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b. (Form) Sublease11281-0009\2392501v5.doc RWG DRAFT: 6/1/2020 Recording requested by and when recorded mail to: City of Orange c/o Richards, Watson & Gershon, A Professional Corporation 350 South Grand Avenue, 37th Floor Los Angeles, California 90071 Attention: Teresa Ho-Urano, Esq. Exempt from Recording Fees Pursuant to Gov. C. § 27383 Exempt from Documentary Transfer Tax Pursuant to Rev. & T.C. § 11922 ==================================================================== SUBLEASE by and between the ORANGE CITY PUBLIC FACILITIES FINANCING AUTHORITY, as lessor, and the CITY OF ORANGE, as lessee Dated as of July 1, 2020 ==================================================================== TABLE OF CONTENTS Page 11281-0009\2392501v5.doc -i- SECTION 1. DEFINITIONS ...................................................................................................... 1 SECTION 2. TERM ................................................................................................................... 3 SECTION 3. RENTAL ............................................................................................................... 3 SECTION 4. USE OF PROCEEDS ........................................................................................... 5 SECTION 5. MAINTENANCE, UTILITIES, TAXES AND ASSESSMENTS ....................... 5 SECTION 6. CHANGES TO THE LEASED PROPERTIES .................................................... 5 SECTION 7. TITLE INSURANCE............................................................................................ 6 SECTION 8. OTHER INSURANCE ......................................................................................... 6 SECTION 9. DAMAGE, DESTRUCTION AND CONDEMNATION .................................... 8 SECTION 10. DEFAULT ............................................................................................................ 9 SECTION 11. PREPAYMENT AND CREDITS....................................................................... 10 SECTION 12. RIGHT OF ENTRY ............................................................................................ 11 SECTION 13. MECHANICS’ LIENS ....................................................................................... 11 SECTION 14. QUIET ENJOYMENT........................................................................................ 12 SECTION 15. INDEMNIFICATION......................................................................................... 12 SECTION 16. ASSIGNMENT TO TRUSTEE .......................................................................... 12 SECTION 17. ABATEMENT OF RENTAL ............................................................................. 13 SECTION 18. ADDITIONAL COVENANTS REGARDING TAX-EXEMPT BONDS ............................................................................................................... 13 SECTION 19. SUBSTITUTION OR RELEASE OF PROPERTY ........................................... 14 SECTION 20. WAIVER............................................................................................................. 15 SECTION 21. NET LEASE ....................................................................................................... 15 SECTION 22. AMENDMENTS ................................................................................................ 15 SECTION 23. GOVERNING LAW ........................................................................................... 15 SECTION 24. NOTICES ............................................................................................................ 15 SECTION 25. VALIDITY AND SEVERABILITY .................................................................. 15 SECTION 26. SECTION HEADINGS ...................................................................................... 16 SECTION 27. EXECUTION ...................................................................................................... 16 EXHIBIT A DESCRIPTION OF LEASED PROPERTIES EXHIBIT B BASE RENTAL PAYMENT SCHEDULE 11281-0009\2392501v5.doc -1- SUBLEASE This Sublease, dated as of July 1, 2020 (this “Sublease”), is made by and between the ORANGE CITY PUBLIC FACILITIES FINANCING AUTHORITY, a joint powers authority duly formed and existing pursuant to the laws of the State of California (the “Authority”), as lessor, and the CITY OF ORANGE, a municipal corporation duly organized and existing under the laws of the State of California (the “City”), as lessee. RECITALS: A. The Authority is a joint powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement, dated as of March 19, 2020, by and between the City and the California Statewide Communities Development Authority, and under the provisions of Articles 1 through 4 (commencing with Section 6500), Chapter 5, Division 7, Title 1 of the Government Code of the State of California, and is authorized pursuant to Article 4 of the Act to borrow money for the purpose of financing and refinancing public capital improvements. B. The Authority is issuing its Lease Revenue Bonds, Series 2020A (the “Bonds”), pursuant to the Indenture, dated as of July 1, 2020 (the “Indenture”), by and between the Authority and U.S. Bank National Association, as trustee. C. Proceeds from the sale of the Bonds will be used to assist the City with the financing of certain public capital improvements, including: (i) the construction of a new Fire Station No. 1 Headquarters, (ii) roof and related improvements at the City’s police station headquarters, (iii) roof and other improvements at the City’s other fire stations, and (iv) installation of security improvements at City facilities. D. In connection with the issuance of the Bonds, the City and the Authority are entering into the Lease Agreement, dated as of July 1, 2020 (the “Lease”), whereby the Authority will lease certain properties from the City (the “Leased Properties”). E. Pursuant to this Sublease, the Authority will sublease the Leased Properties to the City. 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: SECTION 1. DEFINITIONS. Terms used and not otherwise defined herein but which are defined in the Indenture shall have the meanings ascribed to them in the Indenture. Unless the context otherwise requires, the terms defined in this Section shall, for all purposes of this Sublease, have the meanings specified in this Section (the following definitions to be equally applicable to both the singular and plural forms of any of such defined terms): “Additional Rental” has the meaning assigned to that term in Section 3(b) hereof. 