contained herein. The Trustee shall not be responsible for calculating rebate amounts or for the adequacy or correctness of any rebate report or rebate calculations. The Trustee shall -26- have no independent duty to review such calculations or enforce the compliance by the Authority with such rebate requirements. The Trustee shall have no duty or obligation to determine the applicability of the Code and shall only be obligated to act in accordance with written instructions provided by the Authority. (b) Upon the Authority's written direction, an amount shall be deposited to the Rebate Fund by the Trustee from deposits by the Authority, if and to the extent required, so that the balance in the Rebate Fund shall equal the Rebate Requirement. Computations of the Rebate Requirement shall be furnished by or on behalf of the Authority in accordance with the Tax Certificate. The Trustee shall supply to the Authority all necessary information in the manner provided in the Tax Certificate to the extent such information is reasonably available to the Trustee. (c) The Trustee shall have no obligation to rebate any amounts required to be rebated pursuant to this Section 6.08, other than from moneys held in the funds and accounts created under this Indenture or from other moneys provided to it by the Authority. (d) At the written direction of the Authority, the Trustee shall invest all amounts held in the Rebate Fund in Permitted Investments. Moneys shall not be transferred from the Rebate Fund except as provided in paragraph (e) below. The Trustee shall not be liable for any consequences arising from such investment. (e) Upon receipt of the Authority's written directions, the Trustee shall remit part or all of the balances in the Rebate Fund to the United States, as so directed. In addition, if the Authority so directs, the Trustee will deposit money into or transfer money out of the Rebate Fund from or into such accounts or funds as directed by the Authority's written directions; provided, however, only moneys in excess of the Rebate Requirement may, at the written direction of the Authority, be transferred out of the Rebate Fund to such other accounts or funds or to anyone other than the United States in satisfaction of the arbitrage rebate obligation. Any funds remaining in the Rebate Fund after each five year remission to the United States, redemption and payment of all of the Bonds and payment and satisfaction of any Rebate Requirement, or provision made therefor satisfactory to the Trustee, shall be withdrawn and remitted to the Authority. (f) Notwithstanding any other provision of this Indenture, including in particular Article X, the obligation to remit the Rebate Requirement to the United States and to comply with all other requirements of this Section 6.08, Section 6.07 and the Tax Certificate shall survive the defeasance or payment in full of the Bonds. Section 6.09. Collection of Amounts Due Under Lease Agreement. The Trustee shall promptly collect all amounts due from the City pursuant to the Lease Agreement. Subject to the provisions of Article VIII, the Trustee shall enforce, and take all steps, actions and proceedings which the Trustee determines to be reasonably necessary for the enforcement of all of its rights thereunder as assignee of the Authority, for the enforcement of all of the obligations of the City under the Lease Agreement. The Authority shall not amend, modify or terminate any of the terms of the Lease Agreement, or consent to any such amendment, modification or termination, without the prior written consent of the Trustee. The Trustee shall give such written consent only if (a) in the opinion of Bond Counsel, such amendment, modification or termination will not materially adversely affect the interests of the Owners, or (b) the Trustee first obtains the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding to such amendment, modification or termination. -27- Section 6.10. Continuing Disclosure. The Authority hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Indenture, failure of the Authority to comply with the Continuing Disclosure Certificate shall not constitute an Event of Default hereunder; provided, however, that any Participating Underwriter or any Owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance by the Authority of its obligations under this Section 6.10, including seeking mandate or specific performance by court order. Section 6.11. Waiver of Laws. The Authority shall not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension of law now or at any time hereafter in force that may affect the covenants and agreements contained in this Indenture or in the Bonds, and all benefit or advantage of any such law or laws is hereby expressly waived by the Authority to the extent permitted by law. Section 6.12. Further Assurances. The Authority will make, execute and deliver any and all such further indentures, 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. -28- ARTICLE VII EVENTS OF DEFAULT AND REMEDIES Section 7.01. Events of Default. The following events shall be Events of Default hereunder: (a) Default in the due and punctual payment of the principal or sinking fund installments of any Bonds when and as the same shall become due and payable, whether at maturity as therein expressed, by proceedings for redemption or otherwise. (b) Default in the due and punctual payment of any installment of interest on any Bonds when and as the same shall become due and payable. (c) Default by the Authority in the observance of any of the other covenants, agreements or conditions on its part in this Indenture or in the Bonds contained, if such default shall have continued for a period of thirty (30) days after written notice thereof, specifying such default and requiring the same to be remedied, shall have been given to the Authority by the Trustee;provided, however, that if in the reasonable opinion of the Authority the default stated in the notice can be corrected, but not within such thirty (30) day period, such default shall not constitute an Event of Default hereunder if the Authority shall commence to cure such default within such thirty (30) day period and thereafter diligently and in good faith cure such failure in a reasonable period of time. (d)The occurrence and continuation of an event of default under and as defined in the Lease Agreement. Section 7.02. Remedies Upon Event of Default. Upon the occurrence and continuance of any Event of Default, then and in every such case the Trustee in its discretion may, and upon the written request of the Owners of not less than 25% in principal amount of the Bonds then Outstanding and receipt of indemnity to its satisfaction, and payment of its fees and expenses, including the fees and expenses of its counsel, shall in its own name and as the Trustee of an express trust: (a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Owners under, and require the Authority or the City to carry out any agreements with or for the benefit of the Owners of Bonds and to perform its or their duties under the Lease Agreement and this Indenture, provided that any such remedy may be taken only to the extent permitted under the applicable provisions of the Lease Agreement or this Indenture, as the case may be; (b) bring suit upon the Bonds; (c) by action or suit in equity require the Authority to account as if it were the trustee of an express trust for the Owners of Bonds, or (d)by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of Bonds hereunder. Upon the occurrence of an Event of Default, the Trustee shall be entitled as a matter of right to the appointment of a receiver or receivers for the Revenues, ex parte, and without notice, and the Authority consents to the appointment of such receiver upon the occurrence of an Event of Default. In the case of any receivership, insolvency, bankruptcy, or other -29- judicial proceedings affecting the Authority or the City, the Trustee shall be entitled to file such proofs of claims and other documents as may be necessary or advisable in order to have the claims of the Trustee and the Bond Owners allowed in such proceedings, without prejudice, however, to the right of any Bond Owner to file a claim on his or her own behalf; provided, the Trustee shall be entitled to compensation and reimbursement for the reasonable fees and expenses of its counsel and indemnity for its reasonable expenses and liability from the Authority, the City or the Bond Owners, as appropriate. Section 7.03. Application of Revenues and Other Funds After Default. If an Event of Default shall occur and be continuing, all Revenues and any other funds then held or thereafter received by the Trustee under any of the provisions of this Indenture shall be applied by the Trustee as follows and in the following order: (a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the Bonds and payment of reasonable fees, charges and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under this Indenture; (b) To the payment of the principal of and interest then due on the Bonds (upon presentation of the Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid) in accordance with the provisions of this Indenture, as follows: First: To the payment to the persons entitled thereto of all installments of interest then due in the order of the maturity of such installments, and, if the amount available shall not be sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and Second: To the payment to the persons entitled thereto of the unpaid principal of any Bonds which shall have become due, whether at maturity or by redemption, with interest on the overdue principal at the rate borne by the respective Bonds (to the extent permitted by law), and, if the amount available shall not be sufficient to pay in full all the Bonds, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference. Section 7.04. Trustee to Represent Bond Owners. The Trustee is hereby irrevocably appointed (and the successive respective Owners of the Bonds, by taking and holding the same, shall be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney-in-fact of the Owners of the Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the Bonds, this Indenture and applicable provisions of any law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, the Trustee shall, proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it shall deem most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained herein, or in aid of the execution of any power herein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the Bonds, this Indenture or any other law; -30- and upon instituting such proceeding, the Trustee shall be entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under this Indenture, pending such proceedings. All rights of action under this Indenture or the Bonds or otherwise maybe prosecuted and enforced by the Trustee without the possession of any of the Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in the name of the Trustee for the benefit and protection of all the Owners of such Bonds, subject to the provisions of this Indenture. Section 7.05. Bond Owners' Direction of Proceedings. Anything in this Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have the right,by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its reasonable satisfaction, to direct the method of conducting all remedial proceedings taken by the Trustee hereunder, provided that such direction shall not be otherwise than in accordance with law and the provisions of this Indenture, and that the Trustee shall have the right to decline to follow any such direction which in the opinion of the Trustee would expose it to liability. Section 7.06. Limitation on Bond Owners' Right to Sue. Notwithstanding any other provision hereof, no Owner of any Bonds shall have the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under this Indenture, the Lease Agreement or any other applicable law with respect to such Bonds, unless (a) such Owner shall have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners shall have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee shall have failed to comply with such request for a period of sixty (60) days after such written request shall have been received by, and said tender of indemnity shall have been made to, the Trustee; and (e) no direction inconsistent with such written request shall have been given to the Trustee during such sixty (60) day period by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding. Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by any Owner of Bonds of any remedy hereunder or under law; it being understood and intended that no one or more Owners of Bonds shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture or the rights of any other Owners of Bonds, or to enforce any right under the Bonds, this Indenture, the Lease Agreement or other applicable law with respect to the Bonds, except in the manner herein provided, and that all proceedings at law or in equity to enforce any such right shall be instituted, had and maintained in the manner herein provided and for the benefit and protection of all Owners of the Outstanding Bonds, subject to the provisions of this Indenture. Section 7.07. Absolute Obligation of Authority. Nothing in Section 7.06 or in any other provision of this Indenture or in the Bonds contained shall affect or impair the obligation of the Authority, which is absolute and unconditional, to pay the principal of and interest and premium (if any) on the Bonds to the respective Owners of the Bonds at their respective dates of maturity, or upon call for redemption, as herein provided, but only out of the Revenues and other assets herein pledged therefor, or affect or impair the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the Bonds. -31- Section 7.08. Termination of Proceedings. If any proceedings taken by the Trustee or any one or more Bond Owners on account of any Event of Default shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Trustee or the Bond Owners, then the Authority, the Trustee and the Bond Owners, subject to any determination in such proceedings, shall be restored to their former positions and rights hereunder, severally and respectively, and all rights, remedies, powers and duties of the Authority, the Trustee and the Bond Owners shall continue as though no such proceedings had been taken. Section 7.09. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee or the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, shall be cumulative and in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Section 7.10. No Waiver of Default. No delay or omission of the Trustee or any Owner of the Bonds to exercise any right or power arising upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and every power and remedy given by this Indenture to the Trustee or the Owners of the Bonds may be exercised from time to time and as often as may be deemed expedient. Section 7.11. Parties Interested Herein. Nothing in this Indenture expressed or implied is intended or shall be construed to confer upon, or to give to; any person or entity, other than the City, the Authority, the Trustee, their officers, employees and agents, and the Owners any right, remedy or claim under or by reason of this Indenture, or any covenant, condition or stipulation hereof, and all covenants, stipulations, promises and agreements in this Indenture contained by and on behalf of the Authority shall be for the sole and exclusive benefit of the City, the Authority, the Trustee, their officers, employees and agents, and the Owners. -32- ARTICLE VIII THE TRUSTEE Section 8.01. Duties, Immunities and Liabilities of Trustee. (a) The Trustee shall, prior to an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are expressly and specifically set forth in this Indenture and no implied duties or covenants shall be read into this Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured or waived), exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Authority may remove the Trustee at any time unless an Event of Default shall have occurred and then be continuing, and the Authority shall remove the Trustee if at any time requested to do so by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee shall cease to be eligible in accordance with subsection (e) of this Section 8.01, or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property shall be appointed, or any public officer shall take control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and the City and thereupon shall appoint a successor Trustee by an instrument in writing. Any such removal shall be made upon at least thirty (30) days' prior written notice to the Trustee. (c) The Trustee may at any time resign by giving written notice of such resignation to the Authority and the City, and by giving the Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. Upon receiving such notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument in writing. (d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within sixty (60) days of giving notice of removal or notice of resignation as aforesaid, the Authority shall petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under this Indenture, shall signify its acceptance of such appointment by executing and delivering to the Authority, to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless at the Written Request of the Authority or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Indenture and shall pay over, transfer, assign and deliver to the successor 'Trustee any money or other property subject to the trusts and conditions herein set forth. Upon request of the successor -33- Trustee, the Authority shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Authority shall promptly mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts hereunder to each rating agency which is then rating the Bonds and to the Bond Owners at the addresses shown on the Registration Books. If the Authority fails to mail such notice within fifteen (15) days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Authority. (e) Any Trustee appointed under this Indenture shall be a corporation or association organized and doing business under the laws of any state or the United States of America or the District of Columbia, shall be authorized under such laws to exercise corporate trust powers, shall have (or,in the case of a corporation or national banking association included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least fifty million dollars ($50,000,000), shall be subject to supervision or examination by federal or state agency, so long as any Bonds are Outstanding. If such corporation or national banking association publishes a report of condition at least annually pursuant to law or to the requirements of any supervising or examining agency above referred to then for the purpose of this subsection (e), the combined capital and surplus of such corporation or national banking association shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section 8.01. Section 8.02. Merger or Consolidation. Any bank or trust company into which the Trustee may be merged or converted or with which it may be consolidated or any bank or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank or trust company shall be eligible under subsection (e) of Section 8.01 shall be the successor to such Trustee, without the execution or filing of any paper or any further act, anything herein to the contrary notwithstanding. Section 8.03. Liability of Trustee. (a) The recitals of facts herein and in the Bonds contained shall not be taken as statements of the Trustee, and the Trustee shall not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of this Indenture, the Bonds or the Lease Agreement, nor shall the Trustee incur any responsibility in respect thereof, other than as expressly stated herein in connection with the respective duties or obligations herein or in the Bonds assigned to or imposed upon it. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties hereunder, except for its own negligence. The Trustee may become the Owner of Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of Bond Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding. -34- (b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture. (d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. (e) The Trustee shall not be deemed to have knowledge of any Event of Default hereunder, or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default hereunder unless and until it shall have actual knowledge thereof, or a corporate trust officer shall have received written notice thereof, at its Office. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance by the Authority or the City of any of the terms, conditions, covenants or agreements herein, under the Lease Agreement or of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default. The Trustee shall not be responsible for the validity, effectiveness or priority of any collateral given to or held by it. Without limiting the generality of the foregoing, the Trustee shall not be required to ascertain or inquire as to the performance or observance by the City and the Authority of the terms, conditions, covenants or agreements set forth in the Lease Agreement, other than the covenants of the City to make Lease Payments to the Trustee when due, such reports and certifications as the City are required to file with the Trustee thereunder. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it is not assured to its satisfaction that the repayment of such funds or adequate indemnity against such risk or liability is reasonably assured to it. (g) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. (h) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of Owners pursuant to this Indenture, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee hereunder shall be construed to impose a duty to exercise such power, right or remedy. (i) Whether or not therein expressly so provided, every provision of this Indenture and the Lease Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of Section 8.01(a), this Section 8.03 and Section 8.04 hereof. -35- (j) The Trustee shall not be concerned with or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions hereof. (k) The Trustee makes no representation or'warranty, expressed or implied as to the title, value, design, compliance with specifications or legal requirements, quality, durability, operation, condition, merchantability or fitness for any particular purpose for the use contemplated by the Authority or the City of the Property. In no event shall the Trustee be liable for incidental, indirect, special or consequential damages in connection with or arising from the Lease Agreement or this Indenture for the existence, furnishing or use of the Property. (1) Except to the extent that information was provided by the Trustee, 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. (m) The indemnities extended to the Trustee also extend to its directors, officers, employees and agents. (n) The Trustee may become the owner or pledgee of any Bonds with the same rights it would have if it were not Trustee. (o) The Trustee shall not be considered in breach of or in default in its obligations hereunder or progress in respect thereto in the event of enforced delay ("unavoidable delay") in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the Property, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee. (p) The Trustee agrees to accept and act upon facsimile transmission of written instructions and/or directions pursuant to this Indenture provided, however, that: (a) subsequent to such facsimile transmission of written instructions and/or directions the Trustee shall forthwith receive the originally executed instructions and/or directions, (b) such originally executed instructions and/or directions shall be signed by a person as may be designated and authorized to sign for the party signing such instructions and/or directions, and (c) the Trustee shall have received a current incumbency certificate containing the specimen signature of such designated person. Section 8.04. Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, facsimile, e-mail, resolution, request, requisition, consent, order, certificate, report, opinion, bonds or other paper or document believed by them 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 of or to the Authority, with regard to legal questions, and the opinion or advice of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder in good faith and in accordance therewith. -36- The Trustee may treat the Owners of the Bonds appearing in the Registration Books as the absolute owners of the Bonds for all purposes and the Trustee shall not be affected by any notice to the contrary. Whenever in the administration of the trusts imposed upon it by 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 be deemed to be conclusively proved and established by a Written Certificate, Written Request or Written Requisition of the Authority or the City, and such Written Certificate, Written Request or Written Requisition shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of this Indenture in reliance upon such Written Certificate, Written Request or Written Requisition, 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 deem reasonable. Section 8.05. Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of this Indenture shall be retained by the Trustee and shall be subject at all reasonable times to the inspection of the Authority, the City and any Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions. Section 8.06. Compensation and Indemnification. The Authority shall pay to the Trustee from time to time compensation for all services rendered under this Indenture and also all reasonable expenses and disbursements (including fees and expenses of counsel), incurred in and about the performance of its powers and duties under this Indenture. The Authority shall indemnify, defend and hold harmless the Trustee against any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers hereunder. As security for the performance of the obligations of the Authority under this Section 8.06 to the Trustee, the Trustee shall have a lien prior to the lien of the Bonds upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of or interest on particular Bonds. The rights of the Trustee and the obligations of the Authority under this Section 8.06 shall survive the resignation or removal of the Trustee or the discharge of the Bonds and this Indenture. -37- ARTICLE IX MODIFICATION OR AMENDMENT OF THIS INDENTURE Section 9.01. Amendments Permitted. (a) This Indenture and the rights and obligations of the Authority and of the Owners of the Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the Authority and the Trustee may enter into when the written consents of the Owners of a majority in aggregate principal amount of all Bonds then Outstanding, shall have been filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each Bond so affected, or (ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under this Indenture prior to or on a parity with the lien created by this Indenture except as permitted herein, or deprive the Owners of the Bonds of the lien created by this Indenture on such Revenues and other assets (except as expressly provided in this Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. (b) This Indenture and the rights and obligations of the Authority, of the Trustee and the Owners of the Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the Authority and the Trustee may enter into without the consent of any Bond Owners, if the Trustee has been furnished an opinion of counsel that the provisions of such Supplemental Indenture shall not materially adversely affect the interests of the Owners of the Bonds, including, without limitation, for any one or more of the following purposes: (i) to add to the covenants and agreements of the Authority in this Indenture contained other covenants and agreements thereafter to be observed, to pledge or assign additional security for the Bonds (or any portion thereof), or to surrender any right or power herein reserved to or conferred upon the Authority; (ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in this Indenture, or in regard to matters or questions arising under this Indenture, as the Authority may deem necessary or desirable; (iii) 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, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; or (iv) to modify, amend or supplement this Indenture in such manner as to cause interest on the Bonds to remain excludable from gross income under the Code. -38- (c) The Trustee may in its discretion, but shall not be obligated to, enter into any such Supplemental Indenture authorized by subsections (a) or (b) of this Section 9.01 which materially adversely affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. (d) Prior to the Trustee entering into any Supplemental Indenture hereunder, there shall be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of this Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion from gross income for purposes of federal income taxes of interest on the Bonds. (e) Written notice of any amendment or modification made pursuant to this Section 9.01 shall be given by the Authority to any rating agency then rating the Bonds at least thirty (30) days prior to the effective date of such amendment or modification. Section 9.02. Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to this Article IX, this Indenture shall be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture of the Authority, the Trustee and all Owners of Bonds Outstanding shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture shall be deemed to be part of the terms and conditions of this Indenture for any and all purposes. Section 9.03. Endorsement of Bonds; Preparation of New Bonds. Bonds delivered after the execution of any Supplemental Indenture pursuant to this Article may, and if the Authority so determines shall, bear a notation by endorsement or otherwise in form approved by the Authority and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any Bonds Outstanding at the time of such execution and presentation of his Bonds 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 shall be made on such Bonds. If the Supplemental Indenture shall so provide, new Bonds so modified as to conform, in the opinion of the Authority and the Trustee, to any modification or amendment contained in such Supplemental Indenture, shall be prepared and executed by the Authority and authenticated by the Trustee, and upon demand on the Owners of any Bonds then Outstanding shall be exchanged at the Office of the Trustee, without cost to any Bond Owner, for Bonds then Outstanding, upon surrender for cancellation of such Bonds, in equal aggregate principal amount of the same series and maturity. Section 9.04. Amendment of Particular Bonds. The provisions of this Article IX shall not prevent any Bond Owner from accepting any amendment as to the particular Bonds held by him. -39- ARTICLE X DEFEASANCE Section 10.01. Discharge of Indenture. Any or all of the Outstanding Bonds may be paid by the Authority in any of the following ways, provided that the Authority also pays or causes to be paid any other sums payable hereunder by the Authority: (a) by paying or causing to be paid the principal of and interest and premium (if any) on such Bonds, as and when the same become due and payable; (b) by depositing with the Trustee, in trust, at or before maturity, Defeasance Obligations in the necessary amount (as provided in Section 10.03) to pay or redeem such Bonds; or (c) by delivering to the Trustee, for cancellation by it, such Bonds. If the Authority shall also pay or cause to be paid all other sums payable hereunder by the Authority, then and in that case, at the election of the Authority (evidenced by a Written Certificate of the Authority, filed with the Trustee, signifying the intention of the Authority to discharge all such indebtedness and this Indenture), and notwithstanding that any of such Bonds shall not have been surrendered for payment, this Indenture and the pledge of Revenues and other assets made under this Indenture with respect to such Bonds and all covenants, agreements and other obligations of the Authority under this Indenture with respect to such Bonds shall cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the Authority, the Trustee shall execute and deliver to the Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee shall pay over, transfer, assign or deliver to the City all moneys or securities or other property held by it pursuant to this Indenture which are not required for the payment or redemption of any of such Bonds not theretofore surrendered for such payment or redemption. Section 10.02. Discharge of Liability on Bonds. Upon the deposit with the Trustee, in trust,at or before maturity, of money or securities in the necessary amount (as provided in Section 10.03) to pay or redeem any Outstanding Bonds (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 maturity, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, then all liability of the Authority in respect of such Bonds shall cease, terminate and be completely discharged, and the Owners thereof shall thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject, however, to the provisions of Section 10.04. The Authority may at any time surrender to the Trustee for cancellation by it any Bonds previously issued and delivered, which the Authority may have acquired in any manner whatsoever, and such Bonds, upon such surrender and cancellation, shall be deemed to be paid and retired. Section 10.03. Deposit of Money or Securities with Trustee. Whenever in this Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to this Indenture and shall be: -40- (a) lawful money of the United States of America in an amount equal to the principal amount of such Bonds and all unpaid interest thereon to maturity, except that, in the case of Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice, the amount to be deposited or held shall be the principal amount of such Bonds and all unpaid interest thereon to the redemption date; or (b) Defeasance Obligations, the principal of and interest on which when due will, in the written opinion of an Independent Accountant filed with the City, the Authority and the Trustee, provide money sufficient to pay the principal of and interest and premium (if any) on the Bonds to be paid or redeemed, as such principal, interest and premium become due, provided that in the case of Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption shall have been given as provided in Article IV or provision satisfactory to the Trustee shall have been made for the giving of such notice; provided, in each case, that (i) the Trustee shall have been irrevocably instructed (by the terms of this Indenture or by Written Request of the Authority) to apply such money to the payment of such principal, interest and premium (if any) with respect to such Bonds, and (ii) the Authority shall have delivered to the Trustee an opinion of Bond Counsel to the effect that such Bonds have been discharged in accordance with this Indenture (which opinion may rely upon and assume the accuracy of the Independent Accountant's opinion referred to above). Section 10.04. Unclaimed Funds. Notwithstanding any provisions of this Indenture, and subject to applicable provisions of State law, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any Bonds and remaining unclaimed for two (2) years after the principal of all of the Bonds has become due and payable (whether at maturity or upon call for redemption as provided in this Indenture), if such moneys were so held at such date, or two (2) years after the date of deposit of such moneys if deposited after said date when all of the Bonds became due and payable, shall be repaid to the Authority free from the trusts created by this Indenture, and all liability of the Trustee with respect to such moneys shall thereupon cease; provided, however, that before the repayment of such moneys to the Authority as aforesaid, the Trustee shall (at the written request and cost of the Authority) first mail to the Owners of Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the Bonds so payable and not presented and with respect to the provisions relating to the repayment to the Authority of the moneys held for the payment thereof. -41- ARTICLE XI MISCELLANEOUS Section 11.01. Liability of Authority Limited to Revenues. Notwithstanding anything in this Indenture or in the Bonds contained, the Authority shall not be required to advance any moneys derived from any source other than the Revenues and other assets pledged under this Indenture for any of the purposes in this Indenture mentioned, whether for the payment of the principal of or interest on the Bonds or for any other purpose of this Indenture. Nevertheless, the Authority may, but shall not be required to, advance for any of the purposes hereof any funds of the Authority which may be made available to it for such purposes. Section 11.02. Limitation of Rights to Parties and Bond Owners. Nothing in this Indenture or in the Bonds expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the City and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Indenture or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Trustee, the City, the Authority and the Owners of the Bonds. Section 11.03. Funds and Accounts. Any fund or account required by this Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with industry standards to the extent practicable, and with due regard for the requirements of Section 5.08 and for the protection of the security of the Bonds and the rights of every Owner thereof. The Trustee may establish such funds and accounts as it deems necessary to perform its obligations hereunder. The Trustee shall deliver a monthly accounting to the Authority of the funds and accounts held hereunder; provided, that the Trustee shall not be obligated to deliver an accounting for any fund or account that has had no activity since the last reporting date and that has a balance of zero. Section 11.04. Waiver of Notice; Requirement of Mailed Notice. Whenever in this Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in this Indenture any notice shall be required to be given by mail, such requirement shall be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail. Section 11.05. Destruction of Bonds. Whenever in this Indenture provision is made for the cancellation by the Trustee and the delivery to the Authority of any Bonds, the Trustee shall, in lieu of such cancellation and delivery, destroy such Bonds as may be allowed by law, and at the written request of the Authority the Trustee shall deliver a certificate of such destruction to the Authority. Section 11.06. Severability of Invalid Provisions. If any one or more of the provisions contained in this Indenture or in the Bonds shall for any reason be held to be invalid, illegal or unenforceable in any respect, then such provision or provisions shall be deemed severable from the remaining provisions contained in this Indenture and such invalidity, -42- illegality or unenforceability shall not affect any other provision of this Indenture, and this Indenture shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein. The Authority hereby declares that it would have entered into this Indenture and each and every other Section, paragraph, sentence, clause or phrase hereof and authorized the issuance of the Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of this Indenture may be held illegal, invalid or unenforceable. Section 11.07. Notices. All written notices to be given under this Indenture shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either(a) upon transmission by facsimile transmission or other form of telecommunication, confirmed by Phone, (b) after deposit in the United States mail, postage prepaid, upon receipt, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the Authority: Huntington Beach Public Financing Authority 2000 Main Street Huntington Beach, CA 92648 Attention: Treasurer Phone: (714)536-5225 Fax: (714)374-1571 If to the City: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attention: Finance Director Phone: (714) 536-5225 Fax: (714)374-1571 If to the Trustee: Attention: Corporate Trust Services Phone: Fax: The City, the Authority and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. Section 11.08. Evidence of Rights of Bond Owners. Any request, consent or other instrument required or permitted by this Indenture to be signed and executed by Bond Owners may be in any number of concurrent instruments of substantially similar tenor and shall be signed or executed by such Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of Bonds transferable by delivery, shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee and the Authority if made in the manner provided in this Section 11.08. The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other -43- officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer. The ownership of Bonds shall be proved by the Registration Books. Any request, consent, or other instrument or writing of the Owner of any Bond shall bind every future Owner of the same Bond and the Owner of every Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the Authority in accordance therewith or reliance thereon. Section 11.09. Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under this Indenture, Bonds which are known by the Trustee to be owned or held by or for the account of the Authority or the City, or by any other obligor on the Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Authority or the City or any other obligor on the Bonds, shall be disregarded and deemed not to be Outstanding for the purpose of any such determination. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 11.09 if the pledgee shall certify to the Trustee the pledgee's right to vote such Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect..common control with, the Authority or the City or any other obligor on the Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee. Upon request, the Authority or the City shall specify to the Trustee those Bonds disqualified pursuant to this Section 11.09. The Trustee may conclusively rely on such representation of the Authority and City. Section 11.10. Money Held for Particular Bonds. The money held by the Trustee for the payment of the interest or principal due on any date with respect to particular Bonds (or portions of Bonds in the case of Bonds redeemed in part only) shall, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the Bonds entitled thereto, subject, however, to the provisions of Section 10.04 hereof but without any liability for interest thereon. Section 11.11. Waiver of Personal Liability. No member, officer, agent or employee of the Authority shall be individually or personally liable for the payment of the principal of or interest or premium (if any) on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing herein contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law or by this Indenture. Section 11.12. Successor Is Deemed Included in All References to Predecessor. Whenever in this Indenture either the City, the Authority or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in this Indenture contained by or on behalf of the City, the Authority or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not. Section 11.13. Execution in Several Counterparts. This Indenture may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed -44- to be an original; and all such counterparts, or as many of them as the Authority and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. Section 11.14. Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State. -45- IN WITNESS WHEREOF, the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY has caused this Indenture to be signed in its name by its officers identified below and , in token of its acceptance of the trust 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. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary as Trustee By Authorized Signatory -46- Quint &Thimmig LLP 01/25/08 01/31/08 EXHIBIT A FORM OF BOND UNITED STATES OF AMERICA STATE OF CALIFORNIA ORANGE COUNTY HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Lease Revenue Refunding Bonds, 2008 Series A INTEREST RATE: MATURITY DATE: ORIGINAL ISSUE DATE: CUSIP: % September 1, Aril 2008 REGISTERED OWNER: CEDE & CO. PRINCIPAL AMOUNT: DOLLARS The HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a duly constituted redevelopment agency under the laws of the State of California (the "Authority"), for value received, hereby promises to pay to the Registered Owner specified above or registered assigns (the "Registered Owner"), on the Maturity Date specified above (subject to any right of prior redemption hereinafter provided for), the Principal Amount specified above, in lawful money of the United States of America, and to pay interest thereon in like lawful money from the Interest Payment Date (as hereinafter defined) next preceding the date of authentication of this Bond unless (i) this Bond is authenticated on or before an Interest Payment Date and after the close of business on the fifteenth day of the month preceding such interest payment date, in which event it shall bear interest from such Interest Payment Date, or (ii) this Bond is authenticated on or before August 15, 2008, in which event it shall bear interest from the Original Issue Date specified above; provided, however, that if at the time of authentication of this Bond, interest is in default on this Bond, this Bond shall bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment on this Bond, at the Interest Rate specified above, payable semiannually on March 1 and September 1 in each year, commencing September 1, 2008 (collectively, the "Interest Payment Dates"), calculated on the basis of a 360-day year composed of twelve 30-day months. Principal hereof and premium, if any, upon early redemption hereof are payable upon presentation and surrender hereof at the corporate trust office (the "Office") of _ as trustee (the "Trustee") or such other place as designated by the Trustee. Interest hereon is payable by check on the Interest Payment Date of the Trustee mailed on the applicable Interest Payment Date to the Registered Owner hereof at the Registered Owner's address as it appears on the registration books of the Trustee as of the close of business on the fifteenth day of the month preceding each Interest Payment Date (a "Record Date"), or, upon written request filed with the Trustee at least five days prior to such Record Date by a Registered Owner of at least $1,000,000 in aggregate principal amount of Bonds, by wire transfer in immediately available funds to an account in the United States designated by such Registered Owner in such written request. Exhibit A 08008.04 Page 1 This Bond is not a debt of the City of Huntington Beach (the "City"), Orange County, the State of California, or any of its political subdivisions, and neither the City, said County, said State, nor any of its political subdivisions, is liable hereon nor in any event shall this Bond be payable out of any funds or properties of the Authority other than the Revenues (as defined in the Indenture hereinafter defined). This Bond is one of a duly authorized issue of bonds of the Authority designated as the "Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the 'Bonds"), in an aggregate principal amount of dollars ($ ), all of like tenor and date (except for such variation, if any, as may be required to designate varying numbers, maturities, interest rates or redemption provisions) and all issued pursuant to the provisions of Article 5 of Part 1 of Division 24 of the California Health and Safety Code (the "Law"), and pursuant to an Indenture of Trust, dated as of April 1, 2008, by and between the Authority and the Trustee (the "Indenture"), and a resolution of the Authority adopted on February 19, 2008, authorizing the issuance of the Bonds. Reference is hereby made to the Indenture (copies of which are on file at the office of the Authority) and all supplements thereto for a description of the terms on which the Bonds are issued, the provisions with regard to the nature and extent of the Revenues, and the rights thereunder of the owners of the Bonds and the rights, duties and immunities of the Trustee and the rights and obligations of the Authority thereunder, to all of the provisions of which the Registered Owner of this Bond,by acceptance hereof, assents and agrees. The Authority has heretofore issued its Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) (the "1997 Bonds"). The proceeds of the 1997 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public improvements (the "1997 Project"). The Authority has also heretofore issued its Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project)(the "2000 Bonds"). The proceeds of the 2000 Bonds were used to finance the costs of the acquisition, construction, installation and equipping of certain public improvements (the "2000 Project"). To provide for the refinancing of the 1997 Project and the 2000 Project, including the refunding of the 1997 Bonds and the 2000 Bonds, the Authority has determined to issue the Bonds. In order to provide for the repayment of the Bonds, the City and the Authority will enter into a lease agreement, dated as of April 1, 2008 (the "Lease Agreement"), by and between the Authority and the City, pursuant to which the City will agree to make lease payments from moneys in its General Fund and the City will budget and appropriate sufficient amounts in each year to pay the full amount of principal of and interest on the Bonds, which payments under the Lease Agreement have been calculated to be sufficient to enable the Authority to pay the principal of and interest and premium (if any) on the Bonds when due and payable. This Bond and the interest and premium, if any, hereon and all other Bonds and the interest and premium, if any, thereon (to the extent set forth in the Indenture) are special obligations of the Authority, and are payable from, and are secured by a charge and lien on the Revenues as defined in the Indenture, consisting primarily of payments under the Lease Agreement. As and to the extent set forth in the Indenture, all of the Revenues are exclusively and irrevocably pledged in accordance with the terms hereof and the provisions of the Indenture, to the payment of the principal of and interest and premium (if any) on the Bonds. The rights and obligations of the Authority and the owners of the Bonds may be modified or amended at any time in the manner, to the extent and upon the terms provided in the Indenture, but no such modification or amendment shall extend the fixed maturity of Exhibit A Page 2 any Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the owner of each Bond so affected. The Bonds maturing on or before September 1, , are not subject to optional redemption prior to their respective stated maturities. The Bonds maturing on or after September 1, , other than the Bonds maturing on September 1, , are subject to redemption at the option of the Authority as a whole, or in part in such order of maturity as the City shall designate (and, if no specific order of redemption is designated by the City, pro rata among maturities) on any date on or after September 1, , from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Bonds maturing on September 1, 2024, are subject to optional redemption prior to their stated maturity date, at the written direction of the Authority, from moneys deposited by the Authority or the City, in whole, or in part, on any date on or after September 1, 2016, from any available source of funds, at the following redemption prices (expressed as a percentage of the principal amount of Bonds called for redemption), together with interest accrued thereon to the date fixed for redemption: Redemption Period (_both dates inclusive) Price September 1, through August 31, 102% September 1, through August 31, 101 September 1, and thereafter 100 The Bonds maturing on September 1, (the "Term Bonds") are also subject to mandatory sinking fund redemption in part by lot on September 1, , and on September 1, , from sinking account payments made by the Authority at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of the Term Bonds have been optionally redeemed, the total amount of all future sinking account payments will be reduced by the aggregate principal amount of Term Bonds so redeemed, to be allocated among the sinking account payments as are thereafter payable on a pro rate basis in integral multiples of $5,000 as determined by the Authority (notice of which determination shall be given by the Authority to the Trustee). Sinking Account Redemption Date Principal Amount to be (September 1) Redeemed or Purchased tMaturity In lieu of redemption of Term Bonds, amounts on deposit as sinking account payments may also be used and withdrawn by the Trustee, at the written direction of the Authority, at any time for the purchase of Term Bonds otherwise required to be redeemed on the following September 1 at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Authority may in its discretion determine. The par amount of any of the Term Bonds so purchased by Exhibit A Page 3 the Authority and surrendered to the Trustee for cancellation in any twelve-month period ending on _ ___ 1 in any year shall be credited towards and shall reduce the par amount of the Term Bonds otherwise required to be redeemed on the following September 1. The Bonds are also subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, to the extent the Trustee has received hazard insurance proceeds or condemnation proceeds not used to repair or replace any portion of the leased property damaged or destroyed and elected by the City, to be used for such purpose, at a redemption price equal to one hundred percent (100%) of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. As provided in the Indenture, notice of redemption shall be mailed by the Trustee by first class mail not less than thirty (30) nor more than sixty (60) days prior to the redemption date to the respective owners of any Bonds designated for redemption at their addresses appearing on the registration books of the Trustee, but neither failure to receive such notice nor any defect in the notice so mailed shall affect the sufficiency of the proceedings for redemption or the cessation of accrual of interest thereon from and after the date fixed for redemption. If this Bond is called for redemption and payment is duly provided therefor as specified in the Indenture, interest shall cease to accrue hereon from and after the date fixed for redemption. If an Event of Default, as defined in the Indenture, shall occur, the principal of all Bonds may be declared due and payable upon the conditions, in the manner and with the effect provided in the Indenture, but such declaration and its consequences may be rescinded and annulled as further provided in the Indenture. This Bond is transferable by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Office of the Trustee, or such other place as designated by the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon registration of such transfer, a new Bond or Bonds, of authorized denomination or denominations, for the same aggregate principal amount and of the same maturity will be issued to the transferee in exchange herefor. This Bond may be exchanged at the Office of the Trustee, or such other place as designated by the Trustee, for Bonds of the same tenor, aggregate principal amount, interest rate and maturity, of other authorized denominations. The Authority and the Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, and the Authority and the Trustee shall not be affected by any notice to the contrary. Unless this bond is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Authority or the Trustee for registration of transfer, exchange, or payment, and any bond 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. Exhibit A Page 4 It is hereby certified that all of the things, conditions and acts required to exist, to have happened or to have been performed precedent to and in the issuance of this Bond do exist,have happened or have been performed in due and regular time, form and manner as required by the Law and the laws of the State of California and that the amount of this Bond, together with all other indebtedness of the Authority, does not exceed any limit prescribed by the Law or any laws of the State of California, and is not in excess of the amount of Bonds permitted to be issued under the Indenture. This Bond shall not be entitled to any benefit under the Indenture or become valid or obligatory for any purpose until the certificate of authentication hereon endorsed shall have been manually signed by the Trustee. IN WITNESS WHEREOF, the Huntington Beach Public Financing Authority has caused this Bond to be executed in its name and on its behalf with the facsimile signature of its Chair and attested to by the facsimile signature of its Secretary, all as of the Original Issue Date specified above. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Chair Attest: Secretary CERTIFICATE OF AUTHENTICATION This is one of the Bonds described in the within-mentioned Indenture. Dated: as Trustee By Authorized Signatory Exhibit A Page 5 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 Guaranteed: Notice: Signature guarantee shall be made by a Notice: The signature on this assignment must guarantor institution participating in the Securities correspond with the name(s) as written on the face of Transfer Agents Medallion Program or in such other the within Bond in every particular without alteration guarantee program acceptable to the Trustee. or enlargement or any change whatsoever." Exhibit A Page 6 Quint &Thimmig LLP 01/25/08 01/31/08 AFTER RECORDATION RETURN TO: Quint & Thimmig LLP 575 Market Street, Suite 3600 San Francisco, California 94105-2874 Attention: Brian D. Quint, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11929 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. SITE AND FACILITY LEASE Dated as of April 1, 2008 by and between the CITY OF HUNTINGTON BEACH, as Lessor and HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, as Lessee Relating to Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A 08008.04 SITE AND FACILITY LEASE This SITE AND FACILITY LEASE, dated as of April 1, 2008, is by and between the CITY OF HUNTINGTON BEACH, a municipal corporation and chartered city organized and existing under and by virtue of the laws of the State of California (the "City"), as lessor, and the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California, as lessee (the "Authority"); WITNE SSE TH : WHEREAS, the Authority intends to assist the City by leasing certain real property and improvements to the City pursuant to a Lease Agreement, dated as of April 1, 2008, and recorded concurrently herewith by memorandum thereof (the "Lease Agreement"), and the City proposes to enter into this Site and Facility Lease with the Authority as a material consideration for the Authority's agreement to lease such real property and improvements to the City; NOW, THEREFORE, IT IS HEREBY MUTUALLY AGREED, as follows: Section 1. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Site and Facility Lease shall have the respective meanings specified in that certain Indenture of Trust, dated as of April 1, 2008, by and between the Authority and , as trustee thereunder. Section 2. Site and Facility Lease. The City hereby leases to the Authority and the Authority hereby leases from the City, on the terms and conditions hereinafter set forth, those certain parcels of real property situated in Orange County, State of California, more particularly described ,in Exhibit A attached hereto and made a part hereof (collectively, the "Site"), and certain existing facilities on the Site, more particularly described in Exhibit B attached hereto and made a part hereof (collectively, the "Facility"). Section 3. Term. The term of this Site and Facility Lease shall commence on the date of recordation of this Site and Facility Lease in the Office of the County Recorder of Orange County, State of California, and shall end on September 1, 2030, unless such term is extended or sooner terminated as hereinafter provided. If, on September 1, 2030, the aggregate amount of Lease Payments (as defined in and as payable under the Lease Agreement) shall not have been paid, or provision shall not have been made for their payment, then the term of this Site and Facility Lease shall be extended until such Lease Payments shall be fully paid or provision made for such payment. If, prior to September 1, 2030, all Lease Payments shall be fully paid or provision made for such payment in accordance with Section 4.3 or 4.4 of the Lease Agreement, the term of this Site and Facility Lease shall end ten (10) days thereafter. Section 4. Rental. The City acknowledges receipt from the Authority as and for rental hereunder the sum of one dollar ($1.00), on or before the date of delivery of this Site and Facility Lease. Section 5. Purpose. The Authority shall use the Site and the Facility solely for the purpose of leasing the Site and the Facility to the City pursuant to the Lease Agreement and ,for such purposes as may be incidental thereto; provided, however, that in the event of default by the City under the Lease Agreement, the Authority and its assigns may exercise the remedies provided in the Lease Agreement. Section 6. City's Interest in the Site and the Facility. The City covenants that it is the owner of fee title to the Site and the Facility. Section 7. Assignments; Subleases; Amendments. Unless the City shall be in default under the Lease Agreement, the Authority may not assign its rights under this Site and Facility Lease or sublet the Site or the Facility, except as provided in the Lease Agreement and the Indenture, without the written consent of the City. This Site and Facility Lease may be amended, if required, pursuant to the provisions of Section 8.3 of the Lease Agreement. Section 8. Right of Entry. The City reserves the right, for any of its duly authorized representatives, to enter upon the Site and the Facility at any reasonable time to inspect the same or to make any repairs, improvements or changes necessary for the preservation thereof. Section 9. Termination. The Authority agrees, upon the termination of this Site and Facility Lease, to quit and surrender the Site and the Facility in the same good order and condition as the same was in at the time of commencement of the term hereunder, reasonable wear and tear excepted, and agrees that any permanent improvements and structures existing upon the Site and the Facility at the time of the termination of this Site and Facility Lease shall remain thereon and title thereto shall vest in the City. Section 10. Default. In the event the Authority shall be in default in the performance of any obligation on its part to be performed under the terms of this Site and Facility Lease, which default continues for thirty (30) days following notice and demand for correction thereof to the Authority, the City may exercise any and all remedies granted by law, except that no merger of this Site and Facility Lease and of the Lease Agreement shall be deemed to occur as a result thereof; provided, however, that so long as any Bonds are outstanding and unpaid in accordance with the terms thereof, the Lease Payments assigned by the Authority to the Trustee under the Indenture shall continue to be paid to the Trustee. Section 11. Quiet Enjoyment. The Authority, at all times during the term of this Site and Facility Lease, shall peaceably and quietly have, hold and enjoy the Site and the Facility subject to the provisions of the Lease Agreement and the Indenture. Section 12. Waiver of Personal Liability. All liabilities under this Site and Facility Lease on the part of the Authority are solely liabilities of the Authority and the City hereby releases each and every member, director, officer, employee and agent of the Authority of and from any personal or individual liability under this Site and Facility Lease. No member, director, officer, employee or agent of the Authority shall at any time or under any circumstances be individually or personally liable under,this Site and Facility Lease for anything done or omitted to be done by the Authority hereunder. Section 13. Taxes. The City covenants and agrees to pay any and all assessments of any kind or character and also all taxes, including possessory interest taxes, levied or' assessed upon the Site and the Facility (including both land and improvements). Section 14. Eminent Domain. In the event the whole or any part of the Site or the Facility is taken by eminent domain proceedings, the interest of the Authority shall be recognized and is hereby determined to be the amount of the then unpaid Bonds including the unpaid principal and interest with respect to any such Bonds then outstanding and, -2- subject to the provisions of the Lease Agreement, the balance of the award, if any, shall be paid to the City. Section 15. Use of the Proceeds. The City and the Authority hereby agree that the lease to the Authority of the City's right, title and interest in the Site and the Facility pursuant to Section 2 serves the public purposes of the City. The City hereby agrees that the proceeds of the Bonds shall be used solely for the purpose of financing the costs of certain public improvements owned, to be held or controlled by the City for its public purposes, on or before the date three years following the date of execution and delivery of the Bonds, or to refinance prior obligations of the City incurred for such purposes. Section 16. Partial Invalidity. If any one or more of the terms, provisions, covenants or conditions of this Site and Facility Lease shall, to any extent, be declared invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, the finding, order or decree of which becomes final, none of the remaining terms, provisions, covenants and conditions of this Site and Facility Lease shall be affected thereby, and each provision of this Site and Facility Lease shall be valid and enforceable to the fullest extent permitted by law. Section 17. Notices. All notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder by either party to the other shall be in writing and shall be sufficiently given and served upon the other party if delivered personally or if mailed by United States registered mail, return receipt requested, postage prepaid, and, if to the City, to the City Clerk, the City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648, and if to the Authority, to the Secretary, Huntington Beach Public Financing Authority, 2000 Main Street, Huntington Beach, CA 92648, or to such other addresses as the respective parties may from time to time designate by notice in writing. Section 18. Section Headings. All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Site and Facility Lease. Section 19. Applicable Law. This Site and Facility Lease shall be governed by and construed in accordance with the laws of the State. Section 20. Execution in Counterparts. This Site and Facility Lease may be executed in any number of counterparts, each of which shall be deemed to be an original but all together shall constitute but one and the same instrument. -3- IN WITNESS WHEREOF, the City and the Authority have caused this Site and Facility Lease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. CITY OF HUNTINGTON BEACH, as Lessee By Name Title Attest: Joan L. Flynn City Clerk HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary -4- [NOTARY ACKNOWLEDGMENTS TO BE ATTACHED] EXHIBIT A DESCRIPTION OF THE SITE The land referred to herein is situated in the City of Huntington Beach, County of Orange, State of California, and is described as follows: [LEGAL DESCRIPTION TO COME] APNs: 111-042-41, 111-050-38 & 111-032-35 Exhibit A Page 1 EXHIBIT B DESCRIPTION OF THE FACILITY The Donald W. Kiser Corporation Yard is a 14.3 acre site that consists of a main building, four large warehouse type structures, equipment and materials storage and office space. The two-story 7,200 square foot administration building was constructed in 1972 and is used for centralized customer service operations and office space. The City Yard buildings provide operations bases for a variety of maintenance services. Building B is approximately 26,000 square feet and was also constructed in 1972. Building B houses the fleet maintenance facility that includes mechanics bays and parts storage for servicing vehicles, large and small equipment and fire engines. Building C, constructed in 1973, is approximately 19,000 square feet. The building holds materials and equipment used in traffic signal, signs and markings maintenance. Building C also includes facility maintenance small equipment such as carpentry, locksmith, plumbing and electrical tools. Building D is approximately 7,500 square feet and was built in 1983. It is used for mechanical services to police vehicles, motorcycles, and radio equipment. This facility includes mechanics bays and parts storage. Building E, approximately 14,600 square feet is a storage warehouse for parts, supplies and equipment. Building E was finished in 1988. The lot includes several small sheds as well as storage for sand, gravel and loose construction materials. A fuel island contains four gasoline, two diesel, and one propane pumps that service all city owned vehicles and equipment. Exhibit B Quint &Thimmig LLP 01/25/08 01/31/08 LEASE AGREEMENT Dated as of April 1, 2008 by and between the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, as Lessor and the CITY OF HUNTINGTON BEACH, as Lessee Relating to Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A 08008.04 TABLE OF CONTENTS Pale ARTICLE I DEFINITIONS AND EXHIBITS SectionI.I. Definitions.................................................................................................................2 Section1.2. Exhibits......................................................................................................................2 ARTICLE 11 REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of Authority............................................3 Section 2.2. Representations, Covenants and Warranties of the City...............................................4 ARTICLE III ISSUANCE OF THE BONDS Section3.1. The Bonds..................................................................................................................6 ARTICLE IV LEASE OF PROPERTY; TERM OF THE LEASE AGREEMENT; LEASE PAYMENTS Section4.1. Lease of Property.......................................................................................................7 Section4.2. Term of Lease............................................................................................................7 Section4.3. Lease Payments..........................................................................................................7 Section4.4. Prepayment Option....................................................................................................8 Section4.5. Quiet Enjoyment........................................................................................................9 Section4.6. Title...........................................................................................................................9 Section 4.7. Additional Payments..................................................................................................9 ARTICLE V MAINTENANCE, TAXES, INSURANCE AND OTHER MATTERS Section 5.1. Maintenance, Utilities,Taxes and Assessments.............:.................` ......................... 10 Section 5.2. Modification of Property.......................................................................................... 10 Section 5.3. Public Liability and Property Damage Insurance...................................................... 11 Section 5.4. Fire and Extended Coverage Insurance.................................................................... 11 Section 5.5. Rental Interruption Insurance..................................................................................11 Section 5.6. Recordation Hereof; Title Insurance......................................................................... 12 Section 5.7. Net Proceeds of Insurance; Form of Policies............................................................ 12 Section 5.8. Installation of Personal Property.............................................................................. 12 Section5.9. Liens........................................................................................................................ 13 Section5.10. Tax Covenants......................................................................................................... 13 Section 5.11. Continuing Disclosure............................................................................................. 13 ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; ABATEMENT OF LEASE PAYMENTS Section 6.1. Application of Net Proceeds.................................................................................... 14 Section 6.2. Abatement of Lease Payments.................................................................................. 14 -i- ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS Section 7.1. Disclaimer of Warranties.......................................................................................... 16 Section7.2. Rights of Access....................................................................................................... 16 Section 7.3. Release and Indemnification Covenants................................................................... 16 ARTICLE VIII ASSIGNMENT, LEASING AND AMENDMENT Section 8.1. Assignment by the Authority................................................................................... 17 Section 8.2. Assignment and Subleasing by the City.................................................................... 17 Section 8.3. Amendment of Lease............................................................................................... 17 ARTICLE IX EVENTS OF DEFAULT; REMEDIES Section 9.1. Events of Default Defined.........................................................................................21 Section9.2. Remedies on Default................................................................................................21 Section 9.3. Limitation on Remedies...........................................................................................22 Section9.4. No Remedy Exclusive..............................................................................................22 Section 9.5. Agreement to Pay Attorneys' Fees and Expenses......................................................22 Section 9.6. No Additional Waiver Implied by One Waiver........................................................23 Section 9.7. Trustee and Bond Owners to Exercise Rights............................................................23 ARTICLE X MISCELLANEOUS Section10.1. Notices....................................................................................................................24 Section10.2. Binding Effect..........................................................................................................24 Section10.3. Severability..............................................................................................................24 Section 10.4. Net-net-net Lease.......................................... ........................................................24 Section 10.5. Further Assurances and Corrective Instruments........................................................24 Section 10.6. Execution in Counterparts........................................................................................25 Section 10.7. Applicable Law.......................................................................................................25 Section 10.8. Authorized Representatives......................................................................................25 Section 10.9. Waiver of Personal Liability.....................................................................................25 Section 10.10. Limitation of Rights to Parties and Bond Owners......................................................25 Section10.11. Captions..................................................................................................................25 EXHIBIT A: DESCRIPTION OF THE SITE EXHIBIT B: DESCRIPTION OF THE FACILITY EXHIBIT C: SCHEDULE OF LEASE PAYMENTS -ii- I LEASE AGREEMENT THIS LEASE AGREEMENT (the "Lease Agreement"), dated for convenience as of April 1, 2008, by and between the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California, as lessor (the "Authority"), and the CITY OF HUNTINGTON BEACH, a municipal corporation and chartered city organized and existing under and by virtue of the laws of the State of California, as lessee (the "City"); WITNE SSE TH : WHEREAS, pursuant to that certain Site and Facility Lease, dated as of April 1, 2008 (the "Site and Facility Lease"), the City has leased those certain parcels of real property situated in Orange County, State of California, more particularly described in Exhibit A attached hereto and made a part hereof (the "Site"), and certain existing facilities on the Site, more particularly described in Exhibit B attached hereto and made a part hereof (the "Facility" and, with the Site, the "Property"), all for the purpose of enabling the City to refinance the costs of the acquisition, construction, installation and equipping of certain public capital improvements, including (a) the refunding of the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) (the "1997 Bonds"), and (b) the refunding of a portion of the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project) (the "2000 Bonds"); WHEREAS, in order to provide the revenues necessary to enable the Authority to pay debt service on the Bonds as it becomes due, the Authority proposes to lease the Property to the City pursuant to this Lease Agreement and to assign its right to receive lease payments under this Lease Agreement (the "Lease Payments"), its right to enforce payment of the Lease Payments and otherwise to enforce its interest and rights under this Lease Agreement in the event of a default hereunder by the City, to , as trustee (the "Trustee"), pursuant to that certain Indenture of Trust, dated as of April 1, 2008, by and between the Authority and the Trustee (the "Indenture"), and pursuant to which the Authority will issue and the Trustee will authenticate and deliver the $ aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds"); and WHEREAS, the Authority and the City have duly authorized the execution and delivery of this Lease Agreement; NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: ARTICLE I DEFINITIONS AND EXHIBITS Section I.I. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease Agreement shall have the respective meanings specified in Section 1.01 of the Indenture. Section 1.2. Exhibits. The following exhibits are attached to, and by this reference made a part of, this Lease Agreement: Exhibit A: Description of the Site Exhibit B: Description of the Facility Exhibit C: Schedule of Lease Payments -2- ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.1. Representations, Covenants and Warranties of Authority. The Authority makes the following covenants, representations and warranties as the basis for its undertakings herein contained: (a) Due Organization and Existence. The Authority is joint exercise of powers authority, organized and existing under and by virtue of the laws of the State; has power to enter into this Lease Agreement, the Site and Facility Lease, the Indenture, the 1997 Escrow Agreement and the 2000 Escrow Agreement; is possessed of full power to own and hold, improve and equip real and personal property, and to lease and lease back the same; and has duly authorized the execution and delivery of each of the aforesaid agreements and such agreements constitute the legal, valid and binding obligations of the Authority, enforceable against the Authority in accordance with their respective terms. (b) Due Execution. The representatives of the Authority executing this Lease Agreement, the Site and Facility Lease, the Indenture, the 1997 Escrow Agreement and the 2000 Escrow Agreement are fully authorized to execute the same pursuant to official action taken by the governing body of the Authority. (c) Vapid, Binding and Enforceable Obligations. This Lease Agreement, the Site and Facility Lease, the Indenture, the 1997 Escrow Agreement and the 2000 Escrow Agreement have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance their respective terms. (d) No Conflicts. The execution and delivery of this Lease Agreement, the Site and Facility Lease, the Indenture, the 1997 Escrow Agreement and the 2000 Escrow Agreement, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement, the Site and Facility Lease, the Indenture, the 1997 Escrow Agreement and the 2000 Escrow Agreement or the financial condition, assets, properties or operations of the Authority. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement, the Site and Facility Lease, the Indenture, the 1997 Escrow Agreement and the 2000 Escrow Agreement, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. -3- (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement, the Site and Facility Lease, the Indenture or the Escrow Agreement, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement, the Site and Facility Lease, the Indenture or the Escrow Agreement or the financial conditions, assets, properties or operations of the Authority. Section 2.2. Representations Covenants and Warranties of the City. The City makes the following covenants, representations and warranties to the Authority as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The City is a municipal corporation and chartered city organized and existing under and by virtue of its charter and the laws of the State, has full legal right, power and authority under the laws of the State to enter into the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery of the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement. (b) Due Execution. The representatives of the City executing the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement have been fully authorized to execute the same pursuant to a resolution duly adopted by the City Council of the City. (c) Valid, Binding and Enforceable Obligations. The Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding obligations of the City enforceable against the City in accordance with their respective terms. (d) No Conflicts. The execution and delivery of the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of -4- the transactions contemplated by the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement, or the financial condition, assets, properties or operations of the City. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement, or upon the financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Site and Facility Lease, this Lease Agreement, the 1997 Escrow Agreement and the 2000 Escrow Agreement, or the financial conditions, assets, properties or operations of the City. -5- ARTICLE III ISSUANCE OF THE BONDS Section 3.1. The Bonds. The Authority has authorized the issuance of the Bonds pursuant to the Indenture in the aggregate principal amount of dollars ($ ). The Authority agrees that the proceeds of sale of the Bonds shall be paid to the Trustee on the Closing Date for deposit and application pursuant to the terms and conditions of the Indenture, which terms and conditions authorize the City to draw upon specified proceeds of the Bonds for purposes of refunding the 1997 Certificates and a portion of the 2000 Bonds. The City hereby approves the Indenture, the assignment to the Trustee of the rights of the Authority assigned or purported to be assigned thereunder, and the issuance of the Bonds by the Authority thereunder. -6- ARTICLE IV LEASE OF PROPERTY; TERM OF THE LEASE AGREEMENT; LEASE PAYMENTS Section 4.1. Lease of Property. The Authority hereby leases the Property to the City, and the City hereby leases the Property from the Authority, upon the terms and conditions set forth in this Lease Agreement. Section 4.2. Term of Lease. This Lease Agreement shall take effect on the date hereof, and shall end on the earlier of September 1, 2030, or such earlier date on which the Bonds shall no longer be Outstanding under the Indenture. If, on September 1, 2030, the Indenture shall not be discharged by its terms or if the Lease Payments payable hereunder shall have been abated at any time and for any reason, then the Term of the Lease Agreement shall be extended until there has been deposited with the Trustee an amount sufficient to pay all obligations due under the Lease Agreement, but in no event shall the Term of the Lease Agreement extend beyond September 1,2040. Section 4.3. Lease Payments. (a) Obligation to Pay. In consideration of the lease of the Property from the Authority hereunder and subject to the provisions of Section 6.2, the City agrees to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Property during each Fiscal Year, the Lease Payments (denominated into components of principal and interest) for the Property in the respective amounts specified in Exhibit C hereto, to be due and payable on the respective Lease Payment Dates specified in Exhibit C hereto. Any amount held in the Revenue Fund (except the Reserve Account therein), the Interest Account, the Principal Account or the Sinking Account on any Lease Payment Date, derived from any source of funds of the City or the Authority, shall be credited towards the Lease Payment then due and payable. The Lease Payments coming due and payable in any Fiscal Year shall be for the use of the Property for such Fiscal Year. The City's obligation to pay Lease Payments hereunder shall be absolute and unconditional subject only to abatement, in the event and to the extent that there is substantial interference with the use and occupancy of the property or any portion there of. (b) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 4.3, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, from the date of default to the date of payment at the highest rate of interest borne by any Outstanding Bond. Such interest, if received, shall be deposited in the Revenue Fund. (c) Fair Rental Value. The Lease Payments and Additional Payments coming due and payable in each Fiscal Year shall constitute the total rental for the Property for each Fiscal Year and shall be paid by the City in each Fiscal Year for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Property during each Fiscal Year. The Authority and the City hereby agree and determine that the total Lease Payments do not exceed the fair rental value of the Property. In making such determination, consideration has been given to the obligations of the parties under this Lease Agreement, the value of the Property, the uses and purposes which may be served by -7- the Property and the benefits therefrom which will accrue to the City and the general public. (d) Source of Payments; Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of the City, subject to the provisions of Section 6.2. The City covenants to take such action as may be necessary to include all Lease Payments due hereunder in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Lease Payments. The covenants on the part of the City herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such official to enable the City to carry out and perform the covenants and agreements in this Lease Agreement agreed to be carried out and performed by the City. During the Term of the Lease Agreement, the City shall furnish to the Authority and the Trustee, no later than ten days following the adoption of a budget for the current Fiscal Year, a certificate stating that the Lease Payments due in that Fiscal Year have been included in the budget approved by the City Council for such Fiscal Year. (e) Assignment. The City understands and agrees that all Lease Payments have previously been assigned by the Authority to the Trustee in trust, pursuant to Section 5.01 of the Indenture, for the benefit of the Owners of the Bonds, and the City hereby assents to such assignment. The Authority hereby directs the City, and the City hereby agrees, to pay all of the Lease Payments to the Trustee at its Office. (f) Security Deposit. Notwithstanding any other provision of this Lease Agreement, the City may on any date secure the payment of the Lease Payments for the Property in whole or in part by depositing with the Trustee an amount of cash which, together with other available amounts, including but not limited to amounts on deposit in the Revenue Fund and the Reserve Account, is either (i) sufficient to pay such Lease Payments, including the principal and interest components thereof, and premium, if any, in accordance with the Lease Payment schedule set forth in Exhibit C, or (ii) invested in whole or in part in Defeasance Obligations in such amount as will, in the opinion of an Independent Accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due hereunder, as the City shall instruct at the time of said deposit. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease Agreement. Section 4.4. Prepayment Option. The Authority hereby grants an option to the City , to prepay the principal component of the Lease Payments in full, or in part, without premium. Said option may be exercised with respect to Lease Payments due on and after August 15, , in whole or in part on any date commencing August 15, . Said option shall be exercised by the City by giving written notice to the Authority and the Trustee of the exercise of such option at least sixty (60) days prior to said Lease Payment Date. Such option shall be exercised in the event of prepayment in full, by depositing with said notice cash in an amount, which, together with amounts then on deposit in the Reserve Account, the Insurance and Condemnation Fund and the Revenue Fund, will be sufficient to pay the aggregate unpaid Lease Payments on said Lease Payment Date as set forth in Exhibit C hereto, together with any Lease Payments then due but unpaid, or, in the event of prepayment in part, by depositing with said notice cash equal to the amount desired to be -8- prepaid (the principal component of which shall be an amount divisible by $5,000) together with any Lease Payments then due but unpaid. In the event of prepayment in part, the partial prepayment shall be applied against Lease Payments in such manner as the City shall determine and if the City shall fail to make such determination, in inverse order of their payment dates. Lease Payments due after any such partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by, the City to the Trustee and which shall represent an adjustment to the schedule set forth in Exhibit C attached hereto taking into account said partial prepayment. Section 4.5. Ouiet Enjoyment. During the Term of the Lease Agreement, the Authority shall provide the City with quiet use and enjoyment of the Property, and the City shall, during such Term, peaceably and quietly have and hold and enjoy the Property without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease Agreement. The Authority will, at the request of the City and at the City's cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall have the right to inspect the Property as provided in Section 7.2. Section 4.6. Title. If the City pays all of the Lease Payments and Additional Payments during the Term of the Lease Agreement as the same become due and payable, or if the City posts a security deposit for payment of the Lease Payments pursuant to Section 4.3(f), and if the City has paid in full all of the Additional Payments coming due and payable as of such date, and provided in any event that no Event of Default shall have occurred and be continuing, all right, title and interest of the Authority in and to the Property shall be transferred to and vested in the City. The Authority agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer of title. Section 4.7. Additional Payments. In addition to the Lease Payments, the City shall pay when due the following Additional Payments: (a) Any fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Property as and when the same become due and payable; (b) Any amounts due to the Trustee pursuant to Section 8.06 of the Indenture for all services rendered under the Indenture and for all reasonable expenses, charges, costs, liabilities, legal fees and other disbursements incurred in and about the performance of its powers and duties under the Indenture; (c) Any reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under this Lease Agreement or the Indenture; and (d) Any reasonable out-of-pocket expenses of the Authority in connection with the execution and delivery of this Lease Agreement or the Indenture, or,in connection with the issuance of the Bonds, including any and all expenses incurred in connection with the authorization, issuance, sale and delivery of the Bonds, or incurred by the Authority in connection with any litigation which may at any time be instituted involving this Lease Agreement, the Bonds, the Indenture or any of the other documents contemplated hereby or thereby, or incurred by the Authority in connection with the Continuing Disclosure Certificate, or otherwise incurred in connection with the administration hereof or thereof. -9- ARTICLE V MAINTENANCE, TAXES, INSURANCE AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of the Lease Agreement, as part of the consideration for the rental of the Property, all improvement, repair and maintenance of the Property shall be the responsibility of the City and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Property which may include, without limitation, janitor service, security, power, gas, Phone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or lessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Property, as hereinbefore more specifically set forth. The City waives the benefits of subsections 1 and 2 of Section 1932 of the California Civil Code, but such waiver shall not limit any of the rights of the City under the terms of this Lease Agreement. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease Agreement as and when the same become due. The City may, at the City's expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority shall notify the City that, in the reasonable opinion of the Authority, by nonpayment of any such items, the interest of the Authority in the Property will be materially endangered or the Property or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority and the Trustee. Section 5.2. Modification of Property. The City shall, at its own expense, have the right to make additions, modifications and improvements to the Property. All additions, modifications and improvements to the Property shall thereafter comprise part of the Property and be subject to the provisions of this Lease Agreement. Such additions, modifications and improvements shall not in any way damage the Property or cause the Property to be used for purposes other than those authorized under the provisions of State and federal law; and the City shall file with the Trustee and the Authority a Written Certificate of the City stating that the Property, upon completion of any additions, modifications and improvements made thereto pursuant to this Section 5.2, shall be of a value which is not substantially less than the value of the Property immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or remain against the Property for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City pursuant to this Section 5.2, provided that if any such lien is established and the City shall first notify or cause to be -10- notified the Authority of the City's intention to do so, the City may in good faith contest any lien filed or established against the Property, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Section 5.3. Public Liability and Property Damage Insurance. The City shall maintain or cause to be maintained throughout the Term of the Lease Agreement, a standard comprehensive general insurance policy or policies in protection of the Authority, City, and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Property. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $3,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum amount of $100,000 (subject to a deductible clause of not to exceed $5,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy in the amount of $3,000,000 covering all such risks. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and such liability insurance may be maintained in whole or in part in the form of self- insurance by the City, subject to the provisions of Section 5.7, or in the form of the participation by the City in a joint powers agency or other program providing pooled insurance. The proceeds of such liability insurance shall be applied by the City toward extinguishment or satisfaction of the liability with respect to which paid. Section 5.4. Fire and Extended Coverage Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, insurance against loss or damage to the improvements constituting a part of the Property by fire and lightning, with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, when required, shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance, and shall include earthquake coverage if such coverage is available at reasonable cost from reputable insurers in the judgment of the City. Such insurance shall be in an amount at least equal to the lesser of (a) one hundred percent (100%) of the replacement cost of all of the insured improvements, or (b) the aggregate principal amount of the outstanding Bonds. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided however, that such insurance may not be maintained by the City in the form of self-insurance. The Net Proceeds of such insurance shall be applied as provided in Section 6.1(a). Section 5.5. Rental Interruption Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term of the Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Property as a result of any of the hazards covered in the insurance required by Section 5.4, in an amount at least equal to the maximum Lease Payments coming due and payable during any future twenty-four (24) month period. Such insurance may be maintained as -11- part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained in the form of,self-insurance. The proceeds of such insurance, if any, shall be paid to the Trustee and deposited in the Revenue Fund, and shall be credited towards the payment of the Lease Payments as the same become due and payable. Section 5.6. Recordation Hereof; Title Insurance. On or before the Closing Date the City shall,at its expense, (a) cause the Site and Facility Lease and this Lease Agreement, or a memorandum hereof or thereof, in each case in form and substance approved by Bond Counsel, to be recorded in the office of the Orange County Recorder, and (b) obtain a CLTA policy of title insurance which insures the City's leasehold estate in the Property in an amount equal to the aggregate principal amount of the Bonds. All Net Proceeds received under said policy shall be deposited with the Trustee in the Redemption Fund and shall be applied to the redemption of Bonds pursuant to Section 4.01(c) of the Indenture. Section 5.7, Net Proceeds of Insurance; Form of Policies. Each policy of insurance maintained pursuant to Sections 5.4,5.5 and 5.6 shall name the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. All required insurance policies shall be provided by a commercial insurer in one of the two highest rating categories by Moody's and S&P (without regard to designations of plus (+) or minus (-)). The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease Agreement. All such policies shall provide that the Trustee shall be given thirty (30) days' notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency or amount of any insurance or self-insurance herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss. The City shall cause to be delivered to the Trustee annually, no later than September 1 in each year, a certificate stating that all of the insurance policies required by this Lease Agreement are in full force and effect and identifying whether any such insurance is then maintained in the form of self-insurance. In the event that any insurance maintained pursuant to Section 5.3 shall be provided in the form of self-insurance, the City shall file with the Trustee annually, within ninety (90) days following the close of each Fiscal Year, a statement of the City risk manager, insurance consultant or actuary identifying the extent of such self-insurance and stating the determination that the City maintains sufficient reserves with respect thereto. In the event that any such insurance shall be provided in the form of self-insurance by the City, the City shall not be obligated to make any payment with respect to any insured event except from such reserves. The results of such review shall be filed with the Trustee. Section 5.8. Installation of Personal Property. The City may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Property. All such items shall remain the sole property of the City, in which neither the Authority nor the Trustee shall have any interest, and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Property resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City from purchasing or leasing items to be installed pursuant to this Section 5.8 under a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Property. -12- Section 5.9. Liens. Neither the City nor the Authority shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Property, other than the respective rights of the Trustee, the Authority and the City as provided herein and Permitted Encumbrances. Except as expressly provided in this Article V, the City and the Authority shall promptly, at their own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Section 5.10. Tax Covenants. (a) Private Activity Bond Limitation. The City shall assure that proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of section 141(c) of the Code. (b) Federal Guarantee Prohibition. The City shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Bonds to be "federally guaranteed" within the meaning of section 149(b) of the Code. (c) Rebate Requirement. The City shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds. (d) No Arbitrage. The City shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Bonds to be "arbitrage bonds" within the meaning of section 148 of the Code. (e) Maintenance of Tax-Exemption. The City shall take all actions necessary to assure the exclusion of interest with respect to the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the Closing Date. Section 5.11. Continuing Disclosure. The City hereby covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of this Lease Agreement, failure of the City to comply with the Continuing Disclosure Certificate shall not constitute an Event of Default hereunder; provided, however, that the Participating Underwriter or any Owner or beneficial owner of the Bonds may take such actions as may be necessary and appropriate to compel performance by the City of its obligations under this Section 5.11, including seeking mandate or specific performance by court order. -13- ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; ABATEMENT OF LEASE PAYMENTS Section 6.1. Application of Net Proceeds. (a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Property by fire or other casualty shall be paid by the City to the Trustee and shall be deposited in the Insurance and Condemnation Fund by the Trustee and applied as set forth in Section 5.08 of the Indenture. (b) From Eminent Domain Award. If the Property or any portion thereof shall be taken permanently or temporarily under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Net Proceeds resulting therefrom shall be deposited in the Insurance and Condemnation Fund and applied as set forth in Section 5.08 of the Indenture. (c) From Title Insurance Award. The Net Proceeds of any title insurance award shall be paid to the Trustee, deposited in the Insurance and Condemnation Fund and applied as set forth in Section 5.07 of the Indenture. Section 6.2. Abatement of Lease Payments. (a) Abatement Due to Damage or Destruction of the Property; Non-Completion. The Lease Payments shall be abated during any period in which by reason of damage to or destruction of the Property (other than by eminent domain which is hereinafter provided for) there is substantial interference with the use and occupancy by the City of the Property or any portion thereof. The amount of such abatement shall be an amount agreed upon by the City and the Authority such that the resulting Lease Payments represent fair consideration for the use and occupancy of the portions of the Property not damaged or destroyed and available for use and possession by the City. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction or the date when the remaining portion of the Property is available for use and possession by the City. In the event of any such damage, destruction or non-completion, this Lease Agreement shall continue in full force and effect and the City waives any right to terminate this Lease Agreement by virtue of any such damage, destruction or non-completion. There shall be no abatement of the Lease Payments to the extent that moneys derived from any person as a result of such damage or destruction are available to pay the amount which would otherwise be abated or if there is any money available in the Revenue Fund or the Reserve Account to pay the amount which would otherwise be abated. (b) Abatement Due to Eminent Domain. If all of the Property shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease Agreement shall cease with respect to the Property as of the day possession shall be so taken. if less than all of the Property shall be taken permanently, or if all of the Property or any part thereof shall be taken temporarily under the power of eminent domain, (a) this Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there shall be a partial abatement of Lease Payments in an amount to be agreed upon by the City and the Authority such that -14- s the resulting Lease Payments for the Property represent fair consideration for the use and occupancy of the remaining usable portion of the Property. -15- ARTICLE VII DISCLAIMER OF WARRANTIES; ACCESS Section 7.1. Disclaimer of Warranties. THE AUTHORITY MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE, DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY OF THE PROPERTY, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROPERTY. IN NO EVENT SHALL THE AUTHORITY AND ITS ASSIGNS BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THE SITE AND FACILITY LEASE, THIS LEASE AGREEMENT OR THE INDENTURE FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR THE CITY'S USE OF THE PROPERTY. Section 7.2. Rights of Access. The City agrees that the Authority and any Authorized Representative of the Authority, and the Authority's successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Property. The City further agrees that the Authority, any Authorized Representative of the Authority, and the Authority's successors or assigns, shall have such rights of access to the Property as may be reasonably necessary to cause the proper maintenance of the Property in the event of failure by the City to perform its obligations hereunder; provided, however, that the Authority's assigns shall not be required to cause such proper maintenance. Section 7.3. Release and Indemnification Covenants. The City shall and hereby agrees to indemnify and save the Authority, the Trustee and their respective officers, agents, successors and assigns, harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Property by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease Agreement, (c) any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Property, (d) any act or negligence of any lessee of the City with respect to the Property, or (e) the performance by the Trustee of its duties hereunder or under the Indenture. No indemnification is made under this Section 7.3 or elsewhere in this Lease Agreement for willful misconduct or negligence under this Lease Agreement by the Authority, the Trustee or any of their respective officers or employees. The indemnification hereunder shall survive removal or resignation of the Trustee, termination of this Lease Agreement or discharge of the Bonds. -16- ARTICLE V1II ASSIGNMENT, LEASING AND AMENDMENT Section 8.1. Assignment by the Authority. Certain rights of the Authority under this Lease Agreement, including the right to receive and enforce payment of the Lease Payments to be made by the City under this Lease Agreement, have been pledged and assigned to the Trustee for the benefit of the Owners of the Bonds pursuant to the Indenture, to which pledge and assignment the City hereby consents. The assignment of this Agreement to the Trustee is solely in its capacity as Trustee under the Indenture and the duties, powers and liabilities of the Trustee in acting hereunder shall be subject to the provisions of the Indenture, including, without limitation, the provisions of Article VIII thereof. Section 8.2. Assignment and Subleasing by the City.. This Lease Agreement may not be assigned by the City. The City may sublease the Property or any portion thereof, subject to, and delivery to the Authority of a certificate as to, all of the following conditions: (a) This Lease Agreement and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City; (b) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) No such sublease by the City shall cause the Property to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) The City shall furnish the Authority and the Trustee with a written opinion of Bond Counsel, stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Bonds to become included in gross income for federal income tax purposes. Section 8.3. Amendment of Lease. (a) Substitution of Site. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute other land (a "Substitute Site") for the Site (the "Former Site"), or a portion thereof, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such substitution: (i) The City shall file with the Authority and the Trustee an amended Exhibit A to the Site and Facility Lease which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site; (ii) The City shall file with the Authority and the Trustee an amended Exhibit A to this Lease Agreement which adds thereto a description of such Substitute Site and deletes therefrom the description of the Former Site; (iii) The City shall certify in writing to the Authority and the Trustee that such Substitute Site serves the purposes of the City, constitutes property that is unencumbered (or the portion of such property to be to substituted is -17- unencumbered), subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of the State; (iv) The City delivers to the Trustee and the Authority evidence that the Substitute Site (or the portions to be to substituted) is of equal or greater value than the Site (or the portions thereof) to be to substituted; (vi) The City shall certify the Substitute Site shall not cause the City to. violate any of its covenants, representations and warranties made herein; (vi) The City shall obtain an amendment to the title insurance policy required pursuant to Section 5.6 hereof which adds thereto a description of the Substitute Site and deletes therefrom the description of the Former Site; (vii) The City shall certify that the Substitute Site is of the same or greater essentiality to the City as was the Former Site; (viii) The City shall certify that the Substitute Site has a useful life equal to or longer than the remaining term of the Bonds; and (ix) The City shall provide notice of such substitution to any rating agency then rating the Bonds. So long as the requirements set forth above are satisfied, any such substitution may be accomplished administratively, as evidenced by the signatures of the City Administrator and the Finance Director, and shall not require separate approval by the City Council. (b) Substitution of Facility. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to substitute a substitute facility or substitute facilities (a "Substitute Facility") for the Facility (the "Former Facility"), or a portion thereof, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such substitution: (i) The City shall file with the Authority and the Trustee an amended Exhibit B to the Site and Facility Lease which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility, if applicable; (ii) The City shall file with the Authority and the Trustee an amended Exhibits B to this Lease Agreement which adds thereto a description of such Substitute Facility and deletes therefrom the description of the Former Facility; (iii) The City shall certify in writing to the Authority and the Trustee that such Substitute Facility serve the purposes of the City, constitutes property that is unencumbered (or the portion of such property to be to substituted is unencumbered), subject to Permitted Encumbrances, and constitutes property which the City is permitted to lease under the laws of the State; (iv) The City delivers to the Trustee and the Authority evidence that the Substitute Facility (or the portions to be to substituted) is of equal or greater value than the property (or the portions thereof) to be to substituted; -18- (v) The City shall certify the Substitute Facility shall not cause the City to violate any of its covenants, representations and warranties made herein; (vi) The City shall certify that the Substitute Facility is of the same or greater essentiality to the City as was the Former Facility; (vii) The City shall certify that the Substitute Facility has a useful life equal to or longer than the remaining term of the Bonds; and (viii) The City shall provide notice of such substitution to any rating agency then rating the Bonds. So long as the requirements set forth above are satisfied, any such substitution may be accomplished administratively and shall not require separate approval by the City Council. (c) Release of Site. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Site, provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release: (i) The City shall file with the Authority and the Trustee an amended Exhibit A to the Site and Facility Lease which describes the Site, as revised by such release; (ii) The City shall file with the Authority and the Trustee an amended Exhibit A to this Lease Agreement which describes the Site, as revised by such release; (iii) The City delivers to the Trustee and the Authority evidence that the Site, as revised by such release, together with the Facility, has a total value at least equal to 1.1 times the principal amount of the Bonds then outstanding; (iv) The City shall obtain an amendment to the title insurance policy required pursuant to Section 5.6 hereof which describes the Site, as revised by such release; and (v) The City shall provide notice of such release to any rating agency then rating the Bonds. So long as the requirements set forth above are satisfied, any such release may be accomplished administratively and shall not require separate approval by the City`Council. (d) Release of Facility. The City shall have, and is hereby granted, the option at any time and from time to time during the Term of the Lease Agreement to release any portion of the Facility provided that the City shall satisfy all of the following requirements which are hereby declared to be conditions precedent to such release: (i) The City shall file with the Authority and the Trustee an amended Exhibit B to the Site and Facility Lease which describes the Facility, as revised by such release; (ii) The City shall file with the Authority and the Trustee an amended Exhibit B to this Lease Agreement which describes the Facility, as revised by such release; -19- (iii) The City delivers to the Trustee and the Authority evidence that the Facility, as revised by such release, together with the Site, has a total value at least equal to 1.1 times the principal amount of the Bonds then outstanding; and (iv) The City shall provide notice of such release to any rating agency then rating the Bonds. So long as the requirements set forth above are satisfied, any such release may be accomplished administratively and shall not require separate approval by the City Council. (e) Generally. The Authority and the City may at any time amend or modify any of the provisions of this Lease Agreement, but only (a) with the prior written consents of the Owners of a majority in aggregate principal amount of the Outstanding Bonds, or (b) without the consent of any of the Bond Owners, but only if such amendment or modification is for any one or more of the following purposes: (i) to add to the covenants and agreements of the City contained in this Lease Agreement, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or power herein reserved to or conferred upon the City; (ii) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained herein, or in any other respect whatsoever as the Authority and the City may deem necessary or desirable, provided that, in the opinion of Bond Counsel, such modifications or amendments will not materially adversely affect the interests of the Owners of the Bonds; or (iii) to amend any provision thereof relating to the Tax Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exclusion from gross income of interest on the Bonds under the Code, in the opinion of Bond Counsel. -20- ARTICLE IX EVENTS OF DEFAULT; REMEDIES Section 9.1. Events of Default Defined. The following shall be "Events of Default" under this Lease Agreement: (a) Failure by the City to pay any Lease Payment required to be paid hereunder at the time specified herein. (b) Failure by the City to make any Additional Payment required hereunder and the continuation of such failure for a period of thirty (30) days. (c) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b), for a period of sixty (60) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority or the Trustee; provided, however, that if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such sixty (60) day period, such failure shall not constitute an Event of Default if the City shall commence to cure such failure within such sixty (60) day period and thereafter diligently and in good faith shall cure such failure in a reasonable period of time. (d) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of applicable federal bankruptcy law, or under any similar acts which may hereafter be enacted. Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section 9.1 shall have happened and be continuing, it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement; provided, however, that notwithstanding anything to the contrary herein or in the Indenture, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable or to terminate this Lease Agreement or to cause the fee interest or the leasehold interest of the City in the Property to be sold, assigned or otherwise alienated. Each and every covenant hereof to be kept and performed by the City is expressly made a condition and, upon the breach thereof, the Authority may exercise any and all rights of entry and re-entry upon the Property. The City hereby irrevocably consents to the Authority's repossession of the Property if such an Event of Default shall occur and consents to the Authority's re-letting of the Property for the account of the City. In the event of such default and notwithstanding any re-entry by the Authority, the City shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained and, in any event, such rent and/or damages shall be payable to the Authority at the time and in the manner as herein provided, to wit: -21- (a) The City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse the Authority for any deficiency arising out of the re-leasing of the Property, or, in the event the Authority is unable to re-lease the Property, then for the full amount of all Lease Payments to the end of the Term of the Lease Agreement, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Property or the exercise of any other remedy by the Authority. (b) The City hereby irrevocably appoints the Authority as the agent and attorney-in- fact of the City to enter upon and re-lease the Property in the event of default by the City in the performance of any covenants herein contained to be performed by the City and to remove all personal property whatsoever situated upon the Property to place such property in storage or other suitable place in Orange County, for the account of and at the expense of the City, and the City hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Property and the removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. (c) The City hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Property as herein provided and all claims for damages that may result from the destruction of or injury to the Property and all claims for damages to or loss of any property belonging to the City that may be in or upon the Property. (d) The City agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of the Authority to re-lease the Property in the event of such re- entry without effecting a surrender of this Lease Agreement, and further agrees that no acts of the Authority in effecting such re-leasing shall constitute a surrender or termination of this Lease Agreement irrespective of the term for which such re-leasing is made or the terms and conditions of such re-leasing, or otherwise. Section 9.3. Limitation on Remedies. Notwithstanding the foregoing provisions of Section 9.2, neither the Authority nor the Trustee shall exercise any remedies against the Property to the extent such remedies would generate funds which are not available to satisfy the obligations of this Lease Agreement or the Indenture. Section 9.4. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative and shall, except as herein expressly provided to the contrary, be in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No delay or omission 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 thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law. Section 9.5. Agreement to Pay Attorneys' Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the -22- nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party the reasonable fees of such attorneys and such other expenses so incurred by the nondefaulting party. Section 9.6. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Section 9.7. Trustee and Bond Owners to Exercise Rights. Such rights and remedies as are given to the Authority under this Article IX have been assigned by the Authority to the Trustee under the Indenture, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee and the Owners of the Bonds as provided in the Indenture. The Trustee shall be considered a third party beneficiary for enforcing its rights under this Lease Agreement. -23- ARTICLE X MISCELLANEOUS Section 10.1. Notices. All written notices to be given under this Lease Agreement shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, confirmed by Phone, (b) upon receipt after deposit in the United States mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. If to the Authority: Huntington Beach Public Financing Authority 2000 Main Street Huntington Beach, CA 92648 Attention: Treasurer Phone: (714) 536-5225 Fax: (714)374-1571 If to the City: City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Attention: Finance Director Phone: (714) 536-5225 Fax: (714)374-1571 If to the Trustee: Attention: Corporate Trust Services Phone: Fax: The Authority, the City or the Trustee may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. Section 10.2. Binding Effect. This Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 10.3. Severabilitv. In the event any provision of this Lease Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 10.4. Net-net-net Lease. This Lease Agreement shall be deemed and construed to be a "net-net-net lease" and the City hereby agrees that the Lease Payments shall be an absolute net return to the Authority, free and clear of any expenses, charges or set-offs whatsoever. Section 10.5. Further Assurances and Corrective Instruments. The Authority and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further -24- instruments as may reasonably be required for correcting any inadequate or incorrect description of the Property hereby leased or intended so to be or for carrying out the expressed intention of this Lease Agreement. Section 10.6. Execution in Counterparts. This Lease 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 10.7. A112licable Law. This Lease Agreement shall be governed by and construed in accordance with the laws of the State. Section 10.8. Authorized Representatives. Whenever under the provisions of this Lease Agreement the approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request.of the other, such approval or such request shall be given for the Authority by an Authorized Representative of the Authority and for the City by an Authorized Representative of the City, and any party hereto shall be authorized to rely upon any such approval or request. Section 10.9. Waiver of Personal Liability. All liabilities under this Lease Agreement on the part of the City are solely liabilities of the City and the Authority hereby releases each and every member, director, officer, employee and agent of the City of and from any personal or individual liability under this Lease Agreement. No member, director, officer, employee or agent of the City shall at any time or under any circumstances be individually or personally liable under this Lease Agreement for anything done or omitted to be done by the City hereunder. Section 10.10. Limitation of Rights to Parties and Bond Owners. Nothing in this Lease Agreement expressed or implied is intended or shall be construed to give to any person other than the Authority, the Trustee, the City, the Authority and the Owners of the Bonds, any legal or equitable right, remedy or claim under or in respect of this Lease Agreement or any covenant, condition or provision therein or herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Authority, the Trustee, the City, the Authority and the Owners of the Bond. Section 10.11. Captions. The captions or headings in this Lease Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease Agreement. -25- IN WITNESS WHEREOF, the Authority has caused this Lease Agreement to be executed in its name by its duly authorized officers; and the City has caused this Lease Agreement to be executed in its name by its duly authorized officers, as of the date first above written. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary CITY OF HUNTINGTON BEACH, as Lessee By Name Title Attest: Joan L. Flynn City Clerk -26- [NOTARY ACKNOWLEDGMENTS TO BE ATTACHED] EXHIBIT A DESCRIPTION OF THE SITE The land referred to herein is situated in the City of Huntington Beach, County of Orange, State of California, and is described as follows: [LEGAL DESCRIPTION TO COME] APNs: 111-042-41, 111-050-38& 111-032-35 Exhibit A EXHIBIT B DESCRIPTION OF THE FACILITY The Donald W. Kiser Corporation Yard is a 14.3 acre site that consists of a main building, four large warehouse type structures, equipment and materials storage and office space. The two-story 7,200 square foot administration building was constructed in 1972 and is used for centralized customer service operations and office space. The City Yard buildings provide operations bases for a variety of maintenance services. Building B is approximately 26,000 square feet and was also constructed in 1972. Building B houses the fleet maintenance facility that includes mechanics bays and parts storage for servicing vehicles, large and small equipment and fire engines. Building C, constructed in 1973, is approximately 19,000 square feet. The building holds materials and equipment used in traffic signal, signs and markings maintenance. Building C also includes facility maintenance small equipment such as carpentry, locksmith, plumbing and electrical tools. Building D is approximately 7,500 square feet and was built in 1983. It is used for mechanical services to police vehicles, motorcycles, and radio equipment. This facility includes mechanics bays and parts storage. Building E, approximately 14,600 square feet is a storage warehouse for parts, supplies and equipment. Building E was finished in 1988. The lot includes several small sheds as well as storage for sand, gravel and loose construction materials. A fuel island contains four gasoline, two diesel, and one propane pumps that service all city owned vehicles and equipment. Exhibit B EXHIBIT C SCHEDULE OF LEASE PAYMENTS Lease Total Payment Principal Interest Lease Date Component Component Payment 8/15/08 2/15/09 8/15/09 2/15/10 8/15/10 2/15/11 8/15/11 2/15/12 8/15/12 2/15/13 8/15/13 2/15/14 8/15/14 2/15/15 8/15/15 2/15/16 8/15/16 2/15/17 8/15/17 2/15/18 8/15/18 2/15/19 8/15/19 2/15/20 8/15/20 2/15/21 8/15/21 2/15/22 8/15/22 2/15/23 8/15/23 2/15/24 8/15/24 2/15/25 8/15/25 2/15/26 8/15/26 2/15/27 8/15/27 2/15/28 8/15/28 2/15/29 8/15/29 2/15/30 8/15/30 Exhibit C Quint &Thimmig LLP 01/25/08 01/31/08 AFTER RECORDATION RETURN TO: Quint & Thimmig LLP 575 Market Street, Suite 3600 San Francisco, CA 94105-2874 Attention: Brian D. Quint, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11929 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. MEMORANDUM OF LEASE AGREEMENT This MEMORANDUM OF LEASE AGREEMENT (this "Memorandum of Lease Agreement"), is entered into as of April 1, 2008, by and between the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority"), and the CITY OF HUNTINGTON BEACH, a municipal corporation and chartered city organized and existing under and by virtue of the laws of the State of California, as lessee (the "City"), who agree•as follows: Section 1. The Lease. The City leases from the Authority and the Authority leases to the City, certain real property described in paragraph 2 hereof, and the improvements situated and to be situated upon said real property, upon the terms and conditions, and for the term, more fully set forth in the Lease Agreement, dated as of April 1, 2008, by and between the Authority, as lessor, and the City, as lessee (the "Lease Agreement"), all of the provisions of which are hereby incorporated into this Memorandum of Lease Agreement by reference. Section 2. Leased Premises; Term. The Authority leases, lets and demises unto the City and the City leases, hires and takes from the Authority, those certain parcels of real property situated in Orange County, State of California, more particularly described in Exhibit A attached hereto and made a part hereof (collectively, the "Site"), and certain existing facilities on the Site, more particularly described in Exhibit B attached hereto and made a part hereof (the "Facility" and, with the Site, the "Property"). The Lease Agreement is for a term commencing on the date of recordation and ending on September 1, 2024, or such earlier date on which the Lease Payments (as defined in the Lease Agreement) are paid in full or provision has been made for such payment in accordance with the Lease Agreement. Section 3. Assignment of Lessor's Rights Under Lease Agreement. Pursuant to the Indenture of Trust, dated as of April 1, 2008, by and between the Authority and , as trustee (the "Trustee"), the Authority has agreed to assign and transfer to the Trustee, certain of its rights under the Lease Agreement and in consideration of such assignment, the Authority has agreed to issue and the Trustee has agreed to authenticate and deliver $ aggregate principal amount of the Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A. Section 4. Provisions Binding on Successors and Assigns. Subject to the provisions of the Lease Agreement relating to assignment and subletting, the Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 5. Purpose of Memorandum. This Memorandum of Lease Agreement is prepared for the purpose of recordation and it in no way modifies the provisions of the Lease Agreement. Section 6. Execution. This Memorandum of Lease 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. -2- IN WITNESS WHEREOF, the Authority has caused this Memorandum of Lease Agreement to be executed in its corporate name by its duly authorized officers; and the City has caused this Memorandum of Lease Agreement to be executed in its name by its duly authorized officers, as of the date first above written. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary CITY OF HUNTINGTON BEACH, as Lessee By Name Title Attest: Joan L. Flynn City Clerk -3- [NOTARY ACKNOWLEDGMENTS TO BE ATTACHED] EXHIBIT A DESCRIPTION OF THE SITE The land referred to herein is situated in the City of Huntington Beach, County of Orange, State of California, and is described as follows: [LEGAL DESCRIPTION TO COME] APNs: 111-042-41, 111-050-38& 111-032-35 Exhibit A EXHIBIT B DESCRIPTION OF THE FACILITY The Donald W. Kiser Corporation Yard is a 14.3 acre site that consists of a main building, four large warehouse type structures, equipment and materials storage and office space. The two-story 7,200 square foot administration building was constructed in 1972 and is used for centralized customer service operations and office space. The City Yard buildings provide operations bases for a variety of maintenance services. Building B is approximately 26,000 square feet and was also constructed in 1972. Building B houses the fleet maintenance facility that includes mechanics bays and parts storage for servicing vehicles, large and small equipment and fire engines. Building C, constructed in 1973, is approximately 19,000 square feet. The building holds materials and equipment used in traffic signal, signs and markings maintenance. Building C also includes facility maintenance small equipment such as carpentry, locksmith, plumbing and electrical tools. Building D is approximately 7,500 square feet and was built in 1983. It is used for mechanical services to police vehicles, motorcycles, and radio equipment. This facility includes mechanics bays and parts storage. Building E, approximately 14,600 square feet is a storage warehouse for parts, supplies and equipment. Building E was finished in 1988. The lot includes several small sheds as well as storage for sand, gravel and loose construction materials. A fuel island contains four gasoline, two diesel, and one propane pumps that service all city owned vehicles and equipment. Exhibit B Quint &Thimmig LLP 01/25/08 01/31/08 AFTER RECORDATION RETURN TO: Quint & Thimmig LLP 575 Market Street, Suite 3600 San Francisco, California 94105-2874 Attention: Brian D. Quint, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11922 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 6103 OF THE CALIFORNIA GOVERNMENT CODE. MEMORANDUM OF ASSIGNMENT OF LEASE THIS MEMORANDUM OF ASSIGNMENT OF LEASE (this "Memorandum"), made and entered into as of April 1, 2008, is by and between the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority"), and , a national banking association organized and existing under and by virtue of the laws of the United States of America, as trustee (the "Trustee"), WITNE SSE TH : In the joint and mutual exercise of their powers, in consideration of the mutual covenants herein contained, and for other valuable consideration, the parties hereto recite and agree as follows: Section 1. Recitals. (a) The Authority and the City of Huntington Beach (the "City") have entered into that certain Lease Agreement, dated as of April 1, 2008 (the Lease Agreement"), evidenced by a memorandum recorded concurrently herewith, under which the Authority has leased to the City certain parcels of real property situated in Orange County, State of California, more particularly described in Exhibit A attached hereto and made a part hereof (collectively, the "Site"), certain existing facilities on the Site, more particularly described in Exhibit B attached hereto and made a part hereof (the "Facility" and, with the Site, the "Property"). (b) Under the Lease Agreement, the Authority has agreed to lease the Property to the City in the manner and on the terms set forth therein, which terms include, without limitation, the obligation of the City to pay Lease Payments (as defined in the Lease Agreement) to the Authority, as the rental for the lease of the Property. (c) Under the Lease Agreement and under an Indenture of Trust, dated as of April 1, 2008, by and between the Authority and the Trustee (the "Indenture"), the Authority is 0800&04 required to cause to be deposited certain sums of money to be credited, held and applied in accordance therewith. (d) For the purpose of obtaining such moneys, the Authority has assigned and transferred to the Trustee, under the Indenture, certain of its rights under the Lease Agreement for the purpose of securing the bonds of the Authority designated the "Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A," issued under the Indenture in the aggregate principal amount of. $ (the 'Bonds"). (e) The Authority has requested the Trustee to enter into this Memorandum for the purpose of memorializing such assignment of record. Section 2. Assignment. The Authority has transferred, assigned and set over to the Trustee, pursuant to the terms of the Indenture, and does hereby assign for the benefit of the Owners of Bonds, (a) all of the rights of the Authority in the Lease Agreement (other than the rights of the Authority under Sections 4.7,7.3 and 9.5 thereof), including but not limited to the right to receive and collect all of the Lease Payments (including prepayments thereof) from the City under the Lease Agreement, and the right to exercise such rights and remedies conferred on the Authority pursuant to the Lease Agreement as may be necessary or convenient to enforce payment of the Lease Payments and prepayments thereof, and (b) all of the rights of the Authority in the Site and Facility Lease. All rights assigned by the Authority shall be administered by the Trustee in accordance with the provisions of the Indenture and for the benefit of the owners of the Bonds. Section 3. Acceptance. The Trustee hereby accepts the assignments made herein for the purpose of providing for the payments due pursuant to the Indenture to, and the rights under the Lease Agreement and Indenture of, the owners of the Bonds delivered pursuant to the Indenture, all subject to the provisions of the Indenture. Section 4. Conditions. This Memorandum shall confer no obligations or impose no duties upon the Trustee beyond those expressly provided for in the Indenture. Section 5. Counterpart Signatures. This Memorandum may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same agreement. -2- IN WITNESS WHEREOF, the parties have executed this Memorandum by their officers thereunto duly authorized as of the day and year first written above. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary as Trustee By Authorized Signatory -3- NOTARY ACKNOWLEDGMENT FORMS TO BE ATTACHED EXHIBIT A DESCRIPTION OF THE SITE The land referred to herein is situated in the City of Huntington Beach, County of Orange, State of California, and is described as follows: [LEGAL DESCRIPTION TO COME] APNs: 111-042-41, 111-050-38 & 111-032-35 Exhibit A Page 1 EXHIBIT B DESCRIPTION OF THE FACILITY The Donald W. Kiser Corporation Yard is a 14.3 acre site that consists of a main building, four large warehouse type structures, equipment and materials storage and office space. The two-story 7,200 square foot administration building was constructed in 1972 and is used for centralized customer service operations and office space. The City Yard buildings provide operations bases for a variety of maintenance services. Building B is approximately 26,000 square feet and was also constructed in 1972. Building B houses the fleet maintenance facility that includes mechanics bays and parts storage for servicing vehicles, large and small equipment and fire engines. Building C, constructed in 1973, is approximately 19,000 square feet. The building holds materials and equipment used in traffic signal, signs and markings maintenance. Building C also includes facility maintenance small equipment such as carpentry, locksmith, plumbing and electrical tools. Building D is approximately 7,500 square feet and was built in 1983. It is used for mechanical services to police vehicles, motorcycles, and radio equipment. This facility includes mechanics bays and parts storage. Building E, approximately 14,600 square feet is a storage warehouse for parts, supplies and equipment. Building E was finished in 1988. The lot includes several small sheds as well as storage for sand, gravel and loose construction materials. A fuel island contains four gasoline, two diesel, and one propane pumps that service all city owned vehicles and equipment. Exhibit B Quint &Thinunig LLP 01/25/08 01/31/08 ESCROW DEPOSIT AND TRUST AGREEMENT by and among the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, the CITY OF HUNTINGTON BEACH and U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank Dated April 6, 2008 Relating to the Refunding of the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) 08008.04 ESCROW DEPOSIT AND TRUST AGREEMENT This ESCROW DEPOSIT AND TRUST AGREEMENT is dated this 6th day of April, 2008, by and among the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority"), the CITY OF HUNTINGTON BEACH, a municipal corporation and chartered city duly organized and existing under the laws of the State of California (the "City"), and U.S. BANK NATIONAL ASSOCIATION, a national banking association duly organized and existing under the laws of the United States of America, as escrow bank and as 1997 Trustee (as defined herein)(the "Escrow Bank"); WITNESSETH : WHEREAS, the Authority has heretofore issued its $8,070,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project), of which $2,945,000 remains outstanding (the "1997 Bonds"), the proceeds of which were used to finance the costs of the acquisition, construction, installation and equipping of certain public capital improvements (the "1997 Project"); WHEREAS, the 1997 Bonds were issued pursuant to the terms of a trust indenture, dated as May 1, 1997 (the "1997 Indenture"),by and between the Authority and First Trust of California, National Association, since succeeded by U.S. Bank National Association, as trustee thereunder (the "1997 Trustee"); WHEREAS, in order to provide for the repayment of the 1997 Bonds, the Authority leased certain real property and improvements (the "1997 Property") to the City pursuant to a lease agreement, dated as of May 1, 1997 (the "1997 Lease Agreement"), under which the City agreed to make lease payments to the Authority (the "1997 Lease Payments") from moneys in its General Fund and the City has budgeted and appropriated sufficient amounts in each year to pay the full amount of principal of and interest on the 1997 Bonds; WHEREAS, the City has determined that, as a result of favorable financial market conditions and for other reasons, it is in the best interests of the City at this time to refinance the City's obligation to make the 1997 Lease Payments and, as a result thereof, to provide for the redemption of all outstanding 1997 Bonds in full on May 10, 2008, at the redemption price equal to 101% of the principal amount thereof, plus accrued interest, and to that end, the City proposes to enter into a new lease agreement, dated as of April 1, 2008, by and between the Authority and the City; WHEREAS, the Authority and the City propose to provide for the payments described above and to appoint the Escrow Bank as their agent for the purpose of applying said deposit to provide for the payment of the 1997 Lease Payments in accordance with the instructions provided by this Escrow Deposit and Trust Agreement and of applying said 1997 Lease Payments allocable to the 1997 Bonds to the payment of the principal of and interest on the 1997 Bonds and the Escrow Bank desires to accept said appointment; WHEREAS, the Authority and the City wish to provide for the payment described above and to enter into this Escrow Deposit and Trust Agreement for the purpose of providing the terms and conditions for the deposit and application of amounts so deposited; WHEREAS, the Authority has agreed to issue its $ Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds"), pursuant to the terms of an indenture, dated as April 1, 2008 (the "Indenture"), by and between the Authority and U.S. Bank National Association, as trustee thereunder (the "Trustee"), and to apply a portion of the proceeds thereof to accomplish such refinancing; and WHEREAS, the Escrow Bank has full powers to act with respect to the escrow and trust created herein and to perform the duties and obligations to be undertaken pursuant to this Escrow Deposit and Trust Agreement. NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration, the parties hereto do hereby agree as follows: Section 1. Definitions. Capitalized terms used, but not otherwise defined, herein, shall have the meanings ascribed thereto in the 1997 Indenture. Section 2. ARpointment of Escrow Bank. The Authority and the City hereby appoint the Escrow Bank as escrow bank for all purposes of this Escrow Deposit and Trust Agreement and in accordance with the terms and provisions of this Escrow Deposit and Trust Agreement, and the Escrow Bank hereby accepts such appointment. Section 3. Establishment of Escrow Fund. There is hereby created by the Authority and the City with, and to be held by, the Escrow Bank as security for the payment of the 1997 Bonds as hereinafter set forth, an irrevocable escrow to be maintained in trust by the Escrow Bank on behalf of the Authority and the City and for the benefit of the owners of the 1997 Bonds, said escrow to be designated the "Escrow Fund." All moneys and securities (the "Escrow Securities") deposited in the Escrow Fund shall be held as a special fund for the payment of the principal and interest with respect to the 1997 Bonds in accordance with the provisions of this Escrow Deposit and Trust Agreement. If at any time the Escrow Bank shall receive actual knowledge that the moneys and Escrow Securities in the Escrow Fund will not be sufficient to make any payment required by Section 5 hereof, the Escrow Bank shall notify the City of such fact and the City shall immediately cure such deficiency. The Escrow Bank may rely upon the conclusion of independent certified public accountants, as contained in its opinion and accompanying schedules (the "Report") dated April 6, 2008, that the Federal Securities listed on Exhibit A mature and bear interest payable in such amounts and at such times as, together with cash on deposit in the Escrow Fund, will be sufficient to redeem the outstanding 1997 Bonds in full on May 10, 2008, at a redemption price equal to 101% of the principal amount thereof, plus accrued interest. Section 4. Deposit into Escrow Fund; Investment of Amounts. (a) Concurrently with delivery of the Bonds, the Authority and the City shall cause to be transferred to the Escrow Bank for deposit into the Escrow Fund the amount of $ Jn immediately available funds, derived as follows: (i) $ from the proceeds of the sale of the Bonds; (ii) $ derived from the revenue fund held by the 1997 Trustee with respect to the 1997 Bonds (the "1997 Revenue Fund"); and -2- (iii) $ from amounts on deposit in the reserve account established under the 1997 Indenture (the "1997 Reserve Fund"). (b) The Escrow Bank shall invest $__ _ of the moneys deposited into the Escrow Fund pursuant to the preceding paragraph in the Escrow Securities set forth in Exhibit A attached hereto and by this reference incorporated herein and shall hold the remaining amount ($_ ) in cash, uninvested. The Escrow Securities and cash shall be deposited with and held by the Escrow Bank in the Escrow Fund solely for the uses and purposes set forth herein. The Escrow Bank shall not be liable or responsible for any loss resulting from its full compliance with the provisions of this Escrow Deposit and Trust Agreement. Section 5. Instructions as to A42plication of Deposit. (a) The total amount of Escrow Securities and uninvested moneys deposited in the Escrow Fund pursuant to Section 4 shall be applied by the Escrow Bank for the sole purpose of paying the principal of and interest on the 1997 Bonds as the same shall become due and payable, all at the times and in the amounts set forth in Exhibit B attached hereto and by this reference incorporated herein. (b) The Authority and the City hereby instruct the Escrow Bank, in its capacity as 1997 Trustee, and the Escrow Bank, as 1997 Trustee, hereby agrees to give notice of redemption of the 1997 Bonds, such notice of redemption to be given timely for redemption of such 1997 Bonds on the applicable redemption date, in accordance with the applicable provisions of the 1997 Indenture, and to cause the redemption of such 1997 Bonds on the applicable redemption date, as set forth in Exhibit B attached hereto and by this reference incorporated herein. Section 6. Investment of Any Remaining Moneys. The Escrow Bank shall invest and reinvest the proceeds received from any of the Escrow Securities and the cash originally deposited into the Escrow Fund, for a period ending not later than the next succeeding interest payment date with respect to the 1997 Bonds, in Escrow Securities as directed in writing by the City; provided, however, that such written directions of the City shall be accompanied by a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Escrow Securities then to be so deposited in the Escrow Fund, together with the Escrow Securities then on deposit in the Escrow Fund, together with the interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 5 hereof. In the event that the City shall fail to file any such written directions with the Escrow Bank concerning the reinvestment of any such proceeds, such proceeds shall be held uninvested by the Escrow Bank. Any interest income resulting from investment or reinvestment of moneys pursuant to this Section 6 and not required for the purposes set forth in Section 5, as indicated by such verification, and after payment of any amounts then owed to the Escrow Bank, shall be paid to the City promptly upon the receipt of such interest income by the Escrow Bank. Any amounts remaining on deposit in the Escrow Fund after the final payment of all 1997 Bonds in accordance with this Escrow Deposit and Trust Agreement, shall be transferred by the Escrow Bank to the Trustee for deposit in the Interest Account created under the Indenture and used for the purposes of such fund. Section 7. Substitution or Withdrawal of Escrow Securities, The City may, at any time, direct the Escrow Bank in writing to substitute Escrow Securities for any or all of the -3- Escrow Securities then deposited in the Escrow Fund, or to withdraw and transfer to the City any portion of the Escrow Securities then deposited in the Escrow Fund, provided that any such direction and substitution or withdrawal shall be simultaneous and shall be accompanied by a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Escrow Securities then to be so deposited in the Escrow Fund together with interest to be derived therefrom, or in the case of withdrawal, the Escrow Securities to be remaining in the Escrow Fund following such withdrawal together with the interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 5 hereof. In the event that, following any such substitution of Escrow Securities pursuant to this Section 7, there is an amount of moneys or Escrow Securities in excess of an amount sufficient to make the payments required by Section 5 hereof, as indicated by such verification, such excess shall be invested by the Escrow Bank as directed in Section 6 hereof. The Escrow Bank shall have no responsibility or obligation to notify or obtain the consent of any rating agency or insurer to (i) the disbursement of any surplus amounts hereunder, (ii) the modification or amendment of this Escrow Deposit and Trust Agreement, or (iii) the substitution of collateral or securities. Section 8. Application of 1997 Bond Funds. On the date of original delivery of the Bonds and the deposit of a portion of the proceeds thereof in the Escrow Fund pursuant to Section 4, the Escrow Bank, as 1997 Trustee, is hereby directed to (a) withdraw all amounts on deposit in the 1997 Revenue Fund ($_ ) and transfer such sum to the Escrow Fund, and (b) withdraw all amounts on deposit in the 1997 Reserve Fund ($ ) and transfer such sum to the Escrow Fund. Any amounts remaining on deposit in any fund or account established under the 1997 Indenture for the 1997 Bonds, including any investment earnings received after the date of original delivery of the Bonds, shall be transferred by the Escrow Bank to the Trustee for deposit in the Interest Account created under the Indenture and used for the purposes of such fund. Section 9. Application of Certain Terms of 1997 Indenture. All of the terms of the 1997 Indenture relating to the making of payments of principal and interest with respect to the 1997 Bonds are incorporated in this Escrow Deposit and Trust Agreement as if set forth in full herein. The provisions of the 1997 Indenture relating to the limitations from liability and protections afforded the 1997 Trustee and the resignation and removal of the 1997 Trustee are also incorporated in this Escrow Deposit and Trust Agreement as if set forth in full herein and shall be the procedure to be followed with respect to any resignation or removal of the Escrow Bank hereunder. Section 10. Compensation to Escrow Bank. The City shall pay the Escrow Bank full compensation for its duties under this Escrow Deposit and Trust Agreement, including out-of-pocket costs such as publication costs, prepayment or redemption expenses, legal fees and other costs and expenses relating hereto and, in addition, fees, costs and expenses relating to the purchase of any Escrow Securities after the date hereof. Under no circumstances shall amounts deposited in the Escrow Fund be deemed to be available for said purposes. Section 11. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no obligation to make any payment or disbursement of any type or incur any financial liability in the performance of its duties under this Escrow Deposit and Trust Agreement unless the City shall have deposited sufficient funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in acting upon the written instructions of the City or -4- its agents relating to any matter or action as Escrow Bank under this Escrow Deposit and Trust Agreement. 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 Deposit and Trust Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or any securities deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of such securities or the proceeds thereof, the sufficiency of the securities or any uninvested moneys held hereunder to accomplish the purposes set forth in Section 5 hereof, or any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Escrow Deposit and Trust 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 statement of the City, and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representations as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the purposes set forth in Section 5 hereof or to the validity of this Escrow Deposit and Trust Agreement as to the City or the Authority and, except as otherwise provided herein, the Escrow Bank shall incur no liability in respect thereof. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Deposit and Trust 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 Deposit and Trust Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the City, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of 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 Deposit and Trust Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel) may be deemed to be conclusively established by a written certification of the City. The City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated), to the extent permitted by law, to indemnify, protect, save and hold harmless the Escrow Bank and its respective successors, assigns, agents and servants from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, at any time, the Escrow Bank (whether or not also indemnified against by any other person under any other agreement or instrument) and in any way relating to or arising out of the execution and delivery of this Escrow Deposit and Trust Agreement, the establishment of the Escrow Fund, the retention of the moneys therein and any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Escrow Deposit and Trust Agreement, or as may arise by reason of any act, omission or error of the Escrow Bank made in good faith in the conduct of its duties; provided, however, that the City shall not be required to indemnify the Escrow Bank against its own negligence or misconduct. The indemnities contained in this Section 11 shall survive the termination of this Escrow Deposit and Trust Agreement or the resignation or removal of the Escrow Bank. Section 12. Amendment. This Escrow Deposit and Trust Agreement may be modified or amended at any time by a supplemental agreement which shall become -5- effective when the written consents of the owners of one hundred percent (100%) in aggregate principal amount of the 1997 Bonds shall have been filed with the Escrow Bank. This Escrow Deposit and Trust Agreement may be modified or amended at any time by a supplemental agreement, without the consent of any such owners,but only (1) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any right or power herein or therein reserved to the City, (2) to cure, correct or supplement any ambiguous or defective provision contained herein, (3) in regard to questions arising' hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable and which, in the opinion of counsel, shall not materially adversely affect the interests of the owners of the 1997 Bonds or the Bonds, and that such amendment will not cause interest on the 1997 Bonds or the Bonds to become subject to federal income taxation. In connection with any contemplated amendment or revocation of this Escrow Deposit and Trust Agreement, prior written notice thereof and draft copies of the applicable legal documents shall be provided by the City to each rating agency then rating the 1997 Bonds. Section 13. Severability. If any section, paragraph, sentence, clause or provision of this Escrow Deposit and Trust Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence clause or provision shall not affect any of the remaining provisions of this Escrow Deposit and Trust Agreement. Notice of any such invalidity or unenforceability shall be provided to each rating agency then rating the 1997 Bonds. Section 14. Notice of Escrow Bank, City and Authority. Any notice to or demand upon the Escrow Bank may be served and presented, and such demand may be made, at the Principal Corporate Trust Office of the Escrow Bank as specified by the Escrow Bank as 1997 Trustee in accordance with the provisions of the 1997 Indenture. Any notice to or demand upon the City and the Authority, respectively, shall be deemed to have been sufficiently given or served for all purposes by being mailed by first class mail, and deposited, postage prepaid, in a post office letter box, addressed to such party as provided in the 1997 Lease Agreement (or such other address as may have been filed in writing by the City or the Authority with the Escrow Bank). Section 15. Merger or Consolidation of Escrow Bank. 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, provided such company shall be eligible to act as trustee under the 1997 Indenture, shall be the successor hereunder to the Escrow Bank without the execution or filing of any paper or any further act. -6- IN WITNESS WHEREOF, the Authority, the City and the Escrow Bank have each caused this Escrow Deposit and Trust Agreement to be executed by their duly authorized officers all as of the date first above written. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary CITY OF HUNTINGTON BEACH, as Lessee By Name Title Attest: Joan L. Flynn City Clerk U.S. BANK NATIONAL ASSOCIATION, as Escrow Bank By Martin Meza Assistant Vice President -7- EXHIBIT A SCHEDULE OF ESCROW SECURITIES Security Maturity Principal Rate Price Cost Accrued Total Cost Exhibit A EXHIBIT B PRINCIPAL PAYMENT AND REDEMPTION SCHEDULE OF 1997 BONDS Redemption Maturing Redeemed Redemption Total Date Principal Principal Interest Premium Payment 5/10/08 — $2,945,000 $29,450.00 Exhibit B Quint &Thimmig LLP 01/25/08 01/31/08 ESCROW DEPOSIT AND TRUST AGREEMENT by and among the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, the CITY OF HUNTINGTON BEACH and THE BANK OF NEW YORK TRUST COMPANY, N.A., as Escrow Bank Dated April 6, 2008 Relating to the Refunding of the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project) 08008.04 ESCROW DEPOSIT AND TRUST AGREEMENT This ESCROW DEPOSIT AND TRUST AGREEMENT is dated this 6th day of April, 2008, by and among the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under and by virtue of the laws of the State of California (the "Authority"), the CITY OF HUNTINGTON BEACH, a municipal corporation and chartered city duly organized and existing under the laws of the State of California (the "City"), and THE BANK OF NEW YORK TRUST COMPANY, N.A., a national banking association duly organized and existing under the laws of the United States of America, as escrow bank and as 2000 Trustee (as defined herein)(the "Escrow Bank"); WITNE SSE TH : WHEREAS, the Authority has heretofore issued its $18,310,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project), of which $14,215,000 remains outstanding (the "2000 Bonds"), the proceeds of which were used to finance the costs of the acquisition, construction, installation and equipping of certain public capital improvements (the "2000 Project"); WHEREAS, the 2000 Bonds were issued pursuant to the terms of a trust indenture, dated as August 1, 2000 (the "2000 Indenture"), by and between the Authority and BNY Western Trust Company, since succeeded by The Bank of New York Trust Company, N.A., as trustee thereunder (the "2000 Trustee"); WHEREAS, in order to provide for the repayment of the 2000 Bonds, the Authority leased certain real property and improvements (the "2000 Property") to the City pursuant to a lease agreement, dated as of August 1, 2000 (the "2000 Lease Agreement"), under which the City agreed to make lease payments to the Authority (the "2000 Lease Payments") from moneys in its General Fund and the City has budgeted and appropriated sufficient amounts in each year to pay the full amount of principal of and interest on the 2000 Bonds; WHEREAS, the City has determined that, as a result of favorable financial market conditions and for other reasons, it is in the best interests of the City at this time to refinance the City's obligation to make the 2000 Lease Payments and, as a result thereof, to provide for the payment of the principal of and interest on the 2000 Bonds maturing on September 1, 2012, through September 1, 2015, September 1, 2020, September 1, 2025, and September 1, 2030 (the "Refunded 2000 Bonds) through September 1,2010, and to redeem all outstanding Refunded 2000 Bonds maturing after September 1,2010, in full on September 1, 2010, at the redemption price equal to 100% of the principal amount thereof, plus accrued interest, and to that end, the City proposes to enter into a new lease agreement, dated as of April 1, 2008, by and between the Authority and the City; WHEREAS, the Authority and the City propose to provide for the payments described above and to appoint the Escrow Bank as their agent for the purpose of applying said deposit to provide for the payment of the 2000 Lease Payments allocable to the Refunded 2000 Bonds in accordance with the instructions provided by this Escrow Deposit and Trust Agreement and of applying said 2000 Lease Payments allocable to the Refunded 2000 Bonds to the payment of the principal of and interest on the Refunded 2000 Bonds and the Escrow Bank desires to accept said appointment; WHEREAS, the Authority and the City wish to provide for the payment described above and to enter into this Escrow Deposit and Trust Agreement for the purpose of providing the terms and conditions for the deposit and application of amounts so deposited; WHEREAS, the Authority has agreed to issue its $ _ Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the 'Bonds"), pursuant to the terms of an indenture, dated as April 1, 2008 (the "Indenture"), by and between the Authority and , as trustee thereunder (the "Trustee"), and to apply a portion of the proceeds thereof to accomplish such refinancing; and WHEREAS, the Escrow Bank has full powers to act with respect to the escrow and trust created herein and to perform the duties and obligations to be undertaken pursuant to this Escrow Deposit and Trust Agreement. NOW, THEREFORE, in consideration of the above premises and of the mutual promises and covenants herein contained and for other valuable consideration, the parties hereto do hereby agree as follows: Section 1. Definitions. Capitalized terms used, but not otherwise defined, herein, shall have the meanings ascribed thereto in the 2000 Indenture. Section 2. Appointment of Escrow Bank. The Authority and the City hereby appoint the Escrow Bank as escrow bank for all purposes of this Escrow Deposit and Trust Agreement and in accordance with the terms and provisions of this Escrow Deposit and Trust Agreement, and the Escrow Bank hereby accepts such appointment. Section 3. Establishment of Escrow Fund. There is hereby created by the Authority and the City with, and to be held by, the Escrow Bank as security for the payment of the Refunded 2000 Bonds as hereinafter set forth, an irrevocable escrow to be maintained in trust by the Escrow Bank on behalf of the Authority and the City and for the benefit of the owners of the Refunded 2000 Bonds, said escrow to be designated the "Escrow Fund." All moneys and securities (the "Escrow Securities") deposited in the Escrow Fund shall be held as a special fund for the payment of the principal and interest with respect to the Refunded 2000 Bonds in accordance with the provisions of this Escrow Deposit and Trust Agreement. If at any time the Escrow Bank shall receive actual knowledge that the moneys and Escrow Securities in the Escrow Fund will not be sufficient to make any payment required by Section 5 hereof, the Escrow Bank shall notify the City of such fact and the City shall immediately cure such deficiency. The Escrow Bank may rely upon the conclusion of independent certified public accountants, as contained in its opinion and accompanying schedules (the "Report") dated April 6, 2008, that the Federal Securities listed on Exhibit A mature and bear interest payable in such amounts and at such times as, together with cash on deposit in the Escrow Fund, will be sufficient to pay the principal of and interest on the Refunded 2000 Bonds through September 1, 2010, and to redeem the outstanding Refunded 2000 Bonds maturing after September 1,2010, in full on September 1,2010, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest. -2- Section 4. Deposit into Escrow Fund; Investment of Amounts. (a) Concurrently with delivery of the Bonds, the Authority and the City shall cause to be transferred to the Escrow Bank for deposit into the Escrow Fund the amount of $ in immediately available funds, derived as follows: (i) $ from the proceeds of the sale of the Bonds; (ii) $ derived from the revenue fund held by the 2000 Trustee with respect to the Refunded 2000 Bonds (the "2000 Revenue Fund"); and (iii) $ from amounts on deposit in the reserve account established under the 2000 Indenture (the "2000 Reserve Fund"). (b) The Escrow Bank shall invest $__ __ of the moneys deposited into the Escrow Fund pursuant to the preceding paragraph in the Escrow Securities set forth in Exhibit A attached hereto and by this reference incorporated herein and shall hold the remaining amount ($ ) in cash, uninvested. The Escrow Securities and cash shall be deposited with and held by the Escrow Bank in the Escrow Fund solely for the uses and purposes set forth herein. The Escrow Bank shall not be liable or responsible for any toss resulting from its full compliance with the provisions of this Escrow Deposit and Trust Agreement. Section 5. Instructions as to A11211cation of Deposit. (a) The total amount of Escrow Securities and uninvested moneys deposited in the Escrow Fund pursuant to Section 4 shall be applied by the Escrow Bank for the sole purpose of paying the principal of and interest on the Refunded 2000 Bonds as the same shall become due and payable, all at the times and in the amounts set forth in Exhibit B attached hereto and by this reference incorporated herein. (b) The Authority and the City hereby instruct the Escrow Bank, in its capacity as 2000 Trustee, and the Escrow Bank, as 2000 Trustee, hereby agrees to give notice of redemption of the Refunded 2000 Bonds, such notice of redemption to be given timely for redemption of such Refunded 2000 Bonds on the applicable redemption date, in accordance with the applicable provisions of the 2000 Indenture, and to cause the redemption of such Refunded 2000 Bonds on the applicable redemption date, as set forth in Exhibit B attached hereto and by this reference incorporated herein. Section 6. Investment of Any Remaining Moneys. The Escrow Bank shall invest and reinvest the proceeds received from any of the Escrow Securities and the cash originally deposited into the Escrow Fund, for a period ending not later than the next succeeding interest payment date with respect to the Refunded 2000 Bonds, in Escrow Securities as directed in writing by the City; provided, however, that such written directions of the City shall be accompanied by a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Escrow Securities then to be so deposited in the Escrow Fund, together with the Escrow Securities then on deposit in the Escrow Fund, together with the interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 5 hereof. In the event that the City shall fail to file any such written directions with the Escrow Bank concerning the reinvestment of any such proceeds, such proceeds shall be held uninvested by the Escrow Bank. Any interest income resulting from investment or reinvestment of moneys pursuant -3- to this Section 6 and not required for the purposes set forth in Section 5, as indicated by such verification, and after payment of any amounts then owed to the Escrow Bank, shall be paid to the City promptly upon the receipt of such interest income by the Escrow Bank. Any amounts remaining on deposit in the Escrow Fund after the final payment of all Refunded 2000 Bonds in accordance with this Escrow Deposit and Trust Agreement, shall be transferred by the Escrow Bank to the Trustee for deposit in the Interest Account created under the Indenture and used for the purposes of such fund. Section 7. Substitution or Withdrawal of Escrow Securities, The City may, at any time, direct the Escrow Bank in writing to substitute Escrow Securities for any or all of the Escrow Securities then deposited in the Escrow Fund, or to withdraw and transfer to the City any portion of the Escrow Securities then deposited in the Escrow Fund, provided that any such direction and substitution or withdrawal shall be simultaneous and shall be accompanied by a certification of an independent certified public accountant or firm of certified public accountants of favorable national reputation experienced in the refunding of obligations of political subdivisions that the Escrow Securities then to be so deposited in the Escrow Fund together with interest to be derived therefrom, or in the case of withdrawal, the Escrow Securities to be remaining in the Escrow Fund following such withdrawal together with the interest to be derived therefrom, shall be in an amount at all times at least sufficient to make the payments specified in Section 5 hereof. In the event that, following any such substitution of Escrow Securities pursuant to this Section 7, there is an amount of moneys or Escrow Securities in excess of an amount sufficient to make the payments required by Section 5 hereof, as indicated by such verification, such excess shall be invested by the Escrow Bank as directed in Section 6 hereof. The Escrow Bank shall have no responsibility or obligation to notify or obtain the consent of any rating agency or insurer to (i) the disbursement of any surplus amounts hereunder, (ii) the modification or amendment of this Escrow Deposit and Trust Agreement, or (iii) the substitution of collateral or securities. Section 8. Application of 2000 Bond Funds. On the date of original delivery of the Bonds and the deposit of a portion of the proceeds thereof in the Escrow Fund pursuant to Section 4, the Escrow Bank, as 2000 Trustee, is hereby directed to (a) withdraw all amounts on deposit in the 2000 Revenue Fund ($ ) and transfer such sum to the Escrow Fund, and (b) withdraw all amounts on deposit in the 2000 Reserve Fund ($ ) and transfer such sum to the Escrow Fund. Section 9. Application of Certain Terms of 2000 Indenture. All of the terms of the 2000 Indenture relating to the making of payments of principal and interest with respect to the Refunded 2000 Bonds are incorporated in this Escrow Deposit and Trust Agreement as if set forth in full herein. The provisions of the 2000 Indenture relating to the limitations from liability and protections afforded the 2000 Trustee and the resignation and removal of the 2000 Trustee are also incorporated in this Escrow Deposit and Trust Agreement as if set forth in full herein and shall be the procedure to be followed with respect to any resignation or removal of the Escrow Bank hereunder. Section 10. Compensation to Escrow Bank. The City shall pay the Escrow Bank full compensation for its duties under this Escrow Deposit and Trust Agreement, including out-of-pocket costs such as publication costs, prepayment or redemption expenses, legal fees and other costs and expenses relating hereto and, in addition, fees, costs and expenses relating to the purchase of any Escrow Securities after the date hereof. Under no circumstances shall amounts deposited in the Escrow Fund be deemed to be available for said purposes. -4- Section 11. Liabilities and Obligations of Escrow Bank. The Escrow Bank shall have no obligation to make any payment or disbursement of any type or incur any financial liability in the performance of its duties under this Escrow Deposit and Trust Agreement unless the City shall have deposited sufficient funds with the Escrow Bank. The Escrow Bank may rely and shall be protected in acting upon the written instructions of the City or its agents relating to any matter or action as Escrow Bank under this Escrow Deposit and Trust Agreement. 