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HomeMy WebLinkAbout13- Development Services ORIGINAL CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: Valerie C. Ross, Director Subject: Resolutions authorizing the execution of a Trust Indenture, Lease- Dept: Development Services Purchase Agreement, Deed of Trust, and Promissory Note relative to the purchase of Date: August 5, 2009 property located at 120 S. "D" Street for a Fire Department Maintenance Facility. File No. 15.05-267 MCC Date: August 17, 2009 Synopsis of Previous Council Action: 04-23-2009—Resolution No. 2009-85 was adopted, approving a right of way contract with Caltrans for the sale of the Fire Department Repair Facility located at the comer of Base Line and"H" Streets. 06-15-2009—Resolution No. J-53 was adopted, establishing fair market value and authorizing the execution of a Purchase and Sales Agreement between the San Bernardino Joint Powers Financing Authority and Tim J. Burgess, for property located at 120 S. "D" Street. Recommended Motion: Adopt Resolutions (2) Valerie C. Ross Contact person: Laszlo "Les" Fogassy Phone: 5026 Staff Report, Map, Supporting data attached: Reso.,various financing docs. Ward: 1 $400,000 (Down payment) /$60,000 annual payments for 5 years; $1.2 Million after 5 years, or$100,000 and extension of annual payments FUNDING REQUIREMENTS: Amount: for an additional 5 years. Source: (Acct. No.) N/A (Acct. Description) Finance: Council Notes: �,���5 ��9 - 199 8 S`f Agenda Item No. 13 G 6 ,w I1—� CITY OF SAN BERNARDINO — REQUEST FOR COUNCIL ACTION Staff Report SUBJECT: Resolution authorizing the execution of a Trust Indenture, Lease-Purchase Agreement, Deed of Trust, and Promissory Note relative to the purchase of property located at 120 S. "D" Street for a Fire Department Maintenance Facility. BACKGROUND: As a result of the 1-215 widening project, Caltrans acquired the City's Fire Department Maintenance Facility located at the northwest corner of Base Line Street and "H" Street, in the amount of$1,430,000. Economic Development Agency ("EDA") staff worked with the Fire Department to obtain a suitable long term location to relocate the maintenance facility. The vacant building located at 120 S. "D" Street was determined to be a suitable site. Due to the urgency of establishing a more permanent location, a short term lease was entered into on April 1, 2009, between the property owner of that location, Tim J. Burgess, and the EDA, at a cost of$1 per month subject to a 30- day termination provision by either party. The EDA thereby allowed the City Fire Department to take occupancy of the building under this interim arrangement pending the preparation and approval of all final documents by the City and the San Bernardino Joint Powers Financing Authority ("JPFA") between the City and EDA. A longer tern solution with an immediate purchase of the building was negotiated between the property owner and EDA staff. The property was appraised for $1,500,000 in its prior "as is" condition. The negotiated sales price of$1,600,000 includes $200,000 worth of improvements to the property to include ADA compliance, electrical upgrades and alarms, roof repairs, new ceilings and fixtures and a clarifier that could not be relocated from the former "H" Street facility. As set forth in the Purchase and Sales Agreement, the City will make a cash down payment of$400,000, and interest only payments at 5% for five years, to be paid semi-annually at $30,000 per payment. At the end of five years, the City will have the option to pay the remaining principal balance of $1,200,000 in full, or extend payments to the seller for an additional five year term upon payment of $100,000 to the seller to reduce the principal balance of the loan. The payment of the $100,000 will thus allows the City to continue the interest only payments for an additional 5-year term. The City may prepay the balance to