11281-0009\2392501v5.doc -2- “Assignment Agreement” means the Assignment Agreement, dated as of July 1, 2020, by and between the Authority and the Trustee, as the same may be amended, supplemented or otherwise modified from time to time. “Base Rental” has the meaning assigned to that term in Section 3(a) hereof. “Bonds” means the Authority’s Lease Revenue Bonds, Series 2020A. “Commencement Date” means the Closing Date with respect to the Bonds. “Expiration Date” means November 1, 20__; provided, however, if on such date, the City is in default with respect to any Base Rental payment or an abatement event has occurred such that all Base Rental payments have not been made, then the Expiration Date shall be automatically extended to November 1, 20__. “Fire HQ Project” means the project to construct the City’s new Fire Station No. 1 Headquarters, at 105 South Water Street, City of Orange, California. “Fire HQ Property” means the real property located at 105 South Water Street, City of Orange, California together with improvements thereon. “Leased Properties” means the real property in the City described in Exhibit A of this Sublease, and incorporated herein by reference, including improvements thereon, including the following: (i) the property identified in Exhibit A as Parcel No. 1, including the addresses currently known as 105 South Water Street (the Fire HQ Property) and 189 S. Water Street (City Water Division operation center), (ii) the property identified in Exhibit A as Parcel No. 2, including the address currently known as 300 East Chapman Avenue (City Civic Center), and (iii) the property identified in Exhibit A as Parcel Nos. 3 and 4, including the addresses currently known as 368 North Prospect Street (Grijalva Park). “Indenture” means the Indenture, dated as July 1, 2020, by and between the Authority and the Trustee relating to the Bonds, as the same may be amended and supplemented from time to time in accordance with the terms thereof. “Net Proceeds” means any insurance or condemnation proceeds, paid with respect to the Leased Properties remaining after payment therefrom of all expenses in the collection thereof. “Payment Date” means, with respect to a Base Rental payment, the date listed as its related “Payment Date” in Exhibit B of this Sublease. “Permitted Encumbrances” means (a) liens for general ad valorem taxes, special taxes and assessments, if any, not then delinquent, or which the City may, pursuant to this Sublease, permit to remain unpaid; (b) liens created pursuant to or permitted under the Lease or this 11281-0009\2392501v5.doc -3- Sublease; (c) easements, right of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record as of the Commencement Date; (d) utility, access and other easements and rights of way, restrictions and exceptions that do not interfere with or impair the use intended to be made of the relevant Leased Property; (e) the City’s right to access and exclusive right to use and maintain facilities essential to the City’s utilities systems; (f) any right or claim of any mechanic, laborer, materialman, supplier or vendor filed or perfected in the manner prescribed by law after the Commencement Date; (g) such minor defects, irregularities, encumbrances and clouds on title as normally exist with respect to property similar in character to the relevant Leased Property and as do not materially impair the use intended to be made of property affected thereby; and (h) easements, right of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions established following the Commencement Date which do not materially impair the City’s use of the Leased Properties and to which the Authority and the City consent in writing. “Rental Payments” means, together, Base Rental and Additional Rental. “Sublease” means this Sublease, as the same may be amended and supplemented from time to time in accordance with the terms hereof. SECTION 2. TERM. (a) The Authority hereby subleases to the City and the City hereby leases from the Authority, the Leased Properties on the terms and conditions set forth in this Sublease. (b) The term of this Sublease shall commence on the Commencement Date, and shall end on the earliest of: (i) the Expiration Date; (ii) the date on which the Base Rental payments are paid (or prepaid) in full under the provisions the S ublease; or (iii) the date of discharge of the Indenture. (c) Throughout the term of this Sublease, fee title to the Leased Properties shall remain in the City. While any Bonds remain Outstanding under the Indenture, there shall be no merger of the subleasehold estate in the Leased Properties created by this Sublease, the leasehold estate in the Leased Properties created by the Lease, and the fee estate in the Leased Properties merely because such estates, or any of them, have been acquired or become vested in the same person or entity. SECTION 3. RENTAL. Subject to the provisions of Sections 8(c) and 17 hereof, the City agrees to pay to the Authority, its successors or assigns, as rental for the use and possession of the Leased Properties, the following amounts at the following times: (a) The City shall pay as “Base Rental” to the Authority or to the Trustee, as hereinafter provided, semiannually, the rental payments in accordance with the Base Rental payment Schedule attached hereto as Exhibit B, less any amount credited against Base Rental pursuant to Section 4.02(d) of the Indenture. Each Base Rental payment shall be payable in arrears five days before its Payment Date, and shall be made in consideration for the City’s use 11281-0009\2392501v5.doc -4- and possession of the Leased Properties for the six month period preceding the Payment Date of such payment. (b) The City shall also pay, as “Additional Rental” hereunder, in addition to the Base Rental, to the Authority or to the Trustee, as hereinafter provided, such amounts in each year as shall be required for the payment of all costs and expenses (not otherwise paid for or provided for out of the proceeds of sale of the Bonds) incurred by the Authority or the Trustee in connection with the execution, performance or enforcement of this Sublease or the assignment hereof, the Indenture, or the Authority’s or the Trustee’s respective interests in the Leased Properties, including, but not limited to, all fees, costs and expenses, all administrative costs of the Authority relating to the Leased Properties (including, without limiting the generality of the foregoing, salaries and wages of employees, overhead, insurance premiums, taxes and assessments (if any), expenses, compensation and indemnification of the Trustee payable by the Authority under the Indenture), amount (if any) required to be deposited by the Trustee under the Indenture to restore the balance in the Reserve Account to the full amount of the Reserve Requirement, fees of auditors, accountants, attorneys or engineers, and all other reasonable and necessary administrative costs of the Authority or charges required to be paid by it to comply with the terms of the Bonds or of the Indenture. The Authority or the Trustee shall bill such Additional Rental to the City from time to time. The City shall pa y amounts so billed within 30 days after receipt of the bill by the City. (c) Such payments of Base Rental and Additional Rental for each rental payment period shall constitute the total rental for said rental payment period, and shall be paid by the City in each rental payment period for and in consideration of the right of the use and possession of, and the continued quiet use and enjoyment of, the Leased Properties during each such period for which said rental is to be paid. The parties hereto have agreed and determined that such total rental does not exceed the fair rental value of the Leased Properties for each such period. In making such determination, consideration has been given to other obligations of the parties under this Sublease, the uses and purposes which may be served by the Leased Properties and the benefits therefrom which will accrue to the City and the general public. The determination of fair rental value of the Leased Properties pursuant to this paragraph shall not be