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 Deposit and Trust Agreement, the establishment of the Escrow Fund, the acceptance of the moneys or any securities deposited therein, the purchase of the securities to be purchased pursuant hereto, the retention of such securities or the proceeds thereof, the sufficiency of the securities or any uninvested moneys held hereunder to accomplish the purposes set forth in Section 5 hereof, or any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Escrow Deposit and Trust 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 statement of the City, and the Escrow Bank assumes no responsibility for the correctness thereof. The Escrow Bank makes no representations as to the sufficiency of the securities to be purchased pursuant hereto and any uninvested moneys to accomplish the purposes set forth in Section 5 hereof or to the validity of this Escrow Deposit and Trust Agreement as to the City or the Authority and, except as otherwise provided herein, the Escrow Bank shall incur no liability in respect thereof. The Escrow Bank shall not be liable in connection with the performance of its duties under this Escrow Deposit and Trust 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 Deposit and Trust Agreement. The Escrow Bank may consult with counsel, who may or may not be counsel to the City, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of 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 Deposit and Trust Agreement, such matter (except the matters set forth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel) may be deemed to be conclusively established by a written certification of the City. The City hereby assumes liability for, and hereby agrees (whether or not any of the transactions contemplated hereby are consummated), to the extent permitted by law, to indemnify, protect, save and hold harmless the Escrow Bank and its respective successors, assigns, agents and servants from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including legal fees and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, at any time, the Escrow Bank (whether or not also indemnified against by any other person under any other agreement or instrument) and in any way relating to or arising out of the execution and delivery of this Escrow Deposit and Trust Agreement, the establishment of the Escrow Fund, the retention of the moneys therein and any payment, transfer or other application of moneys or securities by the Escrow Bank in accordance with the provisions of this Escrow Deposit and Trust Agreement, or as may arise by reason of any act, omission or error of the Escrow Bank made in good faith in the conduct of its duties; provided, however, that the City shall not be required to indemnify the Escrow Bank against its own negligence or misconduct. The indemnities contained in -5- this Section 11 shall survive the termination of this Escrow Deposit and Trust Agreement or the resignation or removal of the Escrow Bank. Section 12. Amendment. This Escrow Deposit and Trust Agreement may be modified or amended at any time by a supplemental agreement which shall become effective when the written consents of the owners of one hundred percent (100%) in aggregate principal amount of the Refunded 2000 Bonds shall have been filed with the Escrow Bank. This Escrow Deposit and Trust Agreement may be modified or amended at any time by a supplemental agreement, without the consent of any such owners, but only (1) to add to the covenants and agreements of any party, other covenants to be observed, or to surrender any right or power herein or therein reserved to the City, (2) to cure, correct or supplement any ambiguous or defective provision contained herein, (3) in regard to questions arising hereunder or thereunder, as the parties hereto or thereto may deem necessary or desirable and which, in the opinion of counsel, shall not materially adversely affect the interests of the owners of the Refunded 2000 Bonds or the Bonds, and that such amendment will not cause interest on the Refunded 2000 Bonds or the Bonds to become subject to federal income taxation. In connection with any contemplated amendment or revocation of this Escrow Deposit and Trust Agreement, prior written notice thereof and draft copies of the applicable legal documents shall be provided by the City to each rating agency then rating the Refunded 2000 Bonds. Section 13. Severability. If any section, paragraph, sentence, clause or provision of this Escrow Deposit and Trust Agreement shall for any reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section, paragraph, sentence clause or provision shall not affect any of the remaining provisions of this Escrow Deposit and Trust Agreement. Notice of any such invalidity or unenforceability shall be provided to each rating agency then rating the Refunded 2000 Bonds. Section 14. Notice of Escrow Bank, City and Authority. Any notice to or demand upon the Escrow Bank may be served and presented, and such demand may be made, at the Principal Corporate Trust Office of the Escrow Bank as specified by the Escrow Bank as 2000 Trustee in accordance with the provisions of the 2000 Indenture. Any notice to or demand upon the City and the Authority, respectively, shall be deemed to have been sufficiently given or served for all purposes by being mailed by first class mail, and deposited, postage prepaid, in a post office letter box, addressed to such party as provided in the 2000 Lease Agreement (or such other address as may have been filed in writing by the City or the Authority with the Escrow Bank). Section 15. Merger or Consolidation of Escrow Bank. 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, provided such company shall be eligible to act as trustee under the 2000 Indenture, shall be the successor hereunder to the Escrow Bank without the execution or filing of any paper or any further act. -6- IN WITNESS WHEREOF, the Authority, the City and the Escrow Bank have each caused this Escrow Deposit and Trust Agreement to be executed by their duly authorized officers all as of the date first above written. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary CITY OF HUNTINGTON BEACH, as Lessee By Name Title Attest: Joan L. Flynn City Clerk THE BANK OF NEW YORK TRUST COMPANY, N.A., as Escrow Bank By Helen McNulty Assistant Treasurer -7- EXHIBIT A SCHEDULE OF ESCROW SECURITIES Security Maturity Principal Rate Price Cost Accrued Total Cost Exhibit A EXHIBIT B PRINCIPAL PAYMENT AND REDEMPTION SCHEDULE OF REFUNDED 2000 BONDS Redemption Maturing Redeemed Redemption Total Date Principal Principal Interest Premium Payment 09/01/08 — 03/01/09 — 09/01/09 — 03/01/10 — 09/01/10 — $11,535,000 — Exhibit B Quint&Thimmig LLP 01/25/08 01/31/08 HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Lease Revenue Refunding Bonds, 2008 Series A BOND PURCHASE AGREEMENT March 25,2008 Huntington Beach Public Financing Authority 2000 Main Street Huntington Beach,CA 92648 City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 Ladies and Gentlemen: Citigroup Global Markets Inc. (the "Underwriter") hereby offers to enter into this bond purchase agreement (the 'Bond Purchase Agreement") with the Huntington Beach Public Financing Authority (the "Authority") and the City of Huntington Beach (the "City"). Upon the acceptance hereof by the Authority and the City, this offer will be binding upon the Authority, the City and the Underwriter. This offer is made subject to (a) the written acceptance hereof by the Authority and the City and (b) withdrawal by the Underwriter upon written notice (by telecopy or otherwise) delivered to the Authority and the City at any time prior to each of their acceptance hereof by the Authority and the City. 1. Purchase and Sale. Upon the terms and conditions and upon the basis of the representations, warranties and agreements set forth herein, the Underwriter hereby agrees to purchase on the Closing Date (as defined herein), and the Authority and the City hereby agree to sell and deliver to the Underwriter on the Closing Date, $ aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds). The Bonds are being issued pursuant to Article 4, Chapter 5, Division 7, Title 1 of the California Government Code (the "Marks-Roos Act"), a resolution of the Authority authorizing the issuance of the Bonds, adopted on February 19, 2008 (the "Authority Resolution"), and an Indenture, dated as of April 1, 2008 (the "Indenture"), by and between , as trustee (the "Trustee") and the Authority. The City will lease certain real property and all buildings and other improvements installed thereon (collectively, the "Property") to the Authority pursuant to a Site and Facility Lease, dated as of April 1, 2008 (the "Site and Facility Lease"). The Property will be leased by the Authority to the City pursuant to the Lease Agreement, dated as of April 1, 2008 (the "Lease Agreement"), by and between the Authority and the City. All capitalized terms not defined herein shall have the respective meaning specified in Section 1.01 of the Indenture. 08008.04 Under the Lease Agreement, the City is required to make Lease Payments and Additional Payments from legally available funds in amounts calculated to be sufficient to pay principal of and interest on the Bonds when due. All of the Authority's right, title and interest in and to the Lease Agreement (except for the right to receive Additional Payments to the extent payable to the Authority and certain rights to indemnification), including the right to receive Lease Payments under the Lease Agreement, are assigned to the Trustee for the benefit of the Owners of the Bonds. The Bonds are being issued to (a) refund the Authority's outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) (the "1997 Bonds"); (b) refund a portion of the Authority's Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project) (the "2000 Bonds"), (c) to fund a reserve fund for the Bonds, and (d) to pay costs of issuance of the Bonds. The aggregate purchase price to be paid by the Underwriter for the Bonds is hereby agreed to be $ , which amount represents the principal amount of the Bonds of $ , less $ , representing the Underwriter's discount, plus $ , representing net original issue premium (such payment and delivery of the Bonds and the other actions contemplated hereby to take place at the time of such payment and delivery being herein sometimes called the "Closing"). A Preliminary Official Statement of the City and the Authority, dated March _, 2008 (together with the Appendices thereto, any documents incorporated therein by reference and any supplements or amendments thereto and as disseminated in its printed physical form or in electronic form in all respects materially consistent with such physical form, the "Preliminary Official Statement"), has been prepared for use in marketing the Bonds, and a final Official Statement of the Authority, to be dated the date hereof, as amended to conform to the terms of this Purchase Contract, and with such changes and amendments as are mutually agreed to by the Authority, the City and the Underwriter, including the cover page, inside cover page, the appendices and all information incorporated therein by reference, is herein collectively referred to as the "Official Statement," which shall be in substantially the form of the Preliminary Official Statement, with such changes and amendments thereto as may be mutually agreed upon by the Underwriter, the Authority and the City. The Bonds shall be dated their date of delivery, and shall have the maturities, bear interest at the rates, have reoffering yields, and be subject to mandatory sinking fund redemption as shown on Exhibit A hereto. It shall be a condition to the Authority's obligation to sell and to deliver the Bonds to the Underwriter and to the obligation of the Underwriter to purchase, to accept delivery of and to pay for the Bonds that the entire $ aggregate principal amount of the Bonds as authorized by the Indenture shall be sold and delivered by the Authority and accepted and paid for by the Underwriter at the Closing. The Underwriter may change the offering prices (or yields) of the Bonds from time to time at any time. The Bonds may be offered and sold to certain dealers at prices lower than such initial public offering prices. The obligation of the Authority to sell and deliver the Bonds to the Underwriter shall also be conditioned upon the delivery by Quint & Thimmig LLP, Bond Counsel ("Bond Counsel"), of its approving legal opinion with respect to the Bonds. The Authority and the City hereby authorize the Underwriter to use and distribute the Lease Agreement, the Site and Facility Lease, the Indenture, the Escrow Deposit and Trust Agreement, by and among the Authority, the City and U.S. Bank National Association, as escrow bank (the "1997 Escrow Bank"), relating to the refunding of the 1997 Bonds (the "1997 Escrow Agreement"), the Escrow Deposit and Trust Agreement, by and among the Authority, -2- the City and The Bank of New York Trust Company, N.A., as escrow bank (the "2000 Escrow Bank"), relating to the refunding of the callable 2000 Bonds (the "2000 Escrow Agreement") and the Official Statement and the information contained in such documents in connection with the public offering and sale of the Bonds. The Authority and the City have authorized the use of the Preliminary Official Statement in connection with the public offering of the Bonds by the Underwriter prior to the date hereof. The obligation of the City to make Lease Payments under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Bonds nor the obligation of the City to make Lease Payments under the Lease Agreement constitutes a debt of the Authority, the City, the State of California or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The obligation of the City to make Lease Payments, as set forth in the Lease Agreement, shall be deemed to be and shall be construed to be a ministerial duty imposed by law and it shall be the ministerial duty of each and every public official of the City to take such actions and do such things as are required by law in the performance of such duty, subject to abatement in the event of damage or destruction to,or condemnation of,the Property or a portion thereof. 2. The Bonds. The Bonds will be issued, executed and delivered pursuant to the Indenture. The Authority will assign its interest in the Lease Agreement and the Site and Facility Lease to the Trustee pursuant to the Indenture. The City Council of the City has adopted a resolution on February 19, 2008, relating to the Bonds (the "City Resolution"). This Bond Purchase Agreement, the Lease Agreement, the Site and Facility Lease, the 1997 Escrow Agreement, the 2000 Escrow Agreement and the Continuing Disclosure Certificate (as hereinafter defined), are collectively referred to as the "City Documents." This Bond Purchase Agreement, the Indenture, the Lease Agreement, the Site and Facility Lease, the 1997 Escrow Agreement and the 2000 Escrow Agreement are collectively referred to as the "Authority Documents." 3. Official Statement,Continuing Disclosure. (a) The Authority and the City represent that they have deemed the Preliminary Official Statement to be final as of its date, except for either revisions or additions to the offering price(s), interest rate(s), yield(s) to maturity, selling compensation, aggregate principal amount, principal amount per maturity, delivery date, rating(s) and other terms of the Bonds which depend upon the foregoing as provided in and pursuant to Rule 15c2-12 of the Securities and Exchange Commission under the Securities Exchange Act of 1934,as amended (the "Rule"). (b) The Underwriter agrees that, prior to the time the final Official Statement is available, the Underwriter will send to any potential purchaser of the Bonds, upon the request of such potential purchaser, a copy of the most recent Preliminary Official Statement. Such Preliminary Official Statement shall be sent by first class mail (or other equally prompt means) not later than the second business day following the date upon which each such request is received. (c) The Authority agrees to deliver to the Underwriter, at such addresses as the Underwriter shall specify, as many copies of the final Official Statement relating to the Bonds as the Underwriter shall reasonably request as necessary to comply with paragraph (b)(4) of the Rule and with Rule G-32, Rule G-36 and all other applicable rules of the Municipal Securities Rulemaking Board. The Authority agrees to deliver such Official Statements within seven business days after the execution hereof. The Underwriter agrees to give notice to the Authority on the date after which the Underwriter shall no longer be obligated to deliver Official Statements pursuant to paragraph (b)(4) of the Rule, which date shall be no earlier than 25 days after the "end of the underwriting period,"as determined in accordance with Section 13 herein. -3- (d) Prior to the earlier of (i) receipt of notice from the Underwriter that no participating underwriter, as such term is defined in the Rule, remains obligated to deliver Official Statements pursuant to paragraph (b)(4) of the Rule or (ii) 25 days after the date of the Closing (as defined below), the Authority and the City shall provide the Underwriter with such information regarding the Authority and the City, each of their current financial conditions and ongoing operations as the Underwriter may reasonably request. (e) The City hereby covenants and agrees that it will, on or prior to the Closing Date, enter into an agreement or contract for the benefit of the owners of the Bonds in which the City will undertake to provide financial information, operating data and notices of material events as required by paragraph (d)(2)(ii) of the Rule substantially in the form of Appendix D to the Official Statement(the"Continuing Disclosure Certificate"). 4. Representations. Warranties and Agreements of the City. The City represents, warrants and agrees as follows: I (a) The City is a municipal corporation and chartered city duly organized and validly existing under its charter and the Constitution and laws of the State of California. (b) The City has full legal right,power and authority (i) to enter into, execute and deliver the City Documents; and (ii) to carry out and consummate the transactions on its part contemplated by the City Documents and the Official Statement. (c) By all necessary official action, the City has duly authorized and approved the City Documents, has duly authorized and approved the Preliminary Official Statement and the Official Statement and approved the distribution thereof(including in electronic form), has duly authorized and approved the execution and delivery of, and the performance by the City of the obligations in connection with the execution and delivery of the Bonds on its part contained in the City Documents, and the consummation by it of all other transactions contemplated by the City Documents in connection with the execution and delivery of the Bonds, all pursuant to the City Resolution adopted at a meeting duly called and held in accordance with the requirements of all applicable laws and at which a quorum of the members of the City Council was continuously present. The City Resolution has not been modified, amended or rescinded since the date of its adoption. (d) The City is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of the State of California or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the City Documents) or other instrument to which the City is a party which breach or default has or may have an adverse effect on the ability of the City to perform its obligations under the City Documents, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both,would constitute such a default or event of default under any such instrument; and the execution and delivery of the Bonds and the City Documents, and compliance with the provisions on the City's part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the City is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the City or under the terms of any such law, regulation or instrument,except as provided by the Bonds and the City Documents. -4- (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the City of its obligations in connection with the execution and delivery of the Bonds under the City Documents or the consummation by it of all other transactions contemplated by the City Documents have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the City of its obligations under the City Documents have been duly obtained. (f) There is no action, suit,proceeding, inquiry or investigation, notice of which has been duly served on the City, at law or in equity before or by any court, government agency, public board or body, pending or to the best knowledge of the officer of the City executing this Bond Purchase Agreement, threatened against the City, affecting the existence of the City or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, execution or delivery of the Bonds pursuant to the Indenture, or contesting or affecting as to the City the validity or enforceability of the Bonds or the City Documents, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the City to cause the execution and delivery of the Bonds, or the execution and delivery or adoption by the City of the City Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the City, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bonds or the authorization, execution, delivery or performance by the City of the City Documents. (g) The City will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the City shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, and the Underwriter shall bear all costs in connection with the foregoing. (h) As of the date thereof, the Preliminary Official Statement did not, except for the omission of certain information permitted to be omitted in accordance with the Rule, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (i) At the time of the City's acceptance hereof, and (unless an event occurs of the nature described in paragraph (k) of this Section 4) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading. -5- (j) If the Official Statement is supplemented or amended pursuant to paragraph (k) of this Section 4, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein,in the light of the circumstances under which they were made,not misleading. (k) If between the date of this Bond Purchase Agreement and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 13 hereof) any event of which the officer of the City executing this Bond Purchase Agreement has knowledge shall occur affecting the City which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the City shall notify the Underwriter thereof, and if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the City will at its expense prepare and furnish to the Underwriter a reasonable number of copies of such supplement to, or amendment of,the Official Statement in a form and in a manner approved by the Underwriter. (1) Any certificate signed by any officer of the City and delivered to the Underwriter pursuant to the City Documents or any document contemplated thereby or required for the valid execution and delivery of the Bonds shall be deemed a representation and warranty by the City to the Underwriter as to the statements made therein. (m) The City will cause the proceeds from the sale of the Bonds to be paid to the Trustee for the purposes specified in the Indenture and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Indenture, the City will not issue or sell, or cause to be issued or sold, any Bonds or other obligations, other than the Bonds delivered thereunder, the interest on and premium, if any, or principal of which will be payable from Lease Payments. (n) The City shall honor all other covenants on its part contained in the Lease Agreement which are incorporated herein and made a part of this Bond Purchase Agreement. 5. Representations, Warranties and Agreements of the Authority. The Authority represents,warrants and agrees as follows: (a) The Authority is a joint exercise of powers entity duly organized and validly existing under the laws of the State of California pursuant to a Joint Exercise of Powers Agreement between the City and the Redevelopment Agency of the City of Huntington Beach dated March 1988(the "JPA Agreement"). (b) The Authority has full legal right, power and authority (i) to enter into, execute and deliver the Authority Documents and to sell and deliver the Bonds to the Underwriter as provided herein; and (ii) to carry out and consummate the transactions on its part contemplated by the Authority Documents and the Official Statement. (c) By all necessary official action, the Authority has duly authorized and approved the issuance of the Bonds and the Authority Documents, has duly authorized and approved the Preliminary Official Statement and the Official Statement and approved the distribution thereof (including in electronic form), has duly authorized and approved the execution and delivery of, -6- and the performance by the Authority of the obligations in connection with the execution and delivery of the Bonds on its part contained in the Bonds and the Authority Documents, and the consummation by it of all other transactions contemplated by the Authority Documents in connection with the execution and delivery of the Bonds, all pursuant to the Authority Resolution adopted at a meeting duly called and held in accordance with the requirements of all applicable laws and at which a quorum of the board members of the Authority was continuously present. The Authority Resolution has not been modified, amended or rescinded since the date of its adoption and each Authority Document is the valid and binding obligation of the Authority. (d) The Authority is not in any material respect in breach of or default under any applicable constitutional provision, law or administrative regulation of the State of California or of the United States, or any agency or instrumentality of either, or any applicable judgment or decree, or the JPA Agreement, or any loan agreement, indenture, bond, note, resolution, agreement (including, without limitation, the Authority Documents) or other instrument to which the Authority is a party which breach or default has or may have an adverse effect on the ability of the Authority to perform its obligations under the Bonds or the Authority Documents, and no event has occurred and is continuing which with the passage of time or the giving of notice, or both, would constitute such a default or event of default under any such instrument; and the execution and delivery of the Bonds and the Authority Documents, and compliance with the provisions on the Authority's part contained therein, will not conflict in any material way with or constitute a material breach of or a material default under any constitutional provision, law, administrative regulation, judgment, decree, loan agreement, indenture, Bond, note, resolution, agreement or other instrument to which the Authority is a party nor will any such execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the property or assets of the Authority or under the terms of any such law, regulation or instrument,except as provided by the Bonds and the Authority Documents. (e) All authorizations, approvals, licenses, permits, consents and orders of any governmental authority, legislative body, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Authority of its obligations in connection with the execution and delivery of the Bonds under the Authority Documents or the consummation by it of all other transactions contemplated by the Authority Documents have been duly obtained, except for such approvals, consents and orders as may be required under the Blue Sky or securities laws of any state in connection with the offering and sale of the Bonds; except as described in or contemplated by the Official Statement, all authorizations, approvals, licenses, permits, consents and orders of any governmental authority, board, agency or commission having jurisdiction of the matter which are required for the due authorization by, or which would constitute a condition precedent to or the absence of which would materially adversely affect the due performance by, the Authority of its obligations under the Bonds and the Authority Documents have been duly obtained. (f) The Bonds, when executed, issued, authenticated and delivered in accordance with the Indenture, and sold to the Underwriter as provided herein, will be validly executed and outstanding obligations, entitled to the benefits of the Indenture, and upon such execution and delivery, the Indenture will provide, for the benefit of the Owners from time to time of the Bonds, the legally valid and binding security interest it purports to create. (g) There is no action, suit, proceeding, inquiry or investigation, notice of which has been duly served on the Authority, at law or in equity before or by any court, government agency, public board or body, pending or to the best knowledge of the officer of the Authority -7- executing this Bond Purchase Agreement, threatened against the Authority, affecting the existence of the Authority or the titles of its officers to their respective offices, or affecting or seeking to prohibit, restrain or enjoin the sale, issuance, execution or delivery of the Bonds pursuant to the Indenture, or contesting or affecting as to the Authority the validity or enforceability of the Bonds or the Authority Documents, or contesting the completeness or accuracy of the Preliminary Official Statement or the Official Statement, or contesting the powers of the Authority to cause the execution and delivery of the Bonds, or the execution and delivery or adoption by the Authority of the Authority Documents, or in any way contesting or challenging the consummation of the transactions contemplated hereby or thereby; nor, to the best knowledge of the Authority, is there any basis for any such action, suit, proceeding, inquiry or investigation, wherein an unfavorable decision, ruling or finding would materially adversely affect the validity of the Bonds or the authorization, execution, delivery or performance by the Authority of the Bonds or the Authority Documents. (h) The Authority will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the laws of such states and other jurisdictions, and will use its best efforts to continue such qualifications in effect so long as required for the distribution of the Bonds; provided, however, that the Authority shall not be required to execute a general or special consent to service of process or qualify to do business in connection with any such qualification or determination in any jurisdiction, and the Underwriter shall bear all costs in connection with the foregoing. (i) As of the date thereof, the Preliminary Official Statement did not, except for the omission of certain information permitted to be omitted in accordance with the Rule, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (j) At the time of the Authority's acceptance hereof, and (unless an event occurs of the nature described in paragraph (1) of this Section 5) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) did not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading. (k) If the Official Statement is supplemented or amended pursuant to paragraph (1) of this Section 5, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such paragraph) at all times subsequent thereto up to and including the Closing Date, the Official Statement (other than information therein provided by the Underwriter) as so supplemented or amended will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading. (1) If between the date of this Bond Purchase Agreement and that date which is 25 days after the end of the underwriting period (as determined in accordance with Section 13 hereof) any event of which the officer of the Authority executing this Bond Purchase Agreement has knowledge shall occur affecting the Authority which might adversely affect the marketability of the Bonds or the market prices thereof, or which might cause the Official Statement, as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority shall notify the Underwriter thereof, and -8- if in the opinion of the Underwriter such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will at its expense prepare and furnish to the Underwriter a reasonable number of copies of such supplement to, or amendment of,the Official Statement in a form and in a manner approved by the Underwriter. (m) Any certificate signed by any officer of the Authority and delivered to the Underwriter pursuant to the Authority Documents or any document contemplated thereby or required for the valid execution and delivery of the Bonds shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein. (n) The Authority will cause the proceeds from the sale of the Bonds to be paid to the Trustee for the purposes specified in the Indenture and the Official Statement. So long as any of the Bonds are outstanding and except as may be authorized by the Indenture, the Authority will not issue or sell any Bonds or other obligations, other than the Bonds delivered thereunder, the interest on and premium,if any,or principal of which will be payable from the Revenues. (o) The Authority shall honor all other covenants on its part contained in the Indenture and the Lease Agreement which are incorporated herein and made a part of this Bond Purchase Agreement. 6. Closing. At 8:00 A.M., California time, on April 6, 2008, or on such other date time, as may be mutually agreed upon by the Authority, the City and the Underwriter (the "Closing Date"), the Authority will, subject to the terms and conditions hereof, deliver to the Underwriter, at the offices of The Depository Trust Company ("DTC"), in New York, New York, or at such other place as the Authority, the City and the Underwriter may mutually agree upon, the Bonds in definitive, fully registered form (one Bond for each maturity), duly executed and registered in the name of Cede & Co. as nominee of DTC; and, subject to the terms and conditions hereof, the Underwriter shall wire to the Trustee Federal Reserve Bank Funds in the amount of the purchase price of the Bonds. 7. Closing Conditions. The Underwriter has entered into this Bond Purchase Agreement in reliance upon the representations and warranties of the Authority and the City contained herein, and in reliance upon the representations and warranties to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the Authority and the City of its obligations hereunder, both as of the date hereof and as of the Closing Date. Accordingly, the Underwriter's obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds shall be conditioned upon the performance by the Authority and the City of their respective obligations to be performed hereunder and under such documents and instruments at or prior to the Closing Date, shall be subject, at the option of the Underwriter, to the accuracy in all material respects of the statements the officers and other officials of the Authority and of the City, as the Underwriter, authorized representatives of Bond Counsel, the Trustee, and the City Attorney made in any certification or other documents furnished pursuant to the provisions hereof, and shall also be subject to the following additional conditions: (a) The respective representations and warranties of the Authority and the City contained herein shall be true, complete and correct on the date hereof and on and as of the Closing Date, as if made on the Closing Date; (b) At the time of Closing, the City Documents and the Authority Documents shall be in full force and effect in accordance with their terms and shall not have been amended, modified or supplemented and the Official Statement shall not have been supplemented or amended, except in any such case as may have been agreed to by the Underwriter; -9- (c) All necessary official action of the Authority, the City and of the other parties thereto relating to the City Documents and the Authority Documents shall have been taken and shall be in full force and effect and shall not have been amended, modified or supplemented in any material respect; (d) Subsequent to the date hereof, there shall not have occurred any change in or affecting particularly the Authority, the City or the Bonds, as the foregoing is described in the Official Statement, which in the reasonable opinion of the Underwriter materially impairs the investment quality of the Bonds;and (e) At or prior to the Closing Date, the Underwriter shall have received copies of each of the following documents: (i) The Official Statement and each supplement or amendment, if any, thereto, executed by authorized officers of the Authority and the City; (ii) A copy of the Indenture,executed by the parties thereto; (iii)A copy of the Lease Agreement,executed by the parties thereto; (iv)A copy of the Site and Facility Lease,executed by the parties thereto; (v)A copy of the 1997 Escrow Agreement,executed by the parties thereto; (vi)A copy of the 2000 Escrow Agreement,executed by the parties thereto; (vii) A copy of the Continuing Disclosure Certificate,executed by the City; (viii)A certified copy of the JPA Agreement; (ix) A certificate or certificates of the City, dated the Closing Date, to the effect that: (A) the representations and warranties of the City contained herein are true and correct in all material respects on and as of the Closing Date as if made on the Closing Date and the City has complied with all of the terms and conditions of this Purchase Agreement required to be complied with by the City at or prior to the Closing Date; (B) none of the proceedings or authority for (i) the authorization, sale, execution and delivery of the Bonds, (ii) the adoption of the City Resolution, or (iii) the execution and delivery of the City Documents and performance of its obligations thereunder, has been repealed, modified, amended, revoked or rescinded; (C) subsequent to September 30, 2004, and prior to Closing, there have been no material adverse changes in the financial position of the City; (D) no event affecting the City has occurred since the date of the Official Statement that should be disclosed in the Official Statement for the purposes for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect; -10- (E) the information and statements contained in the Official Statement (other than information relating to The Depository Trust Company and its book- entry system) do not contain an untrue statement of a material fact required to be stated therein or necessary to make such statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; and (iv) to the best of its knowledge after reasonable investigation, the City is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement (including but not limited to the Lease Agreement) or other instrument to which the City is a party or is otherwise subject, which would have a material adverse impact on the City's ability to perform its obligations under the City Documents, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument;and (F) No consent is required for the inclusion of the City's 2003-04 audited financial statements in the Official Statement. (x) A certificate or certificates of the Authority, dated the Closing Date, to the effect that: (A) the representations and warranties of the Authority contained herein are true and correct in all material respects on and as of the Closing Date as if made on the Closing Date and the Authority has complied with all of the terms and conditions of this Purchase Agreement required to be complied with by the Authority at or prior to Closing Date; (B) none of the proceedings or authority for (i) the authorization, sale, execution and delivery of the Bonds, (ii) the adoption of the Authority Resolution, or (iii) the execution and delivery of the Authority Documents, has been repealed,modified,amended,revoked or rescinded; (C) no event affecting the Authority has occurred since the date of the Official Statement that should be disclosed in the Official Statement for the purposes for which it is to be used or which it is necessary to disclose therein in order to make the statements and information therein not misleading in any material respect. (D) the information and statements contained in the Official Statement (other than information relating to the Underwriter and The Depository Trust Company and its book-entry system) do not contain an untrue statement of a material fact required to be stated therein or necessary to make such statements therein, in the light of the circumstances under which they were made, not misleading in any material respect; and to the best of its knowledge after reasonable investigation, the Authority is not in breach of or default under any applicable law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party or is otherwise subject, which would have a material adverse impact on the Authority's ability to perform its obligations under the Authority Documents, and no event has occurred and is continuing which, with the passage of time or the giving of notice, or both, would constitute a default or an event of default under any such instrument; -11- (xi) An opinion or opinions, dated the Closing Date and addressed to the Underwriter, of the Huntington Beach City Attorney, counsel for the City, to the effect that: (A) The City is a municipal corporation and chartered city duly organized and validly existing under its charter and the Constitution and laws of the State of California; (B) The City Documents have been duly approved by a resolution of the City adopted at a meeting duly called and held in accordance with the requirements of all applicable laws, with all public notice required by law, and at which a quorum of the members of the City Council was continuously present and such resolution has not been modified, amended or rescinded since the date of its adoption; (C) Except as described in the Official Statement, there is no litigation, inquiry, or investigation pending or to the best of such counsel's knowledge after due inquiry, threatened, which: (1) challenges the right or title of any member or officer of the City to hold his or her office or exercise or perform the powers and duties pertaining thereto; (2) challenges the validity or enforceability of the Bonds or the City Documents; (3) seeks to restrain or enjoin the sale of the Bonds or the execution and delivery by the City of, or the performance by the City of its legal obligations under, the City Documents or in which a final adverse decision could materially adversely affect the operations of the City with respect to the Property; or (4) contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, nor, to the best of such counsel's knowledge,is there any basis therefor; (D) The execution and delivery by the City of, and the performance by the City of its obligations under, the City Documents, do not conflict with, violate or constitute a default under any provision of any law, court order or decree or any contract, instrument or agreement to which the City is a party or by which it is bound and of which such counsel has knowledge; (E) As of the date hereof, the statements and information relating to the City contained in the Preliminary Official Statement and Official Statement did not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances, under which they were made not misleading;and (F) The City Documents have been duly authorized, executed and delivered by the City and, assuming due authorization, execution and delivery of the City Documents by the parties thereto other than the City, the City Documents constitute legal, valid and binding agreements of the City, enforceable against the City in accordance with their respective terms except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights and remedies in general, or by the application of equitable principles if equitable remedies are sought. (G) Except as may be required under the "blue sky" or securities laws of the United States or any state, there is no authorization, approval, consent or other order of, or filing with, or certification by, the State or any other governmental authority or agency within the State having jurisdiction over the -12- City required for the issuance of the Bonds or the consummation by the City of the other financial transactions contemplated by the Official Statement and the City Documents. (H) Based on the information made available to the City Attorney in its role as City Attorney to the City, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement, nothing has come to its attention which would lead it to believe that the Official Statement as of its date and as of the date of Closing (excluding therefrom the financial and statistical data and forecasts included therein, as to which no opinion is expressed and information relating to the Authority, the municipal bond insurance policy and the Depository Trust Company and its book entry system) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; (xii) An opinion or opinions, dated the Closing Date and addressed to the Underwriter, of the Huntington Beach City Attorney, counsel for the Authority, to the effect that: (A) The Authority is a joint exercise of powers authority duly organized and validly existing under the laws of the State of California pursuant to the JPA Agreement; (B) The Authority Documents have been duly approved by a resolution of the Authority adopted at a meeting duly called and held in accordance with the requirements of all applicable laws, with all public notice required by law, and at which a quorum of the members of the Board of the Authority was continuously present and such resolution has not been modified, amended or rescinded since the date of its adoption; (C) Except as described in the Official Statement, there is no litigation, inquiry, or investigation pending to the best of such counsel's knowledge after due inquiry, or threatened, which: (1) challenges the right or title of any member or officer of the Authority to hold his or her office or exercise or perform the powers and duties pertaining thereto; (2) challenges the validity or enforceability of the Bonds or the Authority Documents; (3) seeks to restrain or enjoin the sale of the Bonds or the execution and delivery by the Authority of, or the performance by the Authority of its legal obligations under, the Authority Documents or in which a final adverse decision could materially adversely affect the operations of the Authority with respect to the Property; or (4) contesting in any way the completeness or accuracy of the Preliminary Official Statement or the Official Statement, nor, to the best of such counsel's knowledge, is there any basis therefor; (D) The execution and delivery by the Authority of, and the performance by the Authority of its obligations under, the Authority Documents, do not conflict with, violate or constitute a default under any provision of any law, court order or decree or any contract, instrument or agreement to which the Authority is a party or by which it is bound and of which such counsel has knowledge; (E) The Authority Documents have been duly authorized, executed and delivered by the Authority and, assuming due authorization, execution and -13- delivery of the Authority Documents by the parties thereto other than the Authority, the Authority Documents constitute legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the enforcement of creditors' rights and remedies in general, or by the application of equitable principles if equitable remedies are sought. (F) Except as may be required under the "blue sky" or securities laws of the United States or any state, there is no authorization, approval, consent or other order of, or filing with, or certification by, the State or any other governmental authority or agency having jurisdiction over the Authority required for the issuance of the Bonds or the consummation by the Authority of the other financial transactions contemplated by the Official Statement and the Authority Documents. (G) Based on the information made available to such City Attorney in its role as counsel to the Authority, and without having undertaken to determine independently or assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Official Statement under the captions entitled "THE AUTHORITY," and "LITIGATION", nothing has come to such City Attorney's attention that would lead it to believe that the statements contained in the above-referenced captions as of the date of the Official Statement and as of the date of Closing (excluding therefrom the financial and statistical data and forecasts included therein, as to which no opinion is expressed) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made,not misleading; (xiii) An opinion, dated the Closing Date and addressed to the Authority, of Bond Counsel, substantially in the form set forth in Appendix C to the Official Statement, together with a letter from such counsel, dated the Closing Date and addressed to the Underwriter, to the effect that the foregoing opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to them; (xiv) A supplemental opinion, dated the Closing Date and addressed to the Underwriter,of Bond Counsel, to the effect that: (A) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture Act of 1939,as amended; (B) the Bond Purchase Agreement has been duly executed and delivered by the Authority and the City and is a valid and binding agreement of the Authority and the City;and (C) the statements contained in the Official Statement under the captions "THE BONDS," "SECURITY FOR THE BONDS" and "TAX MATTERS" and in APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS," insofar as such statements expressly summarize certain provisions of the Indenture, the Lease Agreement, the Site and Facility Lease and the final opinion of Bond Counsel concerning certain state income tax matters relating to the Bonds,are accurate in all material respects; -14- (xv) A defeasance opinion with respect to the 1997 Bonds to be defeased, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, in form and substance satisfactory to the Underwriter; (xvi) A defeasance opinion with respect to the 2000 Bonds to be defeased, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, in form and substance satisfactory to the Underwriter; (xvii) An opinion letter, dated the Closing Date and addressed to the Authority, the City and the Underwriter of Quint & Thimmig, LLP, San Francisco, California, Disclosure Counsel ("Disclosure Counsel"), to the effect that based upon their participation in the preparation of the Official Statement as Disclosure Counsel, except to the extent set forth in their supplemental opinion without assuming any responsibility for the accuracy, completeness or fairness of any of the statements contained in the Official Statement nor making any representation regarding independent verification of the accuracy, completeness or fairness of any of the statements contained in the Official Statement, except to the extent set forth in their supplemental opinion such counsel advises that during the course of such representation of the Authority as disclosure counsel on this matter, no information came to the attention of the attorneys in such firm rendering legal services in connection with such representation which caused them to believe that the Official Statement as of its date (except for any financial, statistical or economic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion (except opinions of Bond Counsel), Appendix A to the Official Statement, or any information about book-entry or DTC included therein, as to which no opinion or view is expressed) contained-any untrue statement of a material fact or omitted 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; (xvii) A certificate of an authorized officer of the Trustee