the seller at anytime without a pre-payment penalty. At the end of the second 5-year term, the principal balance would be $1,100,000. On June 16, 2009, Resolution No. J-53 was adopted, establishing the fair market value of $1,600,000 for the property and authorized the execution of a Purchase and Sales Agreement between the JPFA and the property owner, and authorized the preparation of the various financing documents. Specifically, these include a Trust Indenture between the JPFA and corporate bond trustees; Lease-Purchase Agreement between the JPFA and the City; Deed of Staff Rcport— Continued Trust by the JPFA in favor of the Trustee under the Trust Indenture; and a Promissory Note between the JPFA and the seller. As proposed, the JPFA will be used to finance the balance of$1,200,000 with tax-exempt seller take-back financing, as set forth in the attached agreements and various documents. Title to the building will transfer from the seller to the JPFA upon the close of escrow. The JPFA will hold title to the property under the Trust Indenture between the JPFA and the seller. The JPFA will then lease the property to the City under an annual appropriations lease agreement that allows the City to prepay the balance at anytime. Nothing in the lease agreement commits the City to remit lease payments for other than a year-to-year basis pursuant to each annual City budget. The seller will have the benefit of and be secured by a deed of trust on the property as will be owned in fee by the JPFA during the period of the financing. At such time as the City elects to either refinance the property with other tax-exempt bond proceeds or cash payments from the Fire Capital Development Impact Fee ("DIF") accounts, title would then vest in the City after the seller financing had been paid in full. As previously approved, $800,000 of the $1,430,000 proceeds from the sale of the Base Line and "H" site will go into the General Fund, with the remaining $630,000 to go to the Fire Department. The $400,000 down payment is to be made from the $630,000, with the balance of $230,000 to be used for additional improvements to the new site, if needed. Additional improvements have not been identified at this time. FINANCIAL IMPACT: The $400,000 down payment is to be paid from the proceeds of the sale of the Fire Department Maintenance Facility located at Base Line and "H" Streets to Caltrans. Interest only payments will be paid for up to five years in 10 semi-annual payments of$30,000 ($60,000/yr for a grand total of$300,000). The FY 2009-10 budget already includes both the $400,000 down payment and the $60,000 annual payment that needs to be paid. The principal balance of$1,200,000 is to be repaid at the end of five years, unless the City exercises its option to extend for an additional five years upon payment of a $100,000 extension fee to the seller to be applied to reduce the principal balance of the loan as a credit against the principal amount owed. The remaining principal amount of $1,100,000 is then due at the end of the second five-year term after the payment of five additional years of interest only payments. All payments, except the initial down payment, are to be paid under the JPFA financing structure. RECOMMENDATION: Adopt Resolution. Attachments: -Site Map -Resolutions (2) various financing documents and agreements r � ➢Q' Ili I °a � I � ` O LJH1� I u — as o c va �= eo � I am co I I , I a I N ' ti rr _ o I I N - m I I I -1 �I N LA H� O - I 1 ' i C ..y , - n _ I f y _ � o � RH mil•_ ' J ! O1r7tl ILr1 _ I ti N r C= Cl- O � h I _ e< ero{ I jDin n n w m e - ---- --_—__ —__-- _— L M L]aa4S'0000-OO-ZZL-O£LO-BOOZ-SOOZ'Vo'auiyewag ueg - COPY 1 RESOLUTION NO. 2 RESOLUTION OF THE SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY AUTHORIZING AND DIRECTING THE EXECUTION OF A 3 PROMISSORY NOTE; A TRUST INDENTURE; A DEED OF TRUST; AND A LEASE- 4 WITH RIGHT OF PURCHASE AGREEMENT RELATIVE TO PROPERTY LOCATED AT 120 SOUTH "D" STREET, SAN BERNARDINO, FOR A CITY FIRE DEPARTMENT 5 MAINTENANCE FACILITY. 