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Lease Agreement 2003-0077577RECORDING REQUESTED BY _ _ _ FIRSTAMERICAN PPE _ ' `� �` National Commercial Services �� 76 4 DOC # CCjj �` RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: STRADLING YOCCA CARLSON & RAUTH 660 Newport Center Drive, Suite 1600 Newport Beach, California 92660 Attention: Denise E. Hering, Esq. (ti �f DOCSOC191777 l v7\22468.0019 OFFICIAL RECORDS SAN DIEGO COUNTY RECORDER'S OFFICE GREGORY 3. SMITH, COUNTY RECORDER FEES: 0.40 00: HA [Space ab( IIIII4144144114441141111111411111111117577 1411111 This document is recorded for the benefit of the City of Poway, and the recording is fee - exempt under Section 27383 of the Government Code. LEASE AGREEMENT by and between CITY OF POWAY, as Lessee and POWAY PUBLIC FINANCING AUTHORITY, as Lessor Dated as of January 1, 2003 Relating to $17,655,000 CITY OF POWAY 2003 CERTIFICATES OF PARTICIPATION (CITY OFFICE BUILDING PROJECT) SECTION 1.1. SECTION 1.2. SECTION 2.1. SECTION 2.2. 2'7648 Table of Contents Paae ARTICLE I DEFINITIONS AND EXHIBITS Definitions and Rules of Construction.............................................................. l Exhibits.............................................................................................................3 ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Representations, Covenants and Warranties of the City...................................3 Representations, Covenants and Warranties of the Authority ..........................5 ARTICLE III ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT SECTION 3.1. Deposit of Certificate Proceeds........................................................................6 SECTION 3.2. Acquisition, Construction and Installation of the Project.................................6 SECTION 3.3. Payment of Costs..............................................................................................6 SECTION 3.4. Completion Date; Certification.........................................................................6 SECTION 3.5. Substitution and Release...................................................................................7 SECTION 3.6. Further Assurances and Corrective Instruments...............................................7 ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS SECTION 4.1. SECTION 4.2. SECTION 4.3. SECTION 4.4. SECTION 4.5. SECTION 4.6. SECTION 4.7. SECTION 4.8, SECTION 4.9. SECTION 4.10 SECTION 4.11 SECTION 4.12 Docsoc01777 k v7U2468.0018 Lease.................................................................................................................8 Term..................................................................................................................8 Extension of Lease Term..................................................................................8 LeasePayments.................................................................................................8 NoWithholding............................................................... ----.....9 FairRental Value..............................................................................................9 Budgetand Appropriation................................................................................9 Assignment of Lease Payments......................................................................10 Use and Possession.........................................................................................10 Abatement of Lease Payments and Additional Payments...... ........................ 10 Additional Payments.......................................................................................11 Net -Net -Net Lease.......................................................................................... I 1 27649 Table of Contents (continued) ARTICLE V INSURANCE SECTION 5.1. Public Liability and Property Damage ................. SECTION 5.2. Worker's Compensation ...................................... SECTION 5.3. Hazard Insurance ................................................. SECTION 5.4. Rental Interruption Insurance .............................. SECTION S.S. Title Insurance..................................................... SECTION 5.6. General Insurance Provisions .............................. SECTION 5.7. Cooperation.......................................................... ARTICLE VI Paae ..........................................11 ..........................................12 ....•.....................................12 .......................................... 13 -----.--•.................................13 ..........................................13 ..........................................14 DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1. Application of Net Proceeds...........................................................................15 ARTICLE VII COVENANTS WITH RESPECT TO THE PROPERTY SECTION 7.1. Use of the Property.........................................................................................16 SECTION 7.2. Leasehold Interest in the Property..................................................................16 SECTION 7.3. Option to Prepay Lease Payments..................................................................16 SECTION 7.4. Quiet Enjoyment.............................................................................................17 SECTION 7.5. Installation of City's Personal Property..........................................................17 SECTION 7.6. Access to the Property •.................................................................................17 SECTION 7.7. Maintenance, Utilities, Taxes and Assessments..... ........................................ 17 SECTION 7.8. Modification of the Property...........................................................................18 SECTION7.9. Liens................................................................................................................18 SECTION 7.10. Authority's Disclaimer of Warranties.............................................................19 SECTION 7.11. City's Right to Enforce Warranties of Manufacturers, Vendors or Contractors......................................................................................................19 ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1. Assignment by the Authority..........................................................................19 SECTION 8.2. Assignment and Subleasing by the City.........................................................19 SECTION 8.3. Amendments and Modifications.....................................................................20 aocsaC01 n7 1 v7\22469.0018 SECTION 9.1. SECTION 9.2. SECTION 9.3. SECTION 9.4. SECTION 9.5. SECTION 9.6. SECTION 9.7. SECTION 10.1. SECTION 10.2. SECTION 10.3. SECTION 10.4. SECTION 10.5. SECTION 10.6. 2'7650 Table of Contents (continued) ARTICLE IX EVENTS OF DEFAULT AND REMEDIES PaLye Defaultsand Remedies...................................................................................20 Waiver.............................................................................................................23 NoRemedy Exclusive....................................................................................24 Agreement to Pay Attorneys Fees and Expenses............................................24 No Additional Waiver Implied by One Waiver..............................................24 Application of the Proceeds Following Default..............................................24 Trustee and Certificate Owners to Exercise Rights........................................24 ARTICLE X PREPAYMENT OF LEASE PAYMENTS SecurityDeposit..............................................................................................24 Extraordinary Prepayment From Net Proceeds..............................................25 OptionalPrepayment......................................................................................25 SinkingFund Redemption..............................................................................25 Credit for Amounts on Deposit.......................................................................25 Effectof Prepayment......................................................................................26 ARTICLE XI INSURER TERMS SECTION 11.1. Third Party Beneficiary ......................................... SECTION 11.2. City Payment Requirement ................................... SECTION 12.1. SECTION 12.2. SECTION 12.3. SECTION 12.4. SECTION 12.5. SECTION 12.6. Signatures Exhibit A Exhibit B Exhibit C DOCS00917771 v712246&.0018 ARTICLE XII MISCELLANEOUS Notices ................................26 ................................26 BindingEffect................................................................................... Severability........................................................................................ Execution in Counterparts................................................... I............. ApplicableLaw.................................................................................. Captions............................................................................................. Description of the Site ......... Schedule of Lease Payments Lease Supplement ............... 26 27 27 27 27 27 ............................... S-1 .............................. A -1 ...............................B-1 ............................... C-1 27651 LEASE AGREEMENT THIS LEASE AGREEMENT, dated as of January 1, 2003, is entered into by and between the POWAY PUBLIC FINANCING AUTHORITY, a joint powers authority duly organized and existing under the laws of the State of California, as lessor (the "Authority"), and the CITY OF POWAY, a municipal corporation of the State duly organized and existing under and by virtue of the Constitution and laws of the State of California, as lessee (the "City"); WITNESSETH: WHEREAS, pursuant to the Government Code of the State of California, the City may enter into leases and agreements relating to real property to be used by the City; WHEREAS, the Authority and City desire to enter into this Lease Agreement (the "Lease") and authorize the execution and delivery of certificates of participation, in order to finance the acquisition and construction of certain City Office improvements (the "Project") described below, evidencing proportionate interests in certain rights of the Authority under this Lease, including the right to receive lease payments to be made by the City hereunder, with respect to certain public improvements to be located on the site described in Exhibit A hereto, which site and improvements are referred to herein collectively as the "Property"; and WHEREAS, in consideration of the lease payments to be paid by the City to the Authority hereunder, the Authority will lease the Property to the City pursuant to Section 4.1 hereof; and WHEREAS, the Authority is authorized pursuant to the laws of the State of California to provide financial assistance to the City by acquiring, constructing and financing various public facilities, land and equipment and the leasing of facilities, land and equipment for the use, benefit and enjoyment of the public; NOW, THEREFORE, in consideration of the above premises and of the mutual covenants hereinafter contained and for other good and valuable consideration, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND EXHIBITS SECTION 1.1. Definitions and Rules of Construction. Unless the context otherwise requires, the capitalized terms used herein shall, for all purposes of this Lease, have the meanings specified in the Trust Agreement; and the additional terms defined in this Section shall, for all purposes of this Lease, have the meanings herein specified. Unless the context otherwise indicates, words importing the singular number shall include the plural number and vice versa. The terms "hereby," "hereof," "hereto," "herein," "hereunder" and any similar terms, as used in this Lease, refer to this Lease as a whole. "Additional Certificates" means any certificates of participation executed and delivered by the Trustee pursuant to Section 3.17 of the Trust Agreement subsequent to the Delivery Date for the Certificates, which are secured on a parity with the Certificates. DOCSOC%917771 v7122468.0018 2'7652 "Assignment Agreement" means that certain Assignment Agreement by and between the Authority and the Trustee dated as of January 1, 2003 as amended and supplemented from time to time. "Certificates" means the $17,655,000 2003 Certificates of Participation (City Office Building Project), executed and delivered by the Trustee pursuant to the Trust Agreement. "Completion Certificate" means a certificate of the City filed with the Trustee and signed by the City Representative, as prescribed by Section 3.4 hereof. "Component" means any portion of the Property designated in Exhibit A hereto as a Component, as such Exhibit A may be amended from time to time in accordance herewith. "County" means the County of San Diego, State of California. "Hazardous Substances" means any substance, waste, pollutants, or contaminants now or hereafter included in such (or any similar) term under any federal, state or local code, statute, regulation or ordinance now in effect or hereafter enacted or amended. "Independent Counsel" means an attorney duly admitted to the practice of law before the highest court of the State and who is not an employee or officer of the Authority, the Trustee or the City. "Insurer" means Ambac Assurance Corporation, a stock insurance company incorporated under the laws of the State of Wisconsin, and any successor thereto or assignee thereof. "Lease" means this Lease Agreement, by and between the City and the Authority, as amended and supplemented from time to time. "Lease Supplement" means one or more amendments to this Lease executed substantially in the form attached as Exhibit C hereto. "Permitted Encumbrances" means as of any particular time: (1) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may, pursuant to Section 7.7 hereof, permit to remain unpaid; (2) the Assignment Agreement, as it may be amended from time to time; (3) this Lease, as it may be amended from time to time; (4) the Site Lease as it may be amended from time to time; (5) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the Delivery Date for the Certificates which is being contested by the City in accordance with Section 7.8(b) hereof; (6) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Delivery Date for the Certificates and which the City certifies in writing on the Delivery Date for the Certificates will not materially impair the use of the Site for its intended purposes; and (7) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the Delivery Date for the Certificates, or existing on any real property substituted for the Property, to which the Authority, the Insurer and the City consent in writing and which the City certifies will not materially impair the use of the Property, or real property substituted for the Property, as the case may be for its intended purposes. 