deemed to be controlling in connection with a determination of fair value of the Leased Properties by the parties hereto for any other purpose. (d) Each installment of Base Rental payable hereunder shall be paid in lawful money of the United States of America to the order of the Trustee. (e) Notwithstanding any dispute between the City and the Authority, the City shall make all Rental Payments when due, without deduction or offset of any kind, and shall not withhold any Rental Payments pending the final resolution of any such dispute. In the event of a determination that the City was not liable for said Rental Payments or any portion thereof, said payments or excess of payments, as the case may be, at the option of the City, shall be credited against subsequent Rental Payments due hereunder or be refunded at the time of such determination. (f) The City covenants to take such action as may be necessary to include all such Rental Payments due hereunder in its annual budget and to make the necessary annual 11281-0009\2392501v5.doc -5- appropriations for all such Rental Payments. If the City’s adopted annual budget for any fiscal year fails to include sufficient appropriation for the scheduled Rental Payments for the such fiscal year, the City shall give written notice to the Authority and the Trustee of such failure as soon as practical, but in any event within ten Business Days of the adoption of such annual budget. The covenants on the part of the City contained in this Sublease shall be deemed to be and shall be construed to be duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such officials to enable the City to carry out and perform the covenants and agreements in this Sublease agreed to be carried out and performed by the City; provided, the obligation of the City to make Base Rental or Additional Rental payments does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. Neither the Bonds nor the obligation of the City to make Base Rental or Additional Rental payments constitutes an indebtedness of the City, the State or any of its political subdivisions in contravention of any constitutional or statutory debt limitation or restriction. SECTION 4. USE OF PROCEEDS. The Authority and the City agree that the proceeds of the Bonds will be used to: (i) finance the Projects, (ii) fund the Reserve Account, and (iii) pay the costs of issuing the Bonds and incidental and related expenses, as more fully set forth in the Indenture. SECTION 5. MAINTENANCE, UTILITIES, TAXES AND ASSESSMENTS. (a) During such time as the City or any assignee or sublessee thereof is in possession of the Leased Properties, all maintenance and repair, ordinary or extraordinary, of the Leased Properties shall be the responsibility of the City, and the City shall pay for or otherwise arrange for the payment of: (i) all utility services supplied to the Leased Properties, (ii) the cost of operation of the Leased Properties, and (iii) the costs of maintenance of and repair to the Leased Properties resulting from ordinary wear and tear or want of care on the part of the City. The City shall, at the City’s sole cost and expense, keep and maintain the Leased Properties clean and in a safe and good condition and repair. The Authority shall have no obligation to alter, remodel, improve, repair, decorate, or paint the Leased Properties or any part thereof, and the parties hereto affirm that the Authority has made no representations or warranties to the City respecting the condition of the Leased Properties. (b) The City shall comply with all statutes, ordinances, regulations, and other requirements of all governmental entities that pertain to the occupancy or use of the Leased Properties. The Authority has no responsibility or obligation whatsoever to construct any improvements, modifications or alterations to the Leased Properties. (c) The parties hereto contemplate that the City will use the Leased Properties for public purposes and, therefore, that the Leased Properties will be exempt from all taxes presently assessed and levied with respect to real and personal property, respectively. In the event that the use, possession or acquisition by the Authority or the City of any of the Leased Properties is found to be subject to taxation in any form, the City will pay during the term hereof, as the same respectively become due, all taxes and governmental charges of any kind whatsoever 11281-0009\2392501v5.doc -6- that may at any time be lawfully assessed or levied against or with respect to such Leased Property and any other property acquired by the City in substitution for, as a renewal or replacement of, or a modification, improvement or addition to such Leased Property; provided, that with respect to any governmental charges or taxes that may lawfully be paid in installments over a period of years, the City shall be obligated to pay only such installments as are accrued during such time as this Sublease is in effect. SECTION 6. CHANGES TO THE LEASED PROPERTIES. (a) The City shall have the right during the term of this Sublease to acquire and construct improvements or to attach fixtures, structures or signs to any of the Leased Properties if the improvements, fixtures, structures or signs are necessary or beneficial for the use of such Leased Properties by the City; provided, however, that no such acquisition or construction shall result in a material reduction in the aggregate value of the Leased Properties or reduce the aggregate fair rental value thereof or result in an abatement of the Rental Payments. (b) Upon termination of this Sublease, the City may remove any fixture, structure or sign added by the City, but such removal shall be accomplished so as to leave the Leased Properties, except for ordinary wear and tear and damage by casualty, in substantially the same condition as they were in before the fixture, structure or sign was attached. SECTION 7. TITLE INSURANCE. The City shall obtain one or more California Land Title Association insurance policies (or, at the City’s sole discretion, American Land Title Association insurance policies) at the time of and dated as of the Commencement Date in an aggregate amount not less than the aggregate principal amount of the Bonds, payable to the Trustee, insuring the respective interests of the City and the Authority in the Leased Properties, and insuring the validity of this Sublease, subject only to Permitted Encumbrances, naming the Trustee as an insured thereunder, issued by a title insurance company qualified to do business in the State of California and acceptable to the Trustee. To the extent permitted under the Indenture, the costs of obtaining such title insurance policy or policies may be paid out of the sale proceeds of the Bonds. SECTION 8. OTHER INSURANCE. (a) Fire and Extended Coverage Insurance. The City shall maintain or cause to be maintained fire, lightning and extended coverage insurance on the Leased Properties in an amount equal to (i) 100 percent of the then current replacement cost of the Leased Properties, excluding the then fair market value of the land as unimproved or (ii) the principal amount of all outstanding Bonds, whichever is less (except that such insurance may be subject to a deductible clause not to exceed 10 percent of the amount of such policy). Earthquake insurance shall be maintained on the Leased Properties only if available on the open market