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HomeMy WebLinkAboutBANK OF NEW YORK MELLON TRUST COMPANY, N.A., THE (3).A- 2014 -133 -B Quint & Tlummig LLP 04/30/14 05/28/14 05/31/14 FNAL 06/06/14 LEASE AGREEMENT Dated as of June 1, 2014 by and between the SANTA ANA FINANCING AITTHORITY, as Sublessor and the CITY OF SANTA AINA, as Sublessee 19014.10 TABLE OF CONTENTS DEFINITIONS; RULES OF INTERPRETATION SectionI.I. Definitions ........................................................................................................................................................ ..............................2 Section1.2. Interpretation .................................................................................................................................................. ..............................6 ARTICLE II COVENANTS, REPRESENTATIONS AND WARRANTIES Section 2.1. Covenants, Representations and Warranties of the City ......................................................... ..............................7 Section 2.2. Covenants, Representations and Warranties of the Authority ............................................ ..............................9 107M0410 111 DEPOSIT AND APPLICATION OF FUNDS Section 3.1. Deposit of and Application of ARTICLE IV LEASE OF PROPERTY; LEASE PAYMENTS Section 4.1. Sublease of Property by the Authority Back to the City ......................................................... .............................12 Section4.2. Term ................................................................................................................................................................... .............................12 Section4.3. Lease Payments ............................................................................................................................................ .............................12 Section4.4. Quiet Enjoyment .......................................................................................................................................... .............................14 Section4.5. Title .................................................................................................................................................................... .............................14 Section 4.6. Release of Excess Property ...................................................................................................................... .............................15 Section4.7. Substitution of Property ........................................................................................................................... .............................15 ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments .......................................................................... .............................17 Section5.2. Modification of Property .......................................................................................................................... .............................17 Section5.3. Public Liability Insurance ....................................................................................................................... .............................17 Section54. Casualty Insurance ..................................................................................................................................... .............................18 Section 5.5. Rental Interruption Insurance .............................................................................................................. .............................18 Section 5.6. Worker's Compensation Insurance ................................................................................................... .............................18 Section 5.7. Recordation Hereof; Title Insurance .................................................................................................. .............................18 Section 5.8. Insurance Net Proceeds; Form of Policies ........................................................................................ .............................19 Section 5.9. Installation of City's Personal Property ........................................................................................... .............................19 Section5.10. Liens ................................................................................................................................................................. .............................19 Section5.11. Advances ....................................................................................................................................................... .............................19 Section 5.12. Environmental Covenants ................................................................................................................... .............................19 Section 5.13. City Consents to Assignment Agreements ................................................................................. .............................20 ARTICLE VI EMINENT DOMAIN; USE OF NET PROCEEDS Section6.1. Eminent Domain ................................................................................. ............................... Section 6.2. Application of Net Proceeds ........................................................... ............................... Section 63. Abatement of Lease Payments in the Event of Damage or Destruction ARTICLE VII OTHER COVENANTS OF THE CITY Section 7.1. Disclaimer of Warranties ......................................................................................................................... .............................24 -i- Section 72. Access to the Property; Grant and Conveyance of Right of Entry ..................................... .............................24 Section 73. Release and Indemnification Covenants ........................................................................................ .............................24 Section 7.4. Assignment by the Authority .............................................................................................................. .............................25 Section 7.5. Assignment and Subleasing by the City ........................................................................................ .............................25 Section 7.6. Amendment of Lease Agreement ...................................................................................................... .............................25 Section7.7. Tax Covenants ............................................................................................................................................... .............................26 Section 7.8. Financial Statements; Budgets .............................................................................................................. .............................26 Section 7.9. Records and Accounts ............................................................................................................................... .............................26 Section 7.10. Observance or Laws and Regulations ........................................................................................... .............................26 Section7.11. Notices .............................................................................................................................. ............................... 97 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES SectionS.I. Events of Default Defined ....................................................................................................................... .............................28 Section8.2. Remedies on Default ................................................................................................................................. .............................28 Section83. No Remedy Exclusive ............................................................................................................................... .............................30 Section 8.4. Agreement to Pay Attorneys' Fees and Expenses ..................................................................... .............................30 Section 8.5. No Additional Waiver Implied by One Waiver ......................................................................... .............................30 Section 8.6. Assignees to Exercise Rights ................................................................................................................. .............................30 Section 9.1. Security Section 9.2. No Opti, Section 9.3. Mandat( ARTICLE IX PREPAYMENT OF LEASE PAYMENTS Prepayment From Net Proceeds of Insurance or Eminent Domain ........ .............................32 ARTICLE X MISCELLANEOUS Section10.1. Notices ............................................................................................................................................................. .............................33 Section10.2. Binding Effect .............................................................................................................................................. .............................34 Section10.3. Severability .................................................................................................................................................. .............................34 Section10.4. Net-net-net Lease ...................................................................................................................................... .............................34 Section 10.5. Further Assurances and Corrective Instruments ..................................................................... .............................34 Section 10.6. Execution in Counterparts .................................................................................................................... .............................34 Section10.7. Applicable Law .......................................................................................................................................... .............................34 Section10.8. Captions ......................................................................................................................................................... .............................34 EXHIBIT A DESCRIPTION OF THE SITE EXHIBIT B DESCRIPTION OF THE FACILITY EXHIBIT C -1 SCHEDULE OF LEASE PAYMENTS (to be paid to TPB Investments, Inc.) EXHIBIT C -2 SCHEDULE OF LEASE PAYMENTS (to be paid to Compass Mortgage Corporation) EXHIBIT C -3 SCHEDULE OF LEASE PAYMENTS (to be paid to Capital One Public Funding, LLC) EXHIBIT C -4 SCHEDULE OF LEASE PAYMENTS (to be paid to Capital One Public Funding, LLC) EXHIBIT C -5 SCHEDULE OF LEASE PAYMENTS (Total) -ii- LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease Agreement'), dated as of June 1, 2014, is by and between the SANTA ANA FINANCING AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the State of California, as lessor (the "Authority "), and the CITY OF SANTA ANA, a municipal corporation and chartered city organized and existing under and by virtue of the laws of the State of California, as lessee (the "City"); WITNESSETH: WHEREAS, pursuant to that certain Site and Facility Lease, dated as of June 1, 2014 (the "Site and Facility Lease "), the City has leased those certain parcels of real property situated in Orange County, State of California, more particularly described in Exhbit A attached hereto and made a part hereof (the "Site "), and those certain improvements thereon, more particularly described in Exhibit B hereto (the "Facility" and, with the Site, the "Property "), to the Authority, all for the purpose of enabling the City to undertake (a) the defeasance of $33,550,000 (50 %) of the outstanding Santa Ana Financing Authority Police Administration and Holding Facility Lease Revenue Bonds, Series 1994A, issued to finance the costs of the construction and equipping of a police administration building and holding facility, and (b) the current refunding of the outstanding City of Santa Ana Certificates of Participation (1998 City Hall Expansion Project), delivered to finance the costs of the construction and equipping of an expansion of the Santa Ana City Hall; WHEREAS, the Authority proposes to lease the Property back to the City pursuant to th s Lease Agreement and to assign all of its rights, title and interest in, to and under this Lease Agreement, including its right to receive lease payments under this Lease Agreement (the "Lease Payments "), its right to enforce payment of the Lease Payments and otherwise to enforce its interest and rights under this Lease Agreement in the event of a default hereunder by the City and its rights under the Site and Facility Lease, to TPB Investments, Inc., a wholly owned subsidiary of Western Alliance Bank, an Arizona corporation, Compass Mortgage Corporation, an Alabama corporation and Capital One Public Funding, LLC (collectively, the "Assignees "), pursuant to that certain assignment agreement, dated as of June 1, 2014, by and between the Authority and U.S. Bank National Association, as agent on behalf of the Assignees; and WHEREAS; the City and the Authority have agreed to enter into this Lease Agreement providing for Lease Payments with an aggregate principal component in the amount of $45,060,000 for the purpose of implementing the financing transactions described above. AGREEMENT: NOW, THEREFORE, for and in consideration of the premises and the covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: ARTICLE I DEFINITIONS; RULES OF INTERPRETATION Section 1.1. Definitions. All terms defined in this Section 1.1 have the meanings herein specified for all purposes of this Lease Agreement. "Additional Payments" means the amounts specified as such in Section 4.3(b) of this Lease Agreement. "Agent" means U.S. Bank National Association. "Applicable Environmental Laws" means and shall include, but shall not be limited to, the Comprehensive Environmental Response, Compensation, and Liability Act ( "CERCLA "), 42 USC Sections 9601 et seq.; the Resource Conservation and Recovery Act ( "RCRA "), 42 USC Sections 6901 et seq.; the Federal Water Pollution Control Act, 33 USC Sections 1251 et seq.; the Clean Air Act, 42 USC Sections 7401 et seq.; the California Hazardous Waste Control Law ( "HWCL "), California Health & Safety