2 ❑OCS00917771 x7\22468.0018 2"7653 "Property" means collectively, the Site and all buildings and capital improvements located thereon. "Site" means the real property described from time to time in Exhibit A hereto, as such Exhibit A may be amended and supplemented from time to time in accordance with the provisions of this Lease. "Site Lease" means the Site and Facilities Lease dated as of the date hereof, by and between the Lessor and the Lessee. "Term" means the term of this Lease as established by Section 4.2 hereof. "Trust Agreement" means the Trust Agreement, dated as of the date hereof, by and among U.S. Bank, N.A., as trustee, the City and the Authority, as amended and supplemented from time to time. SECTION 1.2. Exhibits. The following Exhibits are attached to, and by reference made a part of, this Lease: Exhibit A. Description of the Site. Exhibit B: Schedule of Lease Payments. Exhibit C: Lease Supplement. ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES SECTION 2.1. Representations, Covenants and Warranties of the City. The City represents, covenants and warrants to the Authority as follows: (a) Due Organization and Existence. The City is duly organized and validly existing under and by virtue of the Constitution and laws of the State, with the power and authority to own, lease and acquire real and personal property and equipment. (b) Authorization; Enforceability. The Constitution and laws of the State authorize the City to enter into this Lease, the Site Lease, the Trust Agreement and the Continuing Disclosure Agreement and to enter into the transactions contemplated by and to carry out its obligations under all of the aforesaid agreements, and the City has duly authorized and executed all Of the aforesaid agreements. This Lease, the Site Lease, the Trust Agreement and the Continuing Disclosure Agreement constitute the legal, valid and binding obligations of the City, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally. (C) No Conflicts or Default; No Liens or Encumbrances. Neither the execution and delivery of this Lease, the Site Lease, the Trust Agreement or the Continuing Disclosure Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a DOCSOC\917771 v7122468.001 8 27654 breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the City is now a party or by which the City is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the City or upon the Property, except for Permitted Encumbrances and the pledges and assignments contained in the Trust Agreement and the Assignment Agreement. (d) Execution and Delivery. The City has duly authorized and executed this Lease and the Trust Agreement in accordance with the Constitution and laws of the State. (e) Indemnification of the Authority and the Trustee. To the extent permitted by law, the City covenants to defend, indemnify and hold harmless the Authority, the Insurer, the Trustee and their respective assigns, board members and employees (collectively, the "Indemnified Party") against any and all losses, claims, damages or liabilities, joint or several, including fees and expenses incurred in connection therewith, to which such Indemnified Party may become subject under any statute or at law or in equity or otherwise in connection with the transactions contemplated by this Lease or the Trust Agreement, and shall reimburse any such Indemnified Party for any legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions, insofar as such losses, claims, damages, liabilities or actions arise out of the transactions contemplated by this Lease or the Trust Agreement. In particular, without limitation, to the extent permitted by law, the City shall and hereby agrees to indemnify and save the Indemnified Party harmless from and against all claims, losses and damages, including legal fees and expenses, arising out of (i) the use, maintenance, condition or management of, or from any work or thing done on, the Site or the Property by the City including, without limitation, as a result of the use, storage, presence, disposal or release of any Hazardous Substances by City or persons other than the Indemnified Party on or about the Site, (ii) any breach or default on the part of the City in the performance of any of its obligations under this Lease, (iii) any act of negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Property, (iv) any act of negligence of any assignee or sublessee of the City (except an Indemnified Party) with respect to the Site or the Property, or (v) the completion of the Property or the authorization of payment of the Costs by the City. No indemnification is made under this Section or elsewhere in this Lease for claims, losses or damages, including legal fees and expenses arising out of the willful misconduct, negligence, or breach of duty under this Lease by the Authority, the Insurer, or the Trustee, or their respective officers, board members, agents, employees, successors or assigns. (f) General Tax and Arbitrage Covenant. The City hereby covenants that, notwithstanding any other provision of this Lease, it will make no use of the proceeds of the Certificates or any Additional Certificates or of any other amounts, regardless of the source, or of any property or take any action, or refrain from taking any action that may cause the obligations of the City under this Lease to be "arbitrage bonds" within the meaning of Section 148 of the Code, or under applicable Treasury Regulations promulgated thereunder or to cause the Interest Component of the Lease Payments to become subject to State of California personal income taxation. (g) Fee Ownership, Essentiality. The City hereby represents that it is and shall continue to be fee owner of the Property and that the Property is essential to the provision of City administrative services within the boundaries of the City and the Authority. In addition, the City covenants that it will not make any use of the proceeds of the obligations provided herein or in the Trust Agreement or of any other funds of the City, or take or DOCSOC1917771 v7\22468.0018 27655 omit to take any other action that would cause the obligations of the City under this Lease to be "private activity bonds" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as necessary to maintain the exclusion from gross income for federal income tax purposes of the Interest Component of the Lease Payments, the City will comply with all requirements of such Sections and all regulations thereunder and under Section 103 of the Code, to the extent that such requirements are, at the time, applicable and in effect. SECTION 2.2. Representations, Covenants and Warranties of the Authority. The Authority represents, covenants and warrants to the City as follows: (a) Due Organization and Existence; Enforceability. The Authority is a joint powers authority duly organized, validly existing and in good standing under and by virtue of the laws of the State, has the power to enter into this Lease, the Assignment Agreement and the Trust Agreement; is possessed of full power to own and hold real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of this Lease, the Assignment Agreement, the Site Lease and the Trust Agreement. This Lease, the Assignment Agreement, the Site Lease and the Trust Agreement constitute the legal, valid and binding obligations of the Authority, enforceable in accordance with their respective terms, except to the extent limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws or equitable principles affecting the rights of creditors generally. (b) No Encumbrances. The Authority will not sell, assign, pledge or encumber this Lease, the Lease Payments, the Additional Payments or any other amounts derived from the Site or the Property or from its other rights under this Lease, except for Permitted Encumbrances and except as expressly provided under the terms of this Lease, the Assignment Agreement and the Trust Agreement. (c) No Conflicts or Defaults-, No Liens or Encumbrances. Neither the execution and delivery of this Lease, the Assignment Agreement, the Site Lease or the Trust Agreement, nor the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of the formation documents of the Authority or any restriction or any agreement or instrument to which the Authority is now a party or by which the Authority is bound, or constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Authority or upon the Site or the Property, except for Permitted Encumbrances and except by the pledges and assignments contained in the Trust Agreement and the Assignment Agreement. (d) Execution and Delivery. The Authority has duly authorized and executed this Lease, the Assignment Agreement and the Trust Agreement in accordance with the Constitution and laws of the State. (e) General Tax and Arbitrage Covenant. So long as no Event of Default has occurred, the Authority covenants that, notwithstanding any other provision of this Lease, it will make no use of the proceeds of the Certificates or any Additional Certificates or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action that may cause the obligations of the City under this Lease to be "arbitrage bonds" subject to federal DOCS00917771 YM2468.0018 9'7656 Ad income taxation by reason of Section 148 of the Code or to cause the Interest Component of the Lease Payments to become subject to State of California personal income taxation. In addition, so long as no Event of Default has occurred, the Authority covenants that it will not make any use of the proceeds of the obligations provided herein or in the Trust Agreement or of any other funds of the City or take or omit to take any other action that would cause such obligations to be "private activity bonds" within the meaning of Section 141 of the Code, or "federally guaranteed" within the meaning of Section 149(b) of the Code. To that end, so long as no Event of Default has occurred, so long as necessary to maintain the exclusion from gross income for federal income tax purposes of the Interest Component of the Lease Payments, the Authority will comply with all requirements of such Sections and all regulations of the United States Department of the Treasury issued thereunder and under Section 103 of the Code, to the extent that such requirements are, at the time, applicable and in effect. (f) Maintenance of Existence. The Authority hereby covenants and agrees that during the term hereof it will maintain its existence as a joint powers authority, will not dissolve or otherwise dispose of all or substantially all of its assets, if any, will not become a general or limited partner in any partnership or a joint venturer in any joint venture and will not combine or consolidate with or merge into any other entity or permit one or more other entities to consolidate with or merge into it, unless such action (A) will not cause a merger of the City's leasehold estate in the Property and the successor thereto is a public agency which expressly agrees to assume all rights and responsibilities of the Authority under the Assignment Agreement, the Trust Agreement and this Lease and (B) is consented to in writing by the Insurer. ARTICLE III ACQUISITION, CONSTRUCTION AND INSTALLATION OF THE PROJECT SECTION 3.1. Deposit of Certificate Proceeds. On the Delivery Date for the Certificates and on the Delivery Date for any Additional Certificates, the