from reputable insurance companies at a reasonable cost. The extended coverage endorsement shall, as nearly as practicable, cover loss or damage by explosion, windstorm, riot, aircraft, vehicle damage, smoke, vandalism, malicious mischief, dumping or other deposit of any pollutant or other debris and such other hazards as are normally covered b y such endorsement. Each such policy of insurance shall be in form reasonably satisfactory to the Authority, and shall contain a clause 11281-0009\2392501v5.doc -7- naming the Trustee as an additional insured and making all losses payable to the Trustee, and all proceeds thereof shall be paid over to the party contractually responsible for making repairs of casualty damage. In the event of any damage to or destruction of the Leased Properties caused by the perils covered by such insurance, the proceeds of such insurance shall be utilized to repair, reconstruct or replace the Leased Properties to the end that the project shall be restored to at least the same condition that it was in prior to such damage or destruction. Any balance of such proceeds not required for such repair, reconstruction or replacement shall be transferred to the Authority and treated as Revenues and applied in the manner provided in the Indenture. (b) Liability Insurance. The City shall maintain or cause to be maintained public liability insurance with limits of not less than $3,000,000 for one person and $5,000,000 for more than one person involved in one accident to protect the Authority and the Trustee from all direct or contingent loss or liability for damages for bodily injury or death occasioned by reason of the construction, condition or operation of the Leased Properties. The City will also maintain or cause to be maintained insurance against liability for property damage resulting from any casualty attributable to the operation of the project in an amount not less than $1,000,000 for each accident. The public liability insurance and property damage insurance may be subject to a deductible clause for anyone accident of not to exceed $250,000. The insurance coverage required by this subsection may be effected by blanket policies covering the Leased Properties issued to the party contractually responsible for the maintenance and operation of the project and such insurance policy or policies shall name the Trustee as an additional insured. (c) Rental Interruption Insurance. The City will maintain or cause to be maintained rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Leased Properties as a result of any of the hazards covered by the insurance required by subsection (a) of this section in an amount not less than the greatest of the aggregate Base Rental payable by the City under this Sublease for a period of any future 24 months. Any such insurance policy shall be in form satisfactory to the Authority and shall contain a clause naming the Trustee as an additional insured and making any loss thereunder payable to the Trustee as its interests may appear. Any proceeds of such insurance shall be used by the Trustee to pay Annual Debt Service on the Outstanding Bonds for the period during which the payment of rental under the Sublease is abated or shall be deposited in the Reserve Account to the extent necessary to restore the balance therein to the Reserve Requirement, and any proceeds of such insurance not so used shall be applied as provided in the Indenture to the extent required to pay administrative costs of the Authority in connection with the Leased Properties. (d) Self-Insurance; Alternative Plan of Protection. As an alternative to providing the insurance required by paragraph (b) above, the City may provide or cause to be provided a self-insurance method or plan of protection if and to the extent such self-insurance method or plan of protection shall afford reasonable protection to the City and the Authority, and their directors, officers, agents and employees and the Trustee, its directors, officers, agents and employees in light of all circumstances, giving consideration to cost, availability and similar plans or methods of protection adopted by public entities in the State of California other than the City; provided that the obligation of the Authority or City to make payments under such self- insurance shall be limited to money in a designated fund balance established by the Authority or 11281-0009\2392501v5.doc -8- City and that the Authority or City shall not be obligated to replenish such designated fund balance from the General Fund or be otherwise obligated to make payments except from such designated fund balance. After the Commencement Date, before any substitute method or plan may be provided by the City, there shall be filed with the Trustee a certificate of an actuary, independent insurance consultant or other qualified person, stating that, in the opinion of the signer, the substitute method or plan of protection is in accordance with the requirements of this Section and, when effective, would afford adequate protection to the City and the Authority, and their directors, officers, agents and employees and the Trustee and its directors, officers, agents and employees against loss and damage from the hazards and risks covered thereby; provided, however, that in the event the City provides a self-insurance method or plan of protection for the insurance required by paragraph (c) above, the designated fund balance established by the City shall be funded in an amount at least equal to the greatest of the aggregate Base Rental payable by the City under this Sublease for a period of any future 24 months. Moreover, as an alternative to providing the insurance required by paragraph (b) above, the City may provide a self-insurance method or plan of protection through the California Insurance Pool Authority (or another insurance risk sharing pool joint powers authority formed in the State) or any successor entity as the City may reasonably determine. (e) Evidence of Insurance. The City shall deliver to the Trustee each year a Certificate of the City stating that all requirements of this Sublease related to insurance have been complied with. Each such insurance policy shall require that the Trustee be given 30 days’ notice of any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall have no responsibility as to the sufficiency of coverage or amounts of such policies. If so requested in writing by the Trustee, the City shall also deliver to the Trustee duplicate originals or certified copies of each insurance policy described in such schedule. (f) Advances. If the City shall fail to perform any of its obligations under this Section, then the Authority may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money on behalf of the City, and the City shall be obligated to repay all such advances as soon as possible, as Additional Rental under Section 3(b). (g) Waivers of Subrogation. Each of the parties hereby waives any and all rights to recovery against the other or against any other tenant or occupant of the Leased Properties, or against the officers, employees, agents, representatives, customers, and business visitors of such other party or of such other tenant or occupant of the Leased Properties, for loss or damage to such waiving party or its property or the property of others under its control, arising from any cause insured against under the standard form of property damage insurance policy with all permissible extensions and endorsements covering extended perils or under any other policy of insurance carried by such waiving party in lieu thereof, to the extent such policies then in force permit such waiver. 