Code Sections 25100 et seq.; the Hazardous Substance Account Act ( "HSAA "), California Health & Safety Code Sections 25300 et seq.; the Porter - Cologne Water Quality Control Act (the "Porter- Cologne Act "), California Water Code Sections 1300 et seq.; the Air Resources Act, California Health & Safety Code Sections 3900 et seq.; the Safe Drinking Water & Toxic Enforcement Act, California Health & Safety Code Sections 25249.5 et seq.; and the regulations under each thereof; and any other local, state, and /or federal laws or regulations, whether currently in existence or hereafter enacted, that govern: (a) the existence, cleanup, and /or remedy of contamination on property; (b) the protection of the environment from spilled, deposited, or otherwise emplaced contamination; (c) the control of hazardous wastes; or (d) the use, generation, transport, treatment, removal, or recovery of Hazardous Substances, including building materials. "Applicable Lazo" means (a) all applicable common law and principles of equity and (b) all applicable provisions of all (i) constitutions, statutes, rules, regulations and orders of all Governmental Authorities, (ii) Applicable Environmental Laws, (iii) applicable seismic building code requirements at the time of construction, and (iv) orders, decisions, judgments, writs, injunctions and decrees of all courts (whether at law or in equity) and arbitrators. "Assignees" means (a) initially, WAPF, CMC and COPE, as assignees of all rights, title and interests of the Authority hereunder, and (b) any other entity to whom the rights of the Authority hereunder are assigned, including subsequent assignees of the Assignees. "Assignment Agreement" means the Assignment Agreement, dated as of June 1, 2014, between the Authority, as assignor, and the Agent, on behalf of the Assignees, as originally executed or as thereafter amended under any duly authorized and executed amendments thereto. "Authority" means Santa Ana Financing Authority, a joint exercise of powers authority, organized and existing under the laws of the State. -2- "Authority Representative" means the Chair, the Executive Director or the Treasurer or the designee of any such official, or any other person authorized by resolution of the Authority delivered to the Assignees to act on behalf of the Authority under or with respect to the Site and Facility Lease, the Lease Agreement and the Assignment Agreements. "Bond Counsel" means (a) Quint & Thimmig LLP, or (b) any other attorney or firm of attorneys of nationally recognized expertise with respect to legal matters relating to obligations the interest on which is excludable from gross income under Section 103 of the Tax Code. "Business Day" means a day other than a Saturday, Sunday or legal holiday, on which banking institutions are not closed in the State. "City" means the City of Santa Ana, a municipal corporation and chartered city organized and existing under the laws of the State. "City Representative" means the Mayor, the City Manager, the Executive Director of Finance, or the designee of any such official, or any other person authorized by resolution delivered to the Authority and the Assignees to act on behalf of the City under or with respect to the Site and Facility Lease and this Lease Agreement. "Closing Date" means the date this Lease Agreement or a memorandum thereof is recorded in the office of the County Recorder of the County of Orange. "COPF Assignment Agreement" means the Assignment Agreement, dated as of June 1, 2014, between the Authority, as assignor of a portion of its rights under the Site and Facility Lease and this Lease Agreement, and COPF, as assignee, as originally executed or as thereafter amended under any duly authorized and executed amendments thereto. "Contract" means any indenture, trust agreement, contract, agreement (other than this Lease Agreement), other contractual restriction, lease, mortgage or instrument. "Defeased 1994 Bonds" means $33,550,000 (50 %) of the 1994 Bonds. "Escrow Bank" means The Bank of New York Mellon Trust Company, N.A., as escrow bank under the Escrow Agreement. "Event of Default" means any of the events of default as defined in Section 8.1. "Facility" means those certain existing facilities more particularly described in Exhibit B to the Site and Facility Lease and in Exhibit B to the Lease Agreement. "Federal Securities" means any direct general non - callable obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), or obligations the timely payment of principal of and interest on which are directly guaranteed by the United States of America. "Fiscal Year" means each twelve -month period during the Term of this Lease Agreement commencing on July 1 in any calendar year and ending on June 30 in the next succeeding calendar year, or any other twelve -month period selected by the City as its fiscal year period. "Governmental Authority" means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, central bank, service, City or other instrumentality of any governmental entity or other entity exercising -3- executive, legislative, judicial, taxing, regulatory, fiscal, monetary or administrative powers or functions of or pertaining to government, or any arbitrator, mediator or other person with authority to bind a party at law. "Hazardous Substance" means any substance that shall, at any time, be listed as "hazardous" or "toxic" in any Applicable Environmental Law or that has been or shall be determined at any time by any agency or court to be a hazardous or toxic substance regulated under Applicable Environmental Laws; and also means, without limitation, raw materials, building components, the products of any manufacturing, or other activities on the Property, wastes, petroleum, and source, special nuclear, or by- product material as defined by the Atomic Energy Act of 1954, as amended (42 USC Sections 3011 et seq.). "Lease Agreement " means this Lease Agreement, dated as of June 1, 2014, between the Authority and the City. "Lease Payment Date" means January 1 and July 1 in each year, commencing January 1, 2015, and continuing to and including the date on which the Lease Payments are paid in full. "Lease Payments" means all payments required to be paid by the City under Section 4.3, including any prepayment thereof under Sections 9.2 or 9.3. "Material Adverse Effect" means an event or occurrence which adversely affects in a material manner (a) the assets, liabilities, condition (financial or otherwise), business, facilities or operations of the City, (b) the ability of the City to carry out its business in the manner conducted as of the date of this Lease Agreement or to meet or perform its obligations under this Lease Agreement on a timely basis, (c) the validity or enforceability of this Lease Agreement, or (d) the exclusion of the interest component of the Lease Payments from gross income for federal income tax purposes or the exemption of such interest for state income tax purposes. "Material Litigation" means any action, suit, proceeding, inquiry or investigation against the City in any court or before any arbitrator of any kind or before or by any Governmental Authority, (a) if determined adversely to the City, may have a Material Adverse Effect, (b) seek to restrain or enjoin any of the transactions contemplated by this Lease Agreement, or (c) may adversely affect (i) the exclusion of the interest component of the Lease Payments from gross income for federal income tax purposes or the exemption of such interest for state income tax purposes or (ii) the ability of the City to perform its obligations under this Lease Agreement. "Net Proceeds" means any insurance or eminent domain award (including any proceeds of sale to a governmental entity under threat of the exercise of eminent domain powers), paid with respect to the Property, to the extent remaining after payment therefrom of all expenses incurred in the collection thereof. "1994 Bonds" means the Santa Ana Financing Authority Police Administration and Holding Facility Lease Revenue Bonds, Series 1994A, outstanding in the principal amount of $67,100,000. "1994 Bonds Escrow Agreement" means that certain escrow deposit and trust agreement, dated June 12, 2014, by and between the City and the Escrow Bank, relating to the defeasance of a portion of the Defeased 1994 Bonds. "1994 Bonds Escrow Fund" means the escrow fund established by and held by the Escrow Bank under the 1994 Bonds Escrow Agreement. -4- "1398 Certificates " means the City of Santa Ana. Certificates of Participation (1998 City Hall Expansion Project), outstanding in the principal amount of $8,015,000. "1998 Certificates Escrow Agreement" means that certain escrow deposit and trust agreement, dated June 12, 2014, by and between the City and the Escrow Bank, relating to the defeasance of the 1998 Certificates. "1998 Certificates Escrow Fund" means the escrow fund established by and held by the Escrow Bank under the 1998 . Certificates Escrow Agreement. "Permitted Encumbrances" means, as of any time: (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which the City may permit to remain unpaid under Article VI of this Lease Agreement; (b) the Site and Facility Lease, this Lease Agreement and the Assignment Agreement; (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; (d) the exceptions disclosed in the title insurance policy issued with respect to the Property issued as of the Closing Date; and (e) any easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist of record and which the City certifies in writing will not materially impair the use of the Property for its intended purposes. "Property" means, collectively, the Site and the Facility. "Rental Period" means each period during the 'Term of the Lease commencing on and including July 2 in each year and extending to and including the next succeeding July 1. The first Rental Period begins on the Closing Date (which may be prior to July 2, 2014) and ends on July 1, 2015. "Site" means that certain real property more particularly described in Exhibit A to the Site and Facility Lease and in Exhibit A to the Lease Agreement. "Site and Facility Lease" means the Site and Facility Lease, dated as of June 1, 2014, by and between the City, as lessor, and the Authority, as lessee, together with any duly authorized and executed amendments thereto. "State" means the State of California. "Tax Code" means the Internal. Revenue Code of 1986 as in effect on the Closing Date or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the Closing Date, together with applicable proposed, temporary and final regulations promulgated, and applicable official public guidance published, under the Tax Code. "Term of this Lease Agreement" or "Tenn" means the time during which this Lease Agreement is in effect, as provided in Section 4.2. "WAPF Assignment Agreement' ;means the Assignment Agreement, dated as of June 1, 2014, between the Authority, as assignor of a portion of its rights under the Site and Facility Lease and th s Lease Agreement, and WAPF, as assignee, as originally executed or as thereafter amended under any duly authorized and executed amendments thereto. -5- Section 1.2. Interpretation. (a) Unless the context otherwise indicates, words expressed in the singular include the plural and vice versa and the use of the neuter, masculine, or feminine gender is for convenience only and include the neuter, masculine or feminine gender, as appropriate. (b) Headings of articles and sections herein and the table of contents hereof are solely for convenience of reference, do not constitute a part hereof and do not affect the meaning, construction or effect hereof. (c) All references herein to "Articles," "Sections" and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Lease Agreement; the words "herein," "hereof," "hereby," "hereunder" and other words of similar import refer to this Lease Agreement as a whole and not to any particular Article, Section or subdivision hereof. 02 ARTICLE II COVENANTS, REPRESENTATIONS AND WARRANTIES Section 2.1. Covenants, Representations and Warranties of the City. The City makes the following covenants, representations and warranties to the Authority as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The City is a municipal corporation and chartered city, organized and existing under and by virtue of the laws of the State, has full legal right, power and authority under the laws of the State to enter into the Escrow Agreement, the Site and Facility Lease and this Lease Agreement and to carry out and consummate all transactions on its part contemplated hereby and thereby, and by proper action the City has duly authorized the execution and delivery by the City of the Escrow Agreement, the Site and Facility Lease and this Lease Agreement. (b) Due Execution. The representative of the City executing the Escrow Agreement, the Site and Facility Lease and this Lease Agreement has been fully authorized to execute the same by a resolution duly adopted by the City Council of the City. (c) Valid, Binding and Enforceable Obligations. The Escrow Agreement, the Site and Facility Lease and this Lease Agreement have been duly authorized, executed and delivered by the City and constitute the legal, valid and binding agreements of the City enforceable against the City in accordance with their respective terms. (d) No Conflicts. The execution and delivery of the Escrow Agreement, the Site and Facility Lease and this Lease Agreement, the consummation of the transactions therein and herein contemplated and the fulfillment of or compliance with the terms and conditions thereof and hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the City is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the City, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Escrow Agreement, the Site and Facility Lease or this Lease Agreement or the financial condition, assets, properties or operations of the City. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the City or of the voters of the City, and no consent, permission, authorization, order or license of, or filing or registration with, any Governmental Authority is necessary in connection with the execution and delivery of the Escrow Agreement, the Site and Facility Lease and this Lease Agreement, or the consummation of any transaction therein and herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other Governmental Authority pending and notice of which has been served on the City or, to the knowledge of the City after reasonable investigation, threatened against or affecting the City or the assets, properties or operations of the City which, if determined adversely to the City or its interests, would have a Material Adverse Effect upon the consummation of the transactions contemplated by or the validity of the Escrow Agreement, the Site and Facility Lease and this Lease Agreement or upon the -7- financial condition, assets, properties or operations of the City, and the City is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other Governmental Authority, which default might have consequences that would have a Material Adverse Effect on the consummation of the transactions contemplated by this Lease Agreement, or the financial condition, assets, properties or operations of the City. (g) Sufficient Funds. The City reasonably believes that sufficient funds canbe obtained to make all Lease Payments and all other amounts required to be paid pursuant to this Lease Agreement. (h) No Defaults. The City has never non - appropriated or defaulted under any of its payment or performance obligations or covenants, either under any financing lease of the same general nature as this Lease Agreement, or under any of its bonds, notes, or other debt obligations. (i) Fee Title. The City is the owner in fee of title to the Property. No lien or encumbrance on the Property materially impairs the City's use of the Property for the purposes for which it is, or may reasonably be expected to be, held. (j) Use of the Property. During the term of this Lease Agreement, the Property will be used by the City only for the purpose of performing one or more governmental or proprietary functions of the City consistent with the permissible scope of the City's authority. (k) Change in Financial Condition. The City has experienced no material change in its financial condition since June 30, 2013. (1) Hazardous Substances. The Property is free of all Hazardous Substances, and the City is in full compliance with all Applicable Environmental Laws. (m) Flooding Risk. The Property is not located in a 100 -year flood zone and has never been subject to material damage from flooding. (n) Value of Property. The value of the Property (real property replacement cost) is not less than $50,000,000. (o) Essential to City Operations. The Property is essential to the City's efficient and economic operations and the lease thereof for use by the City is in the best interest of the City. (p) Financial Statements. The statement of financial position of the City as of June 30, 2013, and the related statement of activities and statement of cash flows and changes in financial position for the year then ended and the auditors' reports with respect thereto, copies of which have heretofore been furnished to the Assignees, are complete and correct and fairly present the financial condition, changes in financial position and results of operations of the City at such date and for such period, and were prepared in accordance with generally accepted accounting principles. Since the period of such statements, there has been no (i) change which would have a Material Adverse Effect and (ii) no material increase in the indebtedness of the City. 0 (q) No Material Adverse Change. Since the most current date of the information, financial or otherwise, supplied by the City to the Assignees: (i) There has been no change in the assets, liabilities, financial position or results of operations of the City which might reasonably be anticipated to cause a Material Adverse Effect. (ii) The City has not incurred any obligations or liabilities which might reasonably be anticipated to cause a Material Adverse Effect. (iii) The City has not (A) incurred any material indebtedness, other than the Lease Payments, and trade accounts payable arising in the ordinary course of the City's business and not past due, or (B) guaranteed the indebtedness of any other person. (r) Accuracy of Information. All information, reports and other papers and data furnished by the City to the Assignees were, at the time the same were so furnished, complete and accurate in all material respects and insofar as necessary to give the Assignees a true and accurate knowledge of the subject matter and were provided in expectation of the Assignees' reliance thereon in entering into the transactions contemplated by this Lease Agreement. No fact is known to the City which has had or, so far as the City can now reasonably foresee, may in the future have a Material Adverse Effect, which has not been set forth in the financial statements previously furnished to the Assignees or in other such information, reports, papers and data or otherwise disclosed in writing to the Assignees prior to the Closing Date. Any financial, budget and other projections furnished to the Assignees by the City or its or their agents were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair and reasonable in light of the conditions existing at the time of delivery of such financial, budget or other projections, and represented, and as of the date of this representation, represent the City's best estimate of its future financial performance. No document furnished nor any representation, warranty or other written statement made to the Assignees in connection with the negotiation, preparation or execution of this Lease Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state (as of the date made or furnished) any material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were or will be made, not misleading. (s) Facility. The Facility complies with all applicable restrictive covenants, zoning ordinances, building laws and other Applicable Laws (including without limitation, the Americans with Disabilities Act, as amended). Section 2.2. Covenants, Representations and Warranties of the Authority. The Authority makes the following covenants, representations and warranties to the City as of the date of the execution and delivery of this Lease Agreement: (a) Due Organization and Existence. The Authority is a joint exercise of powers authority, duly organized and existing under the laws of the State, has full legal right, power and authority to enter into the Site and Facility Lease, this Lease Agreement and the Assignment Agreement and to carry out and consummate all transactions on its part contemplated hereby and thereby, and by proper action the Authority has duly authorized the execution and delivery by the Authority of the Escrow Agreement, the Site and Facility Lease, this Lease Agreement and the Assignment Agreement. (b) Due Execution. The representative of the Authority executing the Escrow Agreement, the Site and Facility Lease, this Lease Agreement and the Assignment Agreement is fully -9- authorized to execute the same under official action taken by the Board of Directors of the Authority. (c) Valid, Binding and Enforceable Obligations. The Escrow Agreement, the Site and Facility Lease, this Lease Agreement and the Assignment Agreement have been duly authorized, executed and delivered by the Authority and constitute the legal, valid and binding agreements of the Authority, enforceable against the Authority in accordance with their respective terms. (d) No Conflicts. The execution and delivery of the Escrow Agreement, the Site and Facility Lease, this Lease Agreement and the Assignment Agreement, the consummation of the transactions herein and therein contemplated and the fulfillment of or compliance with the terms and conditions hereof and thereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which the Authority is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of the Authority, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Escrow Agreement, the Site and Facility Lease, this Lease Agreement and the Assignment Agreement or the financial condition, assets, properties or operations of the Authority. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of the Authority, and no consent, permission, authorization, order or license of, or filing or registration with, any Goverrunental Authority is necessary in connection with the execution and delivery of the Escrow Agreement, the Site and Facility Lease, this Lease Agreement or the Assignment Agreement, or the consummation of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other Governmental Authority pending and notice of which has been served on the Authority or, to the knowledge of the Authority after reasonable investigation, threatened against or affecting the Authority or the assets, properties or operations of the Authority which, if determined adversely to the Authority or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of the Escrow Agreement, the Site and Facility Lease, this Lease Agreement or the Assignment Agreement, or upon the financial condition, assets, properties or operations of the Authority, and the Authority is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other Governmental Authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by the Escrow Agreement, the Site and Facility Lease, this Lease Agreement or the Assignment Agreement or the financial condition, assets, properties or operations of the Authority. -10- ARTICLE III DEPOSIT AND APPLICATION OF FUNDS Section 3.1. Deposit of and Application of Funds. On the Closing Date, from the amounts paid by the Assignees, the Authority shall cause (a) the amount of $36,834,932.55 to be transferred to the Escrow Bank for deposit in the 1994 Bonds Escrow Fund and applied to the defeasance of the Defeased 1994 Bonds, and (b) the amount of $8,021,278.42 to be transferred to the Escrow Bank for deposit in the 1998 Certificates Escrow Fund and applied to the defeasance of the outstanding 1998 Certificates. Such amounts shall be derived from amounts paid by the Assignees under the Assignment Agreement. In addition, a portion of the amounts paid by the Assignees under the Assignment Agreement (including amounts retained by the Assignees for its fees) shall be applied by the Assignees to pay financing costs of the transaction in the amount of $203,789.03. -11- ARTICLE IV LEASE OF PROPERTY; LEASE PAYMENTS Section 4.1. Sublease of Property by the Authority Back to the City. (a) The Authority hereby subleases the Property to the City, and the City hereby subleases the Property from the Authority, upon the terms and conditions set forth in this Lease Agreement. (b) The leasing of the Property by the City to the Authority pursuant to the Site and Facility Lease shall not affect or result in a merger of the City's subleasehold estate pursuant to this Lease Agreement and its fee estate as lessor under the Site and Facility Lease. Section 4.2. Term. The Term of this Lease Agreement commences on the date of recordation of this Lease Agreement or a memorandum hereof and ends on January 1, 2028, or the date on which all of the Lease Payments have been paid in full pursuant to the terms of this Lease Agreement. If on January 1, 2028, the Lease Payments payable hereunder shall have been abated at any time and for any reason and not otherwise paid from rental interruption insurance or other sources, or the City shall have defaulted in its payment of Lease Payments hereunder or any Event of Default has occurred and continues without cure by the City, then the term of this Lease Agreement shall be extended for the actual period of abatement or for so long as the default remains uncured, as necessary to accommodate the final payment of all Lease Payments due hereunder, not to exceed ten (10) years. The provisions of this Section 4.2 are subject to the provisions of Section 6.1 relating to the taking in eminent domain of the Property or any portion thereof. Section 4.3. Lease Payments. (a) Obligation to Pay. Subject to the provisions of Sections 6.1 and 6.3 and the provisions of Article IX, the City agrees to pay to the Authority, its successors and assigns, the Lease Payments (denominated into components of principal and interest) in the amounts specified in Exhibits C -1, C -2, C -3 and C -4 attached hereto (with the total of all Lease Payments shown in Exhibit C -5 attached hereto) (including any supplements thereto) and by this reference incorporated herein, to be due and payable in immediately available funds on each of the respective Lease Payment Dates specified in Exhibits C -1, C -2, C -3 and C -4; provided, hozuever, that if any Lease Payment Date is not a Business Day, such Lease Payment shall be due on the next succeeding Business Day and shall continue to accrue interest to the next succeeding Business Day. The Lease Payments payable in any Rental Period with respect to the Property shall be for the use of the Property during such Rental Period. The interest component of the portion of the Lease Payments specified in Exhibits C -1, C -2 and C -3 has been calculated based on an interest rate of 3.32% per annum, on the basis of a 360 -day year of twelve 30 -day months. The interest component of the portion of the Lease Payments specified in Exhibit C -4 has been calculated based on an interest rate of 3.75% per annum, on the basis of a 360 -day year of twelve 30 -day months. If, for any reason, the interest component of the Lease Payments becomes includable in the gross income of the Assignees for federal income tax purposes under the Code based upon a final determination thereof by the Internal Revenue Service, the City, at the option of the Assignees, shall pay to the Assignees within thirty days of such determination, the amount which, with respect to Lease Payments previously paid and taking into account all penalties, fines, interest and additions to tax (including all federal, state and local taxes imposed on the interest component of the Lease Payments due through the date of such determination) that are imposed on the Assignees as a result of the loss of the exclusion, will restore the Assignees to the same after -tax yield on the transaction evidenced by this Lease Agreement (assuming tax at the actual marginal corporate -12- rate) that it would have realized had the tax exemption not been lost. Furthermore, the City agrees that upon the occurrence of such an event, it shall pay additional amounts to the Assignees on each succeeding Lease Payment Date as will maintain such after -tax yield to the Assignees. (b) Additional Payments. In addition to the Lease Payments set forth herein, the City agrees to pay as Additional Payments all of the following: (i) all taxes and assessments of any