Authority agrees to pay or cause to be paid to the Trustee the amount specified in Section 3.01 of the Trust Agreement, which moneys shall be deposited with the Trustee as provided in Section 4.01 of the Trust Agreement, or in the case of Additional Certificates as provided in any Supplemental Trust Agreement which relates to such Additional Certificates. SECTION 3.2. Acquisition, Construction and Installation of the Project. The City agrees to acquire, construct, deliver and install the Project, or to cause them to be acquired, constructed, delivered and installed, with the proceeds of the Certificates paid to the City by the Authority pursuant to Section 3.1 above and the Authority shall have no responsibility with respect thereto. SECTION 3.3. Payment of Costs. Payment of the Costs shall be made from the moneys deposited with the Trustee in the Project Fund as provided in Section 3.1 hereof and Section 4.02 of the Trust Agreement, which shall be disbursed from the Project Fund in accordance and upon compliance with Section 4.02 of the Trust Agreement. SECTION 3.4. Completion Date; Certification. Upon the completion of acquisition, construction, delivery and installation of the City Office Improvement, the City shall deliver to the Trustee a Completion Certificate with respect thereto. On the date of filing the Completion DOCSOC1917771 v7\22469.00 18 27657 Certificate, all excess moneys remaining in the Acquisition and Construction Account of the Project Fund shall be applied in accordance with the provisions of Section 4.02(e) of the Trust Agreement. SECTION 3.5. Substitution and Release. The City shall have the right from time to time to add other real property and improvements (subject only to Permitted Encumbrances) or to substitute other real property or improvements (subject only to Permitted Encumbrances) for all or a portion of the Property or to release a portion of the real property or improvements constituting the Property, if it has provided the Trustee with a written Lease Supplement and has obtained and provided to the Trustee each of the following: (a) Written consent of the Insurer; (b) Written confirmation from each Rating Agency that has rated the Certificates that its then existing rating with respect to the Certificates will not be reduced or withdrawn as a result of such addition, substitution or release; (c) Certificates of insurance applicable to the Property (at and after the addition, substitution or release) which comply with the requirements of Article V hereof; (d) No prior liens on the substituted property which are unacceptable to the Insurer; (e) An opinion of Bond Counsel to the effect that such addition, substitution or release will not adversely affect the exclusion from gross income for federal income tax purposes and the exemption from State personal income taxation of the Interest Component of the Lease Payments and that this Lease, as amended, remains a legal, valid and binding obligation of the City; and (f) Title insurance for the substituted property provided prior to the release of the Property or evidence that the existing title insurance policy is not adversely affected by such substitution. In connection with a substitution or release, all interests of the Authority, and its assignee, in the portion of the Property released shall terminate and the Authority and its assignee shall execute and record with the County Recorder of the County of San Diego all documents deemed necessary by the City to evidence such termination of interest. Upon receipt of the items described in subparagraphs (a), (b), (c), (d) and (e) above, the Trustee also shall execute a Lease Supplement and, if necessary, a Supplemental Trust Agreement, and shall not impose on the City any further conditions or prerequisites to the requested addition, substitution or release. The City shall cause the Lease Supplement to be recorded in the real property records of the City. All costs and expenses incurred in connection with such addition, substitution or release shall be borne by the City. No addition, substitution or release under this Section 3.6 shall be, by itself, the basis for any reduction in or abatement of the Lease Payments due from the City hereunder. SECTION 3.6. 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 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. DOCSOC191777 f X7122468.0018 27658 ARTICLE IV AGREEMENT TO LEASE; TERM OF LEASE; LEASE PAYMENTS SECTION 4.1. Lease. The Authority hereby leases the Property to the City upon the terms and conditions set forth herein. This Lease shall not operate as a merger of the Lessee"s leasehold estate in the Property pursuant to this Lease and its fee estate in the Property and shall not cause the extinguishment of the leasehold granted to the Lessor under the Site Lease. The City shall continue to have and hold a fee estate in said Property throughout the term of the Lease. SECTION 4.2. Term. The Term of this Lease shall commence on the Delivery Date for the Certificates and shall end on July 1, 2033, unless extended pursuant to Section 4.3 hereof, or unless terminated prior thereto upon the earliest of any of the following events: (a) Payment of All Lease Payments. The payment by the City of all Lease Payments required under Section 4.4 hereof and all Additional Payments required under Section 4.11 hereof and the occurrence of the first date upon which the Certificates are no longer Outstanding under the Trust Agreement; or (b) Prepayment. The optional prepayment of all Lease Payments in accordance with Section 10.3 hereof and the payment of all Additional Payments due through such prepayment date and the occurrence of the first date upon which the Certificates are no longer Outstanding under the Trust Agreement. SECTION 4.3. Extension of Lease Term. The Term of this Lease may be extended up to July 1, 2043. If on the final maturity date of the Certificates or any Additional Certificates all Interest Components and Principal Components represented thereby shall not be fully paid, or if the Lease Payments or Additional Payments due hereunder shall have been abated at any time as permitted by the terms hereof, then the Term shall be extended until all Certificates, Additional Certificates and all other amounts payable hereunder or under the Trust Agreement shall be fully paid, except that the Term shall in no event be extended beyond July 1, 2043. SECTION 4.4. Lease Payments. (a) Time and Amount. Subject to the provisions of Section 4.10 (regarding abatement in event of loss of use of any portion of the Site) and Article 10 hereof (regarding prepayment of Lease Payments), the City hereby unconditionally and irrevocably agrees to pay to the Authority, its successors and assigns, as annual rental for the right to the use and possession of the Site, the Lease Payments (denominated into Interest Components and Principal Components) and the Additional Payments. The Lease Payments are intended to be sufficient in both time and amount to pay when due the Principal Components and Interest Components represented by the Certificates and any Additional Certificates, and are due and payable in arrears and in immediately available funds on the fifteenth Business Day prior to each July I and January 1, commencing the first Interest Payment Date following receipt by the Trustee of the Completion Certificate pursuant to Section 3.4 hereof (the "Lease Payment Date") as set forth in Exhibit B hereto. In the event that any Additional Certificates are executed and delivered pursuant to the Trust Agreement, the City and the Trustee ❑OCSOC1917771 v7122468.0018 27659 shall execute an amendment to Exhibit B to state the Lease Payments due hereunder as a result of the execution and delivery of such Additional Certificates. (b) Credits. Any amount held in the Lease Payment Fund or the Interest Account of the Certificate Fund on the date any Lease Payment is made by the City (other than amounts required for payment of past due Principal Components or Interest Components with respect to any Certificates or Additional Certificates that have matured or been called for redemption and have not been presented for payment or amounts which have been paid with respect to a prior Lease Payment Date but not yet distributed to Owners) and available for payment of Lease Payments shall be credited towards the Lease Payment then due and payable. No payment need be made by the City on any Lease Payment Date if the amounts then held in the Lease Payment Fund and the Interest Account of the Certificate Fund (other than those amounts excluded under the prior sentence and amounts transferred from the Reserve Account which causes the balance therein to be less than the Reserve Requirement) and available for payment of Lease Payments are at least equal to the Lease Payment then required to be paid. (c) Rate on Overdue Payments. In the event the City should fail to make any Lease Payments required by this Section 4.4, or any portion of any such Lease Payment, the Lease Payment or portion thereof 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, to the extent permitted by law, from the date such amount was originally payable at the rate equal to the original interest rate payable with respect to each Certificate or Additional Certificate, as applicable, represented by such delinquent Lease Payment. SECTION 4.5. No Withholding. Notwithstanding any dispute between the Authority and the City, other than a dispute arising under Section 4.10 hereof as a result of which the City has concluded that it may not legally pay the Lease Payments in dispute, the City shall make all Lease Payments and Additional Payments when due and shall not withhold any Lease Payments or Additional Payments pending the final resolution of such dispute. SECTION 4.6. Fair Rental Value. The Lease Payments and the Additional Payments (as defined in Section 4.11 hereof) shall be paid by the City in consideration of the right to the use and possession of the Property during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental to be paid hereunder does not exceed the fair rental value of the Property during the Term of this Lease. In making such determination, consideration has been given to the fair rental value of the Property (including but not limited to costs of maintenance, taxes and insurance), the uses and purposes which may be served by the Property and the essential public benefits therefrom which will accrue to the City and the general public. SECTION 4.7. Budget and Appropriation. The City shall take all such actions as may be necessary to include all Lease Payments in each of its annual budgets for its general fund during the Term of this Lease and to make the necessary annual appropriations for all such Lease Payments and Additional Payments. The covenants of the City in this Lease constitute duties imposed by law and each and every public official of the City shall take such action and 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 this Lease agreed to be carried out and performed by the City. The City shall furnish to the Trustee within 15 days following adoption of the final budget in each Fiscal Year which shall be on or before September 30 a certificate stating that the Lease Payments and Additional Payments were included in the final budget as adopted. DOCSOC1917771 v7122468.0018 2'7660 To the extent that the amount of such payment becomes known after the adoption of the annual budget, such amounts shall be included and maintained in such budget as amended. The City covenants to take such action as is necessary to include such amounts in a supplemental budget of the City. The obligation of the City to pay Lease Payments and Additional Payments hereunder shall constitute a current expense of the City payable from all legally available funds and shall not in any way be construed to be a debt of the City, or the State, or any political subdivision thereof, in contravention of any applicable constitutional or statutory limitation or requirements concerning the creation of indebtedness by the City, the State, or any political subdivision thereof, nor shall anything contained herein constitute a pledge of general revenues, funds or moneys of the City or 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. SECTION 4.8. Assignment of Lease Payments. Certain of the Authority's rights under this Lease, including the right to receive and enforce payment of the Lease Payments to be made by the City hereunder, have been assigned to the Trustee, subject to certain exceptions, pursuant to the Assignment Agreement, to which assignment the City hereby consents. The Authority hereby directs the City, and the City hereby agrees, to pay to the Trustee at the Trustee's corporate trust office, or to the Trustee at such other place as the Trustee shall direct in writing, all Lease Payments and Prepayments thereof payable by the City hereunder. The Authority will not assign or pledge the Lease Payments or other amounts derived from the Property or from its other rights under this Lease except as expressly provided under the terms of this Lease or the Assignment Agreement. The Authority shall not assign its duties and obligations hereunder except as expressly