satisfactory to the Underwriter,certifying substantially as follows: (A) The Trustee is a national banking association duly organized and in good standing under the laws of the United States of America and has all necessary power and authority to enter into the Indenture and to perform its duties under the Indenture; (B) The Trustee is duly authorized to enter into the Indenture and to authenticate and deliver the Bonds to the Underwriter pursuant to the terms of the Indenture and, when executed by the other parties thereto, the Indenture will constitute a legal, valid and binding obligation of the Trustee enforceable in accordance with its terms; (C) The Bonds have been duly authenticated and delivered to the Underwriter pursuant to direction from the Authority; (D) The Trustee is not in breach of or default under any law or administrative rule or regulation of the State of California or of any department, division, agency or instrumentality thereof, of any applicable court or administrative decree or order, or any other instrument to which the Trustee is a party or is otherwise subject or bound and which would materially impair the ability of the Trustee to perform its obligations under the Indenture; -15- (E) 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 or threatened in any way affecting the existence of the Trustee or the titles of its directors or officers to their respective offices, or seeking to restrain or enjoin the execution, sale or delivery of the Bonds, the application of the proceeds thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of the Bonds or the Indenture; (F) The execution and delivery of the Indenture will not conflict with or constitute a breach of or default under the Trustee's duties under such documents, or any law, administrative regulation, court decree, resolution, charter, bylaws or other agreement to which the Trustee is subject or by which it is bound;and (G) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the Trustee that has not been obtained is or will be required for the authentication and delivery of the Bonds, the execution and delivery of the Indenture, the performance of the Trustee's duties under the Indenture or the consummation by the Trustee of the other transactions contemplated by the Indenture, except as such may be required under the state securities or blue sky laws in connection with the distribution of the Bonds by the Underwriter. (xix) A certificate of an authorized officer of the 1997 Escrow Bank satisfactory to the Underwriter,certifying substantially as follows: (A) The 1997 Escrow Bank is a national banking association duly organized and in good standing under the laws of the United States of America and has all necessary power and authority to enter into the 1997 Escrow Agreement and to perform its duties under the 1997 Escrow Agreement; (B) The 1997 Escrow Bank is duly authorized to enter into the 1997 Escrow Agreement and, when executed by the other parties thereto, the 1997 Escrow Agreement will constitute a legal, valid and binding obligation of the 1997 Escrow Bank enforceable in accordance with their terms; (C) The 1997 Escrow Bank is not in breach of-or default under any law or administrative rule or regulation of the State of California or of any department, division, agency or instrumentality thereof, or of the United States of America, of any applicable court or administrative decree or order, or any other instrument to which the 1997 Escrow Bank is a party or is otherwise subject or bound and which would materially impair the ability of the 1997 Escrow Bank to perform its obligations under the 1997 Escrow Agreement; (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 or threatened in any way affecting the existence of the 1997 Escrow Bank or the titles of its directors or officers to their respective offices, or in any way contesting or affecting the validity or enforceability of the 1997 Escrow Agreement; (E) The execution and delivery of the 1997 Escrow Agreement will not conflict with or constitute a breach of or default under the 1997 Escrow Bank's duties under such documents, or any law, administrative regulation, court -16- decree, resolution, charter, bylaws or other agreement to which the 1997 Escrow Bank is subject or by which it is bound;and (F) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the 1997 Escrow Bank that has not been obtained is or will be required for the execution and delivery of the 1997 Escrow Agreement, the performance of the 1997 Escrow Bank's duties under the 1997 Escrow Agreement or the consummation by the 1997 Escrow Bank of the other transactions contemplated by the 1997 Escrow Agreement, except as such may be required under the state securities or blue sky laws in connection with the distribution of the Bonds by the Underwriter. (xx) A certificate of an authorized officer of the 2000 Escrow Bank satisfactory to the Underwriter,certifying substantially as follows: (A) The 2000 Escrow Bank is a national banking association duly organized and in good standing under the laws of the United States of America and has all necessary power and authority to enter into the 2000 Escrow Agreement and to perform its duties under the 2000 Escrow Agreement; (B) The 2000 Escrow Bank is duly authorized to enter into the 2000 Escrow Agreement and, when executed by the other parties thereto, the 2000 Escrow Agreement will constitute a legal, valid and binding obligation of the 2000 Escrow Bank enforceable in accordance with their terms; (C) The 2000 Escrow Bank is not in breach of or default under any law or administrative rule or regulation of the State of California or of any department, division, agency or instrumentality thereof, or of the United States of America, of any applicable court or administrative decree or order, or any other instrument to which the 2000 Escrow Bank is a party or is otherwise subject or bound and which would materially impair the ability of the 2000 Escrow Bank to perform its obligations under the 2000 Escrow Agreement; (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 or threatened in any way affecting the existence of the 2000 Escrow Bank or the titles of its directors or officers to their respective offices, or in any way contesting or affecting the validity or enforceability of the 2000 Escrow Agreement; (E) The execution and delivery of the 2000 Escrow Agreement will not conflict with or constitute a breach of or default under the 2000 Escrow Bank's duties under such documents,,or any law, administrative regulation, court decree, resolution, charter, bylaws or other agreement to which the 2000 Escrow Bank is subject or by which it is bound;and (F) No consent, approval, authorization or other action by any governmental or regulatory authority having jurisdiction over the 2000 Escrow Bank that has not been obtained is or will be required for the execution and delivery of the 2000 Escrow Agreement, the performance of the 2000 Escrow Bank's duties under the 2000 Escrow Agreement or the consummation by the 2000 Escrow Bank of the other transactions contemplated by the 2000 Escrow Agreement, except as such may be required under the state securities or blue sky laws in connection with the distribution of the Bonds by the Underwriter. -17- (xxi) An opinion of counsel to the Trustee in form and substance acceptable to the Underwriter; (xxii) An opinion of counsel to the 1997 Escrow Bank in form and substance acceptable to the Underwriter; (xxiii) An opinion of counsel to the 2000 Escrow Bank in form and substance acceptable to the Underwriter; (xxiv) Evidence, satisfactory to Bond Counsel and the Underwriter, of insurance, including a CLTA title insurance policy,in compliance with the Lease Agreement; (xxv) 15c2-12 certificates of City and the Authority; (xxvi)Certified copies of the City Resolution and the Authority Resolution; (xxvii) Evidence, satisfactory to the Underwriter, that the Bonds have been assigned the rating of"Aaa"by Moody's Investors Services; (xxviii) A verification report, prepared by as to the sufficiency of the escrows established for the defeasance of the 1997 Bonds and the callable 2000 Bonds; (xxix) Transcripts of all proceedings relating to the authorization, issuance, execution and delivery of the Bonds certified by the City and the Authority as applicable;and (xxx) Such additional legal opinions, certificates, instruments and other documents as the Underwriter may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the date of the Closing, of the City's representations and warranties contained herein and of the statements and information contained in the Official Statement and the due performance or satisfaction by the City and the Authority on or prior to the date of the Closing of all the agreements then to be performed and conditions then to be satisfied by each of them. All the opinions, letters, certificates, instruments and other documents mentioned above or elsewhere in this Bond Purchase Agreement shall be deemed to be in compliance with the provisions hereof if, but only if, they are in form and substance satisfactory to Bond Counsel, Disclosure Counsel and the Underwriter. If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds contained in this Bond Purchase Agreement, or if the obligations of the Underwriter to purchase, to accept delivery of and to pay for the Bonds shall be terminated for any reason permitted by this Bond Purchase Agreement, this Bond Purchase Agreement shall terminate and none of the Underwriter, the Authority)or the City shall be under any further obligation hereunder. 8. Termination. The Underwriter shall have the right to terminate the Underwriter's obligations under this Bond Purchase Agreement to purchase, to accept delivery of and to pay for the Bonds by notifying the Authority and the City in writing or by telegram, of its election to do so, if, after the execution hereof and prior to the Closing: (a) the United States has become engaged in hostilities which, in the reasonable opinion of the Underwriter, materially adversely affects the marketability or market price of the Bonds; (b) there shall have occurred the -18- declaration of a general banking moratorium by any authority of the United States or the State of New York or the State of California; (c) an event shall have occurred or been discovered as described in paragraph (k) of Section 4 or paragraph (1) of Section 5 hereof which in the opinion of the Underwriter requires the preparation and publication of disclosure material or a supplement or amendment to the Official Statement; (d) any legislation, ordinance, rule or regulation shall be introduced in, or be enacted by any governmental body, department or agency in the State of California, or a decision by any court of competent jurisdiction within the State of California shall be rendered which, in the Underwriter's reasonable opinion, materially adversely affects the market price of the Bonds; (e) any rating of the Bonds or the rating of any obligations of the City secured by the City's general fund shall have been downgraded or withdrawn by national rating services which, in the opinion of the Underwriter, materially adversely affects the market price of the Bonds; (f) legislation shall be introduced, by amendment or otherwise, or be enacted by the House of Representatives or the Senate of the Congress of the United States, or a decision by a court of the United States shall be rendered, or a stop order, ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission or other governmental agency having jurisdiction of the subject matter shall be made or proposed, to the effect that the execution, issuance, delivery, offering or sale of obligations of the general character of the Bonds, or the Bonds, as contemplated hereby or by the Official Statement, is or would be in violation of any provision of the Securities Act of 1933, as amended and as then in effect, or 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 with the purpose or effect of otherwise prohibiting the issuance, offering or sale of obligations of the general character of the Bonds or the Bonds, as contemplated hereby or by the Official Statement; (g) 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; (h) the New York Stock Exchange, or other national securities exchange or association 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 broker-dealers; (i) trading in securities on the New York Stock Exchange or other national securities exchange or association shall have been suspended or limited or minimum prices have been established on either such exchange; (j) any action shall have been taken by any government in respect of its monetary affairs which, in the reasonable opinion of the Underwriter, has a material adverse effect on the United States securities market; or as of the date hereof that in the Underwriter's reasonable opinion materially adversely affects the marketability or market price of the Bonds. If this Bond Purchase Agreement shall be terminated pursuant to Section 7 or this Section 8, or if the purchase provided for herein is not consummated because any condition to the Underwriter's obligations hereunder is not satisfied or because of any refusal, inability or failure on the part of the City or the Authority to comply with any of the terms or to fulfill any of the conditions of this Bond Purchase Agreement, or if for any reason the City or the Authority shall be unable to perform all of its respective obligations under this Bond Purchase Agreement, neither the City nor the Authority shall be liable to the Underwriter for damages on account of loss of anticipated profits arising out of the transactions covered by this Bond Purchase Agreement. The Underwriter may, in its sole discretion, waive any of the conditions set forth in Section 7 or this Section 8. 9. Changes in Official Statement. After the Closing, neither the Authority nor the City will adopt any amendment of or supplement to the Official Statement to which the Underwriter shall reasonably object in writing. Within 25 days following the "end of the underwriting period" (as defined in Section 240 15c-12 in Chapter II of Title 17 of the Code of Federal Regulations (Rule 15c2-12), whichever occurs first, if any event relating to or affecting the Bonds, the City or the Authority shall occur as a result of which it is necessary, in the opinion of -19- the Underwriter, to amend or supplement the Official Statement in order to make the Official Statement not misleading in any material respect in the light of the circumstances existing at the time it is delivered to a purchaser, the Authority will forthwith prepare and furnish to the Underwriter an amendment or supplement that will amend or supplement the Official Statement so that it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Official Statement is delivered to purchaser, not misleading. The City and the Authority shall cooperate with the Underwriter in the filing by the Underwriter of such amendment or supplement to the Official Statement with a nationally recognized municipal securities repository. 10. Payment of Costs and Expenses. (a) All costs and expenses incident to the sale and delivery of the Bonds to the Underwriter shall be payable by the Authority from the proceeds of the Bonds, including, but not limited to: (i) the fees and expenses of the City, its counsel and consultants; (ii) the fees and expenses of the Authority, its counsel and consultants; (iii) the fees and expenses of Bond Counsel; (iv) the fees and expenses of Disclosure Counsel; (v) the fees and expenses of Public Financial Management, Inc., the City's financial advisor; (vi) all expenses in connection with the preparation and printing of the Bonds; (vii) all expenses in connection with the preparation, printing, distribution and delivery of the Preliminary Official Statement, the Official Statement and any amendment or supplement thereto; (viii) the initial fees and expenses of the Trustee, including the reasonable fees and expenses of its counsel; (ix) the fees and expenses of any rating agency rating the Bonds;and (x) any credit enhancement costs for the Bonds. (b) The Underwriter shall pay all expenses incurred by it in connection with the public offering and distribution of the Bonds including, but not limited to: (i) all advertising expenses in connection with the offering of the Bonds; (ii) the fees and disbursements of Underwriter's counsel and (iii) all out-of-pocket disbursements and expenses incurred by the Underwriter in connection with the offering and distribution of the Bonds, including, air travel and hotel accommodations in connection with the pricing of the Bonds; investor meetings, rating agency trips and meetings, the Closing; meals and transportation for the City, the Underwriter and other working group personnel during rating agency, investor meetings; pricing and Closing trips; expenses related to attending working group meetings, such as parking, meals and transportation and any other miscellaneous costs associated with the Closing; (iv) all other expenses incurred by the Underwriter in connection with the public offering and distribution of Bonds, except as provided in (a) above or as otherwise agreed to by the Underwriter and the City,and (v)the fees of the California Debt and Investment Advisory Commission. 11. Notices. Any notice or other communication to be given under this Bond Purchase Agreement may be given by delivering the same in writing: To the City: City of Huntington Beach 2000 Main Street Huntington Beach,CA 92648 Attention:Finance Director To the Authority: Huntington Beach Public Financing Authority 2000 Main Street Huntington Beach,CA 92648 Attention:Treasurer To the Underwriter: Citigroup Global Markets Inc. 444 South Flower Street,27th Floor Los Angeles,CA 90071 Attention:Mr.Christopher Mukai,Director -20- 12. Parties in Interest. This Bond Purchase Agreement is made solely for the benefit of the Authority, the City and the Underwriter (including the successors or assigns of the Underwriter) and no other person shall acquire or have any right hereunder or by virtue hereof. All of the Authority's and the City's representations, warranties and agreements contained in this Bond Purchase Agreement shall remain operative and in full force and effect, regardless of: (a) any investigations made by or on behalf of the Underwriter; (b) delivery of and payment for the Bonds pursuant to this Bond Purchase Agreement; and (c) any termination of this Bond Purchase Agreement. 13. Determination of End of the Underwriting Period. For purposes of this Bond Purchase Agreement, the end of the underwriting period for the Bonds shall mean the earlier of (a) the Closing Date unless the City and the Authority have been notified in writing by the Underwriter, on or prior to the Closing Date, that the "end of the underwriting period" for the Bonds for all purposes of the Rule will not occur on the Closing Date, or (b) the date on which notice is given to the City and the Authority by the Underwriter in accordance with the following sentence. In the event that the Underwriter has given notice to the City and the Authority pursuant to clause (a) above that the "end of the underwriting period" for the Bonds will not occur on the Closing Date, the Underwriter agrees to notify the City and the Authority in writing as soon as practicable following the "end of the underwriting period" for the Bonds for all purposes of the Rule. The Underwriter agrees to file a copy of the Official Statement with each of the nationally recognized municipal securities information repositories. 14. No Assignment. This Bond Purchase Agreement is entered into between the City, the Authority and the Underwriter, and is solely for the benefit of the City, the Authority, the Underwriter and their respective successors or assigns, and no person other than the foregoing shall acquire or have any right under or by virtue of this Bond Purchase Agreement. All of the representations, warranties and agreements contained in this Bond Purchase Agreement shall survive the delivery of and payment for the Bonds and any termination thereof. 15. Effectiveness. This Bond Purchase Agreement shall become effective upon the execution of the acceptance by an authorized representative of the City and an authorized representative of the Authority and shall be valid and enforceable at the time of such acceptance. 16. Headings. The headings of the sections of this Bond Purchase Agreement are inserted for convenience only and shall not be deemed to be a part hereof. 17. Governing Law. This Bond Purchase Agreement shall be interpreted, governed and enforced in accordance with the laws of the State of California. 18. Counterparts. This Bond Purchase Agreement may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute one and the same instrument. -21- If the foregoing is in accordance with your understanding of this Bond Purchase Agreement please sign and return to us the enclosed duplicate copies hereof, whereupon it will become a binding agreement among the City, the Authority and the Underwriter in accordance with its terms. Very truly yours, CITIGROUP GLOBAL MARKETS INC.,as Underwriter By Title Accepted: HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Title CITY OF HUNTINGTON BEACH By Title -22- EXHIBIT A HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Lease Revenue Refunding Bonds,2008 Series A MATURITIES,PRINCIPAL AMOUNTS,INTEREST RATES,PRICES AND YIELDS Maturity Principal Interest September 1 Amount Rate Yield Price Redemption Provisions Optional Redemption The Bonds maturing on or after September 1, are subject to optional redemption prior to their respective stated maturities, at the written direction of the Authority, from moneys deposited by the Authority or the City, in whole or in part, in such order of maturity as the City designates (and, if no specific order of redemption is designated by the City, in inverse order of maturity), on any date on or after September 1, , from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Account Redemption The Bonds maturing on September 1, (the "Term Bonds") are also subject to mandatory sinking fund redemption in part by lot on September 1, , and on September 1, , from Mandatory Sinking Account Payments made by the Authority at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, in the aggregate respective principal Exhibit A Page 1 amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of the Term Bonds have been optionally redeemed, the total amount of all future Sinking Account payments will be reduced by the aggregate principal amount of Term Bonds so redeemed, to be allocated among the Mandatory Sinking Account Payments as are thereafter payable on a pro rata basis in integral multiples of $5,000 as determined by the Authority (notice of which determination is required to be given by the Authority to the Trustee). Sinking Account Redemption Date Principal Amount to be (September 1) Redeemed or Purchased tMaturity In lieu of redemption of the Term Bonds, amounts on deposit as Mandatory Sinking Account payments may also be used and withdrawn by the Trustee, at the written direction of the Authority, at any time for the purchase of Term Bonds otherwise required to be redeemed on the following September 1 at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Authority may in its discretion determine. The par amount of any of the Term Bonds so purchased by the Authority and surrendered to the Trustee for cancellation in any 12-month period ending on September 1 in any year are required to be credited towards and will reduce the par amount of the Term Bonds otherwise required to be redeemed on the following September 1. Extraordinary Redemption from Insurance or Condenmation Proceeds The Bonds are also subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, in integral multiples of $5,000, to the extent of prepayments made by the City from insurance proceeds or condemnation proceeds not used to repair, reconstruct or replace any portion of the Property damaged or destroyed or elected by the City to be used for such purpose, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption,without premium. Exhibit A Page 2 Quint &Thimmig LLP 01/25/08 01/31/08 CONTINUING DISCLOSURE CERTIFICATE This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and delivered by the CITY OF HUNTINGTON BEACH (the "City") in connection with the issuance by the Huntington Beach Public Financing Authority (the "Authority") of $ aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds"). The Bonds are being issued pursuant to an indenture of trust, dated as of April 1, 2008 (the "Indenture"), by and between the Authority and as trustee (the "Trustee"). The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders 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 Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Dissemination Agent" shall mean _________ or any successor Dissemination Agent designated in writing by the City and which has filed with the City and the Trustee a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. "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. "State Repository" shall mean 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 Certificate, there is no State Repository. 08008.04 Section 3. Provision of Annual Reports. (a) The City shall,or upon written direction shall cause the Dissemination Agent to, not later than June 30 of each year (being the last day of the 9th month after the end of the City's fiscal year, which ends on September 30), commencing with the report for the 2006-07 fiscal year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Trustee. Not later than fifteen (15) Business Days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). 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 Certificate; provided that the audited financial statements of the City 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 not available by that date. The filing of the official statement prepared for the Bonds shall satisfy the filing requirement for the 2006-07 fiscal year. If the City's fiscal year changes, they shall give notice of such change to the Municipal Securities Rulemaking Board and each State Repository with a copy to the Trustee. The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder. (b) If the City does not provide, or cause the Dissemination Agent to provide, an Annual Report to the Repositories by the Annual Report date as required in subsection (a) above, the Dissemination Agent shall send a notice to (i) either the National Repositories or the Municipal Securities Rulemaking Board and (ii) the appropriate State Repository, if any, in substantially the form attached as Exhibit A, with a copy to the Trustee (if different than the Dissemination Agent). (c) With respect to the Annual Report, the Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the City, and if, and to the extent, the City has provided an Annual Report in final form to the Dissemination Agent for dissemination, file a report with the City certifying that the Annual Report has been provided to the Repositories pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited Financial Statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board of the City. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain .unaudited financial statements in a format similar to the financial statements contained in the final official statement for the Bonds, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or prior to the annual filing deadline for Annual Reports provided for in Section 3 above, financial information and operating data with respect to the City for preceding fiscal year, -2- substantially similar to that provided in the corresponding tables and charts in the official statement for the Bonds in the section therein entitled "CITY FINANCIAL INFORMATION." 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 City and/or related public entities, 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 Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. (c) In addition to any of the information expressly required to be provided under this Disclosure Certificate, the City shall provide such further material 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. Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (i) Principal and interest payment delinquencies. (ii) Non-payment related defaults. (iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinions or events affecting the tax-exempt status of the security. (vii) Modifications to rights of security holders. (viii) Contingent or unscheduled bond calls. (ix) Defeasances. (x) Release, substitution, or sale of property securing repayment of the securities. (xi) Rating changes. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable Federal securities law. The Dissemination Agent shall have no responsibility for such determination and shall be entitled to conclusively rely on the City's determination. (c) If the City determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the City shall promptly file a notice of such occurrence with (i) each National Repository or the Municipal Securities Rulemaking Board and (ii) the appropriate State Repository, if any, with a copy to the Trustee (if different than the Dissemination Agent). Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Indenture. Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the earlier of 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 City shall promptly file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository with a copy to the Trustee. -3- Section 7. Dissemination Agent. (a) The initial Dissemination Agent shall be The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Certificate, unless the City is the Dissemination Agent, as provided herein. The initial Dissemination Agent shall be the City. If at any time there is no designated Dissemination Agent appointed by the City, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the City shall be the Dissemination Agent and undertake or assume its obligations hereunder. Any company succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act. The Dissemination Agent may resign its duties hereunder at any time upon written notice to the City. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the City from time to time and for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent (unless the City is the Dissemination Agent) shall have no duty or obligation to review any information provided to it by the City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, holders or beneficial owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the City or an opinion of nationally recognized bond counsel retained by the City. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a) or 4, 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; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not,in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the 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 4- 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 City 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 Municipal Securities Rulemaking Board and each State Repository with a copy to the Trustee. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate 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 Certificate. If the City 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 Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate the Trustee, at the written direction of the Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent moneys or other indemnity satisfactory to the Trustee, has been furnished to the Trustee to hold it harmless from any loss, costs, liability or expense, including fees and expenses of its attorneys and any additional fees of the Trustee, or any holder 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 City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Certificate and the Indenture, and the City agrees to indemnify and save the Dissemination Agent and the Trustee, their 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 its powers and duties hereunder and thereunder, including the costs and expenses (including attorneys fees) of defending .against any claim of liability, but excluding liabilities due to the Dissemination Agent's or the Trustee's respective negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information provided to it by the City and shall not be deemed to be acting in any fiduciary capacity for the City, -5- the Bond holders or any other party. The obligations of the City under this Section 11 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Authority, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. Alternative Filing Location. Any filing under this Disclosure Certificate may be made solely by transmitting such filing to the Texas Municipal Advisory Council (the "MAC") as provided at http://www.disclosureusa.org, unless the United States Securities and Exchange Commission has withdrawn the interpretive advice in its letter to the MAC, dated September 7,2004. Date: April 6, 2008 CITY OF HUNTINGTON BEACH By Name Title ACKNOWLEDGED: as Dissemination Agent By Name Title -6- EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD AND EACH STATE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Huntington Beach Public Financing Authority Name of Issue: $__ _ Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A Date of Issuance: April 6, 2008 NOTICE IS HEREBY GIVEN to [(i) each National Repository or the Municipal Securities Rulemaking Board and (ii) each appropriate State Repository] [the Municipal Securities Rulemaking Board] that the City of Huntington Beach (the "City") has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated April 6, 2008, executed by the City. The City anticipates that the Annual Report will be filed by Dated: as Dissemination Agent By Name Title cc: Trustee Quint &Thimmig LLP 01/25/08 FORM OF FINAL OPINION OF BOND COUNSEL [Letterhead of Quint & Thimmig LLP] April 6, 2008 Huntington Beach Public Financing Authority 2000 Main Street Huntington Beach, California 92648 OPINION: $___ Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A Members of the Authority: We have acted as bond counsel in connection with the delivery by the Huntington Beach Public Financing Authority (the "Authority") of $_______ aggregate principal amount of the bonds of the Authority designated the "Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A" (the 'Bonds"), pursuant to the provisions of Article 4 (commencing with section.6584)of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Law"), and pursuant to an indenture of trust, dated as of April 1, 2008 (the "Indenture"), by and between the Authority and _ , as trustee, and a resolution of the Authority adopted on February 19, 2008. The Bonds are secured by Revenues (as defined in the Indenture), including certain payments made by the City of Huntington Beach (the "City") under a lease agreement, dated as of April 1, 2008 (the "Lease Agreement"), by and between the Authority and the City. We have examined the Law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority and the City contained in the Indenture and Lease Agreement, as applicable, and in the certified proceedings, and upon other certifications furnished to us, without undertaking to verify the same by independent investigation. Based upon our examination we are of the opinion, under existing law, that: 1. The Authority is a duly constituted joint exercise of powers authority under the laws of the State of California with power to enter into the Indenture, to perform the agreements on its part contained therein and to issue the Bonds. 2. The Bonds constitute legal, valid and binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture. 3. The Indenture has been duly approved by the Authority and constitutes a legal, valid and binding obligation of the Authority enforceable against the Authority in accordance with its terms. Huntington Beach Public Financing Authority April 6, 2008 Page 2 4. The Indenture establishes a valid first and exclusive lien on and pledge of the Revenues (as such term is defined in the Indenture) and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture. 5. Subject to the Authority's and the City's compliance with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes under section 103 of the Internal Revenue Code of 1986, as amended (the "Code") and, under section 55 of the Code, is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the Authority or the City to comply with one or more of such covenants could cause interest on the Bonds to not be excludable from gross income under section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the Bonds. 6. Interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. In rendering this opinion, we have relied upon certifications of the Authority, the City and others with respect to certain material facts. Our opinion represents our legal judgment based upon such review of the law and the facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, Quint &Thimmig LLP 01/25/08 AFTER RECORDATION RETURN TO: Quint& Thimmig LLP 575 Market Street, Suite 3600 San Francisco, CA 94105-2874 Attention: Brian D. Quint, Esq. THIS TRANSACTION IS EXEMPT FROM CALIFORNIA DOCUMENTARY TRANSFER TAX PURSUANT TO SECTION 11929 OF THE CALIFORNIA REVENUE AND TAXATION CODE. THIS DOCUMENT IS EXEMPT FROM RECORDING FEES PURSUANT TO SECTION 27383 OF THE CALIFORNIA GOVERNMENT CODE. TERMINATION AGREEMENT Dated April 6, 2008 by and among the CITY OF HUNTINGTON BEACH the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY and U.S. BANK NATIONAL ASSOCIATION, as Successor Trustee Relating to the Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) 08008.04 TERMINATION AGREEMENT This TERMINATION AGREEMENT is made and entered into this 6th day of April, 2008, by and among the CITY OF HUNTINGTON BEACH (the "City"), the HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY (the "Authority"), and U.S. BANK NATIONAL ASSOCIATION, successor to First Trust of California, National Association, as trustee (the "1997 Trustee"). WITNE SSE TH : WHEREAS, the Authority has heretofore issued its $8,070,000 Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project) (the "1997 Bonds"), the proceeds of which were used to finance the costs of the acquisition, construction, installation and equipping of certain public capital improvements (the "1997 Project"); WHEREAS, the 1997 Bonds were issued pursuant to the terms of a trust indenture, dated as May 1,1997 (the "1997 Indenture"), by and between the Authority and First Trust of California, National Association, since succeeded by U.S. Bank National Association, as trustee thereunder (the "1997 Trustee"); WHEREAS, in order to provide for the repayment of the 1997 Bonds, the City and the Authority have heretofore entered into a base lease, dated as of May 1, 1997 (the "1997 Base Lease"), and a lease agreement, dated as of May 1, 1997, evidenced by a memorandum of lease agreement (the "1997 Lease Agreement"), pursuant to which the Authority and the City entered into a transaction for the lease financing of the 1997 Project and the City agreed to make certain lease payments (the "1997 Lease Payments") to the Authority; WHEREAS, the City has determined that, as a result of favorable financial market conditions and for other reasons, it is in the best interests of the City at this time to refinance the City's obligation to make the 1997 Lease Payments and, as a result thereof, to provide for the redemption all outstanding 1997 Bonds in full on May 10, 2008, at the redemption price equal to 101% of the principal amount thereof, plus accrued interest, and to that end, the City proposes to enter into a new lease agreement, dated as of April 1, 2008, by and between the Authority and the City; WHEREAS, the 1997 Lease Agreement provides that in the event that the City deposits, or causes the deposit on its behalf of moneys for the prepayment of the 1997 Lease Payments, then all of the obligations of the City under the 1997 Lease Agreement and all of the security provided by the City for such obligations, excepting only the obligation of the City to make the 1997 Lease Payments from said deposit, shall cease and terminate, and unencumbered title to the 1997 Project shall be vested in the City without further action by the City or the Authority; WHEREAS, to obtain moneys to make such deposit, the Authority has agreed to issue its $_ _ Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds"), pursuant to the terms of an indenture, dated as April 1, 2008 (the "Indenture"), by and between the Authority and U.S. Bank National Association, as trustee thereunder (the "Trustee"); WHEREAS, upon delivery of the Bonds and deposit of a portion of the proceeds for prepayment of the 1997 Lease Payments, the 1997 Lease Agreement and the agreements related thereto need not be maintained (except as otherwise provided below), and the parties hereto now desire to provide for the termination of such documents as provided herein. NOW, THEREFORE, in consideration of the foregoing and for other consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree: Section 1. Termination. (a) By virtue of the deposit of a portion of the proceeds of the Bonds for prepayment of the 1997 Lease Payments, all obligations of the City under the 1997 Lease Agreement shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, all payments from such deposit and title to the 1997 Project shall vest in the City automatically and without further action by the City or the Authority. Said deposit and interest earnings thereon shall be deemed to be and shall constitute a special fund for the prepayment of the 1997 Lease Payments. (b) In accordance with the foregoing, the following agreements are hereby terminated and are of no further force or effect: 1. unrecorded 1997 Base Lease; 2. unrecorded 1997 Lease Agreement,; and 3. Memorandum of Base Lease Agreement and Lease Agreement, dated as of May 1, 1997, recorded on May 13, 1997, as Document No. 19970221305, Official Records of Orange County; and 4. unrecorded Assignment Agreement, dated as of May 1, 1997. (c) that from and after the date hereof, none of the parties shall have any further rights or obligations thereunder. Section 2. Execution in Counterparts. This Termination 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. -2- IN WITNESS WHEREOF, the parties hereto have duly executed this Termination Agreement. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Name Title Attest: Joan L. Flynn Secretary CITY OF HUNTINGTON BEACH, as Lessee By Name Title Attest: Joan L. Flynn City Clerk U.S. BANK NATIONAL ASSOCIATION, as 1997 Trustee By Martin Meza Assistant Vice President -3- NOTARY ACKNOWLEDGMENTS TO BE INSERTED EXHIBIT A DESCRIPTION OF THE SITE THAT CERTAIN PARCEL OF LAND IN THE CITY OF HUNTINGTON BEACH, COUNTY OF ORANGE, STATE OF CALIFORNIA, BEING THAT PORTION OF THE RANCHO LAS BALSAS, SECTIONS 26 AND 35, TOWNSHIP 5 SOUTH, RANGE 11 WEST, AS SHOWN ON MAP RECORDED IN BOOK 51, PAGE 13 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: COMMENCING AT THE CENTERLINE INTERSECTION OF GOLDEN WEST STREET AND ELLIS AVENUE, SAID CENTERLINE INTERSECTION BEING DELINEATED AS THE ORANGE COUNTY HORIZONTAL CONTROL STATION "GPS #5059" HAVING A STATE PLANE COORDINATE VALUE OF NORTHING 2200569.821 FEET AND FASTING 6027477.751 FEET; THENCE NORTH 0016'33" EAST, 2641.81 FEET ALONG THE CENTERLINE OF GOLDEN WEST STREET TO A POINT OF INTERSECTION WITH THE CENTERLINE OF TALBERT AVENUE, SAID CENTERLINE INTERSECTION BEING DELINEATED AS THE ORANGE COUNTY HORIZONTAL CONTROL STATION "GPS #5073" HAVING A STATE PLANE COORDINATE VALUE OF NORTHING 2203211.545 FEET AND FASTING 6027490.465 FEET AND SAID POINT BEING THE SOUTHWESTERLY CORNER OF SAID SECTION 26; THENCE SOUTH 89°43'27" EAST, 207.74 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 2°07'44" WEST, 320.54 FEET; THENCE NORTH 87020'19" EAST, 1122.81 FEET; THENCE NORTH 36°13'50" WEST, 535.78 FEET; THENCE NORTH 0012'15" EAST, 377.82 FEET; THENCE NORTH 83°19'27" WEST, 562.50 FEET; THENCE SOUTH 21008'07" WEST, 261.18 FEET; THENCE SOUTH 14°28'10" EAST, 235.93 FEET; THENCE SOUTH 77048'10" WEST. 201.57 FEET; THENCE SOUTH 2°07'44" WEST. 96.63 FEET TO THE TRUE POINT OF BEGINNING. CONTAINING: 15.74 Acres, more or less. Exhibit A Page I PRELIMINARY OFFICIAL S`I A"Ilib'EN I'D aaI'}:(:3'4 ARCH-11,2008 NEW ISSUE—BOOK-ENTRY ONLY RATINGS: _ Moodv's: S&P:" See"RATINGS"herein. In the opinion of Quint&Thiniong LLP,San Francisco,California,Bond Counsel,subject to the Authority's compliance with certain covenants,interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes under section 103 of the Internal Revenue Code of 1986,as amended(the"Code")and,under section 55 of the Code,is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code,but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations.Failure by the Authority to comply with one or more of such covenants could cause interest on the Bonds to not be excludable from gross income under section 103 of the Code for federal income tax purposes retroactively to the date of _ issuance of the Bonds.In addition,in the opinion of Bond Counsel,interest on the Bonds is exempt from personal income taxation imposed by the State of California.See"TAX MATTERS"herein. qz.., HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY (Orange County,California) Lease Revenue Refunding Bonds,2008 Series A Dated:Date of Delivery Due:September 1,as shown below The$ *Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds,2008 Series A(the"Bonds`),are being issued by the Huntington Beach Public Financing Authority,a joint exercise of powers entity organized and existing under the laws of the State of California(the"Authority`),pursuant to Article 4,Chapter 5,Division 7, Title 1(commencing with section 6584)of the California Government Code,a resolution of the Authority authorizing the issuance of the Bonds and an Indenture,dated as of April 1,2008(the"Indenture"),by and between the Authority and as trustee(the"Trustee").The Bonds are being issued to(a)refinance the costs of the acquisition,construction,installation and equipping of certain public capital improvements,including the refunding of the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds,1997 Series A(Public Facilities Project),and the refunding of a portion of the outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds,2000 Series A(Capital Improvement Financing Project),(b)fund a reserve fund for the Bonds,and(c)pay costs of issuance of the Bonds.See"THE REFUNDING PLAN"and"ESTIMATED SOURCES AND USES OF FUNDS"herein.The Bonds are secured by a pledge of and lien on the Revenues(as defined herein)and the amounts in the Reserve Fund(as-defined herein). The Bonds are issuable in denominations of$5,000 and any integral multiple thereof.interest on the Bonds is payable on March 1 and September 1 of each year,commencing September 1,2008.See"THE BONDS"herein. The Bonds will be delivered in fully registered form only,and,when delivered,will be registered in the name of Cede&Co.,as nominee of The Depository Trust Company,New York,New York("DTC").DTC will act as securities depository of the Bonds.Ownership interests in the Bonds may be purchased in book-entry form only.Principal of,premium,if any,and interest on the Bonds will be paid by the Trustee to DTC or its nominee,which will in turn remit such payment to its participants for subsequent disbursement to the beneficial owners of the Bonds.See"THE BONDS"herein and APPENDIX E—"BOOK-ENTRY ONLY SYSTEM" The Bonds are subject to optional and mandatory redemption as described herein.See"THE BONDSRedemption"herein. The City will lease certain real property and the improvements thereon from the Authority pursuant to a Lease Agreement,dated as of April 1,2008(the"Lease Agreement"),by and between the Authority and the City.Under the Lease Agreement,the City is required to make Lease Payments(as defined herein)from legally available funds in amounts calculated to be sufficient to pay principal of and interest on the Bonds when due.All of the Authority's right,title and interest in and to the Lease Agreement(except for the right to receive any Additional Payments(as defined herein)to the extent payable to the Authority and certain rights to indemnification),including the right to receive Lease Payments under the Lease Agreement,are assigned to the Trustee under the Indenture for the benefit of the Bondowners.See"SECURITY FOR THE BONDS"herein. THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES PLEDGED UNDER THE INDENTURE.THE BONDS ARE NOT A DEBT OF THE CITY,THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL.SUBDIVISIONS,EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN,AND NEITHER THE CITY,THE STATE OF CALIFORNIA NOR ANY OF ITS POLITICAL SUBDIVISIONS,EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN,IS LIABLE THEREON.IN NO EVENT SHALL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT Of ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR SFATUTORY DEBT LIMITATION OR RESTRICTION, NEITHER THE MEMBERS OF THE AUTHORITY,THE CITY NOR ANY PERSONS EXECUTING THE BONDS ARE LIABLE PERSONALLY ON THE BONDS BY REASON OFT HEIR ISSUANCE. MATURITY SCHEDULE* $ Serial Bonds CUSIP Prchx- t _— Maturity Principal Interest CUSIP Maturity Principal Interest CUSIP (September 1) Amount Rate Yield Sufltxt (September 1) Amount Rate Yield Soffixt $ %Term Bonds due September 1, Price: %,to Yield %;CUSIP t This cover page contains information for quick reference only.It is not a summary of this issue.Potential purchasers must read the entire Official Statement to obtain information —= essential to making an informed investment decision. The Bonds will be offered when,as and if issued,and received by the Underwriters,subject to the approval as to their validity by Quint&Thimmig LLP,San Francisco,California, Bond Counsel,and certain other conditions.Certain legal matters will be passed upon for the City and the Authority by the City Attorney and by Quint&Thimmig LLP,San Francisco,California,Disclosure Counsel.Certain legal matters will be passed upon for the Underwriter by Stradling Yucca Carlson&Rauth,Newport Beach,California,It is anticipated that the Bonds will be available for delivery through DTC in New York,Nerc York,on or about April 6,2008. Cltl Dated:March 2008 *Prclimi ary,subject to change. t Copc r�ght 2008,A nerican Ba rke.A-o—non_CUSIP rec,.:tc-r d trademark of the Amor ca n Ba-k ,Assoc afon-CUSIP data he c t n is pros lcd b,the CUSIP S—-,Bumac,operated by Standard&Peor's,o d of The M, ra,I ifI Compan s,Inc This data i not,ctended r,e eve n&tabasc and does rot x e ,-!,,taut,h for the CUSIP Ser, B u r.CUSIP n mbers hark been a signed by in ndependont company not atf fated mlh the Artlho ih'e,the C f,o nd a ndc dcd solely for the convo n c of the n'Ig tc ed o of the Bonds.Neither the Autl e nh ,or the City-s espo s bte for the'el-t,—or c of these CUSIP n tube nd n repro ntnt onis made as to the uhxss on the Bo t.r u le deal here n-The CI.SII'r tuber for a specfic maturitl is vubjer.t to bcTg changed after the rsscn n of the Bonds salt otc wbsegcev aetou-ncled nn,betnotlmTcwi to a refrndi"f; whole,, sport or ass esultofthcprocuvement of seconder market portfolio inscranceor other<mlar enhuncenent by ncestors thill eappllcable to all urn portion of certain maturities of the Bonds- HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY CITY OF HUNTINGTON BEACH City of Huntington Beach 2000 Main Street Huntington Beach, CA 92648 http://www.surfcity-hb.org Authority Board of Directors and City Council Debbie Cook, Chair/Mayor Keith Bohr, Vice Chair/Mayor Pro Tem Joe Carehio, Boardmember/Councilmember Gil Coerper, Board member/Councilmember Cathy Green, Boardmember/Councilmember Don Hansen, Board111en1bcrICoilncil111ember Jill Hardy, Boardmember/Councilmember City Staff Paul Emery, Interim City Administrator Robert Hall, Deputy City Administrator Shari Freidenrieh, City Treasurer Daniel T. Villella, Director of Finance Jennifer McGrath, City Attorney Joan L. Flynn, City Clerk Professional Services Quint& Thimmig LLP San Francisco, California Bond Counsel and Disclosure Counsel Public Financial Management, Inc. Los Angeles, California Financial Advisor Los Angeles, California Trustee The Bank of New York Trust Company, N.A. Los Angeles, California 2000 Escrozv Bank U.S. Bank National Association Los Angeles, California 1997 Escrow Bank Verification Agent No dealer, broker, salesperson or other person has been authorized by the Authority, the City or the Underwriter to give any information or to make any representations other than as set forth herein and,if given or made, such other information or representation must not be relied upon as having been authorized by the Authority, the City or the Underwriter. This Official Statement does not constitute an offer to sell on-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 of the Bonds. Statements contained in this Official Statement that 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 facts. The information set forth in this Official Statement has been obtained from official sources and other sources that are believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation of the Underwriter. 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 Authority or the City since the date hereof. This Official Statement is submitted in connection with the sale of the Bonds referred to herein and may not be reproduced or used, in whole or in part, for any other purpose. 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 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. 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 "plan," "expect," "estimate,""budget" or other similar words. 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. No assurance is given that actual results will meet the Authority's or the City's forecasts in any way, regardless of the level of optimism communicated in the information. The Authority is not obligated to issue any updates or revisions to the forward-looking statements if or when its expectations,or events, conditions or circumstances on which such statements are based occur. See "CONTINUING DISCLOSURE" herein. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE OF THIS OFFICIAL STATEMENT, AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. The City maintains a website, however, the information presented therein is not a part of this Official Statement and should not be relied on in making an investment decision with respect to the Bonds. TABLE OF CONTENTS INTRODUCTION...................................................................1 Ad Valorem Property Taxes............................................24 General Description...........................................................1 Taxable Property and Assessed Valuation.............25 Terms of the Bonds............................................................1 Direct and Overlapping Bonded Debt.....................26 Book-Entry Only..................................................................2 Alternative Method of Tax Apportionment..........27 Source of Payment for the Bonds.................................2 Other Local Taxes.............................................................27 ReserveAccount.................................................................2 In-Lieu Payments..............................................................28 Additional Bonds................................................................3 Other General Fund Revenue Sources....................28 TheCity...................................................................................3 Alternative Liquidity.......................................................29 The Authority.......................................................................3 Retirement Programs......................................................29 Limited Liability...............................................................