nature whatsoever, including but not limited to excise taxes, ad valorem taxes, ad valorem and specific lien special assessments and gross receipts taxes, if any, levied upon the Property or upon any interest of the Authority therein or in this Lease Agreement; provided, however, the City may, at the City's expense and in its name, in good faith contest any such taxes and assessments and, in the event of such contest, may permit such taxes and assessments to remain unpaid during the period of such contest and appeal therefrom unless the Authority shall notify the City that, in the opinion of Bond Counsel, by nonpayment of any such items, the interest of the Authority in the Property will be materially endangered or the Property, or any portion thereof, will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes and assessments or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority; (ii) insurance premiums, if any, on all insurance required under the provisions of Article V hereof; (iii) any other reasonable fees, costs or expenses incurred by the Authority in connection with the execution, performance or enforcement of this Lease Agreement or any of the transactions contemplated hereby or related to the Property, including, without limitation, any amounts which may become due; provided, however, the City shall not be responsible for any costs incurred by the Authority associated with any assignment made by the Assignees; and (iv) any amounts required to be paid as rebate to the United States pursuant to the Tax Certificate. Amounts constituting Additional Payments payable hereunder shall be paid by the City directly to the person or persons to whom such amounts shall be payable. The City shall pay all such amounts when due or at such later time as such amounts may be paid without penalty or, in any other case, within 60 days after notice in writing from the Authority to the City stating the amount of Additional Payments then due and payable and the purpose thereof. (c) Effect of Prepayment. If the City prepays the Lease Payments in part but not in whole under Section 9.3, the principal components of the remaining Lease Payments will be reduced on a pro rata basis; and the interest component of each remaining Lease Payment will be reduced on a pro rata basis. (d) Rate on Upon Event of Default. If the City fails to make any of the payments required in this Section 43 for more than ten days after the due date for payment, the payment in default will continue as an obligation of the City until the amount in default has been fully paid, and the City agrees to pay a rate equal to the rates specified in paragraph (a) above, plus 5% from the date of default to the date of payment. -13- (e) Fair Rental Value. The Lease Payments coming due and payable during each Rental Period constitute the total rental for the Property for such Rental Period, and will be paid by the City in each Rental Period for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of the Property during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments due during each Rental Period are not in excess of the fair rental value of the Property during such Rental Periods. In making this determination, consideration has been given to the estimated fair market value of the Property, the estimated replacement cost of the Property, the uses and purposes which may be served by the Property and the benefits therefrom which will accrue to the City and the general public. (f) Source of Payments, Budget and Appropriation. The Lease Payments are payable from any source of legally available funds of the City, subject to the provisions of Sections 6.1, 6.3 and 9.1. The City covenants to take such action as may be necessary to include all Lease Payments in each of its annual budgets during the Term of this Lease Agreement and to make the necessary annual appropriations for all such Lease Payments. The covenants on the part of the City herein contained constitute duties imposed by law and it is 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 Lease Agreement agreed to be carried out and performed by the City. (g) Allocation of Lease Payments. All Lease Payments received shall be applied first to the interest components of the Lease Payments due hereunder, then to the principal components of the Lease Payments due hereunder, but no such application of any payments that are less than the total rental due and owing shall be deemed a waiver of any default hereunder. (h) No Offsets. Notwithstanding any dispute between the Authority, or Assignees as the Authority's assignee, and the City, the City shall make all Lease Payments when due without deduction or offset of any kind and shall not withhold any Lease Payments pending the final resolution of such dispute. (i) Assignment Agreement. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Agent for the benefit of the Assignees under the Assignment Agreement executed concurrently herewith, and the City hereby assents to such assignment. The Authority hereby directs the City, and the City hereby agrees, to pay to the Agent, on behalf of the Assignees, all payments payable by the City under this Section 4.3 and all amounts payable by the City under Article IX. Lease Payments shall be paid to the Agent pursuant to an invoice to be transmitted to the City by the Agent not less than thrity (3) days prior to each Lease Payment Date. Section 4.4. Quiet Enjoyment. Throughout the Term of this Lease Agreement, the Authority will provide the City with quiet use and enjoyment of the Property and the City will peaceably and quietly have and hold and enjoy the Property, without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease Agreement. The Authority will, at the request of the City and at the City's cost, join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority and the Assignees have the right to inspect the Property as provided in Sections 5.12(c) and 7.2. Section 4.5. Title. At all times during the Term of this Lease Agreement, the City shall hold title to the Property, including all additions which comprise fixtures, repairs, replacements or modifications thereto, subject to Permitted Encumbrances and subject to the provisions of Section 7.2. 14- Upon the termination of this Lease Agreement (other than under Section 8.2(b) hereof), all right, title and interest of the Authority in and to the Property shall be transferred to and vested in the City. Upon the payment in full of all Lease Payments allocable to the Property, or upon the deposit by the City of security for such Lease Payments as provided in Section 9.1, all right, title and interest of the Authority in and to the Property shall be transferred to and vested in the City. The Authority agrees to take any and all steps and execute and record any and all documents reasonably required by the City to consummate any such transfer. Section 4.6. Release of Excess Property. The City may, at any time and from time to time, release any portion of the Property (the "Released Property') from the Lease, with the prior written consent of the Assignees, which consent shall be at the Assignees' sole discretion, and upon satisfaction of all of the following requirements which are conditions precedent to such release: (a) The City shall certify to the Authority and the Assignees that no Event of Default has occurred and is continuing, and no event giving rise to an abatement of Lease Payments under Section 6.3 has occurred or is continuing with respect to the Property to be remaining following release of the Released Property; (b) The City shall file with the Authority and the Assignees, and cause to be recorded in the office of the Orange County Recorder, an amendment to this Lease Agreement which deletes the Released Property from the description of the Property; (c) The City shall file with the Authority and the Assignees a written certificate of the City stating the City's determination that the estimated value of the real property which will remain leased under this Lease Agreement following such release is at least equal to the original principal components of the Lease Payments and upon request of the Assignees, the City shall provide to the Assignees additional information and documents to evidence the value of the remaining portion of the Property; (d) The City shall file with the Authority and the Assignees a written certificate of the City stating the City's determination that the estimated fair rental value, for each remaining Rental Period and in the aggregate, of the Property remaining after release of the Released Property is at least equal to the remaining Lease Payments for each remaining Rental Period and in the aggregate; and (e) The City shall file with the Authority and the Assignees such other information, documents and instruments as the Authority or the Assignees shall reasonably request, including (if requested by the Assignees) evidence of the insurable value of the Property to be remaining following release of the Released Property, indicating that such value is in excess of the then unpaid principal component of the Lease Payments and such endorsements to the title policy delivered on the Closing Date. Upon the satisfaction of all such conditions precedent, the Term of this Lease Agreement will thereupon end as to the Released Property. The City is not entitled to any reduction, diminution, extension or other modification of the Lease Payments whatsoever as a result of such release. The Authority and the City shall execute, delver and cause to be recorded all documents required to discharge this Lease Agreement of record against the Released Property. Section. 4.7. Substitution of Property. (a) In the event of damage or destruction of the Property due to earthquake or other uninsured casualty for which rental interruption insurance is not available or in the event that following the condemnation of all or a portion of the -15- Property the fair rental value of the Property remaining after such condemnation is less than the remaining Lease Payments due under this Lease Agreement, the City shall substitute under the Site and Facility Lease and this Lease Agreement one or more parcels of unimpaired and unencumbered real property, the fair rental value of which, for each remaining Rental Period and in the aggregate, shall be at least equal to the remaining Lease Payments hereunder. (b) If for any reason the City is unable to so substitute real property for the Property with a fair rental value at least equal to the remaining Lease Payments hereunder, the City shall use its best efforts to obtain other financing in an amount necessary to prepay the principal component of the Lease Payments not supported by the fair rental value of the substituted property, if any. -16- ARTICLE V MAINTENANCE; TAXES; INSURANCE; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease Agreement, as part of the consideration for the rental of the Property, all improvement, repair and maintenance of the Property are the sole responsibility of the City, and the City will pay for or otherwise arrange for the payment of all utility services supplied to the Property, which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sublessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Property, as hereinbefore more specifically set forth. The City waives the benefits of subsections I and 2 of Section 1932, Section 1933(4) and Sections 1941 and 1942 of the California Civil Code, but such waiver does not limit any of the rights of the City under the terms of this Lease Agreement. The City will pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Property or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, the City is obligated to pay only such installments as are required to be paid during the Tenn of this Lease Agreement as and when the same become due. The City may, at the City's expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority shall notify the City that, in its reasonable opinion, by nonpayment of any such items the interest of the Authority in the Property will be materially endangered or the Property or any part thereof will be subject to loss or forfeiture, in which event the City will promptly pay such taxes, assessments or charges or provide the Authority with full security against any loss which may result from nonpayment, in form satisfactory to the Authority. The City shall promptly notify the Assignees of any tax, assessment, utility or other charge it elects to contest. Section 5.2. Modification of Property. The City has the right, at its own expense, to make additions, modifications and improvements to the Property or any portion thereof. All additions, modifications and improvements to the Property will thereafter comprise part of the Property and become subject to the provisions of this Lease Agreement. Such additions, modifications and improvements may not in any way damage the Property, or cause the Property to be used for purposes other than those authorized under the provisions of state and federal law; and the Property, upon completion of any additions, modifications and improvements made thereto under this Section, must be of a value which is not substantially less than the value thereof immediately prior to the making of such additions, modifications and improvements. Section 5.3. Public Liability Insurance. The City shall maintain or cause to be maintained throughout the Term of this Lease Agreement a standard comprehensive general liability insurance policy or policies in protection of the City, the Assignees and their respective members, officers, agents, employees and assigns. Said policy or policies shall provide for indemnification of said parties against direct or contingent loss or liability for damages for bodily and personal injury, death or property damage occasioned by reason of the operation of the Property. Such policy or policies must provide coverage with limits of at least $1,000,000 -17- per occurrence, $3,000,000 in the aggregate, for bodily injury and property damage coverage, and excess liability umbrella coverage of at least $5,000,000, and in all events in form and amount (including any deductibles) satisfactory to the Assignees. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City (including, with Assignees' prior written consent, a self insurance program), and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. The City will apply the proceeds of such liability insurance toward extinguishment or satisfaction of the liability with respect to which such proceeds have been paid. Section 5.4. Casualty Insurance. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement, casualty insurance against loss or damage to all buildings situated on the Property and owned by the City, in an amount at least equal to the greater of the replacement value of the insured buildings and the aggregate principal amount of the Lease Payments outstanding, with a lender's loss payable endorsement. Such insurance must, as nearly as practicable, cover loss or damage by all "special form" perils. Such insurance shall be subject to a deductible of not to exceed $250,000. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City (including, with the Assignees' prior written consent, a self insurance program), and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. The City will apply the Net Proceeds of such insurance as provided in Section 6.2. Section 5.5. Rental Interruption Insurance. The City will procure and maintain, or cause to be procured and maintained, throughout the Term of this Lease Agreement, rental interruption or use and occupancy insurance to cover loss, total or partial, of the use of the Property and the improvements situated thereon as a result of any of the hazards covered in the insurance required by Section 5.4, in an amount at least equal to the maximum Lease Payments coming due and payable during any future 24 month period. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance; provided that such rental interruption insurance shall not be self - insured by the City. The City will apply the Net Proceeds of such insurance towards the payment of the Lease Payments allocable to the insured improvements as the same become due and payable. Section 5.6. Worker's Compensation Insurance. If required by applicable California law, the City shall carry worker's compensation insurance covering all employees on, in, near or about the Property and, upon request, shall furnish to the Authority certificates evidencing such coverage throughout the Term of this Lease Agreement. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City (including a self insurance program), and may be maintained in whole or in part in the form of the participation by the City in a joint powers authority or other program providing pooled insurance. Section 5.7. Recordation Hereof; Title Insurance. On or before the Closing Date, the City shall, at its expense, (a) cause this Lease Agreement, the Site and Facility Lease and the Assignment Agreement, or a memorandum hereof or thereof in form and substance approved by Bond Counsel, to be recorded in the office of the Orange County Recorder with respect to the Property, and (b) obtain a CLTA title insurance policy insuring the Assignees' interests in the leasehold estate established under the Site and Facility Lease and hereunder in the Property, subject only to Permitted Encumbrances, in an amount equal to the original principal components of the Lease Payments. The City will apply the Net Proceeds of such insurance as provided in Section 6.2. -18- Section 5.8. Insurance Net Proceeds; Form of Policies. All insurance policies (or riders) required by this Article V and provided by third party insurance carriers shall be taken out and maintained with responsible insurance companies organized under the laws of one of the states of the United States and qualified to do business in the State, and shall contain a provision that the insurer shall not cancel or revise coverage thereunder without giving written notice to the insured parties at least ten days before the cancellation or revision becomes effective. Each insurance policy or rider required by Sections 5.3, 5.4 and 5.5 and provided by third party insurance carriers shall name the City and the Assignees as insured parties and the Assignees as loss payees and shall include a lender's loss payable endorsement for the benefit of the Assignees. In the case of coverage pursuant to Section 5.3, the Authority and the Assignees shall be added as an additional insureds. Prior to the Closing Date, the City will deposit with the Assignees policies (and riders and endorsements, if applicable) evidencing any such insurance procured by it, or a certificate or certificates of the respective insurers stating that such insurance is in full force and effect. Before the expiration of any such policy (or rider), the City will furnish to the Assignees evidence that the policy has been renewed or replaced by another policy conforming to the provisions of this Article V unless such insurance is no longer obtainable, in which event the City shall notify the Assignees of such fact. Section 5.9. 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 other items of equipment or other personal property in or upon the Property. All such items shall remain the sole property of the City, in which the Authority has no interest, and may be modified or removed by the City at any time. The City must repair and restore any and all damage to the Property resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement prevents the City from purchasing or leasing items to be installed under this Section under a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest may attach to any part of the Property. Section 5.10. Liens. The City will not, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to the Property, other than as herein contemplated and except for such encumbrances as the City certifies in writing to the Assignees do not materially and adversely affect the leasehold estate in the Property hereunder and for which the Assignees provides its prior written approval, which approval shall be at Assignees' sole discretion. Except as expressly provided in this Article V, the City will 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, for which it is responsible, if the same shall arise at any time. The City will reimburse the Assignees for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim. Section 5.11. Advances. If the City fails to perform any of its obligations under this Article V, the Authority may take such action as may be necessary to cure such failure, including the advancement of money, and the City shall be obligated to repay all such advances as additional rental hereunder, with interest at the rate set forth in Section 4.3(c). Section 5.12. Environmental Covenants. (a) Compliance with Laws, No Hazardous Substances. The City will comply with all Applicable Environmental Laws with respect to the Property and will not use, store, generate, treat, transport, or dispose of any Hazardous Substance thereon or in a manner that would cause any Hazardous Substance to later flow, migrate, leak, leach, or otherwise come to rest on or in the Property. 19- (b) Notification of Assignees. The City will transmit copies of all notices, orders, or statements received from any governmental entity concerning violations or asserted violations of Applicable Environmental Laws with respect to the Property and any operations conducted thereon or any conditions existing thereon to the Assignees, and the City will notify the Assignees in writing immediately of any release -discharge, spill, or deposit of any Hazardous Substance that has occurred or is occurring that in any way affects or threatens to affect the Property, or the people, structures, or other property thereon, provided that no such notification shall create any liability or obligation on the part of the Assignees. (c) Access for Inspection. The City will permit the Assignees, its agents, or any experts designated by the Assignees to have full access to the Property during reasonable business hours for purposes of such independent investigation of compliance with all Applicable Environmental Laws, provided that the Assignees has no obligation to do so, or any liability for any failure to do so, or any liability should it do so. Section 5.13. City Consent to Assignment Agreement. The Authority's rights under this Lease Agreement (excluding the right to receive notices, the right to reimbursement of costs and to indemnification), including the right to receive and enforce payment of the Lease Payments, and the Site and Facility Lease, are being assigned to the Assignees pursuant to the Assignment Agreement. The City hereby consents to such assignment and to any additional assignment of such rights by the Assignees or its assignees. The City agrees to execute all documents, including notices of assignment and chattel mortgages or financing statements, which may be reasonably requested by the Assignees or its assignees to protect their interests in the Property and in this Lease Agreement. -20- ARTICLE VI EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Eminent Domain. If all of the Property shall be taken permanently under the power of eminent domain or sold to a governmental entity threatening to exercise the power of eminent domain, the Term of this Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Property shall be taken permanently, or if all of the Property or any part thereof shall be taken temporarily under the power of eminent domain, (1) this Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (2) there shall be a partial abatement of Lease Payments in an amount equal to the application of the Net Proceeds of any eminent domain award to the prepayment of the Lease Payments hereunder, in an amount to be agreed upon by the City and the Assignees such that the resulting Lease Payments represent fair consideration for the use and occupancy of the remaining usable portion of the Property. Section 6.2. Application of Net Proceeds (a) From Insurance Award. (i) Any Net Proceeds of insurance against damage to or destruction of any part of the Property collected by the City in the event of any such damage or destruction shall be deposited by the City promptly upon receipt thereof in a special fund with the Assignees designated as the "Insurance and Condemnation Fund." (ii) Within ninety (90) days following the date of such deposit, the City shall determine and notify the Authority and the Assignees in writing of its determination either (A) that the replacement, repair, restoration, modification or improvement of the Property is not economically feasible or in the best interest of the City and the Net Proceeds, together with other moneys available therefor, are sufficient to cause the prepayment of the principal components of all unpaid Lease Payments pursuant to Section 9.3 hereof, or (B) that all or a portion of such Net Proceeds are to be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Property and the fair rental value of the Property following such repair, restoration, replacement, modification or improvement will at least equal the unpaid principal component of the Lease Payments. (iii) In the event the City's determination is as set forth in clause (A) of subparagraph (ii) above, such Net Proceeds shall be promptly applied to the prepayment of Lease Payments and other amounts pursuant to Section 9.3 of this Lease Agreement; provided, however, that in the event of damage or destruction of the Property in full, such Net Proceeds may be so applied only if sufficient, together with other moneys available therefor, to cause the prepayment of the principal components of all unpaid Lease Payments, all accrued and unpaid interest, Prepayment Premiums described in Section 9.2, and all other costs related to such prepayments pursuant to Section 9.3 of this Lease Agreement and otherwise such Net Proceeds shall be applied to the prompt replacement, repair, restoration, modification or improvement of the Property; provided further, however, that in the event of damage or destruction of the Property in part, such Net Proceeds may be applied to the prepayment of Lease Payments only if the resulting Lease Payments following such prepayment from Net Proceeds represent fair consideration for the remaining portions of the Property and otherwise such Net Proceeds shall be applied to the prompt replacement, repair, -21- restoration, modification or improvement of the Property, evidenced by a certificate signed by a City Representative. (iv) In the event the City's determination is as set forth in clause (B) of subparagraph (ii) above and the City certifies to the Assignees that such repair or replacement can be completed within 24 months, such Net Proceeds shall be applied to the prompt replacement, repair, restoration, modification or improvement of the damaged or destroyed portions of the Property by the City, and until the Property has been restored to its prior condition, the City shall not place any lien or encumbrance on the Property that is senior to this Lease Agreement without the prior written consent of the Assignees, at its sole discretion. (b) Frorn Eminent Domain Award. If all or any part of the Property shall be taken by eminent domain proceedings (or sold to a goverunent threatening to exercise the power of eminent domain) the Net Proceeds therefrom shall be deposited by the City in the Insurance and Condemnation Fund and shall be applied and disbursed as follows: (i) If the City has given written notice to the Authority and the Assignees of its determination that (A) such eminent domain proceedings have not materially affected the operation of the Property or the ability of the City to meet any of its obligations with respect to the Property under this Lease Agreement, and (B) such proceeds are not needed for repair or rehabilitation of the Property, the City shall so certify to the Authority and the Assignees, and the City shall credit such proceeds towards the prepayment of the Lease Payments pursuant to Section 9.3 of this Lease Agreement. (ii) If the City has given written notice to the Authority and the Assignees of its determination that (A) such eminent domain proceedings have not materially affected the operation of the Property or the ability of the City to meet any of its obligations with respect to the Property under this Lease Agreement, and (B) such proceeds are needed for repair, rehabilitation or replacement of the Property, the City shall so certify to the Authority and the Assignees, and the City shall apply such amounts for such repair or rehabilitation. (iii) If (A) less than all of the Property shall have been taken in such eminent domain proceedings or sold to a government threatening the use of eminent domain powers, and if the City has given written notice to the