provided under the Assignment Agreement and the Trust Agreement. SECTION 4.9. Use and Possession. The total Lease Payments and Additional Payments due in any Fiscal Year shall be for the right to the use and possession of the Property for such Fiscal Year. During the Term of this Lease, the City shall be entitled to the right to the exclusive use and possession of the Property, subject only to the Permitted Encumbrances. SECTION 4.10. Abatement of Lease Payments and Additional Payments. Except to the extent that proceeds of the type described in the following paragraph are available, the amount of Lease Payments and Additional Payments shall be abated during any period in which there is substantial interference with the use or possession of all or a portion of the Property by the City by condemnation, damage, destruction or title defect. The amount of such abatement shall be such that the resulting Lease Payments, exclusive of the amounts described in the following paragraph, do not exceed the fair rental value (as determined by an independent real estate appraiser selected by the City, who is not an employee of the City) for the use and possession of the portion of the Property for which no substantial interference has occurred, Such abatement shall continue for the period of the substantial interference with the use or possession of the Property. In the event of any such interference with use or possession, this Lease shall continue in full force and effect and the City waives any right to terminate this Lease by virtue of any such interference. Notwithstanding a substantial interference with the use or possession of all or a portion of the Property, the City shall remain obligated to make Lease Payments (i) in an amount not to exceed the fair rental value during each Fiscal Year for the portion of the Property not damaged, destroyed, interfered with or taken, as determined by an independent real estate appraiser selected by the City (who is not an employee of the City); (ii) to the extent that moneys derived from any person or 10 DQC8OC917771 v7122468.001 8 27661 company as a result of any delay in the reconstruction, replacement or repair of the Property, or any portion thereof, are available to pay the amount which would otherwise be abated; or (iii) to the extent that moneys are available in the Certificate Fund (including the Reserve Account) or the Lease Payment Fund to pay the amount which would otherwise be abated, in which event the Lease Payments shall be payable from such amounts as an obligation of the City payable from a special fund. SECTION 4.11. Additional Payments. Subject to Section 4.10 hereof (regarding abatement in event of loss or use of any portion of the Site) and Article 10 hereof (regarding prepayment of Lease Payments), the City shall also pay such amounts (herein called the "Additional Payments") as shall be required to be paid by the Authority for the payment of all amounts, costs and expenses incurred by the Authority in connection with the execution, performance or enforcement of this Lease or any assignment hereof, the Trust Agreement, its interest in the Property and the lease of the Property to the City, including but not limited to payment of all taxes and assessments levied on the Site, all insurance premiums with respect to the insurance the City is obligated to maintain under the Lease, amounts to be rebated to the federal government, and fees, costs and expenses and all administrative costs of the Authority related to the Certificates, any Reserve Credit Facility, including, without limiting the generality of the foregoing, salaries and wages of employees, all expenses, compensation and indemnification of the Trustee payable by the Authority under the Trust Agreement, fees of auditors, accountants, attorneys or architects, and all other necessary administrative costs of the Authority or charges required to be paid by it in order to maintain its existence or to comply with the terms of the Certificates or of the Trust Agreement; but not including in Additional Payments amounts required to pay the principal and interest in respect of the Certificates. Such Additional Payments shall be billed to the City by the Authority or the Trustee from time to time, together with a statement certifying that the amount billed has been paid by the Authority or by the Trustee on behalf of the Authority, for one or more of the items above described, and that such amount is then payable by the City within fifteen (15) days after receipt of the bill by the City. The City reserves the right to audit billings for Additional Payments although exercise of such right shall in no way affect the duty of the City to make full and timely payment for all Additional Payments. SECTION 4.12. Net -Net -Net Lease. This Lease 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, counterclaims or set -offs whatsoever, except as expressly provided herein. ARTICLE V INSURANCE SECTION 5.1. Public Liability and Property Damage. (a) Coverage. The City shall maintain or cause to be maintained, throughout the Term hereof, a standard comprehensive general public liability and property damage insurance policy or policies in protection of the City and the Authority and their respective officers, agents and employees as additional insureds under the policy or policies. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily ROCSOC1917771 v7\22468.0018 27662 and personal injury, death or property damage occasioned by reason of the use or operation of the Property. (b) Limits. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person in each accident or event 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 $500,000 for damage to property resulting from each accident or event (subject to a deductible clause of not to exceed $250,000 or such higher amount as is consented to by the Insurer). Such public liability and property damage insurance may, however, be in the form of a single limit policy covering all such risks in an amount equal to the aggregate minimum liability limits set forth herein. (c) Joint or Self -Insurance. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City. Such liability insurance may be maintained by the City in the form of self-insurance or a risk pooling arrangement which complies with Section 5.6(e) hereof. (d) Payment of Proceeds. The proceeds of such liability insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. SECTION 5.2. Worker's Compensation. The City shall also maintain worker's compensation insurance issued by a responsible carrier authorized under the laws of the State to insure its employees against liability for compensation under the Worker's Compensation Insurance and Safety Act now in force in the State; or any act hereafter enacted as an amendment or supplement thereto, or in lieu thereof such insurance, or a part thereof, may be maintained by the City in the form of self-insurance which complies with Section 5.6(e) hereof. SECTION 5.3. Hazard Insurance. (a) Coverage. The City shall maintain or cause to be maintained, throughout the Term hereof, a policy or policies of insurance, issued by insurance providers rated no less than "A" by Standard & Poor's Ratings Group or Moody's Investors Service, against loss or damage to the Site resulting from fire, lightning, vandalism, malicious mischief and such perils ordinarily defined as "extended coverage", excluding flood and earthquake; provided, however, that a flood and earthquake rider shall be purchased if the City, in its reasonable discretion, determines that such coverage is available from reputable insurers at commercially reasonable rates. Said policy or policies shall be maintained in an amount not less than the full replacement value of the Property, subject to a "deductible clause" not to exceed one hundred thousand dollars ($100,000) for any one loss or, in the case of a flood and earthquake rider, ten percent (10%) of the coverage obtained or such higher amount as is consented to by the Insurer, and shall name the Trustee as loss payee and the Authority as an additional insured under the policy or policies. The term "full replacement value" as used in this Section 5.3 shall mean the actual replacement cost of the improvements located on the Site (including the cost of restoring the surface of the Site, but excluding the cost of restoring trees, plants and shrubs). (b) Joint or Self -Insurance. Such insurance may be maintained as part of or in conjunction with any other insurance carried by the City. The City shall not maintain such hazard insurance in the form of self-insurance. 12 DOCS00017771 Q%22468.0018 27663 (c) Payment of Net Proceeds. The Net Proceeds of such insurance shall be paid to the Trustee and applied as provided in Section 6.1(a) hereof. SECTION 5.4. Rental Interruption Insurance. (a) Coverage and Amount. The City shall maintain or cause to be maintained for the benefit of the Authority rental interruption insurance in an amount not less than an amount equal to twice the maximum annual Lease Payment during the Term hereof, to insure against loss of rental income from the Property caused by perils covered by the insurance required to be maintained as provided in Section 5.3 hereof. Such insurance shall be obtained not later than the Delivery Date for the Certificates and shall be increased as required in connection with each issue of Additional Certificates. (b) Joint Insurance. Such insurance may be maintained as part of or in conjunction with any other rental interruption insurance carried by the City. The City may maintain rental interruption insurance through the Southern California Joint Powers Insurance Authority Pool. If the City discontinues provision of rental interruption insurance through the current self-insurance pool, the insurance provider of the substituted rental interruption insurance must be rated no less than "A" by Standard & Poor's and Moody's and such insurance provider shall be subject to the consent of the Insurer. (c) Payment of Proceeds. The proceeds of such rental interruption insurance shall be paid to the Trustee as loss payee and deposited (1) first in the Reserve Account to make up any deficiencies therein, and (2) second, in the Lease Payment Fund, to be held therein and credited towards the payment of the Lease Payments in the order in which such Lease Payments come due and payable. SECTION 5.5. Title Insurance. The City shall obtain on the Delivery Date for the Certificates that policy of title insurance approved by the Insurer and delivered on the Delivery Date. In connection with any substitution of real property pursuant to Section 3.5 hereof, the City shall obtain title insurance on the Property, in the form of a CLTA Owner's Policy with Western Regional Exceptions. The title policy or policies in effect at any time with respect to the Site shall be in an amount at least equal to the aggregate Principal Component of unpaid Lease Payments, issued by a company of recognized standing duly authorized to issue the same. The title policy or policies shall insure the City's fee simple estate and the Authority's and City's leasehold estate in the substituted Property, subject only to Permitted Encumbrances. The proceeds of such insurance shall be paid to the Trustee as loss payee and applied as provided in Section 6.1(a) hereof. The City shall not maintain title insurance in the form of self-insurance. SECTION 5.6. General Insurance Provisions. (a) Form of Policies. All policies of insurance required to be procured and maintained pursuant to this Lease, other than the worker's compensation insurance and the title insurance specified in Sections 5.2 and 5.5 hereof, respectively, and any statements of self-insurance shall provide that the City and the Trustee shall receive 30 days' notice of each expiration, or any intended cancellation thereof or reduction of the coverage provided thereby. Insurance required to be procured and maintained pursuant to Section 5.3 hereof (regarding hazard insurance), Section 5.4 hereof (regarding rental interruption insurance) and Section 5.5 hereof (regarding title insurance) shall provide that all proceeds thereunder shall be payable to the Trustee as the loss payee. All 13 DOCSOC1917771 v7Q2468.0018 27664 required insurance policies must be provided by a commercial insurance rated A by Best or in the two highest rating categories of S&P and Moody's. All policies shall name the Lessee, the Lessor. and the Trustee as insureds and the Trustee as loss payee. (b) Payment of Premiums. The City shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease. (c) Protection of the Trustee. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance herein required and. upon the receipt of the prior written consent of the Insurer, shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the City. (d) Evidence of Insurance. The City shall deliver certificates to the Trustee and the Insurer within the 30 days prior to July 1 of each year during the Term of this Lease to the effect that the insurance policies required by this Lease are in full force and effect. (e) Self -Insurance. Any self-insurance or risk pooling insurance arrangement ("Pooling") maintained by the City pursuant to Section 5.1(c) or 5.2 hereof shall afford reasonable protection to the Authority, the City and the Trustee. Before the City elects to provide self-insurance or Pooling hereunder, and on each July 1 thereafter, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant selected by the City, or other qualified person selected by the City, who may be the City's Risk Manager, stating that, in the opinion of the signer, the method or plan of protection is sound and affords adequate protection to the Authority, the City and the Trustee against loss and damage from the hazards and risks covered thereby, and there shall also be filed with the Trustee a certificate of the City stating that such substitute method or plan has been implemented. Self-insurance or Pooling for property and casualty and liability risks unless otherwise consented to by the Insurer, shall comply with the following conditions: (i) The self insurance or Pooling program must be approved by an independent insurance consultant; (ii) The self insurance or Pooling program must be maintained on an actuarially sound basis and the Insurer will annually receive a certified actuarial statement attesting to the sufficiency of the program's assets; (iii) The self insurance or Pooling fund must be held in a separate trust fund by an independent trustee; (iv) In the event the self insurance or Pooling program is discontinued, the actuarial soundness of the claim reserve fund must be maintained. The Trustee shall be fully protected in relying on the certificate provided in accordance with this Section 5.6(e) and shall not be responsible for the review or verification of such certificate. The City shall provide adequate reserves to cover the amount of any deductible provisions of the insurance required to be maintained pursuant to Sections 5.1, 5.2, 5.3 and 5.4 hereof. SECTION 5.7. Cooperation. The Authority shall cooperate fully with the City at the expense of the City in filing any proof of loss with respect to any insurance policy maintained 14 DOCSOC1917771 v7122468.0018 2'7665 pursuant to this Article and in the prosecution or defense of any prospective or pending condemnation proceeding with respect to the Property or any portion thereof. ARTICLE VI DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS SECTION 6.1. Application of Net Proceeds. (a) Deposit in Insurance and Condemnation Fund. Pursuant to Section 4.05 of the Trust Agreement, the Trustee shall deposit the Net Proceeds of any hazard insurance required by Section 5.3 hereof and the proceeds of the title insurance required by Section 5.5 hereof in the Insurance and Condemnation Fund promptly upon receipt thereof. The City and/or the Authority shall transfer to the Trustee any other Net Proceeds received by the City and/or Authority in the event of any taking by eminent domain or condemnation with respect to the Property, for deposit in the Insurance and Condemnation Fund. (b) Disbursement for Replacement or -Repair of the Site. Upon receipt of the prior written consent of the Insurer, the certification described in paragraph (i) below and the requisition described in paragraph (ii) below, the Trustee shall disburse moneys in the Insurance and Condemnation Fund to the person, firm or corporation named in the requisition as provided in Section 4.05 of the Trust Agreement. (i) Certification. As a precondition to the disbursement of Net Proceeds, the Authorized Representative of the City must provide to the Authority, the Insurer and the Trustee within 45 days after the event causing the receipt of the Net Proceeds (or such later date as is consented to by the Insurer) a certificate stating that: (A) Sufficiency of Net Proceeds. The Net Proceeds available for such purpose, together with any other funds supplied by the City for such purpose, are sufficient to repair or replace the Property to a use which will have an annual fair rental value not less than maximum the annual Lease Payments and Additional Payments (assuming that the annual Additional Payments due in the future will equal the maximum annual Additional Payments prior to such date) due hereunder, and (B) Timely Completion. In the event that damage, destruction, title defect or taking results in an abatement of Lease Payments or Additional Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in Section 5.4 hereof, together with other legally available funds, will be available to pay in full all Lease Payments and Additional Payments coming due during such period. (ii) Requisition. An Authorized Representative of the City must state with respect to each payment to be made (i) the requisition number, (ii) the name and address of the person, firm or corporation to whom payment is due, (iii) the amount to be paid, and (iv) 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 specifying in reasonable detail the nature of the obligation. 15 DOCS00017771 v7122468.0019 2'7666 Any balance of the Net Proceeds remaining after such replacement or repair has been completed shall be disbursed as provided in Section 4.05 of the Trust Agreement. (c) Disbursement for Prepayment. If an Authorized Representative of the City notifies the Trustee in writing of the City's determination that the certification provided in Section 6.1(b)(1) hereof cannot be made or the Insurer or the City determine that replacement or repair of any portion of the Property is not economically feasible or in the best interest of the City, then the City, with the prior written consent, or at the direction, of the Insurer, shall deposit with the Trustee from legally available funds an amount which, when combined with the Net Proceeds, will prepay sufficient Lease Payments (and result in a corresponding redemption of Certificates and Additional Certificates) such that the fair rental value of the remaining portion of the Property is no less than an amount equal to the Principal Components and Interest Components due with respect to the Certificates and Additional Certificates to remain Outstanding under the Trust Agreement after such Net Proceeds and such deposit by the City are applied to redeem Certificates and Additional Certificates under the Trust Agreement. The Trustee shall promptly transfer the Net Proceeds in respect of such portion to the Redemption Account of the Certificate Fund as provided in Section 4.05 of the Trust Agreement and apply them to the redemption of the Certificates and Additional Certificates as provided in Section 3.10(a) of the Trust Agreement and prepayment of Lease Payments as provided in Section 10.2 hereof. ARTICLE VII COVENANTS WITH RESPECT TO THE PROPERTY SECTION 7.1. Use of the Property. The City represents and warrants that it has an immediate essential need for all of the Property, which need is not expected to be temporary or to diminish in the foreseeable future, and the City hereby covenants that, for the term of the Lease, it will continue to use the Property to serve its administrative needs. SECTION 7.2. Leasehold Interest in the Property. (a) City Holds Fee Interest During Term. During the term of the Lease, the City shall hold a fee interest in the Property. (b) F" Interest Transferred to City at End of Term. On the day of the expiration of the term of the Lease as provided in Section 3 thereof, the City's fee interest in the Property pursuant to the Lease and all right, title and interest of the Authority in the Property shall be transferred to and vest in the City, free and clear of any interest of the Authority or its assigns, without the necessity of any additional document of transfer. SECTION 7.3. Option to Prepay Lease Payments. The City may exercise an option to prepay all or a portion of the Lease Payments in accordance with Article 10 hereof and, by prepaying Lease Payments in the amounts necessary to cause the termination of the Term as provided in Section 4.2(b) hereof, terminate the Authority's leasehold interest in the Property under the Lease and all right, title and interest of the Authority in the Property. If the City elects to prepay a portion of the Lease Payments, and if the Lease Payments have been allocated to Components of the Property in Exhibit B hereto, then it may specify to which Component of the Site such prepayment is applicable. 16 DOCS00917771 v7122468.0018 27 667 SECTION 7.4. Quiet Enjoyment. Subject only to the Permitted Encumbrances, during the Term of this Lease 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, or any person or entity claiming under or through the Authority except as expressly set forth in this Lease or the Trust Agreement. The Authority will, at the request of the City, 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 of access to the Property as provided in Section 7.6 hereof. SECTION 7.5. Installation of City's 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, so long as such installation shall not materially adversely affect the fair rental value of the Property. All such items shall remain the sole personal property of the City, regardless of the manner in which the same may be affixed to such portion of the Property, 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 such portion of the Property resulting from the installation, modification or removal of any such items of equipment. Nothing in this Lease shall prevent the City from purchasing items to be installed pursuant to this Section, provided that no lien or security interest attaching to such items shall attach to any part of the Property. SECTION 7.6. Access to the Property. The City agrees that the Authority, and the Authority's successors and assigns, shall have (1) the right at all reasonable times to enter upon the Property or any portion thereof to examine and inspect the Property, and (2) 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. SECTION 7.7. Maintenance, Utilities, Taxes and Assessments. (a) Maintenance; Repair and Replacement. Throughout the Term of this Lease, as part of the consideration for the rental of the Property, all 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 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 sublessee thereof. The City shall provide or cause to be provided all security service, custodial service, power, gas, telephone, light, heating and water, and all other public utility services for the Property. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Property. (b) Tax and Assessments; Utility Charges, The City shall also pay or cause to be paid all taxes and assessments, including but not limited to utility charges of any type or nature charged to the Authority or the City or levied, assessed or charged against any portion of 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 this Lease as and when the same become due. (c) Contests. The City may, at its 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 17 DOCSOC1917771 v7122468.0019 27668 permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom; provided that prior to such nonpayment it shall furnish the Authority, the Insurer and the Trustee with the opinion of an Independent Counsel to the effect that, by nonpayment of any such items, the interest of the Authority in such portion of the Property will not be materially endangered and that the Property will not be subject to loss or forfeiture. Otherwise, the City shall promptly pay such taxes, assessments or charges or make provisions for the payment thereof in form satisfactory to the Authority and the Insurer. The Authority will cooperate fully in such contest, upon the request and at the expense of the City. SECTION 7.8. Modification of the Property. (a) Additions Modifications and Improvements. The City shall, at its own expense, have the right to make additions, modifications and improvements to any portion of the Property if such additions, modifications or improvements are necessary or beneficial for the use of such portion of the Property, so long as such additions, modifications or improvements do not adversely affect the fair rental value of the Property. Such additions, modifications or improvements shall not in any way damage any portion of the Property or cause it to be used for purposes other than those authorized under the provisions of state and federal law or in any way which would impair the exclusion from gross income for federal income tax purposes of the Interest Components of the Lease Payments or diminish the fair rental value of the Property; and the Property, upon completion of any additions, modifications or improvements made pursuant to this Section, shall be of a value which is not less than the value of the Property immediately prior to the making of such additions, modifications or improvements. (b) No Liens. Except for Permitted Encumbrances, 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 additions, modifications or improvements made by the City pursuant to this Section; provided that if any such lien is established and the City shall first notify or cause to be notified the Authority and the Insurer 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 and its assigns with full security against any loss or forfeiture which might arise from the nonpayment of any such lien, in form satisfactory to the Authority and the Insurer. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. SECTION 7,9. Liens. Except as expressly permitted by this Lease (including without limitation Section 7.8, Section 8.1 or Section 8.2 hereof), the City shall not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, liens, charges, encumbrances or claims, as applicable, on or with respect to the Property, other than Permitted Encumbrances and other than the respective rights of the Authority and the City as herein provided. Except as expressly provided in this Article, the City shall promptly, at its own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, if the same shall arise at any time; provided that the City may in good faith contest such lien or claim if it desires to do so, so long as such contest will not materially, adversely affect the rights of the City and the Authority to the Property or the payment of Lease Payments or Additional Payments hereunder. The City shall reimburse the Authority and its assigns for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. 18 DOCS00017771 v7122468.0018 2160 SECTION 7.14. Authority's Disclaimer of Warranties. THE AUTHORITY AND TRUSTEE MAKE 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 PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE AUTHORITY OR TRUSTEE IS NOT A MANUFACTURER OF THE PROPERTY OR OF ANY PORTION THEREOF, AND IS NOT A DEALER THEREIN, AND THAT THE CITY IS LEASING THE PROPERTY AS IS. In no event shall the Authority or Trustee be liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Lease, the Site Lease, the Assignment Agreement or the Trust Agreement for the existence, furnishincy. functioning or City's use and possession of the Property. SECTION 7.11. City's Right to Enforce Warranties of Manufacturers, Vendors or Contractors. The Authority hereby irrevocably appoints the City its agent and attorney-in-fact during the Term, so long as the City shall not be in default hereunder, to assert from time to time whatever claims and rights, including without limitation, warranty claims, claims for indemnification and claims for breach of any representations, respecting the Site or the Property which the Authority may have against any vendor or contractor, or any agents thereof. The City's sole remedy for the breach of any such warranty, indemnification or representation shall be against the vendor or contractor with respect thereto, and not against the Authority, nor shall such matter have any effect whatsoever on the rights and obligations of the Authority with respect to this Lease, including the right to receive full and timely Lease Payments and to cause the City to make all other payments due hereunder. The City shall be entitled to retain any and all amounts recovered as a result of the assertion of any such claims and rights. The Authority shall, upon the City's request and at the City's expense, do all things and take all such actions as the City may request in connection with the assertion of any such claims and rights. The City expressly acknowledges that neither the Authority nor the Trustee makes, or has made, any representation or warranty whatsoever as to the existence or availability of such warranties of the manufacturer, vendor or contractor with respect to any portion of the Property. ARTICLE VIII ASSIGNMENT, SUBLEASING AND AMENDMENT SECTION 8.1. Assignment by the Authority. Except as expressly provided herein, in the Assignment Agreement and in the Trust Agreement, the Authority will not assign this Lease, or any right, title or interest of the Authority in and to this Lease, to any person, firm or corporation. SECTION 8.2. Assignment and Subleasing by the City. (a) Assignment. This Lease may not be assigned by the City unless (A) the City obtains the prior written consent of the Insurer (which consent shall not be unreasonably withheld), and (B) the City receives an opinion of Bond Counsel stating that such assignment does not adversely affect the exclusion from gross income for federal income tax purposes or the exemption from State personal income taxation of the Interest Components of the Lease Payments. In the event that this Lease is assigned by the City, the obligation to make Lease Payments and Additional Payments and perform the other covenants of the City hereunder shall remain the primary obligation of the City. 19 DOCSOC1917771 v7122468.0018 27670 (b) Sublease. The City may sublease any portion of the Site, with the prior written consent of the Authority and the Insurer, subject to all of the following conditions: (i) this Lease and the obligation of the City to make Lease Payments and Additional Payments and perform the other covenants of the City hereunder shall remain primary obligations of the City; (ii) the City shall, within 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, provided, however, the Trustee shall have no duty to review the form or adequacy of such sublease for any purpose; (iii) no sublease shall cause the Interest Components of the Lease Payments due with respect to the Site to become subject to federal income taxes or State personal income taxes; and (iv) any sublease shall terminable by the Authority upon the occurrence of an Event of Default or abatement event hereunder. No consent of the Authority may be given under this subsection (b) unless the City shall have provided the Authority with opinions of Independent Counsel with respect to the matters set forth in clause (i) above and the opinion of Bond Counsel with respect to the matters set forth in clause (iii) above. SECTION 8.3. Amendments and Modifications. This Lease may be amended or any of its terms modified in accordance with Article VII of the Trust Agreement, with the prior written consent of the Trustee, the Insurer, the City and the Authority. ARTICLE IX EVENTS OF DEFAULT AND REMEDIES SECTION 91. Defaults and Remedies. (a) If the City shall fail to pay any rental or other amount payable hereunder when the same becomes due and payable, time being expressly declared to be of the essence of this Lease, or the City shall fail to keep, observe or perform any other term, covenant or condition contained herein or in the Trust Agreement to be kept or performed by the City for a period of thirty (30) days after notice of the same has been given to the City by the Authority, Insurer or the Trustee or for such additional time as is reasonably required, in the discretion of the Trustee with the prior written consent of the Insurer (which consent shall not be unreasonably withheld), to correct the same, or upon the happening of any of the events specified in subsection (b) of this Section (any such case above being an "Event of Default"), the City shall be deemed to be in default hereunder and it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease. Upon any such default, the Authority, in addition to all other rights and remedies it may have at law, may do any of the following, but only subject to the prior written consent of the Insurer, and shall do any of the following, at the direction of the Insurer: 20 DOCS00017771 v7\22468 .001 R 27671 (i) To terminate this Lease in the manner hereinafter provided on account of default by the City, notwithstanding any re-entry or re -letting of the Property as hereinafter provided for in subparagraph (ii) hereof, and to re-enter the Property and remove all persons in possession thereof and all personal property whatsoever situated upon the Property and place such personal property in storage in any warehouse or other suitable place located within the City. In the event of such termination, the City agrees to surrender immediately possession of the Property, without let or hindrance, and to pay the Authority all damages recoverable at law that the Authority may incur by reason of default by the City, including, without limitation, any costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon the Property and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. Neither notice to pay rent or to deliver up possession of the Property given pursuant to law nor any entry or re-entry by the Authority nor any proceeding in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re-entry or obtaining possession of the Property nor the appointment of a receiver upon initiative of the Authority to protect the Authority's interest under this Lease shall of itself operate to terminate this Lease, and no termination of this Lease on account of default by the City shall be or become effective by operation of law or acts of the parties hereto, or otherwise, unless and until the Authority shall have given written notice to the City of the election on the part of the Authority to terminate this Lease. The City covenants and agrees that no surrender of the Property or of the remainder of the term hereof or any termination of this Lease shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (ii) Without terminating this Lease, (A) to collect each installment of rent and other amounts as they become due, and enforce any other terms or provision hereof to be kept or performed by the City, regardless of whether or not the City has abandoned the Property, or (B) to exercise any and all rights of re-entry upon the Property. In the event the Authority does not elect to terminate this Lease in the manner provided for in subparagraph (i) hereof, the City shall remain liable and agrees to keep or perform all covenants and conditions herein contained to be kept or performed by the City and, if the Property is not re -let, to pay the full amount of the rent and other amounts to the end of the term of this Lease or, in the event that the Property is re -let, to pay any deficiency in rent and other amounts that results therefrom; and further agrees to pay said rent and other amounts and/or rent and other amounts, including without limitation, any rent deficiency, punctually, at the same time and in the same manner as hereinabove provided for the payment of rent and other amounts hereunder (without acceleration), notwithstanding the fact that the Authority may have received in previous years or may receive thereafter in subsequent years rental or other amounts in excess of the rental or other amounts herein specified, and notwithstanding any entry or re-entry by the Authority or suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such entry or re-entry or obtaining possession of the Property. Should the Authority elect to enter or re-enter as herein provided, the City hereby irrevocably appoints the Authority as the agent and attorney-in-fact of the City to re - let the Property, or any part thereof, from time to time, either in the Authority's name or otherwise, upon such terms and conditions and for such use and period as the Authority may deem advisable, and to remove all persons in possession thereof and all personal property whatsoever situated upon the Property and to place such personal property in storage in any warehouse or other suitable place located in the City, 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 21 DOCSOC1917771 x7122468.0018 2'7672 costs, loss or damage whatsoever arising out of, in connection with, or incident to any such re-entry upon and re -letting of the Property and removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The City agrees that the terms of this Lease constitute full and sufficient notice of the right of the Authority to re -let the Property and to do all other acts to maintain or preserve the Property as the Authority deems necessary or desirable in the event of such re-entry without effecting a surrender of this Lease, and further agrees that no acts of the Authority in effecting such re -letting shall constitute a surrender or termination of this Lease irrespective of the use or the term for which such re -letting is made or the terms and conditions of such re -letting, or otherwise, but that, on the contrary, in the event of such default by the City the right to terminate this Lease shall vest in the Authority to be effected in the sole and exclusive manner provided for in sub -paragraph (i) hereof. The City further waives the right to any rental or other amounts obtained by the Authority in excess of the rental and other amounts herein specified and hereby conveys and releases such excess to the Authority as compensation to the Authority for its services in re -letting the Property or any part thereof. The City further agrees to pay the Authority the cost of any alterations or additions to the Property necessary to place the Property in condition for re -letting immediately upon notice to the City of the completion and installation of such additions or alterations. 