11281-0009\2392501v5.doc -9- SECTION 9. DAMAGE, DESTRUCTION AND CONDEMNATION; APPLICATION OF NET PROCEEDS. If: (i) the whole, or any portion, of the Leased Properties is destroyed (in whole or in part) or is damaged by fire of other casualty or taken by eminent domain proceedings (or sold to a government threatening to exercise the power of eminent domain), or (ii) the leasehold title in all or a portion of the Leased Properties is materially impaired by reason of a defect in title, then (a) the City, but only to the extent permitted by law, shall substitute other property for the portion of the Leased Properties that has been destroyed, or taken, or affected by the defective title in accordance with Section 19 hereof; or (b) the City shall require the Net Proceeds of any insurance payment (other than the Net Proceeds of rental interruption insurance which shall be applied pursuant to Section 8(c)) or any condemnation award to be held by the Trustee in a special trust fund to be applied and disbursed by the Trustee as follows: (i) If less than all of the Leased Properties shall have been so destroyed or taken or affected by defective title and the remainder is usable, then this Sublease shall continue in full force and effect as to such remainder and (A) if the portion taken or destroyed is replaced by one or more properties of equal or greater fair market value (as demonstrated by an MAI fair market appraisal), the Trustee upon written direction of the City shall disburse such proceeds to the party that incurred the expense of making such replacement and there shall not be any abatement of the Base Rental under this Sublease; or (B) failing the making of such replacement, there shall be a partial abatement of the Base Rental under this Sublease (in accordance with Section 17) and the Trustee shall apply such Net Proceeds, together with any other money then available to it for such purpose, to the Redemption Fund under the Indenture for the redemption of outstanding Bonds in accordance with Sections 4.03 and 2.03(a) of the Indenture. (ii) If less than all of the Leased Properties shall have been so destroyed or taken or affected by defective title and the remainder is not usable, or if all of the Leased Properties shall have been so destroyed or taken or affected by the defective title, then the term of this Sublease shall cease as of the day that possession shall be so taken; and the Trustee shall apply such Net Proceeds, together with any other money then available to it for such purpose, to the Redemption Fund under the Indenture for the redemption of outstanding Bonds in accordance with Sections 4.03 and 2.03(a) of the Indenture. SECTION 10. DEFAULT. (a) If default shall be made by the City in the observance or performance of any agreement, condition, covenant or term contained herein required to be observed or performed by it (including, without limitation, the payment of any Base Rental or Additional Rental due hereunder), subject to the provisions of subsection (c) below, the Authority may at any time thereafter (with or without notice and demand and without limiting any other rights or remedies the Authority may have) recover rent and other monetary charges as they become due hereunder without terminating the City’s right to possession of the Leased Properties (regardless 11281-0009\2392501v5.doc -10- of whether or not the City has abandoned the Leased Properties). Furthermore, upon the occurrence of such a default, the Authority shall have the right, and the City hereby irrevocably appoints the Authority as its agent and attorney-in-fact for such purpose, to attempt to relet the Leased Properties at such rent, upon such conditions and for such term (subject to then existing Permitted Encumbrances, including but not limited to the City’s right to access and exclusive right to maintain and use facilities essential to the City’s utilities systems), and to do all other acts to maintain or preserve the Leased Properties, including the removal of persons or property therefrom or taking possession thereof, as the Authority deems desirable or necessary. The City hereby waives any and all claims for any damages that may result to the Leased Properties upon any action taken by the Authority under this Section 10(a). No action taken by the Authority under this Section 10(a) shall be deemed to terminate the Lease or the Sublease and the City shall continue to remain liable for any deficiency that may arise out of such reletting, taking into account expenses incurred by the Authority due to such reletting, payable at the same time and manner as provided for Base Rental in Section 3(a). The Authority expressly waives the right to receive any amount from the City pursuant to Section 1951.2(a)(3) of the California Civil Code. Each and all of the remedies given to the Authority hereunder or by any law now existing or hereafter enacted are cumulative and the exercise of any one remedy shall not impair the right of the Authority to any or all other remedies. (b) In addition to any default resulting from breach by the City of any agreement, condition, covenant or term hereof, if – (i) the City’s interest herein or any part thereof is assigned or transferred, either voluntarily or by operation of law, except as provided in Section 16; or (ii) the City shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with or relating to the subject 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 its debts or obligations, or offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar relief, or if the City shall make a general or any assignment for the benefit of its creditors in connection with any proceedings related to bankruptcy, insolvency, liquidation, winding up or similar event; or (iii) the City shall abandon the Leased Properties or any portion thereof, then in each and every such case the City shall be deemed to be in default hereunder. (c) Neither the Authority nor the City shall be in default in the performance of any of its obligations hereunder (except for the obligation of the City to pay Base Rental when due pursuant to Section 3(a)) unless and until it shall have failed to perform such obligation within 30 days after notice by the Authority or the City, as the case may be, to the other party properly specifying wherein it has failed to perform such obligation. 