6 7 WHEREAS, the City of San Bernardino desires to lease and acquire that certain parcel 8 of real property located 120 South "D" Street in said City, being a portion of real property 9 commonly known as Assessors Parcel Number 0136-122-60, and more fully described in 10 Exhibit "1" attached hereto and made a part hereof, relative to the relocation of the Fire 11 Department's maintenance facility; and 12 WHEREAS, on June 15, 2009, by the adoption of Resolution No. J-53, The San 13 Bernardino Joint Powers Financing Authority ("JPFA") authorized the execution of a Purchase 14 15 and Sales Agreement with Tim J. Burgess , the record owner of said real property to be acquired, 16 and established the fair market value of said real property in the amount of 51,600,000.00; and 17 WHEREAS, the execution of various docu rents is necessary to complete the finance, 18 lease and purchase of said real property. 19 NOW, THEREFORE, THE SAN BERNARDINO JOINT POWERS FINANCING 20 AUTHORITY DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: 21 SECTION 1. That the Chairperson of the JPFA is hereby directed and authorized to 22 execute on behalf of said JPFA, the "San Bernardino Joint Powers Financing Authority, San 23 Bernardino City Fire Department Maintenance Facility Note—2009" ("Promissory Note"), a 24 copy of which is attached hereto as Exhibit"2" and made a part hereof; the "Indenture and 25 26 Loan Agreement" ("Indenture"), a copy of which attached hereto as Exhibit "3" and made a part 27 hereof; the "Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Financing 2s 08/06/09 ( / �CSc7 ESOLUTION OF THE CITY OF THE SAN BERNARDINO JOINT POWERS FINANCING %UTHORITY AUTHORIZING SAID PURCHASE AND AUTHORIZING AND DIRECTING THE 1 XECUTION OF A PROMISSORY NOTE; A TRUST INDENTURE; A DEED OF TRUST; AND A EASE-WITH RIGHT OF PURCHASE AGREEMENT RELATIVE TO PROPERTY LOCATED AT 120 2 OUTH "D" STREET, SAN BERNARDINO, FOR A CITY FIRE DEPARTMENT MAINTENANCE ACILITY. 3 4 Statement" ("Deed of Trust'). a copy of which is attached hereto as Exhibit "4" and made a part 5 hereof, all relative to the purchase and acquisition of said real property described herein; 6 SECTION 2. That the Chairperson of the JPFA is hereby directed and authorized to 7 execute a"Lease-With Right of Purchase Agreement" between the JPFA and the City of San 8 9 Bernardino, a copy of which is attached hereto as Exhibit"Y' and made a part hereof, relative to 10 said real property described herein; and 11 SECTION 3. Said documents, referenced in Section and Section 2 above, shall be null 12 and void if either party fails to execute the documents within ninety (90) days of the date of 13 adoption of this Resolution. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 08/12/2009 2 RESOLUTION OF THE CITY OF THE SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY AUTHORIZING SAID PURCHASE AND AUTHORIZING AND DIRECTING THE 1 EXECUTION OF A PROMISSORY NOTE; A TRUST INDENTURE; A DEED OF TRUST; AND A LEASE-WITH RIGHT OF PURCHASE AGREEMENT RELATIVE TO PROPERTY LOCATED AT 120 2 SOUTH "D° STREET, SAN BERNARDINO, FOR A CITY FIRE DEPARTMENT MAINTENANCE FACILITY. 3 4 I HEREBY CERTIFY that the foregoing resolution was duly adopted by the San 5 Bernardino Joint Powers Authority of the City of San Bernardino at a 6 meeting thereof held on the day of 2009, by the 7 following vote, to wit: 8 Board Members: AYES NAYS ABSTAIN ABSENT 9 10 ESTRADA 11 BAXTER 12 13 BRINKER 14 SHORETT 15 KELLEY 16 JOHNSON 17 MCCAMMACK 18 19 20 Rachel G. Clark, Secretary 21 The foregoing resolution is hereby approved this day of 2009. 