`.3 Employee Relations and Collective Continuing Disclosure......................................................3 Bargaining..........................................................................30 TaxMatters............................................................................4 Risk Management.............................................................31 Certain Risk Factors...........................................................4 City Investment Policy and Portfolio........................32 Other Information..............................................................4 Financial Statements........................................................33 ESTIMATED SOURCES AND USES OF FUNDS....5 Short-Term Obligations..................................................37 THE PROPERTY.....................................................................5 Long-Term Obligations..................................................37 THE REFUNDING PLAN..................................................6 CERTAIN RISK FACTORS..............................................37 Refunding of the 1997 Bonds.........................................6 Not a Pledge of Taxes.....................................................37 Refunding of a Portion of the 2000 Bonds................6 Additional Obligations of the City.............................38 THEBONDS.............................................................................7 Default...................................................................................38 General....................................................................................7 Abatement...........................................................................38 Transfer and Exchange of Bonds..................................8 Loss of Tax Exemption...................................................39 Optional Redemption.......................................................8 Earthquakes.........................................................................39 Mandatory Sinking Account Redemption...............9 Limitations on Remedies...............................................39 Extraordinary Redemption from Insurance or Bankruptcy...........................................................................40 Condemnation Proceeds...............................................9 Hazardous Substances....................................................41 Selection of Bonds for Redemption...........................10 Investment of Funds.......................................................41 Notice of Redemption.....................................................10 Secondary Market.............................................................42 Partial Redemption of Bonds.......................................10 State Budget........................................................................42 Effect of Redemption.......................................................10 CONSTITUTIONAL AND STATUTORY SECURITY FOR THE BONDS........................................11 LIMITATIONS ON TAXES AND General..................................................................................II APPROPRIATIONS.............................................................44 Lease Payments and Additional Payments...........11 Article XIIIA........................................................................44 Insurance and Condemnation Awards...................12 Article XIIIB.........................................................................44 ReserveAccount...............................................................13 Proposition 62.....................................................................45 Abatement...........................................................................13 Proposition 218.................................................................-46 Insurance..............................................................................14 Proposition 1A...................................................................48 Debt Service Schedule....................................................15 Future Initiatives...............................................................48 Additional Bonds..............................................................15 TAX MATTERS.....................................................................48 THE AUTHORITY...............................................................15 CERTAIN LEGAL MATTERS.........................................49 THE CITY.................................................................................16 FINANCIAL STATEMENTS...........................................49 General..................................................................................16 LITIGATION...........................................................................49 MunicipalGovernment..................................................16 RATINGS.................................................................................49 Population............................................................................IS UNDERWRITING................................................................50 Employment.......................................................................19 FINANCIAL ADVISOR....................................................50 Major Employers...............................................................20 VERIFICATION OF MATHEMATICAL' Largest Taxpayers.............................................................22 COMPUTATIONS................................................................50 CITY FINANCIAL INFORMATION...........................23 CONTINUING DISCLOSURE........................................51 Budgetary Process and Administration...................23 ADDITIONAL INFORMATION...................................51 Revenues and Expenditure Trends..........................23 APPENDIX A: AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30,2007 APPENDIX B: SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS APPENDIX C: PROPOSED FORM OF BOND COUNSEL OPINION APPENDIX D: FORM OF CONTINUING DISCLOSURE CERTIFICATE APPENDIX E: BOOK-ENTRY ONLY SYSTEM OFFICIAL STATEMENT HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY Lease Revenue Refunding Bonds, 2008 Series A INTRODUCTION The following introduction presents a brief description of certain information in connection with the Bonds (as defined below) and is qualified in its entirety by reference to the entire Official Statement and the documents summarized or described herein. References to, and summaries of, provisions of the Constitution and the laws of the State of California (the "State") and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions thereof. Capitalized terms used in this Official Statement and not defined elsewhere herein have the meanings given such terms in the Indenture. See APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS—Definitions." General Description This Official Statement, including the cover page, the inside cover page and the attached appendices (this "Official Statement"), provides certain information concerning the issuance of $— _* aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds"), by the Huntington Beach Public Financing Authority, a joint exercise of powers entity organized under the laws of the State (the "Authority"). The Bonds are being issued pursuant to Article 4, Chapter 5, Division 7, Title 1 (commencing with section 6584) of the California Government Code, a resolution of the Authority authorizing the issuance of the Bonds (the "Authority Resolution") and an Indenture, dated as of April 1, 2008 (the "Indenture"), by and between the Authority and , as trustee (the "Trustee"). The Bonds are being issued to (a) refund the Authority's outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 1997 Series A (Public Facilities Project)(the "1997 Bonds"), (b) refund a portion of the Authority's outstanding Huntington Beach Public Financing Authority Lease Revenue Bonds, 2000 Series A (Capital Improvement Financing Project)(the "2000 Bonds"), (c) fund a reserve fund for the Bonds and (d) pay costs of issuance of the Bonds. See "THE REFUNDING PLAN" and "ESTIMATED SOURCES AND USES OF FUNDS" herein. Terms of the Bonds The Bonds will mature on the dates and in the principal amounts set forth on the cover page of this Official Statement. Interest on the Bonds is payable semiannually on each March 1 and September 1 (each, an "Interest Payment Date"), commencing September 1, 2008, computed at the respective rates of interest set forth on the inside cover page of this Official Statement. The Bonds will be issuable in denominations of $5,000 or any integral multiple thereof. The Bonds are subject to optional and mandatory redemption as described herein. See "THE BONDS" herein. Preliminary,subject to change. Book-Entry Only The Bonds will be issuable in fully registered form only and, when issued and delivered, will be registered in the name of Cede & Co., as nominee of the Depository Trust Company, New York,New York ("DTC"). DTC will act as the depository of the Bonds and all payments due on the Bonds will be made to DTC or its nominee. Ownership interests in the Bonds may be purchased in book-entry form only. See APPENDIX E—"BOOK-ENTRY ONLY SYSTEM." Source of Payment for the Bonds Pursuant to the Site and Facility Lease, dated as of April 1, 2008 (the "Site and Facility Lease"), by and between the City and the Authority, the City will lease to the Authority certain real property and certain facilities and improvements located thereon (the "Property") owned by the City. See "THE PROPERTY" herein. Concurrently, the City will sublease the Property from the Authority pursuant to a Lease Agreement, dated as of April 1, 2008 (the "Lease Agreement"), by and between the Authority and the City. Under the Lease Agreement, subject to abatement as provided therein, the City is required to make lease payments (the "Lease Payments") from legally available funds for use and occupancy of the Property in amounts calculated to be sufficient to pay principal of and interest on the Bonds when due. The City has covenanted in the Lease Agreement to take such action as may be necessary to include the Lease Payments in each of its annual budgets during the Term of the Lease Agreement and has further covenanted to make the necessary annual appropriations for all such Lease Payments. All of the Authority's right, title and interest in and to the Lease Agreement (apart from certain rights to receive Additional Payments (as defined herein) to the extent payable to the Authority and to indemnification), including the right to receive Lease Payments under the Lease Agreement, are assigned to the Trustee under the Indenture for the benefit of the Bondowners. Except to the extent of amounts held in the Reserve Account or otherwise available to the City for payments under the Lease Agreement, during any period in which, by reason of material damage or destruction (other than by condemnation, which is provided for in the Lease Agreement) there is substantial interference with the use and occupancy by the City of any portion of the Property, Lease Payments will be adjusted or abated in the proportion in which the value of that portion of the Property rendered unusable bears to the entire value of the Property. Such adjustment or abatement will end with the substantial replacement or reconstruction of the Property. See "SECURITY FOR THE BONDS—Abatement" herein. The Bonds are special limited obligations of the Authority payable solely from and secured by the Revenues (as defined herein) and certain other amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account established under the Indenture and pledged therefor, and the Revenues may not be used for any other purpose while any of the Bonds remain Outstanding; provided, however, that the Revenues may be applied for such other purposes as are permitted under the Indenture. "Revenues" means (i) all Lease Payments and other amounts paid, or caused to be paid, by the City, and received by the Authority pursuant to the Lease Agreement (but not Additional Payments), and (ii) all interest or other income from any investment of any- money in any fund or' account established pursuant to the Indenture (other than the Rebate Fund). Reserve Account A reserve fund (the "Reserve Account") will be established and held under the Indenture in order to secure the payment of principal of and interest on the Bonds in an -2- amount, as of the Closing Date, equal to the Reserve Requirement (as defined herein). A portion of the proceeds of the Bonds will be deposited in the Reserve Account in an amount equal to the Reserve Requirement. If, on any Interest Payment Date for the Bonds, the amounts on deposit under the Indenture to pay the principal of and interest due on the Bonds are insufficient therefor, the Trustee will draw on the amounts in the Reserve Account to replenish the Interest Account or the Principal Account, in that order, to make up such deficiencies. See "SECURITY FOR THE BONDS—Reserve Account" herein and APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS" for additional information on the Reserve Account. Additional Bonds The Authority may not issue additional bonds, notes or other indebtedness that would be payable out of the Revenues in whole or in part. See "SECURITY FOR THE BONDS—Additional Bonds." The City The City is a municipal corporation and chartered city of the State. See "THE CITY" herein. The Authority The Authority is a joint exercise of powers entity formed by agreement between the City and the Redevelopment Agency of the City of Huntington Beach (the "Agency") pursuant to Articles 1 through 4, Chapter 5, Division 7, Title 1 of the California Government Code. See "THE AUTHORITY" herein. Limited Liability THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY FROM AND SECURED SOLELY BY CERTAIN PROCEEDS OF THE BONDS HELD IN CERTAIN FUNDS AND ACCOUNTS PURSUANT TO THE INDENTURE AND THE REVENUES DERIVED FROM LEASE PAYMENTS AND OTHER PAYMENTS MADE OR CAUSE TO BE MADE BY THE CITY PURSUANT TO THE LEASE AGREEMENT. THE AUTHORITY IS NOT OBLIGATED TO PAY INTEREST ON OR PRINCIPAL OF THE BONDS EXCEPT FROM THE REVENUES. THE CITY HAS COVENANTED IN THE LEASE AGREEMENT TO TAKE SUCH ACTIONS AS MAY BE NECESSARY TO INCLUDE ALL LEASE PAYMENTS DUE THEREUNDER IN ITS ANNUAL BUDGETS AND TO MAKE THE NECESSARY ANNUAL APPROPRIATIONS THEREFOR. NEITHER THE BONDS NOR THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE AUTHORITY, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION, OR A PLEDGE OF THE FAITH AND CREDIT OF THE CITY. THE AUTHORITY HAS NO TAXING POWER. THE OBLIGATION OF THE CITY TO MAKE LEASE PAYMENTS DOES NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. Continuing Disclosure The ultimate security for the payments of principal and interest on the Bonds comes from the Lease Payments to be made by the City, and, therefore, the City, as an obligated -3- person within the meaning of the Rule (as defined below), has agreed to undertake the continuing disclosure responsibilities required by the Rule. The Authority has not undertaken a commitment to provide any continuing disclosure required by the Rule. The City has covenanted in the Continuing Disclosure Certificate (the "Continuing Disclosure Certificate") to provide, or cause to be provided, to each nationally recognized municipal securities information repository and any public or private repository or entity designated by the State as a state repository and any public or private repository for purposes of Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission (the "Rule") certain annual financial information and operating data of the type set forth herein including, but not limited to, its audited financial statements and, in a timely manner, notice of certain material events. See "CONTINUING DISCLOSURE" herein and APPENDIX D—"FORM OF CONTINUING DISCLOSURE CERTIFICATE" for a description of the specific nature of the annual report and notices of material events and a summary description of the terms of the Continuing Disclosure Certificate pursuant to which such reports and notices are to be made. Tax Matters In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, subject, however, to certain qualifications described herein under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See "TAX MATTERS" herein. Certain Risk Factors Certain events could affect the ability of the City to make the Lease Payments when due. See "CERTAIN RISK FACTORS" for a discussion of certain factors that should be considered, in addition to other matters set forth herein, in evaluating an investment in the Bonds. Other Information The descriptions herein of the Indenture, the Lease Agreement and any other agreements relating to the Bonds are qualified in their entirety by reference to such documents, and the descriptions herein of the Bonds are qualified in their entirety by the forms thereof and the information with respect thereto included in the aforementioned documents. See APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS." Copies of the documents are on file and, upon request and payment to the City of a charge for copying, mailing and handling, from the City Treasurer, City of Huntington Beach, 2000 Main Street, Huntington Beach, CA 92648, Phone: (562) 570-6845. The information and expressions of opinion herein speak only as of their date and are subject to change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any future use of this Official Statement, under any circumstances, creates any implication that there has been no change in the affairs of the City or the Authority since the date hereof. -4- The presentation of information, including tables of receipt of revenues, is intended to show recent historical information and is not intended to indicate future or continuing trends in the financial position or other affairs of the City or the Authority. No representation is made that past experience, as it might be shown by such financial and other information, will necessarily continue or be repeated in the future. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds realized upon the sale of, or in connection with,the Bonds as follows: Estimated Sources and Uses of Funds Estimated Sources: Principal Amount of Bonds Plus: Net Original Issue Premium Plus: Moneys released from the 1997 Indenture Plus: Moneys released from the 2000 Indenture Total Sources Estimated Uses: Deposit to 1997 Bonds Escrow Fund (1) Deposit to 2000 Bonds Escrow Fund (2) Deposit to Reserve Account (3) Deposit to Costs of Issuance Fund (4) Total Uses (1) Represents the amount estimated to be necessary to refund the 1997 Bonds. See "THE REFUNDING PLAN Refunding of the 1997 Bonds" herein. (2) Represents the amount estimated to be necessary to refund a portion of the 2000 Bonds. See "THE REFUNDING PLAN—Refunding of a Portion of the 2000 Bonds" herein. (3) Represents the Reserve Requirement. (4) Includes, but is not limited to,the Underwriter's discount,the fees and expenses of Bond Counsel, Disclosure Counsel, the Financial Advisor, the Trustee, the Escrow Bank and the rating agencies, costs of printing the Official Statement, the premium for title insurance and other costs incurred by the Authority and the City in connection with the issuance and delivery of the Bonds. THE PROPERTY The Property consists of the Donald W. Kiser Corporation Yard and the site thereof. the Donald W. Kiser Corporation Yard consists of a main building, four large warehouse type structures, equipment and materials storage and office space. The two-story 7,200 square foot administration building was constructed in 1972 and is used for centralized customer service operations and office space. The City Yard buildings provide operations bases for a variety of maintenance services. Building B is approximately 26,000 square feet and was also constructed in 1972. Building B houses the fleet maintenance facility that includes mechanics bays and parts storage for servicing vehicles, large and small equipment and fire engines. Building C, constructed in 1973, is approximately 19,000 square feet. The building holds materials and equipment used in traffic signal, signs and markings maintenance. Building C also includes facility maintenance small equipment such as carpentry, locksmith, plumbing and electrical tools. Building D is approximately 7,500 square feet and was built in 1983. It is used for mechanical services to police vehicles, motorcycles, and radio equipment. This facility includes mechanics bays and parts storage. Building E, approximately 14,600 square feet is a storage warehouse for parts, supplies and -5- equipment. Building E was finished in 1988. The lot includes several small sheds as well as storage for sand, gravel and loose construction materials. A fuel island contains four gasoline, two diesel, and one propane pumps that service all city owned vehicles and equipment. The City estimates that the value of the Property, including land and building, to be approximately $29,500,000. THE REFUNDING PLAN The Bonds are being issued to (a) refund the 1997 Bonds, (b) refund the 2000 Bonds maturing on September 1,2012, through September 1,2015, September 1,2020, September 1, 2025, and September 1, 2030 (the "Refunded 2000 Bonds), (c) fund a reserve fund for the Bonds, and (d) to pay costs of issuance of the Bonds. Refunding of the 1997 Bonds The 1997 Bonds were issued pursuant to the terms of an indenture, dated as May 1, 1999, by and between the Authority and First Trust of California, National Association, since succeeded by U.S. Bank National Association, as trustee thereunder. In order to provide for the repayment of the 1997 Bonds, the Authority leased certain real property and improvements to the City pursuant to a lease agreement, dated as of May 1, 1997, under which the City agreed to make lease payments to the Authority from moneys in its General Fund and the City has budgeted and appropriated sufficient amounts in each year to pay the full amount of principal of and interest on the 1997 Bonds. The 1997 Bonds were issued to finance a portion of the City's share of the costs of a countywide 800 Mhz coordinated communications system and a portion of the cost of public facilities installed as part of the City's Pier Plaza project. A portion of the proceeds of the Bonds will be deposited in an escrow fund (the "1997 Bonds Escrow Fund") held in trust by U.S. Bank National Association, as escrow bank (the "1997 Escrow Bank"),, under an escrow deposit and trust agreement with the Authority and the City. A portion of the proceeds of the amounts deposited in the 1997 Bonds Escrow Fund will be invested in direct obligations of the United States (the "1997 Bonds Federal Securities") in an amount which, together with investment earnings thereon and the uninvested cash in the 1997 Bonds Escrow Fund, will be sufficient to redeem the outstanding 1997 Bonds in full on May 10, 2008, at a redemption price equal to 101% of the principal amount thereof, plus accrued interest. The sufficiency of the moneys, investment earnings and maturing 1997 Bonds Federal Securities such purposes will be verified by — , __________ (the "Verification Agent"). See "VERIFICATION OF MATHEMATICAL COMPUTATIONS" herein. Upon the issuance of the Bonds and the deposit in the 1997 Bonds Escrow Fund of moneys sufficient to provide for the refunding of the 1997 Bonds, and assuming the accuracy of the Verification Agent's computations, the 1997 Bonds will be deemed defeased and no longer outstanding. The holders of the 1997 Bonds will be entitled to payment solely out of the moneys or securities deposited in the 1997 Bonds Escrow Fund. Refunding of a Portion of the 2000 Bonds The 2000 Bonds were issued pursuant to the terms of an indenture, dated as August 1, 2000, by and between the Authority and BNY Western Trust Company, since succeeded by The Bank of New York Trust Company, N.A., as trustee thereunder. In order to provide -6- for the repayment of the 2000 Bonds, the Authority leased certain real property and improvements to the City pursuant to a lease agreement, dated as of August 1, 2000, under which the City agreed to make lease payments to the Authority from moneys in its General Fund and the City has budgeted and appropriated sufficient amounts in each year to pay the full amount of principal of and interest on the 2000 Bonds. The 2000 Bonds were issued to refinance the City's Emerald Cove Senior Housing Project and to finance several capital projects including South Beach Phase I improvements, South Beach Phase II improvements, a new Beach Maintenance Facility, energy retrofitting of various facilities, the design costs of the City's Sports Complex and water system improvements. A portion of the proceeds of the Bonds will be deposited in an escrow fund (the "2000 Bonds Escrow Fund") held in trust by The Bank of New York Trust Company, N.A., as escrow bank (the "2000 Escrow Bank"), under an escrow deposit and trust agreement with the Authority and the City. A portion of the proceeds of the amounts deposited in the 2000 Bonds Escrow Fund will be invested in direct obligations of the United States (the "2000 Bonds Federal Securities") in an amount which, together with investment earnings thereon and the uninvested cash in the 2000 Bonds Escrow Fund, will be sufficient to provide for the payment of the principal of and interest on the Refunded 2000 Bonds through September 1, 2010, and to redeem all outstanding Refunded 2000 Bonds maturing after September 1,2010, in full on September 1,2010, at the redemption price equal to 1009% of the principal amount thereof, plus accrued interest The sufficiency of the moneys, investment earnings and maturing 2000 Bonds Federal Securities such purposes will be verified by the Verification Agent. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS" herein. Upon the issuance of the Bonds and the deposit in the 2000 Bonds Escrow Fund of moneys sufficient to provide for the refunding of the Refunded 2000 Bonds, and assuming the accuracy of the Verification Agent's computations, the Refunded 2000 Bonds will be deemed defeased and no longer outstanding. The holders of the Refunded 2000 Bonds will be entitled to payment solely out of the moneys or securities deposited in the 2000 Bonds Escrow Fund. THE BONDS General The Bonds will be issued in fully registered form without coupons in denominations of $5,000 or any integral multiple thereof. The Bonds will mature on September 1 in each of the years and in the amounts, and will bear interest (calculated on the basis of a 360-day year of twelve 30-day months) at the rates set forth on the cover page hereof. Interest on the Bonds will be payable semiannually on each March 1 and September 1, commencing September 1, 2008 (each, an "Interest Payment Date"), to the person whose name appears on the Registration Books as the Owner thereof as of the fifteenth calendar day of the month immediately preceding each such Interest Payment Date (each, a "Record Date"), such interest to be paid by check of the Trustee mailed by first-class mail to the Owners at the respective addresses of such Owners as they appear on the Registration Books; provided, however, that payment of interest may be made by wire transfer in immediately available funds to an account in the United States of America to any Owner of Bonds in the aggregate principal amount of $1,000,000 or more who furnishes written wire instructions to the Trustee at least five days before the applicable Record Date. Principal of any Bond and any premium upon redemption will be paid by check of the Trustee upon -7- presentation and surrender thereof at the corporate trust office of the Trustee, except as provided in APPENDIX E—"BOOK-ENTRY ONLY SYSTEM." Principal of and interest and premium (if any) on the Bonds will be payable in lawful money of the United States of America. Each Bond will be dated as of its date of delivery and will bear interest from the Interest Payment Date next preceding such date of authentication thereof, unless (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date, or (b) it is authenticated on or before August 15, 2008, in which event it will bear interest from the Closing Date; provided, however, that if, as of the date of authentication of any Bond, interest thereon is in default, such Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. The Bonds, when issued, will be registered in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company, New York, New York ("DTC," and together with any successor securities depository, the "Securities Depository"). DTC will act as Securities Depository for the Bonds. Individual purchases of the Bonds will be made in book-entry form. Purchasers will not receive certificates representing their ownership interest in the Bonds. So long as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the Bondholders or registered owners thereof means Cede & Co. as aforesaid, and not the Beneficial Owners (as defined herein) of the Bonds. So long as Cede & Co. is the registered owner of the Bonds, principal of and interest on the Bonds are payable by wire transfer of same day funds by the Trustee to Cede & Co., as nominee for DTC. DTC is obligated, in turn, to remit such amounts to the Participants for subsequent disbursement to the Beneficial Owners. See APPENDIX E—"BOOK-ENTRY ONLY SYSTEM." Transfer and Exchange of Bonds Any Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his duly authorized attorney, upon surrender of such Bond for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. Transfer of any Bond will not be permitted by the Trustee during the period established by the Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption pursuant to the Indenture. Whenever any Bond or Bonds are required to be surrendered for transfer, the Authority will execute and the Trustee will authenticate and will deliver a new Bond or Bonds for a like aggregate principal amount and of like maturity. The Trustee may require the 'Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Any Bond may be exchanged at the corporate trust office of the Trustee for a like aggregate principal amount of Bonds of other authorized denominations and of like maturity. Exchange of any Bond will not be permitted during the period established by the Trustee for selection of Bonds for redemption or if such Bond has been selected for redemption. The Trustee may require the Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Optional Redemption The Bonds maturing on September 1, , are subject to optional redemption prior to their stated maturity date, at the written direction of the Authority, from moneys deposited by the Authority or the City, in whole, or in part, on any date on or after -8- September 1, from any available source of funds, at the following redemption prices (expressed as a percentage of the principal amount of Bonds called for redemption), together with interest accrued thereon to the date fixed for redemption: Redemption Period (both dates inclusive) Price September 1, through August 31, September 1, through August 31, September 1, and thereafter Mandatory Sinking Account Redemption The Bonds maturing on September 1, (the "Term Bonds") are also subject to mandatory sinking fund redemption in part by lot on September 1, and on September 1, , from Mandatory Sinking Account Payments made by the Authority at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of the Term Bonds have been optionally redeemed, the total amount of all future Sinking Account payments will be reduced by the aggregate principal amount of Term Bonds so redeemed, to be allocated among the Mandatory Sinking Account Payments as are thereafter payable on a pro rata basis in integral multiples of $5,000 as determined by the Authority (notice of which determination is required to be given by the Authority to the Trustee). Mandatory Sinking Account Redemption Sinking Account Redemption Date Principal Amount to be (September 1) Redeemed or Purchased tMaturity In lieu of redemption of the Term Bonds, amounts on deposit as Mandatory Sinking Account payments may also be used and withdrawn by the Trustee, at the written direction of the Authority, at any time for the purchase of Term Bonds otherwise required to be redeemed on the following September 1 at public or private sale as and when and at such prices (including brokerage and other charges and including accrued interest) as the Authority may in its discretion determine. The par amount of any of the Term Bonds so purchased by the Authority and surrendered to the Trustee for cancellation in any 12- month period ending on September 1 in any year are required to be credited towards and will reduce the par amount of the Term Bonds otherwise required to be redeemed on the following September 1. Extraordinary Redemption from Insurance or Condemnation Proceeds The Bonds are also subject to redemption as a whole, or in part on a pro rata basis among maturities, on any date, in integral multiples of $5,000, to the extent of prepayments made by the City from insurance proceeds or condemnation proceeds not used to repair, reconstruct or replace any portion of the Property damaged or destroyed or elected by the City to be used for such purpose, at a redemption price equal to 100% of the principal amount thereof plus interest accrued thereon to the date fixed for redemption, without premium. -9- Selection of Bonds for Redemption Whenever provision is made for the redemption of less than all of the Bonds of a particular maturity, the Trustee will select the Bonds to be redeemed from all Bonds of such maturity or such given portion thereof not previously called for redemption, by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Trustee will treat each Bond as consisting of separate $5,000 portions and each such portion will be subject to redemption as if such portion were a separate Bond. Notice of Redemption Notice of redemption will be mailed by first-class mail, postage prepaid, not less than 30 nor more than 60 days before any redemption date, to the respective Owners of any Bonds designated for redemption at their addresses appearing on the Registration Books maintained by the Trustee, and to the Municipal Securities Rulemaking Board, the Securities Depositories and the Information Services. Each notice of redemption will state the date of the notice, the redemption date, the place or places of redemption, whether less than all of the Bonds (or all Bonds of a single maturity) are to be redeemed, the CUSIP numbers and (in the event that not all Bonds within a maturity are called for redemption) Bond numbers of the Bonds to be redeemed, the maturity or maturities of the Bonds to be redeemed and in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on the redemption date there will become due and payable on each of said Bonds the redemption price thereof, and that from and after such redemption date interest thereon will cease to accrue and will require that such Bonds be then surrendered. Neither the failure to receive any notice nor any defect therein will affect the sufficiency of the proceedings for such redemption or the cessation of accrual of interest from and after the redemption date. Notice of redemption of Bonds will be given by the Trustee, at the expense of the Authority, for and on behalf of the Authority. So long as the book-entry system is used for the Bonds, the Trustee will give any notice of redemption or any other notices required to be given to registered Owners of Bonds only to DTC. Any failure of DTC to advise any Participant (as herein defined), or of any Participant to notify the Beneficial Owner (as herein defined), of any such notice and its content or effect will not affect the validity of the redemption of the Bonds called for redemption or any other action premised on such notice. Beneficial Owners may desire to make arrangements with a Participant so that all notices of redemption or other communications to DTC which affect such Beneficial Owners, and notification of all interest payments, will be forwarded in writing by such Participant. See APPENDIX E—"BOOK- ENTRY ONLY SYSTEM." Partial Redemption of Bonds Upon surrender of any Bonds redeemed in part only, the Authority will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the Authority, a new Bond or Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the Bonds surrendered. Effect of Redemption If notice of redemption has been given, and moneys for payment of the redemption price of, together with interest accrued to the date fixed for redemption on, the Bonds (or portions thereof) so called for redemption are being held by the Trustee, on the redemption -10- date designated in such notice, the Bonds (or portions thereof) so called for redemption will become due and payable, interest on the Bonds so called for redemption will cease to accrue, said Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said Bonds will have no rights in respect thereof except to receive payment of the redemption price thereof. All Bonds redeemed pursuant to the provisions of the Indenture will be canceled by the Trustee upon surrender thereof and destroyed. SECURITY FOR THE BONDS General The Bonds are special limited obligations of the Authority payable solely from and secured solely by the Revenues pledged therefor under the Indenture, together with amounts on deposit from time to time in the funds and accounts held by the Trustee, including proceeds of the sale of the Bonds. Under the Indenture, the Authority assigns to the Trustee, for the benefit of the Owners from time to time of the Bonds, all of the Revenues and all of the rights of the Authority in the Lease Agreement (except for the right to receive any Additional Payments to the extent payable to the Authority and certain rights to indemnification set forth therein). The Trustee is entitled to collect and receive all of the Revenues, and any Revenues collected or received by the Authority are required to be held, and to have been collected or received, by the Authority as the agent of the Trustee and must be paid by the Authority to the Trustee. THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE REVENUES AND OTHER MONEYS PLEDGED THERETO IN THE INDENTURE. THE BONDS ARE NOT A DEBT OF THE AUTHORITY, THE CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS AND NEITHER THE AUTHORITY, THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS, EXCEPT THE AUTHORITY TO THE EXTENT DESCRIBED HEREIN, IS LIABLE THEREON. IN NO EVENT WILL THE BONDS OR ANY INTEREST OR REDEMPTION PREMIUM THEREON BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE AUTHORITY AS SET FORTH IN THE INDENTURE. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE MEMBERS OF THE AUTHORITY NOR ANY PERSONS EXECUTING THE BONDS ARE LIABLE PERSONALLY ON THE BONDS BY REASON OF THEIR ISSUANCE. Lease Payments and Additional Payments The Lease Agreement requires the City, subject to abatement as provided therein, to deposit with the Trustee, as assignee of the Authority, on each February 15 and August 15, commencing on August 15, 2008 (the "Lease Payment Dates"), an amount equal to the aggregate Lease Payment coming due and payable on each such Lease Payment Date. The Lease Payments payable in any fiscal year of the City constitute payment for the use and possession of the Property during such fiscal year. The City will receive a credit towards payment of Lease Payments for amounts on deposit in the Revenue Fund, (including the Interest Account and the Principal Account therein) on each Lease Payment Date. -11- The obligation of the City to make Lease Payments is subject to annual appropriations of the City from funds lawfully available therefor. The obligation of the City to make Lease Payments under the Lease Agreement does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the full faith and credit nor the taxing power of the City, the State or any of its political subdivisions is pledged to make Lease Payments under the Lease Agreement. The Authority has no taxing power. The Lease Payments are calculated to be sufficient to pay, when due, the principal of and interest on the Bonds. In addition to the Lease Payments, the City is required to pay when due the following Additional Payments: (a) any fees and expenses incurred by the Authority in connection with or by reason of its leasehold estate in the Property as and when the same become due and payable; (b) any amount due to the Trustee pursuant to the terms of the Indenture; (c) any reasonable fees and expenses of such accountants, consultants, attorneys, and other experts as may be engaged by the Authority or the Trustee to prepare audits, financial statements, reports, opinions or provide such other services required under the Lease Agreement or the Indenture; and (d) any reasonable out-of-pocket expenses of the Authority in connection with the execution and delivery of the Lease Agreement, the Indenture or the Continuing Disclosure Certificate or in connection with the issuance of the Bonds. Pursuant to the Lease Agreement, the City covenants to take such action as may be necessary to include all Lease Payments and Additional Payments due thereunder in its annual budgets and to make annual appropriations therefor. As provided in the Lease Agreement, the covenants of the City thereunder are duties imposed by law, and it is the duty of each and every public official of the City to take such action and to do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in the Lease Agreement agreed to be carried out and performed by the City. California law requires, and the Lease Agreement provides, that Lease Payments are required to be abated in whole or in part during any period in which there is substantial interference with the use and occupancy of the Property by the City due to damage, destruction or taking in eminent domain proceedings. Under these circumstances, failure to make any Lease Payment will not be an event of default under the Lease Agreement. See "SECURITY FOR THE BONDS—Abatement" below. Lease Payments made by the City to the Authority are payable from any revenues lawfully available to the City therefor. The Lease Agreement and the Indenture require that Lease Payments be deposited in the Revenue Fund maintained by the Trustee, which fund is held for the benefit of the owners of the Bonds. Insurance and Condemnation Awards In the event of any damage to or destruction of any part of the Property covered by insurance, the Authority, except as hereinafter provided, is required to cause the proceeds of such insurance to be utilized for the repair, reconstruction or replacement of the damaged or destroyed portion of the Property, and the Trustee is required to hold said proceeds in a fund established by the Trustee for such purpose separate and apart from all other funds, to the end that such proceeds are required to be applied to the repair, reconstruction or replacement of the Property to at least the same good order, repair and condition as was the case prior to the damage or destruction, insofar as the same may be accomplished by the use of said proceeds. The Trustee is required to invest said proceeds -12- in Permitted Investments pursuant to the Written Request of the City, as agent for the Authority under the Lease Agreement, and withdrawals of said proceeds are required to be made from time to time upon the filing of a Written Request of the City with the Trustee, stating that the City has expended moneys or incurred liabilities in an amount equal to the amount therein stated for the purpose of the repair, reconstruction or replacement of the Property, and specifying the items for which such moneys were expended, or such liabilities were incurred, in reasonable detail. The City is required to file a written certificate with the Trustee to the effect that sufficient funds from insurance proceeds or from any funds legally available to the City, or from any combination thereof, are available in the event it elects to repair, reconstruct or replace the Property. Any balance of such proceeds not required for such repair, reconstruction or replacement and the proceeds of use and occupancy insurance are required to be treated by the Trustee as Lease Payments. Alternatively, the City, at its option, if the proceeds of such insurance together with any other moneys then available for such purpose are sufficient to prepay all, in case of damage or destruction in whole of the Property, or that portion, in the case of partial damage or destruction of the Property, of the Lease Payments relating to the damaged or destroyed portion of the Property, may elect not to repair, reconstruct or replace the damaged or destroyed portion of the Property and thereupon is required to cause said proceeds to be used for the redemption of Outstanding Bonds. The City is not required to apply the proceeds of insurance to redeem the Bonds in part due to damage or destruction of a portion of the Property unless the Trustee receives a written certificate of the Authority to the effect that the Lease Payments on the undamaged portion of the Property will be sufficient to pay the initially-scheduled principal and interest on the Bonds remaining unpaid after such redemption. No assurance can be given that the proceeds of any insurance or condemnation award will be sufficient under all circumstances to repair or replace any damaged or taken Property or to prepay all Lease Payments with respect to the Property. Also, the City makes no representation as to the sufficiency of any insurance awards or the adequacy of any self- insurance to pay, when and as due, amounts payable under the Lease Agreement or the Bonds. Reserve Account The Reserve Account is established under the Indenture in an amount equal to the Reserve Requirement, which is$ . As defined in the Indenture, the term "Reserve Requirement" means a fixed amount equal to the least of (a) maximum annual debt service on the Bonds, (b) 125%of average annual debt service on the Bonds, and (c) 10% of the par amount of the Bonds, determined on the Closing Date. All amounts in the Reserve Account are required to be used and withdrawn by the Trustee solely for the purpose of (x) paying principal of or interest on the Bonds when due and payable to the extent that moneys deposited in the Interest Account or the Principal Account are not sufficient for such purpose, and (y) making the final payments of principal of and interest on Bonds on the date on which such Bonds are required to be retired or provision made therefor. Abatement The Lease Agreement provides for the abatement of Lease Payments during any period in which by reason of damage to or destruction of the Property (other than by eminent domain which may cause abatement of Lease Payments as described below), which causes substantial interference with the use and occupancy by the City of the Property or any portion thereof. The amount of such abatement will be an amount agreed upon by the City and the Authority such that the resulting Lease Payments represent fair consideration for the use and occupancy of the portions of the Property not damaged or destroyed or the -13- portion of the Property completed and available for use and possession by the City. Such abatement will continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, the Lease Agreement will continue in full force and effect and the City waives any right to terminate the Lease Agreement by virtue of any such damage and destruction. There will be no abatement of the Lease Payments to the extent that moneys derived from any person as a result of such damage or destruction are available to pay the amount which would otherwise be abated or if there is any money available in the Bond Fund or the Reserve Account to pay the amount which would otherwise be abated. If all of the Property is taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Lease Agreement will terminate with respect to the Property as of the day possession is so taken. If less than all of the Property is taken permanently, or if all of the Property or any part thereof is taken temporarily under the power of eminent domain, (a) the Lease Agreement will continue in full force and effect, and (b) there will be a partial abatement of Lease Payments in an amount to be agreed upon by the City and the Authority such that the resulting Lease Payments for the Property represent fair consideration for the use and occupancy of the remaining usable portion of the Property. Insurance Fire and Extended Coverage Insurance. The City is required under the Lease Agreement to procure and maintain or cause to be procured and maintained, throughout the term of the Lease Agreement, insurance against loss or damage to any structures constituting any part of the Property by fire and lightning, with extended coverage insurance, vandalism, malicious mischief insurance and sprinkler system leakage insurance. Said extended coverage insurance is required to, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance is required to be in an amount equal to the replacement cost (without deduction for depreciation) of all structures constituting any part of the Property, excluding the cost of excavations, of grading and filling, and of the land (except that insurance may be subject to deductible clauses for any one loss of not to exceed two hundred fifty thousand dollars ($250,000) or a comparable deductible adjusted for inflation), or, in the alternative, is required to be in an amount and in a form sufficient, in the event of total or partial loss, to enable a portion of all Bonds then Outstanding equal to the amount of such Bonds to be paid from Lease Payments to be redeemed. The City does not carry earthquake insurance. See "CERTAIN RISK FACTORS—Earthquakes." The net proceeds of such insurance will be applied as provided under the caption "SECURITY FOR THE BONDS—Insurance and Condemnation Awards" above. Rental Interruption Insurance. The Lease Agreement requires the City to procure and maintain or cause to be procured and maintained rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Property as a result of certain hazards, in an amount at least equal to the maximum Lease Payments coming due and payable during any future 24-month period. Such insurance may be maintained as part of or in conjunction with any other property insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers agency or other program providing pooled insurance; provided that such insurance may not be maintained in the form of self-insurance except for a time element deductible not to exceed sixty days in duration. The proceeds of such insurance, if any, will be paid to the Trustee and deposited in the Revenue Fund, and will be credited towards the payment of the Lease Payments as the same become due and payable. -14- Title Insurance. The City is required to obtain upon the execution and delivery of the Lease Agreement, title insurance on the Property, in an amount not less than the aggregate principal amount of Bonds issued by a company of recognized standing duly authorized to issue the same, subject only to Permitted Encumbrances. Proceeds of such insurance are required to be delivered to the Trustee as a prepayment of rent and are required to be applied by the Trustee to the redemption of Bonds. Debt Service Schedule The following table sets forth the debt service due on the Bonds. Debt Service Schedule Year Mandatory Ending Sinking Fund September 1 Principal Installment Interest Total Pursuant to the Lease Agreement, the City is required to make Lease Payments which have been calculated to be sufficient to make the interest and principal payments due on the Bonds. The City's Lease Payments are due on the fifteenth calendar day of the month preceding each Interest Payment Date. Additional Bonds Pursuant to the Indenture, the Authority may not issue additional bonds, notes or other indebtedness which would be payable out of the Revenues in whole or in part. See "THE AUTHORITY" herein. THE AUTHORITY The Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of March 7, 1988, by and between the City and the Agency (the "Members"), and under the provisions of Articles 1 through 4 (commencing with section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act"), and is authorized pursuant to Article 4 of the Act -15- to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations of, or for the purpose of making loans to, public entities, including the Members, and to provide financing for public capital improvements of public entities, including the Members. THE CITY General Founded in the late 1880s, Huntington Beach was incorporated as a general law city in 1909 and became a charter city in 1937. The City has a City Council/City Administrator form of government. The City Council has seven members, each of whom is elected`to a four-year term. City Council Members are limited to two consecutive terms. There are three elected department heads, the City Attorney, City Clerk and City Treasurer. The position of Mayor is filled on a rotating basis. The City of Huntington Beach is a full service city. Its major departments include the City Administrator's office, Administrative Services, Building and Safety, Planning, Library Services, Public Works, Community Services, Economic Development and Police and Fire. The city has approximately 1,144 employees and a total budget of approximately $330,000,000. The coastal City of Huntington Beach, with its sunny Mediterranean climate and idyllic setting, is home to more than 195,000 residents. Internationally known as Surf City, the City boasts eight miles of scenic, accessible beachfront, the largest stretch of uninterrupted beachfront on the West Coast. Tourism remains a vital part of the economy, as over 11 million visitors flock to the city during the summer, on weekends and for special events. The City's parks and recreation features one of the largest recreational piers in the world, public parks, riding stables and equestrian trails, a marina, and a wildlife preserve, and an eight-mile biking, inline skating, jogging, and walking trail along the ocean. The crown jewel of the City's recreation system is the wide expanse of beautiful and spacious beaches, where large crowds gather to watch professional sporting events as the U.S. Open of Surfing, AVP Pro Beach Volleyball and Van's World Championship of Skateboarding. The Huntington Beach Art Center and the Huntington Beach Playhouse provide a wide variety of fine arts, and the excellent library system and numerous museums provide a strong cultural foundation. The educational system, with five city high schools and 35 elementary schools, is excellent. The City is home to Golden West Community College and nearby UC Irvine and Cal State Long Beach and Fullerton. The City encompasses 31.6 square miles (26.4 square miles is land, 5.2 square miles is water) in the coastal area of Orange County, California, adjacent to the Cities of Costa Mesa, Fountain Valley, Newport Beach, Seal Beach and Westminster. The City is approximately 40 miles southeast of Los Angeles and 90 miles northwest of San Diego. Municipal Government The City has a council/administrator form of government. The City Council is comprised of seven members elected bi-annually at large to four-year terms and the Mayor is selected by the Council Members to a one-year term. The City Council appoints the City Administrator who is responsible for the day-to-day administration of City business and the coordination of all departments of the City. Huntington Beach employs [1,0501 full-time employees. -16- The members of the City Council, the expiration dates of their terms and key administrative personnel are set forth in the charts below. CITY COUNCIL Council Member Term Expires Debbie Cook, Mayor November 2008 Keith Bohr, Mayor Pro Tern November 2008 Joe Carchio, Member November 2010 Gil Coerper, Member November 2010 Cathy Green, Member November 2008 Don Hansen, Member November 2008 Jill Hardy, Member November 2010 KEY ADMINISTRATIVE PERSONNEL Paul Emery Interim City Administrator Robert Hall Deputy City Administrator Daniel Villella Finance Director Shari L. Freidenrich City Treasurer Jennifer McGrath City Attorney Joan L. Flynn City Clerk Governmental Services Public Safety and Welfare —Law enforcement and fire protection services are provided by the City. The Huntington Beach Police Department currently employs 220 sworn officers. The Huntington Beach Fire Department employs 131 sworn fire fighters operating out of eight fire stations and maintains a Hazardous Materials Response Unit operating as a part of a county-wide response team. Other services provided by the City include emergency medical aid, traffic safety maintenance, and building safety regulation and inspection. Public Services — Water service is provided to City residents through the City's municipal water department. Public Works/Planning — Additional services include parkway and median maintenance and improvements, refuse management, sewer and storm drain maintenance, zoning and development administration, environmental review, code enforcement and street tree maintenance. Leisure and Community Services — The City operates the Huntington Beach Library which includes the central library and four branches. The City's Community Services Department provides citizens with a variety of park and recreational and marine safety (lifeguard) services on a year round basis. Facilities include the Huntington Beach Art Center, fifty-six park sites, 8.5 miles of public beach, a public golf course, an Equestrian Center and two senior centers. Community Information Public school education is available through four elementary school districts and one high school district. There are 26 