11281-0009\2392501v5.doc -11- SECTION 11. PREPAYMENT AND CREDITS. (a) In the event that, pursuant to Section 9, the City determines that Base Rental shall be abated and Net Proceeds from insurance or any condemnation award shall be used to redeem Bonds, the City shall provide the Authority and the Trustee an amended Exhibit B reflecting the new schedule of Base Rental payments. (b) The City may, at its option, prepay from any source of available moneys, Base Rental then unpaid, in whole or in part, for the redemption of Bonds, which redemption date(s) shall be on or after November 1, 20__. In such event, the Bonds shall be redeemed pursuant to Section 2.03(b) of the Indenture. A prepayment under this Section 11(b) shall be deemed made upon the occurrence of either of the following: (i) The City shall have deposited with the Trustee an amount equal to the sum of (A) the principal components of Base Rental being so prepaid, plus (B) the interest components with respect thereto accrued to the related redemption date(s) of the Bonds, plus (C) a premium, if any, in an amount equal to the redemption premium applicable to the Bonds being so redeemed; or (ii) There shall have been deposited, on behalf of the Authority, with the Trustee or another fiduciary, Federal Securities in a sufficient amount to satisfy the requirements of Section 9.03 of the Indenture to discharge the Bonds to be redeemed in connection with such prepayment. Except in the case of a prepayment of Base Rental to redeem all of the then Outstanding Bonds, a prepayment of principal components of Base Rental pursuant to this Section 11(b) shall: (1) apply only to Base Rental previously unpaid and not yet due, and (2) be applied to reduce Base Rental so that, after such prepayment (and the related redemption of Bonds), (A) each annual installment of principal components of Base Rental due hereunder shall be an integral multiple of $5,000 and (B) the principal components of Base Rental due in any year shall correspond with the principal amount of Bonds due and payable in such year. (c) Before making any prepayment pursuant to this Section 11, the City shall give written notice to the Trustee specifying the date on which the prepayment will be made. Such notice by the City shall be given at least 45 days before th e prepayment date; provided, that the Trustee may accept a shorter notice period or waive such notice requirement at the Trustee’s sole discretion. The City shall have the right to rescind an optional prepayment (exercised under Section 11(b)) by written notice to the Authority and the Trustee prior to the corresponding redemption date of the Bonds, and the Trustee, upon receipt of such notice, shall promptly send notices of rescission of such optional redemption of the Bonds pursuant to Section 2.03(e) of the Indenture. (d) In the event of a partial prepayment of Base Rental under this Section 11, the City shall provide the Trustee with an amended Exhibit B reflecting the new schedule of Base Rental payments. A prepayment made pursuant to this Section 11 shall not cause a defeasance of Bonds unless the requirements of Section 9.03 of the Indenture are satisfied. 11281-0009\2392501v5.doc -12- (e) In the event of a prepayment in full of the principal component of Base Rental under this Section 11, such that this Sublease shall be terminated by its terms as provided in Section 2, all amounts then on deposit under the Indenture which are to be credited to the City’s obligations to make Base Rental payments shall be credited towards the amounts then required to be so prepaid. SECTION 12. RIGHT OF ENTRY. The Authority and its assignees shall have the right to enter any of the Leased Properties during reasonable business hours (and in emergencies at all times), subject to the City’s reasonable security measures, (a) to inspect the same, (b) for any purpose connected with the City’s or the Authority’s rights or obligations under this Sublease, and (c) for all other lawful purposes. SECTION 13. MECHANICS’ LIENS. In the event the City shall at any time before or during the term of this Sublease cause any improvements or other work to be done or performed or materials to be supplied, in or upon the Leased Properties, the City shall pay, when due, all sums of money that may become due for, or purporting to be for, any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to or for the City in, upon or about the Leased Properties and which may be secured by any mechanics’, materialmen’s or other liens against the Leased Properties or the Authority’s interest therein, and will cause any such lien to be fully discharged and released at the time the performance of any obligation secured by any such lien matures or becomes due, except that, if the City desires to contest any such lien it may do so. If any such lien shall be reduced to final judgment and such judgment or such process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and said stay thereafter expires, the City shall promptly pay and discharge said judgment. SECTION 14. QUIET ENJOYMENT. The parties hereto mutually covenant that the City, so long as it keeps and performs the covenants and agreements herein contained, shall at all times during the term of this Sublease peaceably and quietly have, hold and enjoy the Leased Properties without suit, trouble or hindrance from the Authority. SECTION 15. INDEMNIFICATION. The City shall, to the full extent then permitted by law, indemnify, defend, protect and hold harmless the Authority and its members, officers and employees and the Trustee and its officers, directors or employees from and against any and all liabilities, obligations, losses, claims and damages whatsoever, regardless of the cause thereof (except for any liability, obligation, loss, claim or damage arising out of the negligent or intentional act or omission of the Trustee, its officers, directors or employees), and expenses in connection therewith, including, without limitation, counsel fees and expenses, penalties and interest arising out of or as the result of the entering into of this Sublease and the Indenture, or the payment of costs of (including any accident in connection with) the operation, use, condition or possession of the Leased Properties or any portion thereof resulting in damage to property or injury to or death to any person. The 11281-0009\2392501v5.doc -13- indemnification arising under this section shall continue in full force and effect notwithstanding the full payment of all rent obligations hereunder or the termination hereof for any reason, and with regard to the Trustee, the resignation or removal of the Trustee. The City agrees not to withhold or abate any portion of the payments required pursuant hereto by reason of any defects, malfunctions, breakdowns or infirmities of the Leased Properties. The Authority and the City mutually agree to promptly give notice to each other of any claim or liability hereby indemnified against following either’s learning thereof. SECTION 16. ASSIGNMENT TO TRUSTEE; SUBLETTING BY CITY. (a) The parties understand that this Sublease and the rights of the Authority hereunder (except for the Authority’s rights with respect to approvals or consents hereunder, and indemnification and payment or reimbursement for any costs or expenses of the Authority hereunder) will be assigned to the Trustee pursuant to the Assignment Agreement and the Indenture, and accordingly, the City agrees to make all Rental Payments due to the Authority hereunder directly to the Trustee, notwithstanding any claim, defense, setoff or counterclaim whatsoever (whether arising from a breach hereof or otherwise) that the City may have from time to time against the Authority, except as provided in Section 17. (b) Neither this Sublease nor any interest of the City hereunder shall be mortgaged, pledged, assigned or transferred by the City by voluntary act or by operation of law or otherwise; provided, subject to Section 18, that the City may sublease all or any portion of the Leased Properties, and may grant concessions to others involving the use of any portion of the Leased Properties, whether such concessions purport to convey