22 23 PATRICK J. MORRIS, Chairperson 24 San Bernardino Joint Powers Financing Authority 25 Approved as to form: 26 j � 27 A y ounsel 28 08/11/2009 3 EXHIBIT"1" Legal description of Property EXHIBIT "1" LEGAL DESCRIPTION Property Address: 120 South "D" Street APN : 0136-122-60 THAT PORTION OF LOTS 1, 2 AND 3, BLOCK "D", THE PEPPERS, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 17 OF MAPS, PAGE 8, RECORDS OF SAID COUNTY, AND THAT PORTION OF D STREET, VACATED BY RESOLUTION 9848, RECORDED MAY 29, 1969 IN BOOK 7241, PAGE 713,OR DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT 1, BLOCK "D" OF THE PEPPERS, SUBDIVISION, SAID POINT ALSO BEING IN THE EAST LINE OF STODDARD AVENUE, (VACATED BY RESOLUTION 8506, RECORDED JANUARY 27, 1967 IN BOOK 6764, PAGE 380, OFFICIAL RECORDS) 60.00 FEET WIDE; THENCE SOUTH 164.91 FEET ALONG THE EAST LINE OF SAID VACATED STODDARD AVENUE; THENCE NORTH 890 59' 21" EAST 282.78 FEET TO A POINT ON A TANGENT CURVE CONCAVE TO THE NORTH WITH A RADIUS OF 20.00 FEET AND A RADIAL BEARING OF NORTH 000 39"WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 640 59'21", AN ARC DISTANCE OF 22.69 FEET TO A TANGENT LINE; THENCE NORTH 250 00' 00" EAST, 71.88 FEET ALONG SAID TANGENT LINE TO A POINT ON A TANGENT CURVE CONCAVE TO THE WEST WITH A RADIUS OF 208.75 FEET AND A RADIAL BEARING OF NORTH 65' 00' 00" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 250 00' 00", AN ARC DISTANCE OF 91.08 FEET TO A POINT ON THE SOUTH LINE OF THE ATCHINSON,TOPEKA AND SANTA FE RAILROAD 50.00 FEET WIDE; THENCE SOUTH 890 59' 25" WEST 350.83 FEET ALONG SAID SOUTH LINE OF RAILROAD RIGHT OF WAY TO THE POINT OF BEGINNING. CONTAINS 54.409.2 SQUARE FEET, MORE OR LESS. EXHIBIT"2" PROMISSORY NOTE v C EXHIBIT "2" $1,200,000 SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, SAN BERNARDINO CITY FIRE DEPARTMENT MAINTENANCE FACILITY NOTE 2009 DATE OF MATURITY DATE" INTEREST RATE ORIGINAL ISSUE July 1,2019 5% August 1,2009 NOTE OWNER: TIM J. BURGESS,A SINGLE MAN PRINCIPAL ONE MILLION TWO HUNDRED THOUSAND DOLLARS AMOUNT: ($1,200,000) The San Bernardino Joint Powers Financing Authority, organized under the laws of the State of California, (the "Authority"), for value received, hereby promises to pay this promissory note which is designated the "San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note - 2009" (the "Note") to the Note Owner named above or any successor or assign, from the source and in the manner hereinafter provided and as provided in the Indenture and Loan Agreement dated as of August 1, 2009, by and between the Authority and the Note Owner ("Indenture"), in the principal sum of One Million Two Hundred Thousand Dollars ($1,200,000) plus interest at the rate per annum specified above. This Note is issued under and secured by the Indenture and a Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Financing Statement as of August 1, 2009 ("Deed of Trust"). The Indenture provides a description of the nature and extent of the security, the respective rights thereunder of the Note Owner and the Authority, the terms upon which the Note is issued and the definitions of certain terms used in this Note. (Capitalized terms not defined herein shall have the meanings given in the Indenture). This Note may not be offered or sold or otherwise transferred except pursuant to an exemption set forth in California Corporations Code Section 25102. Any sale or transfer of the Note, except a sale or transfer made pursuant to California Corporations Code Section 25102(f), shall require the prior written consent of the Authority. Any attempted sale of the Note in a manner inconsistent with this paragraph shall be void and shall not be binding on the Authority. Principal and interest on this Note shall be payable as provided herein, when due, for as long as the Note remains outstanding, in lawful money of the United States of America at the address indicated in the Indenture or at such other location as the Note Owner shall designate in writing to the Authority. Interest on the outstanding principal balance of this Note shall be calculated on the basis of a 360-day year of twelve 30-day months. If payment due hereunder is delinquent for ten (10) days, after the 10th day the Authority agrees to pay a late charge in the amount of five percent (5%) of the payment then due and unpaid in addition to said payment. 