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 the Property and all claims for damages to or loss of any property belonging to the City, or any other person, that may be in or upon the Property. (b) If (I) the City's interest in this Lease or any part thereof be assigned or transferred, either voluntarily or by operation of law or otherwise, without the prior written consent of the Insurer, as hereinafter provided for, or (2) the City or any assignee shall file any petition or institute any proceeding under any act or acts, State or federal, dealing with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or is to be discharged from any or all of the City's debts or obligations, or offers to the City's creditors to effect a composition or extension of time to pay the City's debts or asks, seeks or prays for reorganization or to effect a plan of reorganization, or for a readjustment of the City's debts, or for any other similar relief, or if any such petition or any such proceedings of the same or similar kind or character be filed or be instituted or taken against the City, or if a receiver of the business or of the property or assets of the City shall be appointed by any court, except a receiver appointed at the instance or request of the Authority, or if the City shall make a general or any assignment for the benefit of the City's creditors, or if (3) the City shall abandon or vacate the Property, then the City shall be deemed to be in default hereunder. (c) The Authority shall in no event be in default in the performance of any of its obligations hereunder or imposed by any statute or rule of law unless and until the Authority shall have failed to perform such obligations within thirty (34) days or such additional time as is reasonably required to correct any such default after notice by the City to the Authority and to the Insurer properly specifying wherein the Authority has failed to pet -form any such obligation. In the event of default by the Authority, the City shall be entitled to pursue any remedy provided by law. 22 DOCSOC1917771 v7122468.0018 27673 (d) In addition to the other remedies set forth in this Section, upon the occurrence of an event of default as described in this Section, the Authority, subject to the direction of the Insurer, shall proceed to protect and enforce the rights vested in the Authority by this Lease or by law. The provisions of this Lease and the duties of the City and of its trustees, officers or employees shall be enforceable by the Authority by mandamus or other appropriate suit, action or proceeding in any court of competent jurisdiction. Without limiting the generality of the foregoing, the Authority may, with the prior written consent of the Insurer, and shall, at the direction of the Insurer, bring the following actions: (i) Accounting. By action or suit in equity to require the City and its trustees, officers and employees and its assigns to account as the trustee of an express trust. (ii) Injunction. By action or suit in equity to enjoin any acts or things which may be unlawful or in violation of the rights of the Authority. (iii) Mandamus. By mandamus or other suit, action or proceeding at law or in equity to enforce the Authority's rights against the City (and its board, officers and employees) and to compel the City to perform and carry out its duties and obligations under the law and its covenants and agreements with the Authority as provided herein. THERE SHALL BE NO RIGHT UNDER ANY CIRCUMSTANCE, INCLUDING WITHOUT LIMITATION THE EXERCISE OF ANY RIGHTS OR REMEDIES UNDER THIS LEASE, TO ACCELERATE LEASE PAYMENTS. Each and all of the remedies given to the Authority hereunder or by any law now or hereafter enacted are cumulative and the single or partial exercise of any right, power or privilege hereunder shall not impair the right of the Authority to other or further exercise thereof or the exercise of any or all other rights, powers or privileges. The term "re -let" or "re -letting" as used in this Section shall include, but not be limited to, re -letting by means of the operation by the Authority of the Property. If any statute or rule of law validly shall limit the remedies given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever remedies are allowable under any statute or rule of law. In the event the Authority shall prevail in any action brought to enforce any of the terms and provisions of this Lease, the City agrees to pay a reasonable amount as and for attorney's fees incurred by the Authority in attempting to enforce any of the remedies available to the Authority hereunder, whether or not a lawsuit has been filed and whether or not any lawsuit culminates in a judgment. So long as the Insurer is not in default under the Insurance Policy, the Insurer, acting alone, shall have the right to direct all remedies upon an event of default. SECTION 9.2. Waiver. Failure of the Authority to take advantage of any default on the part of the City shall not be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up between the parties in the course of administering this instrument be construed to waive or to lessen the right of the Authority to insist upon performance by the City of any term, covenant or condition hereof, or to exercise any rights given the Authority on account of such default. A waiver of a particular default shall not be deemed to be a waiver of the same or any 23 DOCSOC1917771 X7122468.0018 2'7674 subsequent default. The acceptance of rent hereunder shall not be, or be construed to be. a waiver of any term, covenant or condition of this Lease. SECTION 9.3. No Remedy Exclusive. No remedy conferred herein upon or reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease or now or hereafter existing at law or in equity. In order to entitle the Authority to exercise any remedy reserved to it in this Article it shall not be necessary to give any notice, other than such notice as may be required in this Article or by law. SECTION 9.4. Agreement to Pay Attorneys Fees and Expenses. In the event either party to this Lease should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement of performance or observance of any obligation or agreement on the part of the defaulting party contained herein, the defaulting party agrees that it will pay on demand to the nondefaulting party the reasonable fees and disbursements of such entity's attorneys and such other expenses so incurred by the nondefaulting party. SECTION 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease 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 9.6. Application of the Proceeds Following Default. All amounts received by the Authority under this Article 9 (other than fees and expenses recovered under Section 9.4 above) shall be deposited by the Trustee in the Lease Payment Fund for application in accordance with Section 5.04 of the Trust Agreement. SECTION 9.7. Trustee and Certificate Owners to Exercise Rights. Such rights and remedies as are given to the Authority under this Article 9 have been assigned by the Authority to the Trustee under the Assignment Agreement and the Trust Agreement, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee, the Insurer, the Certificate Owners and owners of any Additional Certificates as provided in Article V of the Trust Agreement. ARTICLE X PREPAYMENT OF LEASE PAYMENTS SECTION 14.1. Security Deposit. Notwithstanding any other provision of this Lease, the City may, on any date, secure the payment of any unpaid Lease Payment attributable to the Property as set forth in Exhibit B hereto by an irrevocable deposit by it with the Trustee of cash and/or Permitted Investments of the type described in paragraph 1(b) of the definition thereof, which are adequate in the opinion of an independent certified public accountant to provide for payment of such unpaid Lease Payment as it becomes due and payable hereunder (a "Security Deposit") and provided that such Security Deposit meets all the terms and provisions established for defeasance of the Certificates set forth in Sections 9.01 and 10.010) of the Trust Agreement. 24 DOCSOCN917771 v7122458.0018 r 7-�- In the event that the City has secured the payment of all unpaid Lease Payments attributable to the Property in accordance with the terms and provisions of the immediately preceding paragraph, and provided that the City has made arrangements acceptable to the Trustee and the Insurer to pay any Additional Payments due hereunder, all obligations of the City under this Lease, and all security provided by this Lease for said obligations, shall cease and terminate, excepting only the obligation of the City to make, or cause to be made, Lease Payments from such deposit. Said 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. The Authority shall execute and deliver such further instruments and take such further action as may reasonably be requested by the City for carrying out the leasehold interest transfer for which a security deposit is made hereunder. SECTION 10.2. Extraordinary Prepayment From Net Proceeds. The City shall be obligated to prepay the Lease Payments in whole or in part on any date, from and to the extent of any Net Proceeds transferred to the Redemption Account pursuant to Section 4.05 of the Trust Agreement. The City and the Authority hereby agree that such proceeds shall be credited towards the City's obligations hereunder such that approximately equal annual Lease Payments will prevail with respect to the Property following such prepayment and, if the Lease Payments have been allocated to discrete Components of the Property in Exhibit B hereto, the Lease Payments with respect to the Component or Components from which such Net Proceeds were delivered will be reduced accordingly. SECTION 10.3. Optional Prepayment. Subject to the terms and conditions of this Section and to the prior written consent of the Insurer, the Authority hereby grants an option to the City to prepay in whole or in part the Principal Components of Lease Payments relating to the Property, to the extent, on the dates and at the prepayment prices provided in Section 3.10(c) of the Trust Agreement as such Section 3.10(c) may be amended from time to time with respect to Additional Certificates. The City shall execute said option by giving written notice to the Trustee thereof at least 45 days (or such shorter period as approved by the Trustee in its sole discretion) prior to the date of redemption of Certificates and Additional Certificates from such prepayment and depositing with said notice cash in the minimum amount of (1) accrued interest on the Principal Component of Lease Payments to be prepaid to the date of redemption of Certificates and Additional Certificates with the proceeds of such prepayment, plus (2) the Principal Component of any Lease Payments to be prepaid, plus (3) the applicable prepayment premium described in such Section 3.10(c) of the Trust Agreement as such Section 3.10(c) may be amended from time to time with respect to Additional Certificates. SECTION 10.4. Sinking Fund Redemption. The City and the Authority acknowledge that the Term Certificates are subject to mandatory redemption from the Principal Components of Lease Payments on the dates, at the times and in the amounts provided in Section 3.10(b) of the Trust Agreement. SECTION 10.5. Credit for Amounts on Deposit. In the event of prepayment of all the Lease Payments in full under this Article 10 and the payment in full of all due and payable Additional Payments, such that the Trust Agreement shall be discharged by its terms as a result of such prepayment, all amounts then on deposit in the Lease Payment Fund and the Certificate Fund shall be credited toward the amounts then required to be so prepaid. 25 DOCSOC1917771 v7122468.001 8 Z410au SECTION 10.6. Effect of Prepayment. (a) In Whole. In the event that the City prepays all remaining Lease Payments pursuant to Section 10.3 or Section 10.2 hereof and the Certificates are no longer Outstanding under the Trust Agreement and the City has paid in full all Additional Payments due hereunder, the City's obligations under this Lease shall thereupon cease and terminate, including but not limited to the City's obligation to continue to pay Lease Payments hereunder. (b) In Part. In the event the City prepays less than all of the remaining Principal Component of the Lease Payments pursuant to Section 10.2 or 10.3 hereof, the amount of such prepayment shall be applied to reduce the Principal Component of the Lease Payments corresponding to the resulting prepayment of the Principal Component with respect to the Certificates and the Additional Certificates. ARTICLE XI INSURER TERMS SECTION 11.1. Third Party Beneficiary. The Insurer is hereby deemed to be a third party beneficiary of this Lease Agreement. SECTION 11.2. City Payment Requirement. Subject to the provisions of Section 4.10 hereof, the City hereby covenants and agrees to pay or cause to be paid all amounts required to be paid by the Authority under the Trust Agreement. ARTICLE XII MISCELLANEOUS SECTION 12.1. Notices. All notices, certificates or other communications hereunder to the Authority, the Insurer and City shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed by certified mail, postage prepaid, to the parties listed below: If to the City: City of Poway 13325 Civic Center Drive Poway, California 92064 Attention: City Manager (858)679-4204 Telecopier: (858) 748-1455 If to the Authority: Poway Public Financing Authority 13325 Civic Center Drive Poway, California 92064 Attention: Executive Director (858)679-4204 Telecopier: (858) 748-1455 26 DOCSOC1917771 v71224(8.00 18 27677 If to the Trustee: U.S. Bank, N.A. 550 S. Hope St., Suite 500 Los Angeles, California 90071 Attention: Corporate Trust Department If to the Insurer: Ambac Assurance Corporation One State Street Plaza New York, NY 10004 Attention: Surveillance Re: Policy No. 20374BE Notice shall also be given to the Rating Agency at the address(es) then in effect for the Rating Agency pursuant to Section 9.08 of the Indenture. Notices to the Trustee shall be given initially either telephonically or by written telecommunication and shall then be confirmed in writing delivered by registered or certified mail, return receipt requested. The Authority, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. SECTION 12.2. Binding Effect. This Lease shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. SECTION 12.3. Severability. In the event any provision of this Lease shall be held invalid or unenforceable by a court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. SECTION 12.4. Execution in Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 12.5. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State. SECTION 12.6. Captions. The captions or headings in this Lease are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Lease. 27 DOCSOC1917771 v7122468.0018 27678 IN WITNESS WHEREOF, the Authority has caused this Lease to be executed in its name by its duly authorized officers, and the City has caused this Lease to be executed in its name by its duly authorized officers, as of the date first above written. POWAY PUBLIC FINANCING AUTHORITY, as Lessor By: Its: ATTEST: Secretary CITY OF POWAY, as Lessee By: Its: ATTEST: i City Clerk 5-1 DOCSOC191777I v6122468.0018 27679 STATE OF CALIFORNIA ) ss. COUNTY OF SAN DIEGO ) On —7Qr�una.u� before me, ELzabe�EL R LE'gjT, Notary Public. (Print Name of Notary Public) personally appeared [ personally known to me �J -or- proved to me on the basis of satisfactory evidence to be the person(-) whose name(s) is/a+48-- subscribed to the within instrument and acknowledged to me that hefsheftlteq executed the same in hisHzcrAheirauthorized capacity(ios), and that by his/heWt4�signature(s� on the instrument the person(sr or the entit u on behalf of which the person(t�acted, executed the instrument. ELIZABETH F. DEAN y Commission # 4256279 WITNESS m hand and official seal. Z .i Notary Pubiic - Celftmia z Sen Diego County My ccmtm. Expires Apr 7, 2D04 Signature Of ny OPTIONAL Though the data below is not required by law, it may prove valuable to persons relying on the document and could prevent fraudulent reattachment of this form. CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT ❑ Individual ❑ Corporate Officer Tille(s) Title Or Type Of Document ❑ Partner(s) ❑ Limited ❑ General ❑ Attorney -In -Fact ❑ Trustee(s) ❑ Guardian/Conservator Number Of Pages ❑ Other: Signer is representing, Name Of Person(s) Or Entity(ies) Date Of Documents Signer(s) Other Than Named Above DOCSOC1917771 Y6\22468.0018 27686 CERTIFICATE OF ACCEPTANCE This is to certify that the interest in real property conveyed under the foregoing to the City of Poway, a body corporate and politic, is hereby accepted by the undersigned officer or agent on behalf of the City Council of the City of Poway, pursuant to authority conferred by resolution of the said City Council adopted on October 8, 2002, and the grantee consents to recordation thereof by its duly authorized officer. Dated: January 21, 2003 CITY OF POWAY By: Its: Mayor DOCSOC11917771 v7122468.001 8 27681 EXHIBIT A DESCRIPTION OF THE SITE REAL PROPERTY IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS: PARCEL A: THAT PORTION OF THE NORTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO UNITED STATES GOVERNMENT SURVEY, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHEAST CORNER OF SAID NORTHEAST QUARTER OF THE SOUTHWEST QUARTER, THENCE ALONG THE SOUTHERLY LINE THEREOF NORTH 89 DEGREES 09'25" WEST, A DISTANCE OF 400.17 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING WESTERLY ALONG SAID SOUTHERLY LINE NORTH 89 DEGREES 09' 25" WEST, 269.10 FEET TO THE WESTERLY LINE OF THE EAST HALF OF SAID NORTHEAST QUARTER OF THE SOUTHWEST QUARTER; THENCE ALONG SAID LINE NORTH 01 DEGREES 38' 15" EAST, 684.01 FEET (RECORD 68394 FEET) TO THE NORTHERLY LINE OF THAT EASEMENT FOR COUNTY HIGHWAY GRANTED TO THE COUNTY OF SAN DIEGO PER DOCUMENT RECORDED MAY 11, 1972 AT FILE/PAGE 119095 OF OFFICIAL RECORDS; THENCE ALONG SAID NORTHERLY LINE SOUTH 89 DEGREES 09'25" EAST, 334.36 FEET; THENCE LEAVING SAID NORTHERLY LINE SOUTH 00 DEGREES 50'35" WEST, 277.61 FEET; THENCE SOUTH 45 DEGREES 40'19" WEST, 35.88 FEET; THENCE NORTH 44 DEGREES 19'41" WEST, 34.09 FEET; THENCE SOUTH 44 DEGREES 19' 41" EAST, 165.30 FEET; THENCE SOUTH 64 DEGREES 29' 52" WEST, 56.57 FEET TO THE WESTERLY LINE OF THE EASTERLY 400.00 FEET OF SAID NORTHEAST QUARTER OF THE SOUTHWEST QUARTER; THENCE ALONG SAID WESTERLY LINE SOUTH 01 DEGREES 54'40" WEST, 200.00 FEET TO THE TRUE POINT OF BEGINNING. SAID PROPERTY BEING DESCRIBED AS PARCEL A IN BOUNDARY ADJUSTMENT CERTIFICATE OF COMPLIANCE BOUNDARY ADJUSTMENT NO. 02-09 (BA 02-09) RECORDED ON OCTOBER 22, 2002 AS FILE NO. 2002-0921971 OF OFFICIAL RECORDS OF SAID SAN DIEGO COUNTY. APN: 317-474-07-00-,317-474-08-00; 317-474-09-00 PARCEL B : THAT PORTION OF THE NORTHEAST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 13, TOWNSHIP 14 SOUTH, RANGE 2 WEST, SAN BERNARDINO BASE AND MERIDIAN, IN THE CITY OF POWAY, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO UNITED STATES GOVERNMENT SURVEY, DESCRIBED AS FOLLOWS: COMMENCING AT THE SOUTHEAST CORNER OF SAID NORTHEAST QUARTER OF THE SOUTHWEST QUARTER, THENCE ALONG THE SOUTHERLY LINE THEREOF NORTH 89 A-1 UOCSOC1917771 v7122468.0018 2'682 DEGREES 09'25" WEST, A DISTANCE OF 669.17 FEET TO THE WESTERLY LINE OF THE EAST HALF OF SAID NORTHEAST QUARTER OF THE SOUTHWEST QUARTER; THENCE ALONG SAID LINE NORTH 01 DEGREE 38' 15" EAST, 684.01 FEET (RECORD 68394 FEET) TO THE NORTHERLY LINE OF THAT EASEMENT FOR COUNTY HIGHWAY GRANTED TO THE COUNTY OF SAN DIEGO PER DOCUMENT RECORDED MAY 11, 1972 AT FILE/PAGE 119095 OF OFFICIAL RECORDS; THENCE ALONG SAID NORTHERLY LINE SOUTH 89 DEGREES 09'25" EAST, 334.36 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING EASTERLY ALONG SAID NORTHERLY LINE SOUTH 89 DEGREES 09'25" EAST, 86.14 FEET; THENCE LEAVING SAID NORTHERLY LINE SOUTH 00 DEGREES 50'35" WEST, 234.92 FEET; THENCE SOUTH 44 DEGREES 19'41" EAST, 162.12 FEET; THENCE SOUTH 64 DEGREES 29' 52" WEST, 247.10 FEET, SAID POINT BEING NORTH 64 DEGREES 29' 52" EAST, 56.57 FEET FROM A POINT ON THE WESTERLY LINE OF THE EASTERLY 400.00 FEET OF SAID NORTHEAST QUARTER OF THE SOUTHWEST QUARTER; THENCE NORTH 44 DEGREES 19' 41" WEST, 165.30 FEET; THENCE NORTH 00 DEGREES 01' 16" EAST, 34.09 FEET; THENCE NORTH 45 DEGREES 40'19" EAST, 83.17 FEET; THENCE SOUTH 44 DEGREES 19'41" EAST, 76.30 FEET; THENCE NORTH 45 DEGREES 40' 19" EAST, 35.88 FEET; THENCE NORTH 00 DEGREES 50' 35" EAST, 277.61 FEET TO THE TRUE POINT OF BEGINNING. SAID PROPERTY BEING DESCRIBED AS PARCEL B IN BOUNDARY ADJUSTMENT CERTIFICATE OF COMPLIANCE BOUNDARY ADJUSTMENT NO. 02-09 (BA 02-09) RECORDED ON OCTOBER 22, 2002 AS FILE NO. 2002-0921971 OF OFFICIAL RECORDS OF SAN DIEGO COUNTY. APN: 317-474-07-00; 317-474-08-00 AND 317-474-09-00 A-2 DOCSOC1917771 v7122468.0019 27683 EXHIBIT B SCHEDULE OF LEASE PAYMENTS Lease Payment Date (fifteen Business Days before each of the Principal Interest following dates) Component Component Period Total Fiscal Total 07-01-2003 - $ 362,989.64 $ 362,989.64 - 01-01-2004 $ 350,000.00 413,532.50 763,532.50 $1,126,522.14 07-01-2004 - 408,282.50 408,282.50 - 01-01-2005 315,000.00 408,282.50 723,282.50 1,131,565.00 07-01-2005 - 403,557.50 403,557.50 - 01-01-2006 320,000.00 403,557.50 723,557.50 1,127,115.00 07-01-2006 - 398,757.50 398,757.50 - 01-01-2007 330,000.00 398,757.50 728,757.50 1,127,515.00 07-01-2007 - 393,807.50 393,807.50 - 01-01-2008 340,000.00 393,807.50 733,807.50 1,127,615.00 07-01-2008 - 387,007.50 387,007.50 - 01-01-2009 355,000.00 387,007.50 742,007.50 1,129,015.00 07-01-2009 - 379,907.50 379,907.50 - 01-01-2010 370,000.00 379,907.50 749,907.50 1,129,815.00 07-01-2010 - 372,507.50 372,507.50 - 01-01-2011 385,000.00 372,507.50 757,507.50 1,130,015.00 07-01-2011 - 365,770.00 365,770.00 - 01-01-2012 400,000.00 365,770.00 765,770.00 1,131,540.00 07-01-2012 - 358,370.00 358,370.00 - 01-01-2013 410,000.00 358,370.00 768,370.00 1,126,740.00 07-01-2013 - 350,375.00 350,375.00 - 01-01-2014 430,000.00 350,375.00 780,375.00 1,130,750.00 07-01-2014 - 341,775.00 341,775.00 - 01-01-2015 445,000.00 341,775.00 786,775.00 1,128,550.00 07-01-2015 - 330,093.75 330,093.75 - 01-01-2016 470,000.00 330,093.75 800,093.75 1,130,187.50 07-01-2016 - 317,756.25 317,756.25 - 01-01-2017 495,000.00 317,756.25 812,756.25 1,130,512.50 07-01-2017 - 306,000.00 306,000.00 - 01-01-2018 515,000.00 306,000.00 821,000.00 1,127,000.00 07-01-2018 - 293,125.00 293,125.00 - 01-01-2019 545,000.00 293,125.00 838,125.00 1,131,250.00 07-01-2019 - 279,500.00 279,500.00 - 01-01-2020 570.000.00 279,500.00 849,500.00 1,129,000.00 07-01-2020 - 265,250.00 265,250.00 - 01-01-2021 600,000.00 265,250.00 865,250.00 1,130,500.00 07-01-2021 - 250,250.00 250,250.00 - 01-01-2022 630,000.00 250,250.00 880,250.00 1,130,500.00 07-01-2022 - 234,500.00 234,500.00 - 01-01-2023 660,000.00 234,500.00 894,500,00 1,129,000.00 B-1 DOCSOCW 17771 v7U2468.0018 Lease Payment Date fifteen Business Days before each of the following dates) 07-01-2023 01-01-2024 07-01-2024 01-01-2025 07-01-2025 01-01-2026 07-01-2026 01-01-2027 07-01-2027 01-01-2028 07-01-2028 01-01-2029 07-01-2029 01-01-2030 07-01-2030 01-01-2031 07-01-2031 01-01-2032 07-01-2032 01-01-2033 Principal Component 695,000.00 730,000.00 765,000.00 800,000.00 840,000.00 885,000.00 930,000.00 975,000.00 1,025,000.00 1,075,000.00 $17,655,000.00 Interest Component 218,000.00 218,000.00 200,625.00 200,625.00 182,375.00 182,375.00 163,250.00 163,250.00 143,250.00 143,250.00 122,250-00 122,250.00 100,125.00 100,125.00 76,875.00 76,875-00 52,500.00 52,500.00 26,875.00 26,875.00 $16,221,957.14 B-2 DOCSOC1917771 v7122468.DGI8 2'7684 Period Total 218,000.00 913,000.00 200,625.00 930,625.00 182,375.00 947,375.00 163,250.00 963,250.00 143,250.00 983,250.00 122,250.00 1,007,250.00 100,125.00 1,030,125.00 76,875.00 1,051,875.00 52,500.00 1,077,500.00 26,875.00 1,101,875.00 Fiscal Total 1,131,000.00 1,131,250.00 1,129,750.00 1,126,500.00 1,126,500.00 1,129,500.00 1,130,250.00 1,128,750.00 1,130,000.00 1,128,750.00 $33,876,957.14 $ 33,876,957.14 27685 EXHIBIT C LEASE SUPPLEMENT There is hereby subjected to the terms of that certain Lease Agreement (the "Lease"), dated as of January 1, 2003, between the Poway Public Financing Authority (the "Authority") and the City of Poway, California (the "City") the following real property and improvements, if applicable (the "Substituted Property") which shall hereafter comprise the Property, as defined therein: Description of Substituted Property: Certification 1, the Authorized Representative of the City, hereby certify that: (1) the useful life of the Substituted Property at least equals the remaining Term of the Lease; and (2) the fair rental value of the Substituted Property is such that no reduction of Lease Payments will occur upon the delivery of the Substituted Property and the portion of the Lease Payments and Additional Payments attributable to the Substituted Property does not exceed the fair rental value for the Substituted Property; and (3) the Substituted Property will be used by the City for authorized public purposes, can be leased under the provisions of the Lease and the Permitted Encumbrances thereon will not materially impair the City's use of the Property; (4) the City will cause Exhibit A to the lease and Exhibit A to the Assignment Agreement (each as defined in the Lease) to be amended to reflect the Substituted Property and will have such amendments recorded for the Substituted Property and the previous Property in the County of San Diego recorder's office; (S) all of the documents required to be delivered under Section 3.6 of the Lease in connection with the provision of the Substituted Property have been delivered. The undersigned hereby certifies that it has received copies of the documents required pursuant to Section 3.6 of the Lease; and (6) the Site now consists of the Substituted Property set forth in Exhibit 1 hereto and Exhibit B to the Lease is hereby deemed to be deleted in its entirety and replaced by Exhibit 1 hereto, and the schedule of Lease Payments is set forth in Exhibit 2 hereto and Exhibit B to the Lease is hereby deemed to be amended to incorporate the schedule of Lease Payments set forth in Exhibit 2 hereto. C-1 DOCSOC1917771 v7122468.0018 2"7686 1, the Authorized Representative of the City, hereby certify that the Substituted Property will be leased to the Authority free and clear of a]1 liens or claims of others, except for the lien of the Trust Agreement referred to in the Lease and the rights of the City under the Lease, and that the Authority will not encumber title to the Substituted Property while the Certificates and Additional Certificates remain outstanding. CITY OF POWAY, as Lessee Title The Undersigned Acknowledges Receipt of this Supplement: as assignee of the Lessor Title C-2 DOCSOC191777 l v7122468.0018 X7687 EXHIBIT 1 DESCRIPTION OF SUBSTITUTED PROPERTY C-3 DOCSOD91777 l v7122468.0019 27688 EXHIBIT 2 AMENDED SCHEDULE OF LEASE PAYMENTS C-4 DOCSOM917771 v7\22468.0018