a leasehold interest or a license to use a portion of the Leased Properties. The City shall at all times remain liable for the performance of the covenants and conditions on its part to be performed under this Sublease, notwithstanding any subletting or granting of concessions which may be made. Nothing contained herein shall be construed to relieve the City from its obligation to pay Base Rental and Additional Rental as provided in this Sublease or to relieve the City from any other obligations contained herein. (c) Without limiting the foregoing, to the extent that this Sublease or the Assignment Agreement confer upon or grants the Trustee any right, remedy or claim under or by reason of this Sublease, the Trustee is hereby further recognized as being a third party beneficiary hereunder and may enforce such right, remedy or claim conferred, given or granted hereunder. SECTION 17. ABATEMENT OF RENTAL. (a) The obligation of the City to pay Base Rental and Additional Rental shall be abated during any period in which, by reason of any damage, destruction, condemnation or impairment of leasehold interest, there is substantial interference with the use and occupancy of the Leased Properties or any portion thereof by the City. Such abatement shall be in an amount agreed upon by the City and the Authority such that the resulting Base Rental in any year during which such interference continues does not exceed the fair rental value of the portions of the Leased Properties as to which such damage, destruction, taking or impairment do not substantially interfere with the City’s use and right of possession. Such abatement shall continue 11281-0009\2392501v5.doc -14- for the period commencing with the date of such interference and ending with the restoration of the relevant Leased Properties to tenantable condition. For clarification purposes, to the extent that any Base Rental is to be paid or prepaid from insurance or condemnation proceeds deposited with the Trustee pursuant to Section 8(c) of this Sublease, such Base Rental shall not be reduced or abated pursuant to this Section. (b) Upon the cessation of the occurrence of any abatement event during the term of this Sublease, the City and the Authority shall, in good faith, determine the current fair rental value of the Leased Properties. If such fair rental value is greater than the fair rental value of the Leased Properties determined under Section 3 as of the Commencement Date, the Base Rental shall be increased by the lesser of (i) such incremental value or (ii) the amount needed to recoup all amounts abated during the remaining term of this Sublease. (c) Except as set forth herein, in the event of any damage, destruction of condemnation, this Sublease shall continue in full force and effect and the City hereby waives any right to terminate this Sublease by virtue of such damage, destruction or condemnation. T he City further waives the benefit of Sections 1932(1), 1932(2), 1933(4), 1941 and 1942 of the California Civil Code. SECTION 18. ADDITIONAL COVENANTS REGARDING TAX-EXEMPT BONDS. The City covenants that during the term of this Sublease it shall not use or permit the u se of the Leased Properties or any proceeds of the Bonds, directly or indirectly, in any manner, and shall not take or omit to take any action, that would cause any of the Bonds to be treated as an obligation not described in Section 103(a) of the Code. The City shall comply with the provisions of the Tax Certificate, which is incorporated in this Sublease. SECTION 19. SUBSTITUTION OR RELEASE OF PROPERTY. (a) Notwithstanding anything herein to the contrary, the Leased Properties may be substituted, in whole or in part, by other properties, or a portion of the Leased Properties may be released from this Sublease, at the option of the City; provided, that the following conditions shall have been satisfied: (i) such substitution or release does not, in the opinion of Bond Counsel, adversely affect the Tax-Exempt status of the Bonds; (ii) The City shall have provided certification to the Authority and the Trustee that the fair market value of the Leased Properties, after the proposed substitution or release, shall be equal to or greater than the aggregate amount of the principal component of the Base Rental (i.e., the principal amount of the Outstanding Bonds); (iii) the City certifies to the Authority and the Trustee that, based on the City’s determination, the annual fair rental value of the Leased Properties, after such substitution or release, is at least equal to the maximum annual Base Rental remaining unpaid under the terms of this Sublease, and the expected useful life of the Leased Properties, after such substitution or release, extends at least to the Expiration Date; 11281-0009\2392501v5.doc -15- (iv) Except as provided in Section 19(b), the City shall notify the rating agency (or agencies) then rating the Bonds regarding such substitution or release; (v) in the event that the substituted property consists in whole or in part of real property, a California Land Title Association insurance policy (or, at the City’s sole discretion, an American Land Title Association insurance policy) on the substituted real property has been obtained, along with evidence that, other than Permitted Encumbrances, no prior liens exist as to the substituted property; (vi) the City shall provide to the Authority and the Trustee evidence that any existing title insurance with respect to the portion of the Le ased Properties remaining after such substitution or release is not affected; and (vii) the parties hereto shall amend this Sublease to properly reflect such substitution or release. (b) It is recognized that after the completion of the Fire HQ Project, the City may choose to release a portion of the Leased Properties under the Lease and this Sublease; and in that connection, so long as the Fire Station HQ Property will remain as among the Leased Properties after such release, then the City, with respect to the conditions to be satisfied under Section 19(a), will not be required to provide notice to any rating agency pursuant to Section 19(a)(iv). SECTION 20. 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 be established between the parties in the course of administering this Sublease 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 subsequent default. The acceptance of rent hereunder shall not be, nor be construed to be, a waiver of any term, covenant or condition of this Sublease. SECTION 21. NET LEASE. Subject to the provisions of Section 17 (“Abatement of Rental”), this Sublease shall be deemed and construed to be a “Triple Net Lease” and the City hereby agrees that rental provided for herein shall be an absolute net return to the Authority, free and clear of any expenses, charges or setoffs whatsoever. SECTION 22. AMENDMENTS. This Sublease may only be amended to the extent permitted by Section 5.07 of the Indenture. 