4836.776;-2740A 1 On Closing Date Authority shall pay Note Owner Four Hundred Thousand Dollars ($400,000). Commencing January 1, 2010 through July 1, 2014 interest shall be payable on January I and July 1 of each year in the amount of Thirty Thousand Dollars ($30,000). Authority does hereby have the option to on July 1, 2014, pay the principal then outstanding on the Note to Note Owner in full and terminate the Note, or to extend the term of the Note for an additional five (5) years from July 1, 2014,to July 1, 2019 on the conditions hereinafter set forth. On or before May 1, 2014, Authority shall notify Note Owner of Authority's election regarding the exercise of that option. If the Authority timely notifies the Note Owner that the Authority has elected to extend the term, then, on January 1, 2015, Authority shall make to the Note Owner a payment of principal in the amount of One Hundred Thousand Dollars ($100,000) and of interest in the amount of twenty-seven thousand five hundred dollars ($27,500) for a combined payment on that date of One Hundred Twenty-Seven Thousand Five Hundred Dollars ($127,500). Note Owner may elect to waive the receipt of principal at that time; however, interest payments shall thereafter be calculated as if the principal had been reduced in the amount of One Hundred Thousand Dollars($100,000). Commencing with the payment on July 1, 2015 and continuing to July I, 2019, interest shall be payable on July 1, and January 1, of each year in the amount of Twenty-Seven Thousand Five Hundred Dollars ($27,500). On July 1, 2019, the final interest payment and all principal then outstanding shall be due and payable to the Note Owner by the Authority. All payments shall be of interest only except as otherwise herein provided. *.- This Note is issued by the Authority under the Indenture to finance the acquisition and renovation of the fire maintenance facility generally located at 120 South "D" Street, San Bernardino (the "Project"). Subject to the Indenture, the Authority has agreed to repay the loan solely from the Revenues (as defined in the Indenture) in the amounts and at the times sufficient to pay principal of and interest on this Note as the same shall become due and payable as set forth hereinabove. The Authority's obligation pursuant to the Indenture is evidenced by this Note. Pursuant to the Deed of Trust, the Authority has granted to the Note Owner a first lien on the real property comprising the Project (the "Premises"). Reference is hereby made to the Indenture and the Deed of Trust for a description of the agreements and covenants contained therein and a description of the Premises. This Note is not a general obligation of the Authority, but a limited obligation payable solely from the Revenues pledged pursuant to the Indenture, which shall be used for no other purpose than to pay the principal of, and interest on this Note, except as may be otherwise expressly authorized in the Indenture- EACFTAND EVERY-COVENANT MADE HEREIN BY THE AUTHORITY IS PREDICATED UPON THE CONDITION THAT NEITHER THE AUTHORITY NOR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF SAN BERNARDINO, CALIFORNIA, WILL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE NOTE, OR OTHER FEES AND EXPENSES PROVIDED HEREUNDER OR THE PERFORMANCE OF ANY PLEDGE, SECURITY AGREEMENT, OBLIGATION OR AGREEMENT CREATED BY OR ARISING UNDER THE INDENTURE OR THE NOTE 4836.7765-2740.1 FROM ANY PROPERTY OTHER THAN THE REVENUES AND THE PREMISES; AND FURTHER, THAT NEITHER THE NOTE NOR ANY SUCH OBLIGATION OR AGREEMENT OF THE AUTHORITY IN CONNECTION HEREWITH SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF SAN