elementary schools, 4 middle schools and 5 high schools. Students are also served by 10 parochial and private schools. Area colleges and -17- universities include Orange Coast College, Goldenwest College, Long Beach State University and the University of California at Irvine. Health Care services available within the immediate area are provided by Huntington Beach Hospital in Huntington Beach, Hoag Memorial Hospital in Newport Beach and Fountain Valley Regional Hospital. Area attractions include Disneyland, Knott's Berry Farm, the Aquarium of the Pacific and Wild Rivers Aquatic Park. Locally, the City's public beaches are the site of the Men's and Women's Professional Beach Volleyball Tour and the International Surfing and World Cup event. Other attractions include the Bolsa Chica Ecological Reserve, a restored wetlands area known for winter bird watching, and the International Surf Museum. Transportation The City is 12 miles from the John Wayne/Orange County Airport (SNA), 18 miles from the Long Beach Airport (LGB), 38 miles from Los Angeles International (LAX) and 48 miles from the Ontario International Airport (ONT). Greyhound Lines serves the City with stops in Santa Ana and Irvine. In Orange County, the Orange County Transportation Authority (OCTA) provides convenient service and connections to bus lines serving the greater Los Angeles (Metro Transit Authority) and San Diego areas. The City is accessible by train. The nearest train depots are in Santa Ana, Anaheim and Irvine. Population The following table provides a comparison of population growth for Huntington Beach and Orange County between 1998 and 2007. Population City of Huntington Beach and Orange County 1998-2007 Huntington Orange Year Beach County 1998 184,044 2,724,525 1999 187,061 2,776,163 2000 189,627 2,846,289 2001 192,420 2,891,267 2002 194,886 2,941,141 2003 197,272 2,984,303 2004 199,239 3,021,568 2005 200,409 3,050,403 2006 201,346 3,071,924 2007 202,250 3,098,121 Source: State of California Department of Finance, Population Research Unit, "Population Estimates for California Cities and Counties." -18- Employment The following table sets forth labor force, employment and unemployment for the period from 2002 to 2006, in the City, the County, the State and the United States: HUNTINGTON BEACH LABOR MARKET Labor Force, Employment and Unemployment Annual Average Civilian Civilian Unemployment Year and Area Labor Force Employment Unemployment Rate (%) 2002 City of Huntington Beach 117,200 112,500 4,700 4.0% Orange County 1,532,900 1,456,500 76,400 5.0 California 17,343,600 16,180,800 1,162,800 6.7 United States 144,863,000 136,485,000 8,378,000 5.8 2003 City of Huntington Beach 119,300 114,700 4,600 3.9% Orange County 1,558,700 1,484,200 74,500 4.8 California 17,418,700 16,227,000 1,191,700 6.8 United States 146,510,000 137,736,000 8,774,000 6.0 2004 City of Huntington Beach 121,400 117,200 4,200 3.4% Orange County 1,583,800 1,516,400 67,400 4.3 California 17,538,800 16,444,500 1,094,300 6.2 United States 147,401,000 139,252,000 8,149,000 5.5 2005 City of Huntington Beach 123,000 119,300 3,700 3.0% Orange County 1,605,100 1,544,800 60,300 3.8 California 17,740,400 16,782,300 958,100 5.4 United States 149,297,833 141,707,250 7,590,583 5.1 2006 City of Huntington Beach 124,600 121,200 3,400 2.8% Orange County 1,623,600 1,568,300 55,300 3.4 California 17,901,900 17,029,300 872,600 4.9 United States 151,427,583 144,427,000 7,000,583 4.6 Source: California Employment Development Department; United States Department of Labor. -19- Major Employers The major employers operating within the City and their respective number of employees as of September 30, 2007, are as follows: CITY OF HUNTINGTON BEACH Largest Employers Number of Name of Employer Employees Boeing 7,000 Quiksilver 1,800 Cambo Manufacturing 750 Verizon 736 Hyatt Regency Huntington Beach 670 Fisher & Paykel 654 Huntington Beach Hospital 602 C & D Aerospace 600 Rainbow Disposal 408 Home Depot (including Expo) 383 Total of top 10 13,603 All others 107,497 Total employment (Public and private) 121,100 Source: City of Huntington Beach. Commercial Activity The following charts summarize the volume of retail sales and taxable transactions for the City of Huntington Beach for 2002 through 2006. CITY OF HUNTINGTON BEACH Total Taxable Transactions (in Thousands) 2002-2006 Retail Retail Total Taxable Issued Sales Sales Transactions Sales Year ($000's) Permits ($000's) Permits 2002 1,710,984 2,496 2,104,087 7,136 2003 1,803,194 2,698 2,220,984 7,462 2004 1,983,581 2,758 2,411,197 7,404 2005 2,021,550 2,842 2,479,780 7,381 2006 2,122,983 2,934 2,594,565 7,365 Source: State Board of Equalization, "Taxable Sales in California," published annually in November for prior year. -20- Taxable transactions by type of business for the City of Huntington Beach for 2002 through 2006 are summarized in the table below. CITY OF HUNTINGTON BEACH Taxable Transactions by Type of Business 2002-2006 2002 2003 2004 2005 2006 Retail Stores Apparel Stores $ 81,420 $ 100,803 $ 106,093 $ 99,076 $ 110,818 General Merchandise Stores 183,357 191,169 198,527 181,694 213,964 Food Stores 112,785 112,453 108,393 11,881 115,689 Eating/Drinking Places 224,340 238,054 253,912 275,806 302,294 Home Furnishings/Appliances 106,390 106,332 106,429 112,035 107,385 Building Materials/Farm Implements 178,633 191,324 244,606 275,580 266,383 Auto Dealers/Suppliers 415,352 450,523 468,743 454,408 439,957 Service Stations 120,966 129,086 154,898 170,941 207,894 Other Retail Stores 287,741 283,450 341,980 333,198 358,599 Total Retail Stores $1,710,984 $1,803,194 $1,983,581 $2,021,550 $2,122,983 All Other Outlets 393,103 417,790 427,616 458,230 471,582 Total All Outlets $2,104,087 $2,220,984 $2,411,197 $2,479,780 $2,594,565 Source: State Board of Equalization, "Taxable Sales in California," published annually in November for prior year. -21- Building Activity The following charts summarize building activity valuations for the City of Huntington Beach for the five-year period from 2002 through 2006. CITY OF HUNTINGTON BEACH Building Activity and Valuation (Valuation in Thousands of Dollars) 2002 2003 2004 2005 2006 Residential: New Single-Family $ 62,869 $38,397 $ 55,353 $32,041 $28,746 New Multi-Family 21,658 7,966 16,803 3,407 0 Additions, alterations 20,517 27,708 33,277 39,717 51,381 Total Residential $105,044 $74,071 105,434 75,164 80,128 Commercial: New Commercial $ 14,787 $ 9,222 $25,725 $12,741 $51,808 New Industrial 745 2,304 8,000 13,215 2,304 Other 24,522 12,375 21,836 20,349 22,392 Additions, alterations 24,690 13,693 26,011 26,345 26,469 Total Nonresidential 64,744 $ 37,594 81,572 72,649 102,973 Total Valuation $149,271 $111,665 $187,006 $147,813 $183,100 No. of New Dwelling Units: Single-Dwelling 202 132 191 125 106 Multi-Dwelling 24 59 5 40 0 Total New Units 226 191 276 165 106 Source: Construction industry Research Board,"Building Permit Summary." Largest Taxpayers Largest Property Tax Payers Assessed Valuation Percent Taxpayer (000s) of Total Mayer Financial Limited Partnership $ 1,847 3.59% Bella Terra Associates LLC 1,221 2.37 McDonnel Douglas Corp/Boeing Corp 408 0.79 Waterfront Construction 1 California LP 387 0.75 Mullrock 1 Beach Pointe LLC 378 0.73 First Huntington Capital Limited Partnership 326 0.63 Essex Huntington Breakers 304 0.59 Pierside Pavilion LLC 277 0.54 Atlanta Huntington Beach LLC 247 0.48 CIM Huntington LLC 196 0.38 Total Top Ten 5,591 10.85 All Other Properties 45,919 89.15 City Total $51,510 100.000% Source: City of Huntington Beach Finance Department. -22- CITY FINANCIAL INFORMATION Budgetary Process and Administration Effective March, 1994, the City's fiscal year was changed to October 1 through September 30. Fiscal Year 2007-08 began on October 1, 2007, and ends September 30, 2008. The City uses the following procedures when establishing the budgetary data reflected in its financial statements: Sixty days prior to the start of each fiscal year, the City Administrator submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. Public hearings are conducted at the Civic Center to obtain taxpayer comments. The City Administrator is authorized to transfer budgeted amounts between departments within any fund; however, any revision that alters the total expenditure of any fund must be approved by the City Council. Formal budgetary integration is employed as a management control device during the year from the General Fund, Special Revenue Funds, Debt Service Fund and Capital Projects Fund. Budgets for the General, Special Revenue, Debt Service and Capital Projects Funds are adopted on a basis consistent with generally accepted accounting principles. Revenues and Expenditure Trends The General Fund Budget includes programs which are provided on a largely citywide basis. The programs and services are financed primarily by the City's share of property taxes, sales tax, local taxes, revenues from the State and charges for services provided. -23- The following table compares the City's General Fund Budget budgeted and actual for Fiscal Year 2006-07 and budgeted for Fiscal Year 2007-08. General Fund Comparison of 2006-07 Budgeted and Actual Revenues and Expenditures and 2007-08 Proposed Budget (in thousands) 2006-07 2006-07 2006-07 2007-08 2007-08 Original Budget Final Budget Actual Original Budget Final Budget REVENUES Property taxes $59,587 $59,587 $60,606 $65,001 $65,001 Sales taxes 24,833 24,833 23,724 26,060 26,060 Utility taxes 22,750 22,750 21,479 23,125 23,125 Other taxes 13,885 13,729 13,776 14,580 14,580 License and permits 8,241 8,670 10,026 9,051 9,803 Fines,forfeitures and penalties 4,468 4,468 4,165 4,969 4,969 Use of money and property 11,882 11,882 14,032 14,126 14,126 From other agencies 5,964 5,964 5,348 5,565 5,565 Charges for services 14,476 14,477 15,695 15,722 15,722 Other 723 723 3,143 1,212 1,212 TOTAL REVENUES $166,809 $167,083 $171,994 $179,411 $180,163 EXPENDITURES City Council $ 289 $ 289 $ 287 $ 305 $ 305 City Administrator 1,472 1,582 1,490 1,943 1,943 City Treasurer 1,040 1,072 1,060 1,335 1,335 City Attorney 2,628 2,658 2,438 2,824 2,824 City Clerk 973 1,065 932 980 980 Administrative Services 4,403 4,605 4,400 4,949 4,955 Planning 6,054 5,990 4,202 5,730 5,730 Building 3,266 4,347 2,949 4,003 4,755 Fire 4,222 4,643 4,193 4,546 4,546 Information Services 25,794 25,951 25,935 27,257 27,414 Police 6,634 6,908 6,437 - 7,629 7,598 Economic development 55,238 55,444 54,974 61,050 61,043 Community services 1,876 1,984 1,538 2,147 2,147 Library services 13,130 13,613 13,258 14,192 14,353 Public Works 3,885 4,354 4,145 3,841 4,030 Non-Department 24,658 27,860 23,488 27,554 28,753 Debt Service 16,631 16,382 12,873 14,382 14,226 Principal 642 733 733 540 551 Interest 125 125 125 0 0 TOTAL EXPENDITURES $172,960 $179,605 $165,457 $185,207 $187,488 Source: City of Huntington Beach Finance Department. Ad Valorem Property Taxes Taxes are levied for each fiscal year on taxable real and personal property which is situated in the City as of the preceding January 1. For assessment and collection purposes, property is classified either as "secured" or "unsecured," and is listed accordingly on separate parts of the assessment roll. The "secured roll" is that part of the assessment roll containing State assessed property and real property having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the taxes. Other property is assessed on the "unsecured roll." Property taxes on the secured roll are due in two installments, on November 1 and February 1 of the fiscal year. if unpaid, such taxes become delinquent on December 10 and -24- April 10, respectively, and a 10% penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a redemption penalty of 1-1/2% per month to the time of redemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the County Tax Collector. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll, and an additional penalty of 1-1/2% per month begins to accrue on November 1 of the fiscal year. The City has four ways of collecting unsecured personal property taxes: (1) a civil action against the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer; (3) filing a certificate of delinquency for record in the County Recorder's Office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the assessee. Taxable Property and Assessed Valuation Set forth in the tables below are assessed valuation for secured and unsecured property within the City of Huntington Beach and tax levies and collections (as of the close of each fiscal year) for the five most recent fiscal years. Gross Assessed Value of All Taxable Property (in thousands) Fiscal Year Secured Unsecured Total (1) 2003-04 $20,510,103 $1,003,206 $21,513,309 2004-05 21,967,369 988,181 22,955,550 2005-06 23,711,775 879,978 24,591,753 2006-07 26,081,257 1,089,693 27,170,950 2007-08 27,859,376 1,257,880 29,117,256 Source: City of Huntington Beach Finance Department. (1)Includes redevelopment project area incremental assessed valuation. General Fund Property Tax Levies and Collections Secured Taxes (in thousands) Total Delinquency Delinquency Fiscal Year Total Levy Collections Amount Percent 2002-03 $26,376 $25,937 $362 1.37% 2003-04 29,423 28,669 293 1.00 2004-05 31,855 31,373 411 1.29 2005-06 34,094 33,396 191 0.56 2006-07 39,174 37,503 1,263 3.22 Source: City of Huntington Beach Finance Department. -25- Direct and Overlapping Bonded Debt The statement of direct and overlapping debt (the "Debt Report") set forth below was prepared by California Municipal Statistics, Inc. as of March 1, 2008. The Debt Report includes only such information as has been reported to California Municipal Statistics, Inc. by the issuers of the debt described therein and by others. The Debt Report is included for general information purposes only. The City takes no responsibility for its completeness or accuracy. Direct and Overlapping Bonded Debt 2006-07 Assessed Valuation$24,044,875,126(after deducting$1,432,116,928)of incremental redevelopment valuation) Debt Repaid with Property Taxes (Tax and Assessment Debt): Debt Applicable Tax Debt: %Applicable to City Orange County Teeter Plan Obligations 7.0590% $8,733,748 Metropolitan Water District 1.4770% 5,304,129 Coast Community College District 30.6610% 106,626,346 Huntington Beach Union High School District 77.38901% 180,022,290 Huntington Beach City School District 97.5390% 28,636,438 Los Alamitos Unified School District Comm Facilities Dist. 1990-1 1.2530% 115,527 City of Huntington Beach Community Facilities Districts 100.0000% 45,680,000 Tax and Assessment Debt 375,118,478 Other Debt Other Entities: Orange County General Fund Obligations 38,926,503 Orange County Pension Obligations 5,134,001 Orange County Board of Education Certificates of Participation 1,392,035 MWDOC Facilities Corporation 1,624,446 Orange County Sanitation District Certificates of Participation 10,211,350 North Orange County Regional Occupation Program Certificates of Participation 12,755 Huntington Beach Union High School District Certificates of Participation 13,140,652 Los Alamitos Unified School District Certificates of Participation 255,267 Fountain Valley School Districts Certificates of Participation 4,352,589 Huntington Beach City School District Certificates of Participation 10,295,241 Ocean View School District Certificates of Participation 8,223,755 Westminster School District Certificates of Participation 6,754,329 City of Huntington Judgment Obligation Bonds 10,795,000 City of Huntington Reporting Entity Beach General Fund Obligations: 66,864,678 Total Gross and Overlapping Bonded Debt Not Repaid by Property Taxes 177,982,601 Less Self Supporting Debt of MWDOC Water Facilities Corporation (1,624,446) Total Net Direct and Overlapping General Fund Obligation Debt 176,358,155 Gross Combined Total Debt $551,476,633 Ratios to 2006-2007 Assessed Valuation Total Overlapping Debt and Assessment Debt 1.47% Ratios to Adjusted Assessed Valuations Combined Direct Debt ($77,659,678) 0.32% Gross Combined Total Debt 2.30% Net Combined Total Debt 2.29% State School Building Aid Repayable $0 Source:California Municipal Statistics and City of Huntington Beach Finance Department -26- Alternative Method of Tax Apportionment ("Teeter Plan") Section 4701 through Section 4717 of the California Revenue and Taxation Code permits counties to use a method of apportioning taxes (commonly referred to as the "Teeter Plan") whereby local agencies receive from the County 100% of their respective shares of the amount of secured ad valorem taxes levied, without regard to actual collections of taxes. Due to this allocation method, the cities in the County receive no adjustments for redemption payments on delinquent collections. The unsecured taxes are allocated based on actual unsecured tax collections. The County of Orange adopted this method of distributing taxes in 1993 and will continue to do so unless the County Board of Supervisors takes action to discontinue the practice. The County Treasurer's cash position is protected by a special fund known as the Tax Loss Reserve Fund, which is generated from the collection of penalties and interest on delinquent taxes, as well as other cash reserves. In the event proceeds from the sale of tax- deeded property are insufficient to pay the full amount of the delinquent taxes, the County may draw on its Tax Loss Reserve Fund to make up the deficiency. The City has elected not to participate in the Teeter Plan. Other Local Taxes In addition to ad valorem taxes on real property, the City receives the following local taxes: Sales and Use Taxes. Sales tax is collected and distributed by the State Board of Equalization. Each local jurisdiction receives an amount equal to one percent of taxable sales within its jurisdiction. In addition, the City receives a portion of a 3/4 cent sales tax increase approved by voters in 1993. See "LIMITATION ON TAX REVENUES—State Budgets" herein. Sales tax revenue could be reduced in the next few years, due to legislation relating to the issuance of "economic recovery bonds" by the State, which was approved by State voters at the March 2,2004 election. The initiative relating to such bonds includes the Triple Flip. This legislation diverts a portion of local governments' share of sales taxes to the State, and in return redirect certain property tax revenues from ERAF to local governments. See "Ad Valorem Property Taxes" above and See "LIMITATION ON TAX REVENUES—State Budgets—Economic Recovery Bonds; Triple Flip Legislation" for a more detailed discussion on the property tax shift and the Triple Flip legislation. Franchise Taxes. The City levies a franchise tax on its cable television, trash collection and utility franchises. Business License Taxes. The City levies a business license tax based on number of employees. Transient Occupancy Taxes. The City levies a 10% transient occupancy tax on hotel and motel bills. The City's Redevelopment Agency receives 60%, of any Transient Occupancy Tax collected within the Main Pier Project sub-area, with the exception of the transient occupancy tax from one hotel, all of which is received by the City. Utility Users Taxes. The City levies a tax equal to 5%,of utility bills, which is collected by the companies providing the services and remitted monthly to the City. Property Transfer Taxes. A documentary stamp tax is assessed for recordation of real property transfers. -27- The following table illustrates tax revenues by source: Tax Revenues By Source (in thousands) Actual Actual Actual Actual Budget Source 2003-04 2004-05 2005-06 2006-07 2007-08 Property Taxes $33,797 $48,119 $55,168 $ 60,606 $ 65,001 Sales and Use Tax 26,101 22,122 24,003 23,724 26,060 Utility Taxes 19,424 20,004 21,170 21,479 23,125 Other Taxes 10,046 13,068 13,226 13,776 14,580 Total Tax Revenues $ 89,368 $103,313 $113,567 $119,585 $128,766 Source: City of Huntington Beach Finance Department. In-Lieu Payments A significant revenue source of the City is State payments and other payments in- lieu of taxes. The City receives a portion of Department of Motor Vehicles fees collected statewide. Payment of State assistance depends on the adoption by the State of its budget, including the appropriations therein providing for local assistance. These revenues are shown in the accompanying financial statements as "intergovernmental revenues." As a result of recent changes in State law enacted as part of the fiscal year 2004-05 State budget, the amount of future Motor Vehicle fees received by the City will be significantly reduced. The reduced amount of City Motor Vehicle fees is expected to be substantially offset with property tax revenue. See "LIMITATIONS ON TAX REVENUES-State Budgets" herein. In-Lieu Payments (in thousands) Actual Actual Actual Actual Budget Source 2003-04 2004-05 2005-06 2006-07 2007-08 Motor Vehicle In-Lieu $1,016 $ 7,848 $11,106 $14,078 $14,750 Real Property Transfers 1,355 1,846 1,070 1,122 1,350 Other Taxes 759 5,306 5,977 6,959 7,300 Total In-Lieu Payments $3,130 $15,000 $18,153 $22,159 $23,400 Source: City of Huntington Beach Finance Department. Other General Fund Revenue Sources Licenses and Permits. These revenues consist primarily of building construction permit fees. Fines, Forfeitures and Penalties. These revenues include parking citations and other fines for municipal code violations. Use of Money and Property. These revenues consist primarily of investment earnings and rental/concession income. Charges for Services. The City charges fees for plan checking, building inspection and a variety of other municipal services. The following table illustrates other revenue sources: -28- Other Revenue Sources (in thousands) Actual Actual Actual Actual Budget Source 2003-04 2004-05 2005-06 2006-07 2007-08 Licenses and Permits $ 7,732 $ 7,432 $ 7,209 $10,026 $ 9,803 Fines and Forfeitures 4,342 4,365 4,288 4,165 4,969 Use of Money and Property 8,924 9,736 12,084 14,032 14,126 From Other Agencies 10,146 9,672 5,367 5,348 5,565 Charges for Services 7,819 7,419 13,876 15,695 15,722 Total Other Revenues $38,963 $38,624 $42,824 $49,266 $50,185 i Source: City of Huntington Beach Finance Department. Alternative Liquidity The City historically borrows cash for General Fund purposes from various funds and the Redevelopment Agency at fiscal year end until the next year's tax and revenue anticipation notes are issued, typically in October. The City has not issued tax and revenue anticipation notes since 1999. Actual and estimated cash balances for these sources are: Alternative Liquidity Actual Actual Actual Actual Budget 2003-04 2004-05 2005-06 2006-07 2007-08 Redevelopment Agency $ 7,324 $22,208 $25,180 $28,611 N/A Retiree Medical Fund 4,609 4,796 5,118 7,320 N/A Retirement Supplement 11,881 14,039 16,687 20,235 N/A Emerald Cove Enterprise Fund 2,229 2,587 2,833 2,906 N/A Measure M 5,419 5,390 2,966 3,371 N/A Water Capital 32,335 32,965 30,734 33,579 N/A Source: City of Huntington Beach Finance Department. Retirement Programs California Public Employees' Retirement System. The City contributes to the California Public Employees' Retirement System ("PERS"), an agent multiple-employer public employee defined benefit retirement system that acts as a common investment and administrative agent for participating public entities within the State. All permanent and temporary employees who work more than 1,000 hours are eligible to participate in PERS. Benefits vest after 5 years of service. Benefits for employees vary based upon final yearly compensation, safety or non-safety status and age at retirement. PERS also provides death and disability benefits. City employees' contribution rates are 7 percent (9 percent for safety employees) of their monthly earnings. The City currently reimburses 7 percent of the miscellaneous (non- safety) employees' contribution and 6.75 percent of the safety employees' contribution on behalf of the employees to PERS. The employer PERS contribution rates are 0.000% for miscellaneous employees and 25.144% for safety employees. The City is required to contribute amounts necessary to fund the benefits for its members using the actuarial basis recommended by PERS. The PERS contribution for fiscal year 2006-07 was $12,422,000. The -29- latest actuarial valuation, as of June 30, 2007, projected net assets available for benefits (at cost) to be $ __greater than future benefits for current and retired City employees. City's Retirement Supplement Plan. The City provides a single-employer defined benefit plan to all employees hired before 1998 (dates varies according to labor association) and who are also covered under the City's retirement plan with PERS. The benefit commences at the same time as the PERS benefit commences and is payable for the employee's lifetime. The amount of the monthly benefit is calculated as the difference between the employee's PERS Unmodified Monthly Allowance and the actual monthly PERS retirement benefit the individual actually receives. The monthly benefit payable under the City's Retirement Supplement Plan remains level during the employee's lifetime and will not be reduced. The net Pension Benefit Obligation for the City's Retirement Supplement Plan at September 30, 2006 was$6,548. City's Retirement Supplement Plan Contributions (in thousands) Fiscal Annual Percentage of Net Pension Unfunded Actuarial Year Pension Cost ARC Funded Obligation Liability 2001-02 $3,092 92% $8,595 $29,775 2002-03 2,786 100 8,344 26,749 2003-04 3,073 98 8,415 30,128 2004-05 2,900 127 7,640 29,093 2005-06 2,851 138 6,548 28,796 Source: City of Huntington Beach Finance Department. City's Retiree Medical Plan. The City maintains a Retiree Subsidy Medical Plan for all employees that are guaranteed a retirement benefit allowance by PERS, provided they have a minimum of ten (10) years of continuous service with the City (or are granted an industrial disability retirement) and are employed by the City at the time of their retirement. Payment of the Retiree Subsidy Medical Plan continues until the retiree is eligible for Medicare coverage (age 65), or until death if the employee is not eligible for Medicare. Spouses are covered for one year after an employee's death. City's Retirement Supplement Plan Contributions (in thousands) Actuarially Unfunded Fiscal Required Actual Net Assets Actuarial Year Contributions Contributions Available Liability 2001-02 $744 $579 $4,818 $6,623 2002-03 766 591 4,595 6,698 2003-04 766 623 4,630 6,677 2004-05 740 975 4,829 6,518 2005-06 740 1,011 5,158 6,243 Source: City of Huntington Beach Finance Department. Employee Relations and Collective Bargaining City employees are represented by eight labor union associations, the principal one being Municipal Employees Association which represents approximately 43% of all City -30- employees. Currently 99% of all permanent City employees are covered by negotiated agreements. Negotiated agreements have the following expiration dates: Negotiated Employee Agreements Contract Number of Bargaining Unit Expiration Date Employees Management Employees Organization 12/10/2011 147 Municipal Employees Association 6/30/2012 546 Police Officer's Association 3/31/2010 270 Police Management Association 6/30/2010 14 Firefighters' Association 6/24/2011* 128 Fire Management Association 6/30/2008 8 Marine Safety Officers' Association 9/30/2009 13 Surf City Lifeguard Employees' Association (Part-Time) 9/30/2008 124 (Part Time) N/A 18 Source: City of Huntington Beach Finance Department. *This agreement not yet approved by the City Council. Expired contracts are currently under negotiation. The City has never had an employee work stoppage. Risk Management The City is exposed to various risks of losses related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees and natural disasters. The City records all of these claims as expenditures in the General Fund. The liability for these claims is recorded as part of long-term obligations in the Government-Wide financial statements. The City records the amount of claims payable at year-end that is due and payable at year-end in the fund financial statements. The full amount of claims is reported as a liability in the government-wide financial statements. Liabilities include amounts incurred, but not reported. Liability Claims. Claims of up to $1 ,000,000 are paid from the General Fund. The City is also a participant in the Big Independent Cities Excess Pool Joint Powers Authority (BICEP), which shares payments for claims between $1,000,000 and $2,000,000. It also provides general liability insurance of$25,000,000 above the City's retention of$1 ,000,000. BICEP was created by a joint powers agreement between the City of Huntington Beach and four other local entities for the purpose of providing joint insurance coverage and related risk management services for member cities. BICEP allows member entities to finance claims payment pool for certain liability claims in excess of $1,000,000 million to a limit of $25,000,000. BICEP's governing board has one representative from each city (either a member of the City Councilor designate). Current members must approve any changes to the board. Each participating City pays an insurance premium to BICEP that is used to fund the operating and debt service requirements. Workers' Compensation Claims. Workers' compensation claims of up to $1,000,000 per claim are paid from the General Fund. The BICEP is a member of CSAC-Excess Insurance Authority for excess workers' compensation coverage. Payments for claims from $1,000,000 to $5,000,000 are shared. Payments for claims between $5,000,000 and $200,000,000 are paid by excess insurance coverage. All funds of the City participate in the program and make payments to these funds based on estimated cost information. -31- Claims activity and liabilities relating to the current and prior year are (in thousands): Workers Liability Compensation Insurance Total Balance September 30, 2006 Additions Reductions Net Increase (Decrease) Balance September 30, 2007 Additions Reductions Net Increase (Decrease) Below is a reconciliation of the above schedule of total claims payable to the financial statements (in thousands): Current Claims Payable -Reported on the Balance Sheet of Both the Government-Wide and Fund Statements $ Claims Payable - Long-Term (Greater than One Year) - Reported in Government-Wide Statements, but not in Fund Statements Total $ City Investment Policy and Portfolio The City administers a pooled investment program, excerpt for the employees' retirement funds (which are administered separately) and except for those funds which are managed separately by trustees appointed under bond indentures. This program enables the'City to combine available cash from all funds and to invest cash that exceeds current needs. The most recently revised Investment Policy for the City was adopted November 5, 2007. See APPENDIX D—"CITY OF HUNTINGTON BEACH INVESTMENT POLICY." The City has established an Investment Advisory Board composed of citizen appointments by the City Council, to review the Investment Policy to ensure its consistency with the overall objectives of safety, liquidity and return and to review the monthly portfolio report. The City Treasurer submits a monthly report to the City Council, City Administrator, Finance Officer and the Investment Advisory Board that contains a statement that the City's portfolio is invested in conformance with state law and the Investment Policy; and that there is sufficient liquidity to meet the next six months' estimated expenditures. -32- Investments at February 29, 2008, in all operating funds of the City, including the Redevelopment Agency, were as follows: Investment Portfolio Market Book %of Days to YTM Type Value Value Portfolio Maturity 365 Equiv. Federal Agency Issues—Coupon LAIF Treasury Securities—Coupon Medium Tenn Notes Commercial Paper Disc.—Amortizing Federal Agency Disc.—Amortizing Source: City of Huntington Beach Treasurer Financial Statements The accounting policies of the City conform to generally accepted accounting principles. The Governmental Accounting Standards Board ("GASB") published its Statement No. 34 "Basic Financial Statements - and Management's Discussion and Analysis -for State and Local Governments" on June 30, 1999. Statement No. 34 provides guidelines to auditors, state and local governments and special purpose governments such as school districts and public utilities, on new requirements for financial reporting for all governmental agencies in the United States. Generally, the basic financial statements and required supplementary information should include (i) Management's Discussion and Analysis; (ii) financial statements prepared'using the economic measurement focus and the accrual basis of accounting and (ii) fund financial statements prepared using the current financial resources measurement focus and the modified accrual method of accounting and (iii) required supplementary information. As required by GASB, the City implemented Statement No. 34 for the 2002-03 audited financial statements. Consequently, significant changes in financial statement content and structure is evident in the 2002-03 audit, so financial information is not directly comparable to prior years. Accounts of the City are organized on the basis of funds and account groups each of which is considered a separate accounting entity. Operations of each fund are accounted for with a separate set of self-balancing accounts. The various funds are grouped into broad categories, as follows: Governmental Funds (General, Special Revenue, Capital Projects and Debt Service), Proprietary Funds (Enterprise Funds), Fiduciary Funds (Agency), and Account Groups (General Fixed Assets). All Governmental Funds and Fiduciary Funds use the modified accrual basis of accounting. The Proprietary and Account Groups use the accrual basis of accounting. The General Fund is the general operating fund of the City and is used to account for all financial resources except those required to be accounted for in another fund. The City retained the firm of Diehl Evans & Co. LLP, to examine the general purpose financial statements of the City as of and for the year ended September 30, 2007. See APPENDIX C—"AUDITED FINANCIAL STATEMENTS OF THE CITY OF HUNTINGTON BEACH FOR THE YEAR ENDED SEPTEMBER 30, 2007." -33- The following tables summarize the Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balance of the City's General Fund for the last five fiscal years. General Fund Balance Sheet as of September 30, (in thousands) 2003 2004 2005 2006 2007 Assets: Cash and Investments $ 7,136 $22,685 $22,268 $25,714 $29,010 Taxes Receivable 16,910 17,169 22,735 21,281 24,066 Other Receivables 2,094 3,056 4,120 2,993 4,047 Unbilled Receivables 268 - - Due from Other Funds 3,048 - - - - Advances to Other Funds - - 1,836 1,836 1,620 Land Held for Resale - - - - - Other Assets 2,557 2,412 - - - Prepaid Expenses - - 11,830 11,201 11,261 Total Assets $32,013 $45,322 $62,789 $63,025 $70,004 Liabilities and Fund Balances: Liabilities Accounts Payable $ 2,741 $3,910 $3,116 $ 3,644 $ 3,971 Accrued Payroll 3,785 4,521 2,245 2,326 2,548 Due to Other Funds - - Deposits Payable 1,663 1,430 1,834 1,591 1,824 Deferred Revenue 2,950 4,029 11,364 9,078 12,343 TRAN - - - - - Claims Payable 5,900 5,100 5,944 5,800 5,524 Total Liabilities $17,039 $18,990 $24,503 $22,439 $26,210 Fund Balances Reserved $ 2,757 $ 2,113 $5,915 $ 7,382 $ 7,822 Unreserved: - - - - - Designated 9,984 13,483 28,404 29,632 32,355 Undesignated 2,233 10,736 3,967 3,572 3,617 Total Fund Balances 1.4,974 26,332 38,286 40,586 43,794 Total Liabilities and Fund Balances $32,013 $45,322 $62,789 $63,025 $70,004 Source: City of Huntington Beach Comprehensive Annual Financial Report. -34- General Long-Term Debt Account Group as of September 30, (in thousands) 2003 2004 2005 2006 2007 Judgment Obligation Bonds - $12,500 $12,245 $11,525 $10,795 Certificates of Participation $16,730 16,140 15,525 14,885 14,215 Lease Revenue Bonds 63,535 60,840 58,030 55,120 52,115 Tax Allocation Bonds 29,375 28,305 27,205 26,065 24,885 Compensated Absences 8,223 8,037 9,045 9,630 11,068 Loans Payable 18,179 18,580 17,613 30,432 28,851 Pension Benefit Obligations 8,342 8,409 7,640 6,548 4,775 Leases Payable 6,420 4,885 3,461 2,975 2,281 Claims Payable 37,191 11,937 14,545 3,956 4,672 Other Long-Term Debt 925 337 116 - - Total Long-Term Debt 188,920 169,970 165,425 161,136 153,657 Amount Available for Long-Term Debt - - - - - Amount to be Provided for Long-Term Debt $188,920 $169,970 $165,425 $161,136 $153,657 Source: City of Huntington Beach Comprehensive Annual Financial Report. -35- General Fund Statement of Revenues, Expenditures and Changes in Fund Balance For the year ended September 30, (in thousands) 2003 2004 2005 2006 2007 Revenues: Property Taxes $29,688 $33,797 $48,119 $55,168 $60,606 Sales Taxes 25,882 26,101 22,122 24,003 23,724 Utility Taxes 18,310 19,424 20,004 21,170 21,479 Other Taxes 11,845 10,046 13,068 13,226 13,776 Licenses and permits 6,531 7,732 7,432 7,209 10,026 Fines,Forfeitures and Penalties 3,815 4,342 4,365 4,288 4,165 From Use of Money and Property 6,843 8,924 9,736 12,084 14,032 From Other Agencies 10,885 10,146 9,672 5,367 5,348 Charges for Current Service 9,244 7,819 7,419 13,876 15,695 Other 967 3,709 7,416 3,224 3,143 Total Revenues $124,010 $132,040 $149,353 $159,615 $171,994 Expenditures: Current: City Council $ 269 $ 280 $ 254 $ 271 $ 287 City Administrator 1,559 1,165 1,582 5,504 1,490 City Treasurer 1,376 1,519 1,547 1,446 1,060 City Attorney 2,836 2,771 2,771 2,272 2,438 City Clerk 555 . 712 679 828 932 Administrative Services 8,323 6,295 5,731 0 0 Finance 0 0 2,501 3,310 4,400 Human Resources 0 0 0 0 4,202 Planning 2,403 2,237 2,403 2,661 2,949 Building 2,566 2,830 3,291 3,576 4,193 Fire 18,848 18,758 22,022 23,918 25,935 Information Services 3,072 5,117 5,726 6,540 6,437 Police 40,825 39,140 45,466 49,708 54,974 Economic Development 843 842 776 1,121 1,538 Community Services 9,381 10,345 11,030 13,179 13,258 Library Services 3,192 2,525 2,707 3,129 4,145 Public Works 17,009 14,684 19,124 24,752 23,488 Non-Departmental 9,348 11,222 12,145 12,793 12,873 Capital Outlay 0 0 0 0 0 Debt Service: Principal 1,984 1,786 2,053 1,216 733 Interest 162 258 194 145 125 Total Expenditures $124,551 $122,486 $142,002 $156, 669 $165,457 Excess of Revenues Over (Under) Expenditures (541) 9,554 7,351 3,246 6,537 Other Financing Sources (Uses) Operating Transfers In 8,072 11,092 11,873 7,305 4,632 Proceeds of Bankruptcy Settlements - Proceeds of Long-Term Debt (1,610) 342 Capital Leases 35 Operating Transfers Out (32,692) (9,288) (7,612) (8,251) (7,996) Total Other Financing Sources(Uses) (26,230) 1,804 4,603 (946) (3,329) Excess of Revenues and Other Sources Over (Under) Expenditures and Other Uses (26,771) 11,358 11,954 2,300 3,208 Fund Balance-Beginning of Year 41,745 14,974 26,332 38,286 40,586 Cumulative Effect of Changes in Accounting Principles 0 0 0 0 0 Prior Period Adjustment 0 0 0 0 0 Fund Balance as Restated 41,745 14,974 26,332 38,286 40,586 Residual Equity Transfers In 0 0 0 0 0 Fund Balance-End of Year $14,974 $26,332 $38,286 $40,586 $43,794 Source: City of Huntington Beach Comprehensive Annual Financial Report. -36- Short-Term Obligations The City currently has no outstanding short-term obligations. Long-Term Obligations General Obligation Debt. As of September 30, 2007, the City had no long-term general obligation bonded indebtedness outstanding and has never defaulted on any of its bonded indebtedness previously issued. The City has no authorized but unissued debt. Lease Obligations. The City has made use of various lease arrangements with the Huntington Beach Public Financing Authority to finance capital projects through the issuance of certificates of participation and lease revenue bonds. The following table is a summary of the City's long-term general fund-secured obligations as of September 30, 2007. Summary of Long-Term Obligations Estimated Total Original Outstanding Total Future FY 2007 Issue Principal Payments Payments 1997 Lease Revenue Bonds (1) $ 8,070,000 2000 Lease Revenue Bonds (2) 18,310,000 2001A Lease Revenue Bonds 31,360,000 2001B Lease Revenue Bonds 31,095,000 2004 Judgment Obligation Bonds 12,500,000 Total Long Obligations $88,835,000 Source: City of Huntington Beach Comprehensive Annual Financial Report. (1)This issue to be refunded with the proceeds of the Bonds. (2)$ of this issue to be refunded with the proceeds of the Bonds. CERTAIN RISK FACTORS The following factors, along with all other information in this Official Statement, should be considered by potential investors in evaluating the Bonds. Not a Pledge of Taxes The obligation of the City to pay the Lease Payments and Additional Payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The Authority has no taxing power. The obligation of the City to pay Lease Payments and Additional Payments does not constitute a debt or indebtedness of the City, the State or any of its political subdivisions within the meaning of any constitutional or statutory debt limitation or restriction. The Lease Agreement does not create a pledge, lien or encumbrance upon the funds of the City. Nevertheless, the City is obligated under the Lease Agreement, subject to abatement, to pay Lease Payments and Additional Payments from any source of legally available funds (subject to certain exceptions) and the City has covenanted in the Lease -37- Agreement that, for as long as the Property is available for its use and possession, it will make the necessary annual appropriations within its budget for all Lease Payments and Additional Payments. The Lease Payments and Additional Payments due under the Lease Agreement are payable from the City's general revenues. See "CITY FINANCIAL INFORMATION" herein and APPENDIX A—"AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007." Additional Obligations of the City The City is permitted to enter into other obligations which constitute additional charges against its general revenues without the consent of Owners of the Bonds. To the extent that additional obligations are incurred by the City, the funds available to pay Lease Payments may be decreased. The Lease Payments and other payments due under the Lease Agreement (including payment of costs of repair and maintenance of the Property, taxes and other governmental charges levied against the Property) are payable from funds lawfully available to the City. In the event that the amounts which the City is obligated to pay in a fiscal year exceed the City's revenues for such year, the City may choose to make some payments rather than making other payments, including Lease Payments and Additional Payments, based on the perceived needs of the City. The same result could occur if, because of California Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available revenues or is required to expend available revenues to preserve the public health, safety and welfare. Default Upon the breach of any agreement, condition, covenant or term contained in the Lease Agreement required to be observed or performed by the City, the Authority may exercise any and all rights of entry upon or possession of the Property, and also, at its option, with or without such entry, may terminate the Lease Agreement; provided, that no termination will be effected either by operation of law or acts of the parties thereto except upon express written notice from the Authority to the City terminating the Lease Agreement, as provided therein. In no event does the Authority or any assignee have the right to accelerate the payment of any Lease Payment under the Lease Agreement. Such re- entry or re-letting will not effect a surrender of the Lease Agreement. See APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS—Lease Agreement—Remedies on Default." Abatement The Lease Payments are paid by the City in each rental period for and in consideration of the right of use and occupancy of the Property during each such period for which said rental is to be paid. Except to the extent of amounts held in the Reserve Account or proceeds of rental interruption insurance or eminent domain proceedings, during any period in which, by reason of material damage, destruction or condemnation there is substantial interference with the use and occupancy by the City of any portion of the Property, rental payments due under the Lease Agreement will be abated proportionately, and the City waives the benefits of California Civil Code Sections 1932(2) and 1933(4) and 'of Title 11 of the United States Code, Section 365(h) and any and all other rights to terminate this Lease Agreement by virtue of any such interference and the Lease Agreement will continue in full force and effect notwithstanding any insufficiency in resulting Lease Payments during the period that the Property is being restored. The amount of abatement will be in the proportion in which the initial acquisition cost of that portion of -38- the Property rendered unusable bears to the entire initial acquisition cost of the Property. Such abatement will continue for the period commencing with the date of such damage or destruction and ending with the substantial completion of the work of repair or replacement of the portion of the Property so damaged or destroyed. Under the Lease Agreement, the City has covenanted to obtain and maintain rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of any part of the Property during the term of the Lease as a result of any of the hazards covered in the fire and extended coverage insurance required under the Lease Agreement in an amount at least equal to the maximum Lease Payments for any future 24-month period. See "CERTAIN RISK THE FACTORS—Earthquakes" below and APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS—The Lease Agreement—Insurance." Loss of Tax Exemption In order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Authority and the City have covenanted in the Indenture and the Lease Agreement to comply with each applicable requirement of the Internal Revenue Code of 1986, as amended. The interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of the Bonds, as a result of acts or omissions of the Authority or the City in violation of covenants in the Indenture and the Lease Agreement. Should such an event of taxability occur, the Bonds may not be subject to acceleration or redemption and no increase in rate at which interest on the Bonds compounds will occur, and the Bonds will remain Outstanding until maturity or until redeemed under on of the redemption provisions contained in the Indenture. See "TAX MATTERS" herein. Earthquakes Generally, within the State, some level of seismic activity occurs on a regular basis. During the past 150 years, the Southern California area has experienced several major and numerous minor earthquakes. The most recent major earthquake in the Southern California area was the Northridge earthquake, which occurred on January 17, 1994. The Northridge earthquake, with an epicenter approximately 50 miles north of the City, measured 6.5 on the Richter scale. The City is not legally obligated under the Lease Agreement to maintain, or cause to be maintained, earthquake insurance on the Property and no assurance is made that any earthquake insurance will be maintained. If there were to be an occurrence of severe seismic activity in the City, there could be substantial damage to and interference with the City's right to use and occupy all or a portion of the Property, which could result in Lease Payments being subject to abatement. Additionally, severe seismic activity in the City could impact the City's general fund expenditures. See "CERTAIN RISK FACTORS—Abatement" above. Limitations on Remedies If the City defaults on its obligations to make Lease Payments with respect to the Property, the Trustee, as assignee of the Authority, may (subject to the restrictions described below) retain the Lease Agreement and hold the City liable for all Lease Payments on an annual basis and will have the right to reenter and relet the Property. In the event such reletting occurs, the City would be liable for any resulting deficiency in Lease Payments. Alternatively, the Trustee may terminate the Lease with respect to the Property -39- and proceed against the City to recover damages pursuant to the Lease. The Trustee may not sell or foreclose the Property to obtain money for payment of the principal of or interest on the Bonds in the event of a default. No assurance can be given that the Trustee will be able to relet any portion of the Property so as to provide rental income sufficient to make principal and interest payments with respect to the Bonds in a timely manner, and the Trustee is not empowered to sell the Property for the benefit of the Owners of the Bonds. In addition, due to the governmental function of the Property, it is not certain whether a court would permit the exercise of the remedies of repossession and reletting with respect thereto. Any suit for money damages would be subject to the limitations on legal remedies against local agencies in the State, including a limitation on enforcement of judgments against funds needed to serve the public welfare and interest. Additionally, enforceability of the rights and remedies of the owners of the Bonds, and the obligations incurred by the City, may become subject to the federal bankruptcy code and applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditor's rights generally, now or hereafter in effect, equity principles which may limit the specific enforcement under State law of certain remedies, the exercise by the United States of America of the powers delegated to it by the Constitution, the reasonable and necessary exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on remedies against counties in the State. See "—Bankruptcy" below. In the event of default, there is no remedy of acceleration of any Lease Payments which have not come due and payable in accordance with the Lease Agreement. The City will continue to be liable for Lease Payments as they become due and payable in accordance with the Lease Agreement if the Trustee does not terminate the Lease Agreement, and the Trustee is required to seek a separate judgment each year for that year's defaulted Lease Payments. Any such suit for money damages would be subject to limitations on legal remedies against cities in the State, including a limitation on enforcement of judgments against funds or property needed to serve the public welfare and interest. Bankruptcy In addition to the limitation on remedies contained in the Indenture, the rights and remedies provided in the Indenture and the Lease Agreement may be limited by and are subject to the provisions of federal bankruptcy laws and to other laws or equitable principles that may affect the enforcement of creditors' rights. Under Chapter 9 of the Bankruptcy Code (Title 11, United States Code) ("Bankruptcy Code"), which governs the bankruptcy proceedings for public agencies such as the City, there are no involuntary petitions in bankruptcy. However, pursuant to Chapter 9 of the Bankruptcy Code, the City may seek voluntary protection from its creditors for purposes of adjusting its debts. In the event the City were to become a debtor under the Bankruptcy Code, the City would be entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 proceeding and an owner of a Bond would be treated as a creditor in a municipal bankruptcy. Among the adverse effects of such a bankruptcy might be: (a) the application of the automatic stay provisions of the Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the commencement of any judicial or other action for the purpose of recovering or collecting a claim against the City; (b) the avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy petition; (c) the occurrence of unsecured or court-approved secured debt which may have a priority of payment superior to that of owners of Bonds; and (d) the -40- possibility of the adoption of a plan for the adjustment of the City's debt (a "Plan") without the consent of all of the owners of Bonds, which Plan may restructure, delay, compromise or reduce the amount of the claim of the owners if the Bankruptcy Court finds that the Plan is fair and equitable. In addition, the Bankruptcy code might invalidate any provision of the Bonds which makes the bankruptcy or insolvency of the City an event of default. Title to the Property will be held by the City and leased to the Authority throughout the term of the Site and Facility Lease. Therefore, the Property may be considered property of the estate of the City which may be disposed of by a bankruptcy court in the event of a bankruptcy, insolvency or similar proceeding by or against the City. Except as expressly provided in the Indenture, the Authority does not have any obligation or liability to Owners with respect to the payment when due of Lease Payments by the City or with respect to the performance by the City of other agreements and covenants required to be performed by it contained in the Lease or Indenture, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained in the Indenture. Hazardous Substances The City knows of no existing hazardous substances which require remedial action on or near the Property. However, it is possible that such substances do currently or potentially exist and that the City is not aware of them. The City does not currently carry insurance covering the risks of hazardous substances. Owners and operators of real property may be required by law to remedy conditions of the property 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 California 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. Further, such liabilities may arise not simply from the existence of a hazardous substance but from the method of handling it. All of these possibilities could significantly and adversely affect the operations and finances of the City and/or the value of the Property. Investment of Funds The Reserve Account and all other funds held under the Indenture are required to be invested in Permitted Investments as provided under the Indenture. See APPENDIX B—"SUMMARY OF CERTAIN PROVISIONS OF THE PRINCIPAL LEGAL DOCUMENTS" for a summary of the definition of Permitted Investments. All investments, including the Permitted Investments and those authorized by law from time to time for investments by municipalities, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected, decline in market value and loss or delayed receipt of principal. The occurrence of these events with respect to amounts held under the Indenture or the funds and accounts held by the City could have a material adverse affect on the security for the Bonds and/or the financial condition of the City. See APPENDIX A—"AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007." -41- Secondary Market There can be no guarantee that there will be a secondary market for the Bonds or, if a secondary market exists, that any Bonds can be sold for any particular price. Prices of bond 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. No assurance can be given that the market price for the Bonds will not be affected by the introduction or enactment of any future legislation (including without limitation amendments to the Internal Revenue Code), or changes in interpretation of the Internal Revenue Code, or any action of the Internal Revenue Service, including but not limited to the publication of proposed or final regulations, the issuance of rulings, the selection of the Bonds for audit examination, or the course or result of any Internal Revenue Service audit or examination of the Bonds or obligations that present similar tax issues as the Bonds. On November 5,2007, the U.S. Supreme Court heard an appeal of Davis v. Kentucky Dep't of Revenue of the Finance and Admin. Cabinet, 197 S.W.3d 557 (2006), a decision holding that State statutes providing more favorable State income tax treatment to holders of debt issued by in-state government bodies than for debt issued by out-of-state government bodies violate the U.S. Constitution. If the decision is upheld, the marketability and market price for the Bonds may be affected. State Budget The City relies on a number of revenue sources that could be reduced or eliminated by State legislation, including, among others, sales and use taxes, property taxes and motor vehicle license fees. The State has in prior years experienced budgetary difficulties and has balanced its budget by requiring local political subdivisions to fund certain costs theretofore borne by the State. The State is again experiencing budgetary difficulties. No assurance can be given that the State electorate will not at some future time adopt initiatives or that the State Legislature will not enact legislation that will amend the laws of the State Constitution in a manner that could result in a reduction of the City's General Fund revenues and therefor a reduction of the funds legally available to the City to make Lease Payments. For example, Article XIII A-D of the State Constitution, Proposition 