11281-0009\2392501v5.doc -16- SECTION 23. GOVERNING LAW. This Sublease shall be governed exclusively by the provisions hereof and by the laws of the State of California. SECTION 24. NOTICES. Any notice, request, demand, or other communication under this Sublease shall be governed by Section 10.13 of the Indenture, which is hereby incorporated. SECTION 25. VALIDITY AND SEVERABILITY. If for any reason this Sublease shall be held by a court of competent jurisdiction to be void, voidable, or unenforceable by the Authority or by the City, or if for any reason it is held b y such a court that any of the covenants of the City hereunder, including the covenant to pay rentals hereunder, is unenforceable for the full term hereof, then and in such event this Sublease is and shall be deemed to be a lease from year to year under which the rentals are to be paid by the City monthly in consideration of the right of the City to possess, occupy and use the Leased Properties, and all of the rental and other terms, provisions and conditions of this Sublease, except to the extent that such terms, provisions and conditions are contrary to or inconsistent with such holding, shall remain in full force and effect. SECTION 26. SECTION HEADINGS. All section headings contained are for convenience of reference only and are not intended to define or limit the scope of any provision of this Sublease. [Remainder of this page intentionally left blank.] 11281-0009\2392501v5.doc -17- SECTION 27. EXECUTION; RECORDATION. This Sublease may be executed in any number of counterparts, each of which shall be deemed to be an original, but all together shall constitute but one and the same instrument. IN WITNESS WHEREOF, the Authority and the City have caused this Sublease to be executed by their respective officers thereunto duly authorized, all as of the day and year first above written. ORANGE CITY PUBLIC FACILITIES FINANCING AUTHORITY By: Rick Otto, Executive Director ATTEST: Pamela Coleman, Secretary CITY OF ORANGE By: Mark A. Murphy, Mayor ATTEST: Pamela Coleman, City Clerk 11281-0009\2392501v5.doc A-1 EXHIBIT A Description of Leased Properties THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS, TOGETHER WITH IMPROVEMENTS THEREON: PARCEL 1: APN 390-453-07 [105 South Water Street (the Fire HQ Property) and 189 S. Water Street (City Water Division operation center)] LOTS 1 THROUGH 22 INCLUSIVE IN BLOCK "B" OF THE JAMESON TRACT, AS SHOWN ON A MAP RECORDED IN BOOK 13, PAGE 44 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. EXCEPTING THEREFROM THAT PORTION DESCRIBED IN A DEED TO THE CITY OF ORANGE RECORDED MAY 17, 1982 AS INSTRUMENT NO. 82-092579 OF OFFICIAL RECORDS OF SAID ORANGE COUNTY. ALSO EXCEPTING FROM SAID LOTS 1, 2, 3, 4, 7 AND 8 ALL MINERAL DEPOSITS AS DEFINED IN SECTION 6407 OF THE PUBLIC RESOUR CES CODE BELOW A DEPTH OF 500 FEET, WITHOUT SURFACE RIGHTS OF ENTRY, AS RESERVED IN DEED FROM THE STATE OF CALIFORNIA RECORDED NOVEMBER 4, 1980 IN BOOK 13819, PAGE 335 OF OFFICIAL RECORDS. PARCEL 2: APN 390-383-01 [300 East Chapman Avenue (City Civic Center)] LOTS 1 THROUGH 20 INCLUSIVE IN BLOCK "A" OF P. J. SHAEFER’S ADDITION, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA AS PER MAP RECORDED IN BOOK 10, PAGE 94 OF MISCELLANEOUS MAPS, RECORDS OF LOS ANGELES, CALIFORNIA PARCEl 3: APN 093-031-02 [Grijalva Park] PARCEL 3-A: THAT PORTION OF LOT 9 IN BLOCK "F" OF THE CHAPMAN TRACT, SURVEYED BY FRANK LECOUVREUR IN DECEMBER 1870, AS PER MAP RECORDED IN BOOK 102, PAGE 15 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, INCLUDED WITHIN A STRIP OF LAND 50.00 FEET WIDE, AS DESCRIBED IN THE DEEDS TO THE PACIFIC IMPROVEMENT COMPANY, A CORPORATION, RECORDED JUNE 18, 1888 IN BOOK 454, PAGES 90 AND 95 OF A-2 11281-0009\2392501v5.doc DEEDS IN THE OFFICE OF THE COUNTY RECORDER OF LOS ANGELES COUNTY, CALIFORNIA, BEING A PORTION OF A STRIP OF LAND 50.00 FEET WIDE, THE CENTER LINE OF WHICH IS DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE SOUTHERLY LINE OF LOT 8 (NORTHERLY LINE OF LOT 9) OF SAID CHAPMAN TRACT, DISTANT NORTH 89 DEGREES 54' 55" EAST 494.29 FEET ALONG SAID SOUTHERLY LINE FROM THE SOUTHWESTERLY CORNER OF SAID LOT 8, AS SHOWN ON THE MAP OF TRACT NO. 4626, AS PER MAP RECORDED IN BOOK 169, PAGES 5 AND 6 OF SAID MISCELLANEOUS MAPS, BEING ALSO ENGINEER STATION 330+30.3, AS SHOWN ON THE RIGHT OF WAY AND TRACT MAP V-12-C, SHEET 2, OF THE SOUTHERN PACIFIC COMPANY, STAMPED DECEMBER 31, 1923, AND ALSO THE SOUTHEASTERLY TERMINUS OF THE CENTER LINE OF THE 50.00-FOOT STRIP OF LAND LABELED AS "SOUTHERN PACIFIC RAILROAD R/W" ON SAID MAP OF TRACT NO. 4626; THENCE CONTINUING ALONG SAID CENTER LINE, SOUTH 24 DEGREES 32' 05" EAST TO ENGINEER STATION 330+30.8, BEING THE BEGINNING OF A TAPER 2 CURVE, CONCAVE SOUTHWESTERLY, FOR A 10 DEGREE CURVE; THENCE SOUTHEASTERLY 270.00 FEET ALONG SAID TAPER 2 CURVE, TO THE BEGINNING OF SAID 10 DEGREE CURVE CONCAVE WESTERLY, HAVING A RADIUS OF 573.14 FEET; THENCE SOUTHERLY 373.30 FEET ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 37 DEGREES 19' 05" TO THE BEGINNING OF A SIMILAR TAPER 2 CURVE, CONCAVE NORTHWESTERLY, AT THE END OF SAID 10 DEGREE CURVE; THENCE SOUTHWESTERLY 270.00 FEET ALONG SAID TAPER 2 CURVE; THENCE TANGENT TO SAID CURVE, SOUTH 39 DEGREES 47' 00" WEST TO ENGINEER STATION 342+60.1, AS SHOWN ON SAID R.R. MAP, BEING THE BEGINNING OF A TAPER 2 CURVE, CONCAVE SOUTHEASTERLY, FOR AN 8 DEGREE CURVE; THENCE SOUTHWESTERLY 210.00 FEET ALONG SAID TAPER 2 CURVE, TO THE BEGINNING OF SAID 8 DEGREE CURVE CONCAVE SOUTHEASTERLY, HAVING A RADIUS OF 716.34 FEET; THENCE SOUTHWESTERLY ALONG SAID CURVE, TO THE NORTHERLY LINE OF ROBERT MCPHERSON THIRD ADDITION, AS PER MAPS RECORDED IN BOOK 16, PAGE 39 OF MISCELLANEOUS RECORDS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY OF LOS ANGELES; THE SIDE LINES OF SAID STRIP OF LAND SHOULD BE SHORTENED OR ENLARGED AS TO TERMINATE IN THE NORTHERLY LINE OF SAID THIRD ADDITION. EXCEPT THOSE PORTIONS THEREOF LYING WITHIN LOTS 17 AND 18 OF THE G. HOWARD THOMPSON TRACT, AS SHOWN ON A MAP FILED IN BOOK 1, PAGE 22 OF RECORD OF SURVEYS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY OF ORANGE. PARCEL 3-B: THAT PORTION OF LOT 9 IN BLOCK "F" OF THE CHAPMAN TRACT, SURVEYED BY FRANK LECOUVREUR IN DECEMBER 1870, AS PER MAP RECORDED IN BOOK 102, PAGE 15 OF MISCELLANEOUS MAPS IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHWEST CORNER OF SAID LOT 9; THENCE NORTHERLY 20.00 CHAINS TO THE NORTHWEST CORNER OF SAID LOT 9; THENCE EASTERLY A-3 11281-0009\2392501v5.doc TO THE NORTHEAST CORNER OF SAID LOT 9; THENCE ALONG THE NORTHWESTERLY LINE OF G. HOWARD THOMPSON TRACT, AS PER MAP FILED IN BOOK 1, PAGE 22 OF RECORD OF SURVEYS IN THE OFFICE OF SAID COUNTY RECORDER, SOUTHWESTERLY TO THE POINT OF BEGINNING. EXCEPTING THEREFROM, THAT PORTION INCLUDED WITHIN PARCEL 3-A ABOVE. PARCEl 3: APN 093-031-06 [Grijalva Park] LOTS 17 AND 18 OF THE G. HOWARD THOMPSON TRACT, IN THE CITY OF ORANGE, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS SHOWN ON A MAP RECORDED IN BOOK 1, PAGE 22 OF RECORD OF SURVEYS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. EXCEPTING THEREFROM THE SOUTHERLY 7 FEET, ALSO EXCEPTING THEREFROM ANY PORTION LYING NORTH OF THE SOUTHERLY LINE OF TRACT NO. 15548 AS SHOWN ON A MAP RECORDED IN BOOK 789, PAGE 38 THROUGH 42 OF MISCELLANEOUS MAPS, RECORDS OF ORANGE COUNTY, CALIFORNIA. 11281-0009\2392501v5.doc B-1 EXHIBIT B Base Rental Payment Schedule Payment Date Principal Component Interest Component Total  Payable five days before each payment date. 11281-0009\2392501v5.doc B-2 State of California ) County of Orange ) On _________________________, before me, , (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) State of California ) County of Orange ) On _________________________, before me, , (insert name and title of the officer) Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.