Authority and the Assignees of its determination that such eminent domain proceedings have materially affected the operation of the Property or the ability of the City to meet any of its obligations with respect to the Property under the Lease Agreement or (B) all of the Property shall have been taken in such eminent domain proceedings, then the City shall credit such proceeds towards the prepayment of the Lease Payments pursuant to Section 9.3 of this Lease Agreement. (iv) In making any determination under this Section 6.2(b), the City may, but shall not be required to, obtain at its expense, the report of an independent engineer or other independent professional consultant, a copy of which shall be filed with the Authority and the Assignees. Any such determination by the City shall be final. (c) From Title Insurance. The Net Proceeds from a title insurance award shall be deposited by the City in the Insurance and Condemnation Fund and credited towards the prepayment of Lease Payments required to be paid pursuant to Section 9.3 of this Lease Agreement. _22_ Section 6.3. Abatement of Lease Payments in the Event of Damage or Destruction. Lease Payments shall be abated during any period in which, by reason of damage or destruction, there is substantial interference with the use and occupancy by the City of the Property or any portion thereof to the extent to be agreed upon by the City and the Assignees. The parties agree that the amounts of the Lease Payments under such circumstances shall not be less than the amounts of the unpaid Lease Payments as are then set forth in Exhibit C, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Property not damaged or destroyed, based upon an appropriate method of valuation, in which event the Lease Payments shall be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction as evidenced by a Certificate of a City Representative to the Authority and the Assignees. In the event of any such damage or destruction, this Lease Agreement shall continue in full force and effect and the City waives any right to terminate this Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there shall be no abatement of Lease Payments under this Section 6.3 to the extent that (a) the proceeds of rental interruption insurance or (b) amounts in the Insurance and Condemnation Fund are available to pay Lease Payments which would otherwise be abated under this Section 6.3, it being hereby declared that such proceeds and amounts constitute special funds for the payment of the Lease Payments. -23- ARTICLE VII OTHER COVENANTS OF THE CITY Section 7.1. Disclaimer of Warranties. THE AUTHORITY MAKES NO AGREEMENT, 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, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROPERTY OR ANY PORTION THEREOF. THE CITY ACKNOWLEDGES THAT THE CITY LEASES THE PROPERTY AS -IS, IT BEING AGREED THAT ALL OF THE AFOREMENTIONED RISKS ARE TO BE BORNE BY THE CITY. In no event is the Authority liable for incidental, indirect, special or consequential damages, in connection with or arising out of this Lease Agreement for the existence, famishing, functioning or use of the Property by the City. Section 7.2. Access to the Property; Grant and Conveyance of Right of Entry. The City agrees that the Authority, and the Authority's successors or assigns, has the right at all reasonable times, following at least 48 hours written notice provided to the City, to enter upon and to examine and inspect (to the extent permitted by law and public policy) the Property or any part thereof. The City further agrees that the Authority, and the Authority's successors or assigns shall have such rights of access to the Property or any component thereof, following at least 48 hours written notice provided to the City, as may be reasonably necessary to cause the proper maintenance of the Property if the City fails to perform its obligations hereunder. Neither the Authority nor any of its assigns has any obligation to cause such proper maintenance. The City further grants, conveys and confirms to the Authority, for the use, benefit and enjoyment of the Authority, its successors and assigns in interest to the Property, including the Assignees, and its sublessees, and their respective employees, invitees, agents, independent contractors, patrons, customers, guests and members of the public visiting the Property, a right of entry which shall be irrevocable for the Term of this Lease Agreement over, across and under the property of the City adjacent to the Property to and from the Property for the purpose of: (a) ingress, egress, passage or access to and from the Property by pedestrian or vehicular traffic; (b) installation, maintenance and replacement of utility wires, cables, conduits and pipes; and (c) other purposes and uses necessary or desirable for access to and from and for operation and maintenance of the Property. Section 7.3. Release and Indemnification Covenants. The City hereby indemnifies the Authority, the Assignees and their respective directors, officers, agents, employees, successors and assigns against all claims, losses and damages, including legal fees and expenses, arising out of (a) the use, maintenance, condition or management of, or from any work or thing done on the Property by the City or the City's employees, agents, contractors, invitees or licensees, (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease Agreement, (c) any negligence or willful misconduct of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Property, (d) any intentional misconduct or negligence of any sublessee of the City with respect to the Property, (e) the acquisition, construction, improvement and equipping of the Property, (f) the clean -up of any Hazardous Substances or toxic wastes from the Property, or (g) any claim alleging violation of any Applicable Environmental Laws, or the authorization of payment of the costs thereof. No indemnification is made under this Section 7.3 or elsewhere in this Lease Agreement for willful misconduct or gross negligence under this Lease Agreement by the Authority, the Assignees, or their respective officers, agents, employees, successors or assigns. The indemnification hereunder shall continue in full force and effect notwithstanding the full -24- payment of all obligations under this Lease Agreement or the termination of the Term of tlus Lease Agreement for any reason. The City and the Authority each agree to promptly give notice to each other and the Assignees of any claim or liability hereby indemnified against following learning thereof. Section 7.4. Assignment by the Authority. The Authority's rights, title and interests under this Lease Agreement, including the right to receive and enforce payment of the Lease Payments to be made by the City hereunder, have been assigned to the Assignees; provided that the Authority's rights to indemnification and payment or reimbursement for any costs or expenses hereunder have been retained by the Authority to the extent such rights accrue to the Authority and shall have been assigned to the Assignees to the extent such rights accrue to the Assignees. The City hereby consents to such assignment. Whenever in this Lease Agreement any reference is made to the Authority, such reference shall be deemed to refer to the Assignees (including its assignees). The Assignees may make additional assignments of its rights, title and interests herein, but no such assignment will be effective as against the City unless and until the Assignees has filed with the City at least five (5) Business Days' prior written notice thereof and an executed copy of an investor's letter addressed to the City and the Authority substantially in the form of the letter delivered by the Assignees on the Closing Date. The City shall pay all Lease Payments hereunder to the Assignees, as provided in Section 4.3(h) hereof, or under the written direction of the assignee named in the most recent assignment or notice of assignment filed with the City. During the Term of this Lease Agreement, the City will keep a complete and accurate record of all such notices of assignment. Section 7.5. Assignment and Subleasing by the City. This Lease Agreement may not be assigned, mortgaged, pledged or transferred by the City. The City may sublease the Property, or any portion thereof, with the prior written consent of the Assignees, at the Assignees' sole discretion, subject to all of the following conditions: (a) This Lease Agreement and the obligation of the City to make Lease Payments hereunder shall remain obligations of the City, and any sublease shall be subject and subordinate to this Lease Agreement. (b) The City shall, within 30 days after the delivery thereof, furnish or cause to be furnished to the Authority and the Assignees a true and complete copy of such sublease. (c) No such sublease by the City may cause the Property to be used for a purpose other than as may be authorized under the provisions of the laws of the State. (d) The City shall furnish the Authority and the Assignees with a written opinion of Bond Counsel stating that such sublease does not cause the interest components of the Lease Payments to become includable in gross income for purposes of federal income taxation or to become subject to personal income taxation by the State. (e) Any such sublease shall be subject and subordinate in all respects to the Site and Facility Lease and this Lease Agreement. Notwithstanding the foregoing, in connection with any sublease entered into for financing purposes, the principal component of the then remaining Lease Payments plus the principal component of the sublease payments shall not exceed the fair market value of the Property. Section 7.6. Amendment of Lease Agreement. This Lease Agreement may be amended with the prior written consent of the Authority and the Assignees (at the Assignees' sole -25- discretion) provided such amendment does not, in the Assignees' sole judgment, adversely affect the Assignees. Section 7.7. Tax Covenants. (a) Generally. The City will not take any action or permit to be taken any action within its control which would cause or which, with the passage of time if not cured would cause, the interest components of the Lease Payments to become includable in gross income of the Assignees for federal income tax purposes and will deliver a tax certificate on the Closing Date. (b) Private Activity Bond Limitation. The City will ensure that the proceeds of the Lease Payments are not so used as to cause the City's obligations hereunder to satisfy the private business tests of Section 141(b) of the Tax Code or the private loan financing test of Section 141(c) of the Tax Code. (c) Federal Guarantee Prohibition. The City will not take any action or permit or suffer any action to be taken if the result of the same would be to cause the Lease Payments to be "federally guaranteed" within the meaning of Section 149(b) of the Tax Code. (d) No Arbitrage. The City will not take, or permit or suffer to be taken, any action with respect to the proceeds of the Lease Payments which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the Closing Date would have caused the Lease Payments to be "arbitrage bonds" within the meaning of Section 148(a) of the Tax Code. (e) Arbitrage Rebate. The City will take any and all actions necessary to assure compliance with Section 148(f) of the Tax Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Lease Payments. Section 7.8. Financial Statements; Budgets; Other Information. Within two hundred ten (210) days following the end of each Fiscal Year of the City during the Term of this Lease Agreement, the City will provide the Authority and the Assignees with a copy of its audited financial statements for such Fiscal Year. Such audited financial statements shall include the City's Comprehensive Annual Financial Report ( "CAFR "), including such information as is required by applicable Government Accounting Standards Board pronouncements and applicable State law. Within thirty (30) days of the end of each fiscal year, the City will provide the Assignees with a copy of its annual budget and any interim updates or modifications to such budget. The City hereby agrees to provide the Assignees with such other information as may be reasonably requested by the Assignees. Section 7.9. Records and Accounts. The City covenants and agrees that it shall keep proper books of record and accounts of its operations in accordance with GASB, in which complete and correct entries shall be made of all transactions relating to the City. Said books and records shall at all reasonable times be subject to the inspection of the Assignees upon 72 hours' prior notice. Section 7.10. Observance of Laws and_ Regulations. The City will well and truly keep, observe and perform or cause to be kept, observed and performed all valid and lawful obligations, regulations or Applicable Laws now or hereafter imposed on it by contract, or prescribed by any law of the United States, or of the State, or by any officer, board, commission or Governmental Authority having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or hereafter -26- acquired and enjoyed by the City, including the City's right to exist and carry on business as a municipal corporation, to the end that such rights, privileges and franchises shall be maintained and preserved, and shall not become abandoned, forfeited or in any manner impaired. Section 7.11. Notices. During the Term of this Lease Agreement, the City shall provide to the Assignees: (a) immediate notice by telephone, promptly confirmed in writing, of any event, action or failure to take any action which constitutes an Event of Default under this Lease Agreement, together with a detailed statement by a City Representative of the steps being taken by the City to cure the effect of such Event of Default. (b) prompt written notice of any Material Litigation, or any investigation, inquiry or similar proceeding by any Governmental Authority. (c) with reasonable promptness, such other information respecting the City, and the operations, affairs and financial condition of the City as the Assignees may from time to time reasonably request. (d) Notices of filings with the Municipal Securities Regulatory Board's EMMA system, other than regular annual filings. (e) Notice of an event that could cause a Material Adverse Effect. _27_ ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES Section 8.1. Events of Default Defined. Any one or more of the following events constitutes an Event of Default hereunder: (a) Failure by the City to pay any Lease Payment or other payment required to be paid hereunder at the time specified herein. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed hereunder, other than as referred to in the preceding clause (a) of this Section, for a period of 30 days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Assignees. However, if in the reasonable opinion of the City the failure stated in the notice can be corrected, but not within such 30 -day period, the Authority and the Assignees shall not unreasonably withhold their consent to an extension of such time (for a period not to exceed 60 days) if corrective action is instituted by the City within such 30 -day period and diligently pursued until the default is corrected. (c) The filing by the City of a voluntary petition in bankruptcy, or failure by the City promptly to lift any execution, garnishment or attachment, or adjudication of the City as a bankrupt, or assignment by the City for the benefit of creditors, or the entry by the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the City in any proceedings instituted under the provisions of the Federal Bankruptcy Code, as amended, or under any similar federal or State act now existing or which may hereafter be enacted. (d) Any statement, representation or warranty made by the City in or pursuant to this Lease Agreement or its execution, delivery or performance shall have been false, incorrect, misleading or breached in any material respect on the date when made. (e) Any default occurs under any other agreement for borrowing money, lease financing of property or otherwise receiving credit under which the City is an obligor, if such default (i) arises under any other agreement for borrowing money, lease financing of property or provision of credit provided by the Assignees or any affiliate of the Assignees, or (ii) arises under any obligation under which there is outstanding, owing or committed an aggregated amount in excess of $500,000. (f) Any default by the City to observe any covenant, condition or agreement on its part to be observed or performed under the Site and Facility Lease. (g) Any court of competent jurisdiction shall find or rule that the Site and Facility Lease or this Lease Agreement is not valid or binding against the City. (h) The City abandons any part of the Property. Section 8.2. Remedies on Default. continuing, the Authority may exercise under this Lease Agreement; provided, 1 contrary, there shall be no right under ar otherwise declare any Lease Payments nc Each and every covenant hereof to be k condition and upon the breach thereof tl Whenever any Event of Default has happened and is .ny and all remedies available under law or granted iowever, that notwithstanding anything herein to the y circumstances to accelerate the Lease Payments or t then in default to be immediately due and payable. =pt and performed by the City is expressly made a ie Authority may exercise any and all rights granted -28- hereunder; provided, that no termination of this Lease Agreement shall be effected either by operation of law or acts of the parties hereto, except only in the manner herein expressly provided. Upon the occurrence and during the continuance of any Event of Default, the Authority may exercise any one or more of the following remedies: (a) Enforcement of Payments Without Termination. If the Authority does not elect to terminate this Lease Agreement in the manner hereinafter provided for in subparagraph (b) hereof, the City agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse the Authority for any deficiency arising out of the re- leasing of the Property, or, if the Authority is unable to re -lease the Property, then for the full amount of all Lease Payments to the end of the Term of th s Lease Agreement, but said Lease Payments and /or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re -entry by the Authority or any suit in unlawful detainer, or otherwise, brought by the Authority for the purpose of effecting such re- entry or obtaining possession of the Property or the exercise of any other remedy by the Authority. The City hereby irrevocably appoints the Authority as the agent and attorney -in- fact of the City to enter upon and re -lease the Property upon the occurrence and continuation of an Event of Default and to remove all personal property whatsoever situated upon the Property, to place such property in storage or other suitable place in Orange County for the account of and at the expense of the City, and the City hereby exempts and agrees to save harmless the Authority from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re- leasing of the Property and the removal and storage of such property by the Authority or its duly authorized agents in accordance with the provisions herein contained. The City agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of the Authority to re -lease the Property in the event of such re- entry without effecting a surrender of this Lease Agreement, and further agrees that no acts of the Authority in effecting such re- leasing shall constitute a surrender or termination of this Lease Agreement irrespective of the term for which such re- leasing is made or the terms and conditions of such re- leasing, or otherwise, but that, on the contrary, in the event of such default by the City the right to terminate this Lease Agreement shall vest in the Authority to be effected in the sole and exclusive manner hereinafter provided for in subparagraph (b) hereof. The City agrees to surrender and quit possession of the Property upon demand of the Authority for the purpose of enabling the Property to be re -let under this paragraph. Any rental obtained by the Authority in excess of the sum of Lease Payments plus costs and expenses incurred by the Authority for its services in re- leasing the Property shall be paid to the City. (b) Termination of Lease. If an Event of Default occurs and is continuing hereunder, the Authority at its option may terminate this Lease Agreement and re -lease all or any portion of the Property, subject to the Site and Facility Lease. If the Authority terminates this Lease Agreement at its option and in the manner hereinafter provided due to a default by the City (and notwithstanding any re -entry upon the Property by the Authority in any manner whatsoever or the re- leasing of the Property), the City nevertheless agrees to pay to the Authority all costs, loss or damages howsoever arising or occurring payable at the same time and in the same manner as is herein provided in the case of payment of Lease Payments and Additional Payments. Any surplus received by the Authority from such re- leasing shall be applied by the Authority to Lease Payments due under this Lease Agreement. Neither notice to pay rent or to deliver up possession of the premises given under law nor any proceeding in unlawful detainer taken by the Authority shall of itself operate to terminate this Lease Agreement, and no termination of th s Lease Agreement on account of default by the City shall be or become effective by operation of law, 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 Agreement. The City covenants and agrees that no surrender of the Property, or of -29- the remainder of the Term hereof or any termination of this Lease Agreement shall be valid in any manner or for any purpose whatsoever unless stated or accepted by the Authority by such written notice. (c) Proceedings at Lazo or In Equity. If an Event of Default occurs and continues hereunder, the Authority may take whatever action at law or in equity may appear necessary or desirable to collect the amounts then due and thereafter to become due hereunder or to enforce any other of its rights hereunder. (d) Remedies under the Site and Facility Lease. If an Event of Default occurs and continues hereunder, the Authority may exercise its rights under the Site and Facility Lease. Section 8.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon the occurrence of any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article VIII it shall not be necessary to give any notice, other than such notice as may be required in this Article VIII or by law. Section 8.4. Agreement to Pay Attorneys' Fees and Expenses. If either party to this Lease Agreement defaults under any of the provisions hereof and the nondefaulting party should employ attorneys (including in -house legal counsel) or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the nondefaulting party (including the Assignees) the reasonable fees of such attorneys (including allocable costs and expenses of in -house legal counsel, if any) and such other expenses so incurred by the nondefaulting party. Section 8.5. No Additional Waiver Implied by One Waiver. If any agreement contained in this Lease Agreement is breached by either party and thereafter waived by the other party, such waiver is limited to the particular breach so waived and will not be deemed to waive any other breach hereunder. Section 8.6. Assignees to Exercise Rights. Such rights and remedies as are given to the Authority under this Article VIII have been assigned by the Authority to the Assignees, to which assignment the City hereby consents. Such rights and remedies shall be exercised solely by the Assignees pursuant to an intercreditor agreement, dated as of June 1, 2014, by and among the Assignees. -30- ARTICLE IX PREPAYMENT OF LEASE PAYMENTS Section 9.1. Security Deposit. Notwithstanding any other provision of this Lease Agreement, the City may on any date secure the payment of the Lease Payments in whole or in part by depositing with the Assignees or a fiduciary reasonably satisfactory to the Assignees, in trust, an amount of cash, which shall be held in a segregated trust or escrow fund under a trust or escrow agreement that is in form and content acceptable to the Assignees, which cash so held is either (a) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Exhibit C, or (b) invested in whole in non - callable Federal Securities maturing not later than the dates such funds will be required to make Lease Payments or any prepayment in an amount which is sufficient, in the opinion of an independent certified public accountant (which opinion must be in form and substance, and with such an accountant, acceptable to the Assignees and addressed and delivered to the Assignees), together with interest to accrue thereon and without reinvestment and together with any cash which is so deposited, to pay such Lease Payments when due under Section 4.3(a) or when due on any optional prepayment date under Section 9.2, as the City instructs at the time of said deposit; provided, however, that at or prior to the date on which any such security deposit is established, the City shall deliver to the Assignees an opinion of Bond Counsel (in form and substance acceptable to the Assignees) to the effect that any such security deposit will not adversely affect the excludability of the interest component of Lease Payments from gross income of the Assignees for federal income tax purposes. In the event of a security deposit under this Section with respect to all unpaid Lease Payments, (i) the Term of this Lease Agreement shall continue, (ii) all obligations of the City under this Lease Agreement, and all security provided by this Lease Agreement for said obligations, shall thereupon cease and terminate, excepting only (A) the obligation of the City to make, or cause to be made, all of the Lease Payments from such security deposit and, to the extent of any deficiency, as rent payable from other legally available funds of the City, and (B) the release and indemnification obligations of the City under subparagraphs (f) and (g) of Section 7.3, and (iii) under Section 4.5, the Authority's leasehold interest in the Property will vest in the City on the date of said deposit automatically and without further action by the City or the Authority. The City hereby grants a first priority security interest in and the lien on said security deposit and all proceeds thereof in favor of the Assignees. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease Agreement and, notwithstanding anything to the contrary herein, Lease Payments therefrom shall not be subject to abatement under Section 6.3 hereof to the extent payable from the funds held by the Assignees or the fiduciary as described in the first sentence of this Section 9.1. -31- Section 9.2. Optional Prepayment. (a) The principal components of the Lease Payments shown in Exhibits C -1, C -2 and C- 3 are not prepayable. (b) The City may prepay the principal component of the Lease Payments shown in Exhibit C -4, in whole or in part, on any date on and after July 1, 2019, upon at least 30 days' notice to COPF, in such order as shall be determined by the City, at a prepayment price equal to the principal amount of the principal component of Lease Payments to be prepaid, together with accrued interest to the date fixed for prepayment, and a prepayment premium calculated as a percentage of the amount prepaid, as set forth below: Prepayment Period July 1, 2019, through June 30, 2020 July 1, 2020, through June 30, 2021 July 1, 2021, and thereafter Premium 2% 1% 0% Section 9.3. Mandatory Prepayment From Net Proceeds of Insurance or Eminent Domain. The City shall be obligated to prepay the unpaid principal components of the Lease Payments in whole or in part in such order of prepayment as shall be selected by the City on any date, together with any accrued and unpaid interest, and any other costs related to such prepayment, from and to the extent of any proceeds of insurance award or condemnation award with respect to the Property to be used for such purpose under Section 6.2. The City and the Authority hereby agree that such proceeds, to the extent remaining after payment of any delinquent Lease Payments, shall be credited towards the City's obligations under this Section 9.3. -32- ARTICLE X MISCELLANEOUS Section 10.1. Notices. Any notice, request, complaint, demand or other communication under this Lease Agreement shall be given by first class mail or personal delivery to the party entitled thereto at its address set forth below, or by facsimile transmission or other form of telecommunication, at its number set forth below. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication, (b) 48 hours after deposit in the United States of America first class mail, postage prepaid, or (c) in the case of personal delivery to any person, upon actual receipt. The Authority, the City and the Assignees may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder. If to the City: City of Santa Ana 20 Civic Center Plaza Santa Ana, CA 92701 Attention: Executive Director, Finance and Management Services Phone: (714) 647 -5295 If to the Authority: Santa Ana Financing Authority c/o City of Santa Ana 20 Civic Center Plaza Santa Ana, CA 92701 Attention: Executive Director, Finance and Management Services Phone: (714) 647-5295 If to WAPF: TPB Investments, Inc. One East Washington Street, 14'h Floor Phoenix, AZ 85004 Attention: Senior Vice President Municipal Investment Manager Phone: (602) 797 -3634 If toCMC: Compass Mortgage Corporation 2020 Main Street Irvine, CA 92614 -8231 Attention: Mr. Stewart Roberts (949) 214 -0071 With a copy to: BBVA Compass 201 N. Highway 183 Leander, TX 78641 [P.O. Box 1190 Leander, TX 786461 Attention: Credit Risk Operations Phone: (512) 421 -5715 If to COPF: Capital One Public Funding, LLC 275 Broadhollow Road Melville, NY 11747 Attention: Vice President Phone: (877) 698.2018 -33- If to the Agent: U.S. Bank National Association 101 North First Avenue, Suite 1600 Phoenix, AZ 85003 Attention: Global Corporate TrustServuces Phone: (602) 257 -5431 Section 10.2. Binding Effect. This Lease Agreement inures to the benefit of and is binding upon the Authority, the City and their respective successors and assigns. Section 10.3. Severability. If any provision of this Lease Agreement is held invalid or unenforceable by any court of competent jurisdiction, such holding will not invalidate or render unenforceable any other provision hereof. Section 10.4. Net - net -net Lease. This Lease Agreement is a "net- net -net lease' and the City hereby agrees that the Lease Payments are an absolute net return to the Authority, free and clear of any expenses, charges or set -offs whatsoever. Section 10.5. Further Assurances and Corrective Instruments. The Authority and the City agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Property hereby leased or intended to be so or for carrying out the expressed intention of this Lease Agreement. Section 10.6. Execution in Counterparts. This Lease Agreement may be executed in several counterparts, each of which is an original and all of which constitutes one and the same instrument. Section 10.7. Applicable Law. This Lease Agreement is governed by and construed in accordance with the laws of the State. Section 10.8. Captions. The captions or headings in this Lease Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or section of this Lease Agreement. -34- EXHIBIT A DESCRIPTION OF THE SITE All that certain real property situated in Orange County, State of California, described as follows: Those portions of Lots 4 and 5 in Block B, Lots 1 through 5, inclusive, in Block C, and Lots 1, 2 and 3 in Block F, all of the Ross Addition to Santa Ana as shown on the map filed in Book 3, Pages 534 and 535 of Miscellaneous Records, in the office of the County Recorder of Los Angeles County, California; together with those portions of Lots 1 through 5, inclusive, and Lots 12 through 16, inclusive, all of Stout's Addition to Santa Ana, as shown on the map filed in Book 6, Page 28 of Miscellaneous Maps, in the office of the County Recorder of Orange County, California; together with those portions of Lots 1 through 4, inclusive, and Lots 21 through 24, inclusive, all of Geo. W. Ford's Addition to Santa Ana as shown on the map filed in Book 25, Pages 62 of said Miscellaneous Records of Los Angeles County; together with those portions of Lots 1 through 4, inclusive of the Chilton Tract Addition to Santa Ana as shown on the map filed in Book 34, Page 93 of said Miscellaneous Records of Los Angeles County; together with those portions of Sixth Street, Van Ness Street, Parton Street and the alley within said Geo. W. Ford's Addition to Santa Ana as abandoned by City Resolutions, all being in the City of Santa Ana, County of Orange, State of California, described as a whole as follows: Commencing at the centerline intersection of Ross Street and Civic Center Drive as said intersection is shown on Record of Survey 95 -1031 as filed in Book 149, Pages 49 and 50 of Records of Survey, in said office of the County Recorder of Orange County, California; thence along said centerline of Ross Street South 0 °3723" East 943.49 feet to the centerline intersection of Ross Street and Santa Ana Boulevard as shown on said Record of Survey; thence leaving said centerline of Ross Street, along said centerline of Santa Ana Boulevard, the following courses: South 49 °02'03" West 248.90 feet to the beginning of a curve concave Northwesterly having a radius of 800.00 feet, and Southwesterly 79.51 feet along said curve through a central angle of 5 °41'39'; thence leaving said centerline non - tangent North 35 °16'18" West 54.00 feet to the Northwesterly right -of -way line of said Santa Ana Boulevard, said point also being the most Southerly corner of the land as described in the Grant Deed to the State of California recorded September 26, 2007 as Instrument No. 2007000582904 of Official Records, in the office of said County Recorder of Orange County; thence along the Westerly and Northerly lines of said Grant Deed, the following courses: North 0 °37'23" West 342.65 feet, North 89 °22'37" East 66.00 feet and North 0 °37'23" West 43.99 feet to the TRUE POINT OF BEGINNING; thence continuing along said Westerly and Northerly lines and the general Northwesterly line of said Grant Deed, the following courses: North 0 °37'23" West 7.09 feet to the beginning of a non - tangent cove concave Northwesterly having a radius of 33.00 feet, a radial line of said curve to said point bears South 574722" East, Northeasterly and Northerly 19.53 feet along said curve through a central angle of 3354'20", North 1 °41'42" West 5.71 feet to the beginning of a curve concave Southeasterly having a radius of 18.00 feet, Northerly and Northeasterly 14.69 feet along said curve through a central angle of 46 °44'51 ", North 45 °03'09" East 31.20 feet to the beginning of a curve concave Westerly having a radius of 26.00 feet, Northeasterly, Northerly and Northwesterly 32.33 feet along said cove through a central angle of 71 °14'38 ", non - tangent North 45'01 '29" East 0.66 feet and North 89 °57'38" East 138.81 feet to the Westerly right -of -way line of said Ross Street, said Westerly right -of -way line being parallel with and 40.00 feet Westerly of said centerline of Ross Street, thence leaving said Northerly line along said Westerly right -of -way line North 0 °37'23" West 253.01 feet to the Northerly line of said Lot 5 of Stout's Addition to Santa Ana; thence leaving said Westerly right -of -way line along said Northerly line of Lot 5 and its Westerly prolongation South 89 °57'41" West 220.00 feet to a line being parallel with and 220.00 feet Westerly of said Westerly right -of- way line of Ross Street; thence leaving said Westerly prolongation along said parallel line South 003723" East 100.00 feet; thence leaving said parallel line South 89 °5741" West500.00 feet; thence South 0'02'19" East 250.00 feet to a line bearing North 89 °5741" East and passing through the TRUE POINT OF BEGINNING; thence North 89 °57'41" East 545.08 feet to the TRUE POINT OF BEGINNING. Containing an area of 4.292 acres, more or less. Exhibit A EXHIBIT B DESCRIPTION OF THE FACILITY The Facility consists of Santa Ana City Hall, an 8 -story building, 127,302 square feet, current value of $33,523,899, and the Ross Annex, a 4 -story building, 68,823 square feet, valued at $18,624,187. Santa Ana Cihj Ha11 houses many of the City's General Service departments such as City Manager's Office, Mayor and City Council offices, City Attorney, HR, Finance Department as well as grant related department such as Community Development and Housing Authority. Furthermore, City Hall houses critical infrastructure necessary for the day -to-day operations of the City such as the main IT data center, Telecommunications, Traffic Management Center, main electrical switch, facility security systems, cashiering systems,just to mention a few. The Ross Annex houses the Planning and Building Agency including its permit and plan check counters (including Fire and PD related permits). It also houses the Finance Departments' Applications and Micro Tech Support Division. Additionally, the Ross Annex houses Public Works Agency capital projects and administration divisions, PWA /PBA data center (including GIS) and other enterprise related divisions. Furthermore, the Ross Annex houses critical revenue collection related systems, infrastructure and staff associated with municipal utility billing, business licensing, hotel visitors tax, and utility users tax. Exhib it B EXHIBIT C -1 SCHEDULE OF LEASE PAYMENTS (payable to TPB Investments, Inc.) Lease Total Payment Principal Interest Lease Date Component Component Payment 1/1/15 — $ 391,575.56 $ 391,575.56 7/1/15 $1,870,000 365,200.00 2,235,200.00 1/1/16 — 334,158.00 334,158.00 7/1/16 1,955,000 334,158.00 2,289,158.00 1/1/17 — 301,705.00 301,705.00 7/1/17 2,020,000 301,705.00 2,321,705.00 1/1/18 — 268,173.00 268,173.00 7/1/18 2,085,000 268,173.00 2,353,173.00 1/1/19 — 233,562.00 233,562.00 7/1/19 2,155,000 233,562.00 2,388,562.00 1/1/20 — 197,789.00 197,789.00 7/1/20 2,230,000 197,789.00 2,427,789.00 1/1/21 — 160,771.00 160,771.00 7/1/21 2,305,000 160,771.00 2,465,771.00 1/1/22 — 122,508.00 122,508.00 7/1/22 2,380,000 122,508.00 2,502,508.00 1/1/23 — 83,000.00 83,000.00 7/1/23 2,460,000 83,000.00 2,543,000.00 1/1/24 — 42,164.00 42,164.00 7/1/24 2,540,000 42,164.00 2,582,164.00 TOTAL $22,000,000 $4,244,435.56 $26,244,435.56 (1) Applicable interest rate is 3.32% per annum. Exhibit C -1 EXHIBIT C -2 SCHEDULE OF LEASE PAYMENTS (payable to Compass Mortgage Corporation) Lease Total Payment Principal Interest Lease Date Component Component Payment 111115 — $ 177,988.89 $ 177,988.89 7/1/15 $ 850,000 166,000.00 1,016,000.00 1/1/16 — 151,890.00 151,890.00 7/1/16 890,000 151,890.00 1,041,890.00 1/1/17 — 137,116.00 137,116.00 7/1/17 920,000 137,116.00 1,057,116.00 1 / 1 / 18 — 121,844.00 121,844.00 7/1/18 950,000 121,844.00 1,071,844.00 1/1/19 — 106,074.00 106,074.00 7/1/19 980,000 106,074.00 1,086,074.00 1/1/20 — 89,806.00 89,806.00 7/1/20 1,015,000 89,806.00 1,104,806.00 1/1/21 72,957.00 72,957.00 7/1/21 1,045,000 72,957.00 1,117,957.00 1/l/22 — 55,610.00 55,610.00 7/1/22 1,080,000 55,610.00 1,135,610.00 1/1/23 — 37,682.00 37,682.00 7/1/23 1,115,000 37,682.00 1,152,682.00 1/1/24 — 19,173.00 19,173.00 7/1/24 1,155,000 19,173.00 1,174,173.00 TOTAL $10,000,000 $1,928,292.89 $11,928,292.89 (1) Applicable interest rate is 3.32% per annum. Exhibit C -2 1:00 50 6 1 a v gem SCHEDULE OF LEASE PAYMENTS (payable to Capital One Public Funding, LLC) Lease Total Payment Principal Interest Lease Date Component Component Payment 1/1/15 — $89,617.41 $ 89,617.41 7/1/15 $ 425,000 83,581.00 508,581.00 1/1/16 — 76,526.00 76,526.00 7/1/16 445,000 76,526.00 521,526.00 1/1/17 — 69,139.00 69,139.00 7/1/17 460,000 69,139.00 529,139.00 1 / 1 / 18 — 61,503.00 61,503.00 7/1/18 480,000 61,503.00 541,503.00 1/1/19 — 53,535.00 53,535.00 7/1/19 495,000 53,535.00 548,535.00 1/1/20 — 45,318.00 45,318.00 7/1/20 510,000 45,318.00 555,318.00 1/1/21 — 36,852.00 36,852.00 7/1/21 530,000 36,852.00 566,852.00 1/1/22 28,054.00 28,054.00 7/1/22 545,000 28,054.00 573,054.00 1/1/23 — 19,007.00 19,007.00 7/1/23 565,000 19,007.00 584,007.00 1/1/24 — 9,628.00 9,628.00 7/1/24 580,000 9,628.00 589,628.00 TOTAL $5,035,000 $972,322.41 $6,007,322.41 (1) Applicable interest rate is 3.32% per annum. Exhibit C -3 vWfUR:YNra� SCHEDULE OF LEASE PAYMENTS (payable to Capital One Public Funding, LLC) Lease Total Payment Principal Hlterest Lease Date Component Component Payment 1 / 1 / 15 $ 440,000 $ 161,335.94 $ 601,335.94 7/1/15 — 142,218.75 142,218.75 1/1/16 465,000 142,218.75 607218.75 7/1/16 — 133,500.00 133,500.00 1/1/17 485,000 133,500.00 618,500.00 7/1/17 — 124,406.25 124,406.25 1 / 1 / 18 500,000 124,406.25 624,406.25 7/1/18 — 115,031.25 115,031.25 1/1/19 515,000 115,031.25 630,031.25 7/1/19 — 105,375.00 105,375.00 1/1/20 535,000 105,375.00 640,375.00 7/1/20 — 95,343.75 95,343.75 1/1/21 560,000 95,343.75 655,343.75 7/1/21 — 84,843.75 84,843.75 1/1/22 580,000 84,843.75 664,843.75 7/1/22 — 73,968.75 73,968.75 1/1/23 600,000 73,968.75 673,968.75 7/1/23 — 62,718.75 62,718.75 1/1/24 620,000 62,718.75 682,718.75 7/1/24 — 51,093.75 51,093.75 1/1/25 645,000 51,093.75 696,093.75 7/1/25 — 39,000.00 39,000.00 1 / 1 /26 665,000 39,000.00 704,000.00 7/1/26 — 26,531.25 26,531.25 1/1/27 695,000 26,531.25 721,531.25 7/1/27 — 13500.00 13,500.00 1 / 1 /28 720,000 13,500.00 733,500.00 TOTAL $8,025,000 $2296,398.44 $10,321,398.44 (1) Applicable interest rate is 3,75% per annum. Exhib it C -4 EXHIBIT C -5 SCHEDULE OF TOTAL LEASE PAYMENTS Lease Total Payment Principal Interest Lease Date Component Component Payment 1 /1 /15 7/1/15 1/1/16 7/1/16 1/1/17 7/1/17 1/1/18 7/1/18 1/1/19 7/1/19 1/1/20 7/1/20 1/1/21 7/1/21 1/1/22 7/1/22 1/1/23 7/1/23 1/1/24 7/1/24 1/1/25 7/1/25 1/1/26 7/1/26 1/1/27 7/1/27 1/1/28 TOTAL $ 440,000 3,145,000 465,000 3,290,000 485,000 3,400,000 500,000 3,515,000 515,000 3,630,000 535,000 3,755,000 560,000 3,880,000 580,000 4,005,000 600,000 4,140,000 620,000 4,275,000 645,000 665,000 695,000 720,000 $45,060,000 $ 820,517.80 756,999.75 704,792.75 696,074.00 641,460.00 632,366.25 575,926.25 566,551.25 508,202.25 498,546.00 438,288.00 428,256.75 365,923.75 355,423.75 291,015.75 280,140.75 213,657.75 202,407.75 133,683.75 122,058.75 51,093.75 39,000.00 39,000.00 26,531.25 26,531.25 13,500.00 13,500.00 $9,441,449.30 Exhibit C -4 $ 1,260,517.80 3,901,999.75 1,169,792.75 3,986,074.00 1,126,460.00 4,032,36625 1,075,926.25 4,081,551.25 1,023202.25 4,128,546.00 973,288.00 4,183,256.75 925,923.75 4,235,423.75 871,015.75 4,285,140.75 813,657.75 4,342,407.75 753,683.75 4,397,058.75 696,093.75 39,000.00 704,000.00 26,531.25 721,53125 13,500.00 733,500.00 $54,501,449.30 IN WITNESS WHEREOF, the Authority and the City have caused this Lease Agreement to be executed in their respective names by their duly authorized officers, all as of the date first above written. Attest: Attest: Maria D. Huizaa Secretary O IG GC lly Maria D. Huizaza, T Clerk of the Council -35- SANTA ANA FINANCING AUTHORITY By David avazos Executive Director CITY OF SANTA ANA By- David v Cavazos City Manager