111 and Proposition 62 were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time, other initiative measures could be adopted, further affecting City General Fund revenues or the City's ability to expend revenues. The nature and impact of these measures cannot be anticipated by the City. The State Supreme Court has held that an initiative can repeal a tax ordinance and prohibit the imposition of further such taxes, and that the State Constitutional prohibition against referenda on tax levies does not apply to initiatives. See "CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING TAX REVENUES." The following information concerning the State has been obtained from publicly available information which the City believes to be reliable; however, the City takes no responsibility as to the accuracy or completeness thereof and has not independently verified such information. Information about the State budget is regularly available at various State-maintained websites. Text of the State budget may be found at the Department of Finance website, www.dof.ca.gov, under the heading "California Budget." An impartial analysis of the State budget is posted by the Office of the Legislative Analyst (the "LAO") at www.lao.ca.gov. In addition, various State official statements, many of which contain a summary of the current and past State budgets, may be found at the website of the State Treasurer, www.treasurer.ca.gov. The information referred to is prepared by the respective -42- State agency maintaining each website and not by the City, and the City takes no responsibility for the continued accuracy of the internet addresses or for-the accuracy or timeliness of information posted there; and such information is not incorporated herein by these references. Since early 2001, the State has faced a series of financial challenges, challenges that may continue or reoccur in future years. The major forces involved in the State's economic downturn were sharp declines in the high technology, internet and telecommunications sectors, lower demand for exports, the effects of the events of September 11, 2001, rising unemployment levels and large stock market declines. The downturn resulted in a serious erosion of the State's tax revenues. State finances had recovered but more recently, the downturn in the real estate market and other factors are adversely affecting State finances. On August 24, 2007, the Governor signed the State Budget Act for Fiscal Year 2007-08 (the "2008 Budget Act"). The 2008 Budget Act assumes a carryover balance from Fiscal Year 2006-07 of $4.8 billion. The 2008 Budget Act projects $102.3 billion in revenues for Fiscal Year 2007-08 and authorizes the expenditure of an equal amount, leaving the State's General Fund with a year-end reserve of $4.1 billion. Even though the expenditures authorized under the 2008 Budget Act do not exceed the projected revenues for Fiscal Year 2007-08, the State will still face operating shortfalls in both Fiscal Years 2008-09 and 2009-10. According to the LAO, the shortfall in future years is due to the fact that many of the State's solutions enacted in the 2008 Budget Act are one-time in nature. For example, the State assumes $1 billion in one-time revenues from the sale of EdFund, the State's nonprofit student loan guaranty agency, $293 million in General Fund revenues from amended tribal gaming compacts and $600 million in General Fund revenues due to the transfer from the State's tobacco securitization fund, which transfer was originally scheduled for Fiscal Years 2008- 09 and 2009-10. In addition, due to the fluctuation in estimates of State revenues in Fiscal Year 2006-07, the 2008 Budget Act assumes no additional Proposition 98 funding for Fiscal Year 2006-07. If, however, the finalized revenue figures for Fiscal Year 2006-07 are higher than expected, the State will automatically owe a settle-up payment of approximately $411 million for Fiscal Year 2006-07 Proposition 98 funding, which will be paid out of the State's reserve. The 2008 Budget Act also uses $567 million of one-time and special fund moneys to support Fiscal Year 2007-08 K-12 costs,which results in the State entering Fiscal Year 2008-09 with a large ongoing shortfall for K-12 education. The 2008 Budget Act appropriates approximately $4.2 billion for transportation programs, $950 million of which will be allocated to cities and counties for local streets and roads. On January 11, 2008, Governor Arnold Schwarzenegger submitted his proposed budget for 2008-09, which represents his proposal to address "the systemic problems that drive California's chronic deficits." At the same time, Governor Schwarzenegger issued proclamations declaring a fiscal emergency and calling a special session of the legislature to address the current year $3.3 billion budget gap. The Governor's budget summary is available at http://gov.ca.gov/issue/state-budget/. The City cannot predict what actions will be taken in future years by the State Legislature and the Governor to address future State budget deficits. Future State budgets will be affected by national and state economic conditions and other factors over which the City has no control. To the extent that the State budget_process results in reduced revenues to the City, the City will be required to make adjustments to its budget. -43- CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS There are a number of provisions in the State Constitution that limit the ability of the City to raise and expend tax revenues. Article XIIIA On June 6, 1978, California voters approved Proposition 13, adding Article XIIIA to the California Constitution. Article XIIIA, among other things, affects the valuation of real property for the purpose of taxation in that it defines the full cash property value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under 'full cash value,' or thereafter, the appraised value of real property newly constructed, or when a change in ownership has occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or comparable local data at a rate not to exceed 2% per year, or reduced in the event of declining property value caused by damage, destruction or other factors including a general economic downturn. The amendment further limits the amount of any ad valorem tax on real property to 1% of the full cash value except that additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1,1978, and bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the votes cast by the voters voting on the proposition. On June 3, 1986, California voters approved Proposition 46, which added an additional exemption to the 1% tax limitation imposed by Article XIIIA. Under this amendment to Article XIIIA, local governments and school districts may increase the property tax rate above 1% for the period necessary to retire new general obligation bonds, if two-thirds of those voting in a local election approve the issuance of such bonds and the money raised through the sale of the bonds is used exclusively to purchase or improve real property. Legislation enacted by the California Legislature to implement Article XIIIA provides that all taxable property is shown at full assessed value as described above. In conformity with this procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100%, of assessed value and all general tax rates reflect the $1 per $100 of taxable value. Tax rates for voter approved bonded indebtedness are also applied to 100%of assessed value. Future assessed valuation growth allowed under Article XIIIA (new construction, change of ownership, 2% annual value growth) will be allocated on the basis of "situs" among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and school districts will share the growth of "base" revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation the following year. The City is unable to predict the nature or magnitude of future revenue sources which may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the levying of any other ad valorein property tax above the 1% limit except for taxes to support indebtedness approved by the voters as described above. Article XIIIB On November 6, 1979, California voters approved Proposition 4, which added Article X11IB to the California Constitution. In September 1990, the voters through their approval of Proposition 111 amended Article XIIIB. Article XIIIB of the California -44- Constitution limits the annual appropriations of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted annually for changes in the cost of living, population and services rendered by the governmental entity. The "base year" for establishing such appropriation limit is the 1978-79 fiscal year. Increases in appropriations by a governmental entity are also permitted (i) if financial responsibility for providing services is transferred to a governmental entity, or (ii) for emergencies so long as the appropriations limits for the three years following the emergency are reduced to prevent any aggregate increase above the Constitutional limit. Decreases are required where responsibility for providing services is transferred from the government entity. Appropriations subject to Article XIIIB include generally any authorization to expend during the fiscal year the proceeds of taxes levied by the State or other entity of local government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement, unemployment insurance and disability insurance funds. Appropriations subject to limitation pursuant to Article XIIIB do not include debt service on indebtedness existing or legally authorized as of January 1, 1979, on bonded indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in an election for such purpose, appropriations required to comply with mandates of courts or the Federal government, appropriations for qualified outlay projects, and appropriations by the State of revenues derived from any increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels. "Proceeds of taxes" include, but are not limited to, all tax revenues and the proceeds to any entity of government from (i) regulatory licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service or regulation, (ii) the investment of tax revenues and (iii) certain State subventions received by local governments. Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two fiscal years. As amended in September 1990, the appropriations limit for the City in each year is based on the limit for the prior year, adjusted annually for changes in the costs of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living is, at the City's option, either (i) the percentage change in California per capita personal income, or (ii) the percentage change in the local assessment roll for the jurisdiction due to the addition of nonresidential new construction. The measurement of change in population is a blended average of statewide overall population growth, and change in attendance at local school and community college ("K-14") districts. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate "proceeds of taxes" received by the City over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years. Article XIIIB permits any government entity to change the appropriations limit by vote of the electorate in conformity with statutory and Constitutional voting requirements, but any such voter-approved change can only be effective for a maximum of four years. Proposition 62 Proposition 62 was adopted by the voters at the November 4, 1986, general election which (a) requires that any new or higher taxes for general governmental purposes imposed by local governmental entities such as the City be approved by a two-thirds vote of the -45- governmental entity's legislative body and by a majority vote of the voters of the governmental entity voting in an election on the tax, (b) requires that any special tax (defined as taxes levied for other than general governmental purposes) imposed by a local government entity be approved by a two-thirds vote of the voters of the governmental entity voting in an election on the tax, (c) restricts the use of revenues from a special tax to the purposes or for the service for which the special tax was imposed, (d) prohibits the imposition of ad valorem taxes on real property by local governmental entities except as permitted by Article XIIIA of the California Constitution, (e) prohibits the imposition of transaction taxes and sales taxes on the sale of real property by local governmental entities, and (f) requires that any tax imposed by a local governmental entity on or after August 1, 1985, be ratified by a majority vote of the voters voting in an election on the tax within two years of the adoption of the initiative or be terminated by August 15, 1988. On September 28, 1995, the California Supreme JCourt, in the case of Santa Clara City Local Transportation Authority v. Guardino, upheld the constitutionality of Proposition 62. In this case, the court held that a county-wide sales tax of one-half of one percent was a special tax that, under Section 53722 of the Government Code, required a two-thirds voter approval. The county-wide sales tax at issue received an affirmative vote of only 54.1% and was found to be invalid. Following the California Supreme Court's decision upholding Proposition 62, several actions were filed challenging taxes imposed by public agencies since the adoption of Proposition 62. On June 4,2001, the California Supreme Court released its decision in one of these cases, Hozvard Jarvis Taxpayers Association v. City of La Habra, et al. In this case, the court held that public agency's continued imposition and collection of a tax is an ongoing violation, upon which the statute of limitations period begins anew with each collection. The court also held that, unless another statute or constitutional rule provided differently, the statute of limitations for challenges to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax subject to Proposition 62 may only be made for those taxes received within three years of the date the action is brought. Proposition 218 On November 5, 1996, the voters of the State approved Proposition 218, a constitutional initiative entitled the "Right to Vote on Taxes Act" ("Proposition 218"). Proposition 218 added Articles XIIIC and XIIID to the California Constitution and contained a number of interrelated provisions affecting the ability of local governments, including the City, to levy and collect both existing and future taxes, assessments, fees and charges. The City is unable to predict whether and to what extent Proposition 218 may be held to be constitutional or how its terms will be interpreted and applied by the courts. Proposition 218 could substantially restrict the City's ability to raise future revenues and could subject certain existing sources of revenue to reduction or repeal, and increase the City's costs to hold elections, calculate fees and assessments, notify the public and defend its fees and assessments in court. However, the City does not presently believe that the potential impact on the financial condition of the City as a result of the provisions of Proposition 218 will adversely affect the City's ability to make Lease Payments and perform its other obligations payable from the General Fund as and when due. Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective. Taxes for general governmental purposes of the City require a majority vote and taxes for specific purposes, even if deposited in the City's General Fund, require a two-thirds vote. Further, any general purpose tax that the City imposed, extended or increased without voter approval after December 31, 1994 may continue to be imposed only if approved by a majority vote in an election held within two years of November 5, -46- 1996. These voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues through General Fund taxes, and no assurance can be given that the City will be able to impose, extend or increase such taxes in the future to meet increased expenditure requirements. Article XIIIC also expressly extends to voters the power to reduce or repeal local taxes, assessments, fees and charges through the initiative process, regardless of the date such taxes,assessments, fees or charges were imposed. This extension of the initiative power is not limited by the terms of Proposition 218 to fees imposed after November 6, 1996 and absent other legal authority could result in retroactive reduction in any existing taxes, assessments or fees and charges. The initiative powers extended to voters under Article XIIIC likely excludes actions construed as impairment of contracts under the contract clause of the United States Constitution. SB 919 provides that the initiative power provided for in Proposition 218 "shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before or after November 6, 1999, assumes the risk of, or in any way consents to, any action by initiative measure that constitutes an impairment of contractual rights" protected by the United States Constitution. However, no assurance can be given that the voters of the City will not, in the future, approve an initiative which reduces or repeals local taxes, assessments, fees or charges that currently are deposited into the City's General Fund. Further, "fees" and "charges" are not defined in Article XIIIC or SB 919, and it is unclear whether these terms are intended to have the same meanings for purposes of Article XIIIC as they do in Article XIIID. Accordingly, the scope of the initiative power under Article XIIIC could include all sources of General Fund moneys not received from or imposed by the federal or State government or derived from investment income. The initiative power granted under Article XIIIC of Proposition 218, by its terms, applies to all local taxes, assessments, fees and charges. The City is unable to predict whether the courts will ultimately interpret the initiative provision to be limited to property related local taxes, assessments, fees and charges. No assurance can be given that the voters of the City will not,in the future, approve an initiative which reduces or repeals local taxes, assessments, fees or charges which are deposited into the City's General Fund. The City believes that in the event that the initiative power was exercised so that all local taxes, assessments, fees and charges which may be subject to the provisions of Proposition 218 are reduced or substantially reduced, the financial condition of the City, including its General Fund, would be materially adversely affected. Article XIIID of Proposition 218 adds several new requirements to make it more difficult for local agencies to levy and maintain "assessments" for municipal services and programs. "Assessment" is defined in Proposition 218 and SB 919 as any levy or charge upon real property for a special benefit conferred upon the real property. This includes maintenance assessments imposed in City service areas and in special districts. Article X1IID also adds several provisions, including notice requirements and restrictions on use, affecting "fees" and "charges" which are defined as "any levy other than an act valorein tax, a special tax, or an assessment, imposed by a local government upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service" The annual amount of revenues that are received by the City and deposited into its General Fund which may be considered to be property related fees and charges under Article XIIID of Proposition 218 is not substantial. Accordingly, presently the City does not anticipate that any impact Proposition 218 may have on future fees and charges will not adversely affect the ability of the City to pay the principal of and interest represented by the Series 2006 Certificates as and when due. -47- However, no assurance can be given that the City may or will be able to reduce or eliminate such services in the event the fees and charges that presently finance them are reduced or repealed. Additional implementing legislation respecting Proposition 218 may be introduced in the State legislature from time to time that would supplement and add provisions to California statutory law. No assurance may be given as to the terms of such legislation or its potential impact on the City. Proposition 1A Proposition 1A, proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition 1A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition 1A provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition 1A also provides that if the State reduces the VLF rate currently in effect, 0.65 percent of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition 1A requires the State, beginning July 1, 2006, to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. The City presently anticipates that the operation of Proposition 1A will not adversely affect the ability of the City to pay Lease Payments or any of its other obligations as and when due. Future Initiatives Article X1IIA, Article XIIIB, Article XIIIC, Article XIIID and Propositions 62 and 1A were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time, other initiative measures could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The nature and impact of these measures cannot be predicted by the City. TAX MATTERS In the opinion of Quint & Thimmig LLP, San Francisco, California, Bond Counsel, under existing law, subject to the Authority's and the City's compliance with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes under section 103 of the Internal Revenue Code of 1986, as amended (the "Code"), under section 55 of the Code, is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the -48- Authority and the City to comply with one or more of such covenants could cause interest on the Bonds to not be excludable from gross income under section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the Bonds. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. Bondowners should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds might have tax consequences other than as described above. Bond Counsel expresses no opinion regarding any collateral tax consequences arising with respect to the Bonds other than as expressly described above. CERTAIN LEGAL MATTERS Legal matters incident to the authorization, issuance, sale and delivery by the Authority of the Bonds are subject to the approval as to their validity of Quint & Thimmig LLP, San Francisco, California, Bond Counsel. Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the Authority by Quint & Thimmig LLP, Disclosure Counsel, and for the Authority and the City by Jennifer McGrath, the City Attorney. Certain legal matters will be passed upon for the Underwriter by Stradling Yocca Carlson & Rauth, Newport Beach, California. Certain compensation of Bond Counsel and Disclosure Counsel is contingent upon the issuance and delivery of the Bonds. FINANCIAL STATEMENTS The City's financial statements for the fiscal year ended September 30, 2007, included in APPENDIX A—"AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007," have been audited by KPMG LLP, Certified Public Accountants, Los Angeles, California, as stated in their reports appearing in such appendix. KPMG LLP has not undertaken to update its reports or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in this Official Statement, and no opinion is expressed by KPMG LLP with respect to any event subsequent to its report. LITIGATION To the best knowledge of the Authority and the City, except as otherwise disclosed in this Official Statement, there is no pending or threatened litigation concerning the validity of the Bonds or the pledge of the Revenues or challenging any action taken by the Authority or the City in connection with the authorization of the Indenture or the Lease Agreement, or any other document relating to the Bonds or the defeasance and prepayment of the Bonds to which the Authority or the City is or is to be become a party or the performance by the Authority or the City of any of their obligations under any of the foregoing. RATINGS Moody's Investors Service ("Moody's) and Standard & Poor's Ratings Services ("S&P") have assigned their municipal bond ratings of " " and " ," respectively, to -49- the Bonds. Such ratings reflect only the views of such organizations and an explanation of the significance of such ratings may be obtained from them as follows: Moody's Investors Service, 7 World Trade Center, New York, NY 10007, and Standard & Poor's Ratings Services, 55 Water Street, New York, NY 10041. There is no assurance that such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by such rating agencies, if in the judgment of such rating agencies circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Bonds. UNDERWRITING The Bonds are being purchased by Citigroup Global Markets Inc. (the "Underwriter"). The Underwriter has agreed to purchase the Bonds at a price of $ , which amount represents the principal amount of the Bonds of $ less $ , representing the Underwriter's discount, plus $ , representing net original issue premium. The contract of purchase pursuant to which the Bonds are being purchased by the Underwriter provides that the Underwriter will purchase all of the Bonds if any are purchased. The obligation of the Underwriter to make such purchase is subject to certain terms and conditions set forth in such contract of purchase. The Underwriter may offer and sell the Bonds to certain dealers and others at prices different from the prices stated on the inside cover page of this Official Statement. The offering prices may be changed from time to time by the Underwriter. FINANCIAL ADVISOR Public Financial Management, Inc, Los Angeles, California, has served as Financial Advisor in connection with the authorization and delivery of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume responsibility for the accuracy, completeness or fairness of the information contained in the Official Statement. The fees of the Financial Advisor are contingent upon the sale and delivery of the Bonds. Public Financial Management is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities. VERIFICATION OF MATHEMATICAL COMPUTATIONS The Verification Agent will verify, from the information provided to it, the mathematical accuracy as of the date of the closing of the Bonds of (a) computations relating to the adequacy of the amounts deposited in the 1997 Bonds Escrow Fund for the defeasance of the 1997 Bonds, and (b) computations relating to the adequacy of the amounts deposited in the 2000 Bonds Escrow Fund for the defeasance of the Refunded 2000 Bonds. The Verification Agent will restrict its procedures to examining the arithmetical accuracy of certain computations and will not make a study or evaluation of the information and assumptions on which such computations are based and, accordingly, will not express an opinion on the data used, the reasonableness of the assumptions or the achievability of the forecasted outcome. -50- CONTINUING DISCLOSURE The ultimate security for the payments of principal and interest on the Bonds comes from the Lease Payments to be made by the City and, therefore, the City, as an obligated person within the meaning of the Rule, has agreed to undertake the disclosure responsibilities required by the Rule. The Authority has not undertaken to provide any continuing disclosure required by the Rule. The City has covenanted to provide such annual financial statements and other information in the manner required by Rule 15c2-12 of the Securities and Exchange Commission (17 C.F.R. § 240.15c-2-12) (the "Rule"). These covenants have been made in order to assist the Underwriter in complying with the Rule. The City has will execute a continuing disclosure certificate (the "Continuing Disclosure Certificate") for the benefit of the owners of the Bonds to provide certain financial information and operating data concerning the City to the NRMSIRs annually and to provide notice to the Municipal Securities Rulemaking Board or to the NRMSIRs of certain events, pursuant to the requirements of section (b)(5)(i) of Rule 15c2-12. See APPENDIX D—"FORM OF CONTINUING DISCLOSURE CERTIFICATE" herein for a description of the Continuing Disclosure Certificate. A failure by the City to provide any information required thereunder will not constitute an Event of Default under the Indenture or the Lease Agreement. The City has never failed to comply with any previous undertakings with regard to said Rule to provide annual reports or notices of material events. ADDITIONAL INFORMATION 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 of their provisions. The preparation and distribution of this Official Statement have been authorized by the Authority and the City. HUNTINGTON BEACH PUBLIC FINANCING AUTHORITY By Executive Director CITY OF HUNTINGTON BEACH By City Administrator -5"1- APPENDIX A AUDITED FINANCIAL STATEMENTS OF THE CITY FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007 Appendix A APPENDIX S SUMMARY OF CERTAIN PROVISIONS OF THE LEGAL DOCUMENTS [TO COME] Appendix B APPENDIX C PROPOSED FORM OF BOND COUNSEL OPINION [Letterhead of Quint&Thimmig LLP] [Closing Date] Huntington Beach Public Financing Authority 2000 Main Street Huntington Beach, California 92648 OPINION: $______* Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A Members of the Authority: We have acted as bond counsel in connection with the delivery by the Huntington Beach Public Financing Authority (the "Authority") of $_ * aggregate principal amount of the bonds of the Authority designated the "Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A" (the "Bonds"), pursuant to the provisions of Article 4 (commencing with section 6584) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Law"), and pursuant to an indenture of trust, dated as of April 1, 2008 (the "Indenture"), by and between the Authority and as trustee, and a resolution of the Authority adopted on February 19, 2008. The Bonds are secured by Revenues (as defined in the Indenture), including certain payments made by the City of Huntington Beach (the "City") under a lease agreement, dated as of April 1, 2008 (the "Lease Agreement"), by and between the Authority and the City. We have examined the Law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Authority and the City contained in the Indenture and Lease Agreement, as applicable, and in the certified proceedings, and upon other certifications furnished to us, without undertaking to verify the same by independent investigation. Based upon our examination we are of the opinion, under existing law, that: 1. The Authority is a duly constituted redevelopment agency under the laws of the State of California with power to enter into the Indenture, to perform the agreements on its part contained therein and to issue the Bonds. 2. The Bonds constitute legal, valid and binding special obligations of the Authority enforceable in accordance with their terms and payable solely from the sources provided therefor in the Indenture. 3. The hndenture has been duly approved by the Authority and constitutes a legal, valid and binding obligation of the Authority enforceable against the Authority in accordance with its terms. Preliminary,subject to change. Appendix C Page 1 4. The Indenture establishes a valid first and exclusive lien on and pledge of the Revenues (as such term is defined in the Indenture) and other funds pledged thereby for the security of the Bonds, in accordance with the terms of the Indenture. 5. Subject to the Authority's and the City's compliance with certain covenants, interest on the Bonds is excludable from gross income of the owners thereof for federal income tax purposes under section 103 of the Internal Revenue Code of 1986, as amended (the "Code") and, under section 55 of the Code, is not included as an item of tax preference in computing the federal alternative minimum tax for individuals and corporations under the Code but is taken into account in computing an adjustment used in determining the federal alternative minimum tax for certain corporations. Failure by the Authority or the City to comply with one or more of such covenants could cause interest on the Bonds to not be excludable from gross income under section 103 of the Code for federal income tax purposes retroactively to the date of issuance of the Bonds. 6. Interest on the Bonds is exempt from personal income taxation imposed by the State of California. Ownership of the Bonds may result in other tax consequences to certain taxpayers, and we express no opinion regarding any such collateral consequences arising with respect to the Bonds. The rights of the owners of the Bonds and the enforceability of the Bonds and the Indenture may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and also may be subject to the exercise of judicial discretion in accordance with general principles of equity. In rendering this opinion, we have relied upon certifications of the Authority, the City and others with respect to certain material facts. Our opinion represents our legal judgment based upon such review of the law and the facts that we deem relevant to render our opinion and is not a guarantee of a result. This opinion is given as of the date hereof and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention or any changes in law that may hereafter occur. Respectfully submitted, Appendix C Page 2 APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE This CONTINUING DISCLOSURE CERTIFICATE (the "Disclosure Certificate") is executed and delivered by the CITY OF HUNTINGTON BEACH (the "City") in connection with the issuance by the Huntington Beach Public Financing Authority (the "Authority") of $ * aggregate principal amount of Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A (the "Bonds"). The Bonds are being issued pursuant to an indenture of trust, dated as of April 1, 2008 (the "Indenture"), by and between the Authority and as trustee (the "Trustee"). The City covenants and agrees as follows: Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the holders 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 Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section 2, the following capitalized terms shall have the following meanings: "Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. "Dissemination Agent" shall mean , or any successor Dissemination Agent designated in writing by the City and which has filed with the City and the Trustee a written acceptance of such designation. "Listed Events" shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. "National Repository" shall mean any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. "Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. "Repository" shall mean each National Repository and each State Repository. "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. "State Repository" shall mean 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 Certificate, there is no State Repository. Section 3. Provision of Annual Reports. (a) The City shall, or upon written direction shall cause the Dissemination Agent to, not later than June 30 of each year (being the last day of the 9th month after the end of the City's fiscal year, which ends on September 30), commencing with the report for the 2006-07 fiscal year, provide to each Repository an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate with a copy to the Trustee. Not later than fifteen (15) Business Days prior to said date, the City shall provide the Annual Report to the Dissemination Agent (if other than the City). The Annual Report may be submitted as a single document or as separate documents comprising a Preliminary,subject to change. Appendix D Page 1 package, and may include by reference other information as provided in Section 4 of this Disclosure Certificate; provided that the audited financial statements of the City 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 not available by that date. The filing of the official statement prepared for the Bonds shall satisfy the filing requirement for the 2006-07 fiscal year. If the City's fiscal year changes, they shall give notice of such change to the Municipal Securities Rulemaking Board and each State Repository with a copy to the Trustee. The City shall provide a written certification with each Annual Report furnished to the Dissemination Agent and the Trustee to the effect that such Annual Report constitutes the Annual Report required to be furnished by the City hereunder. (b) If the City does not provide, or cause the Dissemination Agent to provide, an Annual Report to the Repositories by the Annual Report date as required in subsection (a) above, the Dissemination Agent shall send a notice to (i) either the National Repositories or the Municipal Securities Rulemaking Board and (ii) the appropriate State Repository, if any, in substantially the form attached as Exhibit A, with a copy to the Trustee (if different than the Dissemination Agent). (c) With respect to the Annual Report, the Dissemination Agent shall: (i) determine each year-prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and (ii) if the Dissemination Agent is other than the City, and if, and to the extent, the City has provided an Annual Report in final form to the Dissemination Agent for dissemination, file a report with the City certifying that the Annual Report has been provided to the Repositories pursuant to this Disclosure Certificate, stating the date it was provided and listing all the Repositories to which it was provided. Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following: (a) Audited Financial Statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board of the City. If the City's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final official statement for the Bonds, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) Unless otherwise provided in the audited financial statements filed on or prior to the annual filing deadline for Annual Reports provided for in Section 3 above, financial information and operating data with respect to the City for preceding fiscal year, substantially similar to that provided in the corresponding tables and charts in the official statement for the Bonds in the section therein entitled "CITY FINANCIAL INFORMATION." 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 City and/or related public entities, 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 Municipal Securities Rulemaking Board. The City shall clearly identify each such other document so included by reference. (c) In addition to any of the information expressly required to be provided under this Disclosure Certificate, the City shall provide such further material 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. Appendix D Page 2 Section 5. Reporting of Significant Events. (a) Pursuant to the provisions of this Section 5, the City shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, if material: (i) Principal and interest payment delinquencies. (ii) Non-payment related defaults. (iii) Unscheduled draws on debt service reserves reflecting financial difficulties. (iv) Unscheduled draws on credit enhancements reflecting financial difficulties. (v) Substitution of credit or liquidity providers, or their failure to perform. (vi) Adverse tax opinions or events affecting the tax-exempt status of the security. (vii) Modifications to rights of security holders. (viii) Contingent or unscheduled bond calls. (ix) Defeasances. (x) Release, substitution, or sale of property securing repayment of the securities. (xi) Rating changes. (b) Whenever the City obtains knowledge of the occurrence of a Listed Event, the City shall as soon as possible determine if such event would be material under applicable Federal securities law. The Dissemination Agent shall have no responsibility for such determination and shall be entitled to conclusively rely on the City's determination. (c) If the City determines that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the City shall promptly file a notice of such occurrence with (i) each National Repository or the Municipal Securities Rulemaking Board and (ii) the appropriate State Repository, if any, with a copy to the Trustee (if different than the Dissemination Agent). Notwithstanding the foregoing, notice of Listed Events described in subsections (a)(viii) and (ix) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Bonds pursuant to the Indenture. Section 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the earlier of 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 City shall promptly file a notice of such occurrence with the Municipal Securities Rulemaking Board and each State Repository with a copy to the Trustee. Section 7. Dissemination Agent. (a) The initial Dissemination Agent shall be . The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the City pursuant to this Disclosure Certificate, unless the City is the Dissemination Agent, as provided herein. The initial Dissemination Agent shall be the City. If at any time there is no designated Dissemination Agent appointed by the City, or if the Dissemination Agent so appointed is unwilling or unable to perform the duties of Dissemination Agent hereunder, the City shall be the Dissemination Agent and undertake or assume its obligations hereunder. Any company succeeding to all or substantially all of the Dissemination Agent's corporate trust business shall be the successor to the Dissemination Agent hereunder without the execution or filing of any paper or any further act. The Dissemination Agent may resign its duties hereunder at any time upon written notice to the City. (b) The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as agreed to between the Dissemination Agent and the City from time to time and for all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent (unless the Appendix D Page 3 City is the Dissemination Agent) shall have no duty or obligation to review any information provided to it by the City hereunder and shall not be deemed to be acting in any fiduciary capacity for the City, holders or beneficial owners or any other party. The Dissemination Agent may rely and shall be protected in acting or refraining from acting upon any direction from the City or an opinion of nationally recognized bond counsel retained by the City. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of Sections 3(a) or 4, 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; and (c) the proposed amendment or waiver either (i) is approved by holders of the Bonds in the manner provided in the Indenture for amendments to the Indenture with the consent of holders, or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the interests of the holders or beneficial owners of the Bonds. If the 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 City 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 Municipal Securities Rulemaking Board and each State Repository with a copy to the Trustee. Section 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate 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 Certificate. If.the City 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 Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate the Trustee, at the written direction of the Participating Underwriter or the holders of at least 25% aggregate principal amount of Outstanding Bonds, shall, but only to the extent moneys or other indemnity satisfactory to the Trustee, has been furnished to the Trustee to hold it harmless from any loss, costs, liability or expense, including fees and expenses of its attorneys and any additional fees of the Trustee, or any holder or beneficial owner of the Bonds may, take such Appendix D Page 4 actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent and the Trustee shall have only such duties as are specifically set forth in this Disclosure Certificate and the Indenture, and the City agrees to indemnify and save the Dissemination Agent and the Trustee, their 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 its powers and duties hereunder and thereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's or the Trustee's respective negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the City for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent and the Trustee shall have no duty or obligation to review any information provided to it by the City and shall not be deemed to be acting in any fiduciary capacity for the City, the Bond holders or any other party. The obligations of the City under this Section 11 shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Authority, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Bonds, and shall create no rights in any other person or entity. Section 13. Alternative Filing Location. Any filing under this Disclosure Certificate may be made solely by transmitting such filing to the Texas Municipal Advisory Council (the "MAC") as provided at http://www.disclosureusa.org, unless the United States Securities and Exchange Commission has withdrawn the interpretive advice in its letter to the MAC, dated September 7, 2004. Date: [Closing Date] CITY OF HUNTINGTON BEACH By Name Title ACKNOWLEDGED: as Dissemination Agent By Name Title Appendix D Page 5 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD AND EACH STATE REPOSITORY OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Huntington Beach Public Financing Authority Name of Issue: Huntington Beach Public Financing Authority Lease Revenue Refunding Bonds, 2008 Series A Date of Issuance: [Closing Date] NOTICE IS HEREBY GIVEN to [(i) each National Repository or the Municipal Securities Rulemaking Board and (ii) each appropriate State Repository] [the Municipal Securities Rulemaking Board] that the City of Huntington Beach (the "City") has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated April 6, 2008, executed by the City. The City anticipates that the Annual Report will be filed by Dated: as Dissemination Agent By Name Title cc: Trustee Appendix D Page 6 APPENDIX E BOOK-ENTRY ONLY SYSTEM The information in this Appendix E has been provided by The Depository Trust Company ("DTC"), New York, NY, for use in securities offering documents, and neither the Authority nor the City takes no responsibility for the accuracy or completeness thereof. Neither the Authority nor the City can or give any assurances that DTC, DTC Participants or Indirect Participants will distribute the Beneficial Owners either (a) payments of interest, principal or premium, if any, with respect to the Bonds or (b) certificates representing ownership interest in or other confirmation of ownership interest in the Bonds, or that they will so do on a timely basis or that DTC, DTC Direct Participants or DTC Indirect Participants mill act in the manner described in this Official Statement. 1. DTC will act as securities depository for the Bonds (the "Securities"). The Securities 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 Security certificate will be issued for each maturity of the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC. 2. DTC, the world's largest 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 2 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 85 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, in turn, is owned by a number of Direct Participants of DTC and Members of the National Securities Clearing Corporation, Government Securities Clearing Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation, (NSCC, GSCC, MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National Association of Securities Dealers, Inc. 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 Standard & Poor's highest rating: AAA. 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. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("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 Securities 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 certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. Appendix E Page 1 4. To facilitate subsequent transfers, all Securities 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 Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities 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. 5. 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. 6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the issuer 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 Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions, and dividend payments on the Securities 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 issuer or the paying agent or bond 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 nor its nominee, the paying agent or bond trustee, or the issuer, 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 issuer or the paying agent or bond 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. 9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to the issuer or the paying agent or bond trustee. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered. 10. The issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. Appendix E Page 2 r s - 0 Q nxn• Minutes Huntington Beach Public Financing Authority Council Chambers,Civic Center 2000 Main Street Huntington Beach, California 92648 Monday, December 17, 2007 Regular Annual meeting of Huntington Beach Public Financing Authority Called to Order at 7:38 p.m. Public Financing Authority Roll Call: Present: Hansen, Hardy, Bohr, Cook, Coerper, Green, Carchio Absent: None. Election of Officers A motion was made by Coerper, second Carchio to elect Debbie Cook, Chair of the Huntington Beach Financing Authority; Keith Bohr, Vice-Chair of the Huntington Beach Finance Authority and Joan L. Flynn, Secretary of the Huntington Beach Public Financing Authority. The motion carried by the following roll call vote: AYES: Hansen, Hardy, Bohr, Cook, Coerper, Carchio NOES: None. ABSENT: Green (out of room) Approved and Adopted Public Financing Authority Minutes A motion was made by Coerper, second Bohr to approve and adopt the minutes of the December 18, 2006, Annual Meeting of the Public Financing Authority as written and on file in the Office of the Secretary. Submitted by the Secretary. The motion carried by the following roll call vote: AYES: Hansen, Hardy, Bohr, Cook, Coerper, Carchio NOES: None. ABSENT: Green(out of room) Adjournment Chair Cook adjourned the Annual Meeting of the Huntington Beach Public Financing Authority at 7:40 p.m. Secretary ATTEST: Secretary Chair AT ATTACHEMENT #5 D- 1% 2 Site and F'aciit Lease ,f3 Leasereen ent ✓� Nlemarandum3�oea er mere / emoranum of . ssi�1=en f Lease') z . F 6 1997 escrow 3Agreement 2GOO E�—w A� reeinent Purch Bon d �� ase Aieement O t nuil Disel sure erti flea te r/ Bend oun§," Opinion 1 L--" 997 T,er nlnati©n 12 Pre=liminaj&Offic M Statement r g � � t CA ROUTING SHEET INITIATING DEPARTMENT: Finance SUBJECT: Bond Refinance COUNCIL MEETING DATE: February 1�, 2008 Ordinance (w/exhibits & legislative draft if applicable) Attached ❑ Not Applicable ❑ Resolution (w/exhibits & legislative draft if applicable) Attached Not Ap licable ❑ Tract Map, Location Map and/or other Exhibits Attached ❑ Not Applicable ❑ Contract/Agreement (w/exhibits if applicable) Attached ❑ (Signed in full by the City Attorney) Not Applicable ❑ Subleases, Third Party Agreements, etc. Attached ❑ (Approved as to form by City Attorne ) Not Applicable ❑ Certificates of Insurance (Approved by the City Attorney) Attached ❑ Not Applicable ❑ Fiscal Impact Statement (Unbudgeted, over$5,000) Attached ❑ Not Applicable ❑ Bonds (If applicable) Attached educable ❑El No A Staff Report (If applicable) Attached Not Applicable ❑ Commission, Board or Committee Report (If applicable) Attached ❑ Not Ap licable ❑ Findings/Conditions for Approval and/or Denial Attached ❑ Not Applicable ❑ CPII °N-AT9Cc l FOR1 In Q 111} A" ` REVIr s alEIE FQ� AD Administrative Staff Deputy City Administrator Initial ( ) City Administrator Initial City Clerk ( ) EXPLANATIOUFOR,-RETURN QF`I!TEM: RCA Author: 18692 Huntington Beach Independent has been adjudged a newspaper of general circulation in Huntington Beach and Orange County by Decree of the Superior Court of Orange County,State of California.under date of Aug. 24, 1994,case A50479. PROOF OF PUBLICATION STAVE OF CALIFORNIA SS. COUNTY OF ORANGE ) NOTICE OF PUBLIC HEARING I am the Citizen of the United States and a CRY COUNCIL OFTHECITV. resident of the County aforesaid; I am over OF HUNTINGTON BEACH NOTICE IS HEREBY' the age of eighteen years, and not a party GIVEN that the City Council of the City of: to or interested in the below entitled matter. Huntington Beach (the am a principal clerk of the HUNTINGTON February 19, 2008aaat the hour of'6:00 P.M.; BEACH INDEPENDENT, a newspaper of in the City. Council Chambers, located in general circulation, printed and published in the Huntington Beach., City Council Chambers the City of Huntington Beach, County of at. 2000 Main Street, Huntington Beach, CA; I Orange, State of California, and the will hold a.public,hear- ing in accordance with ! attached Notice is a true and complete copy section 6586.5(a)(2) of I the California Govern- as was printed and published . on the ment Code with respect to the issuance of.rev- i following date(s): enue. bonds • (the '"Bonds") by the Hun- ! tington Beach Public,Fi_,' nancing Authority, (the:a "Authority"), in' an amount- not to exceed $17,000,000. The Bonds are'being issued to re- finance the.costs of the ! acquisition, 'con- struction; installation FEBRUARY 0 7, 2 0 0 8 and equipping of certain public capital im- provements,, including I the refunding of the Au- thority's outstanding Huntington Beach,Public Financing Authority i Lease Revenue Bonds, 1997 Series A (Public I Facilitids Project), 'and the refunding of'a por- tion of the Authority's outstanding Huntington I Beach Public'Financing. declare, under penalty of perjury, that the 'Authority Lease Rev- fore foregoing is true and correct. Rev- enue Bands, pro Series g g A;(Capital Improvement Financing Project). Notice is further given that at said hearing all interested persons will 2 0 0 8 have an opportunity'to Executed on FEBRUARY 0 7 i be heard with respect to the financing and the at Huntington Beach, California public benefits arising from the financing.Writ- ten comments may be submitted at or before the hearing_to Ms.-Joan L:Flynn,City Clerk,City ® ® of Huntington Beach, 2000 Main Street, Hun- .Signature t926g48on Beach;. CA _ Published Huntington Beach Independent Feb- ruary 7,2008 021-321! Huntington Beach Independent has been adjudged a newspaper of general circulation in Huntington Beach and Orange County by Decree of the Superior Court of Orange County,State of California,under date of Aug. 24, 1994,case A50479. PROOF OF PUBLICATIOleT STATE OF CALIFORNIA ) SS. COUNTY OF ORANGE ) am the Citizen of the United States and a I NOTICEOFPUBu(HEECI Y CITY COUNCIL OF THE CRY resident of the County aforesaid; I am over OF HUNTINGTON'BEACH NOTICE IS HEREBY the age of eighteen years, and not a party GIVEN that the City Council or the city of to or interested in the below entitled matter. Huntington Beach (the on Tue am a principal clerk of the HUNTINGTON "City"),y 19, 2008a atl BEACH INDEPENDENT, a newspaper of the hour of 6:00 P.M., in the City Council 9 general circulation, printed and published in Chambers, located p p the Huntington Beach. the City of Huntington Beach, County of City Council, Chambers at 2000 Main Street,) Orange e State of California and the Huntington Beach,hear, , will hold a public hear-,, ing in accordance with attached Notice is a true and complete copy section 6586.5(a)(2) of, the. California Govern-, as was printed and published on the ment code with respect following date(s): to,the issuance of rev-' e.nue bonds (the' ."Bonds") by the Hun-i tington Beach Public Fi- nancing Authority (thei 'Authority."), in an amount not to exceed! $17,000,000. The Bonds! are being issued'to re-i finance the costs of the, acquisition, con-' FEBRUARY 0 7, 2 0 0 8 struction, installation! and equipping of certain public . capital' im-,� provements, including the refunding of the:Au-I thority's outstanding Huntington Beach Public, Financing. Authorityi Lease Revenue Bonds, 1997 Series A (Public; Facilities Project), and the refunding of a por-1 tion of the Authority's outstanding Huntington l I declare, under penalty of perjury, that the Beach Public Financing' foregoing is true and correct. Authority Lease. . ties enue Bonds,2000 Series A (Capital Improvement Financing Project). 'Notice is further given) that at said hearing all; interested persons will Executed on FEBRUARY 0 7, 2 0 0 8 have an opportunity to at Huntington Beach, California th hearde financcitlfrespect thing and thee! public benefits arising: from the financing..,Writ-, ten comments may be submitted at or before /ff the hearing to Ms.Joan L. Flynn,City Clerk,City of Huntington Beach, 2000 Main Street, Hun- Signature tington Beach, CA 92648. Published Huntington Beach-independent Feb- ruary 7,2008 .. 021-321