BERNARDINO, CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER, OR AS A PLEDGE OF THE GENERAL CREDIT, FULL FAITH OR TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF. THE AUTHORITY HAS NO TAXING POWER. The Note shall be subject to redemption by the Authority prior to maturity, in whole or in part at any time at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date. In the event the Note is called for redemption, the Authority shall provide notice to the Note Owner, which notice shall specify the redemption date, the redemption price and the amount of the Note to be redeemed. Such notice shall be given by Mail to the Note Owner at least thirty (30) days, but no more than sixty(60) days,prior to the date fixed for redemption. If an "Event of Default," as defined in the Indenture shall occur, subject to the prior payment of this Note, the principal of the Note may be declared due and payable in the manner and with the effect provided in the Indenture. The Note Owner shall have no right to enforce the provisions of the Indenture or the Deed of Trust, to institute action to enforce the covenants therein, to take any action with respect to a default under the Indenture or to institute, appear in or defend any lawsuit or other proceeding with respect thereto, except as provided in the Indenture. It is hereby certified, recited and declared that all conditions, acts and things required by the Constitution and the statutes of the State of California and the Indenture, to exist, happen and be performed precedent to or in the issuance of this Note, do exist, have happened and have been performed in regular and due form as required by law. IN WITNESS WHEREOF, the Authority has caused this Note to be executed in its name and on its behalf by the signature of its Chairman and attested by the signature of its Secretary all as of the Date of Original Issue identified above. San Bernardino Joint Powers Financing Authority By: Chairman 4836-7765-2740.1 3 EXHIBIT"Y' TRUSTINDENTURE `fir EXHIBIT"3" INDENTURE AND LOAN AGREEMENT TABLE OF CONTENTS ARTICLE I DEFINITIONS ARTICLE II THE NOTE Section 2.01. Authority for and Issuance of the Notes. Section 2.02. Execution Section 2.03. Note, Limited Obligations Section 2.04. Form of Note Section 2.05. Mutilated, Lost, Stolen or Destroyed Note ARTICLE III REDEMTION OF NOTE Section 3.01 _Optional Redemption of Note Section 3.02. Notice of Redemption ARTICLE IV GENERAL COVENANTS Section 4.01. Payment of Princinal. Premium, if any, and Interest No General Obligations: Priority of Lien Section 4.02. Performance of Covenants by Authority Due Execution Section 4.03. Instruments of Further Assurance Section 4.04. Recording and Filing: Further Instruments Section 4.05. Arbitrage and Tax Covenants Section 4.06. Access to Books Section 4.07. Taxes. Insurance and Maintenance ARTICLE V DEFAULTS AND REMEDIES Section 5.01. Events of Default Section 5.02. Acceleration of Note: Other Remedies With Respect to the Note Section 5.03. Cure by Note Owner Section 5.04. No Remedy Exclusive Section 5.05. No Waiver of Remedies Section 5.06. Severabilitv of Remedies ARTICLE VI MODIFICATION OF THIS AGREEMENT, THE NOTE, THE DEED OF TRUST AND ANY OTHER DOCUMENTS Section 6.01. Limitations Section 6.02. Effect of Supplemental Agreement Section 6.03. OOvinion ARTICLE VII MISCELLANEOUS Section 7.01. Successors of the Authority Section 7.02. Parties in Interest Section 7.03. Severability Section 7.04. No Personal Liability of Authority Officials Section 7.05. Countemarts Section 7.06. Governing Law Section 7.07. Notices Section 7.08. Holidays INDENTURE AND LOAN AGREEMENT THIS INDENTURE AND LOAN AGREEMENT (this "Indenture"), made and entered into as of August 1,2009, by and between the San Bernardino Joint Powers Financing Authority,a joint exercise of powers agency organized and existing under the laws of the State of California,(the "Authority") and-Tim J. Burgess, a single man ("Note Owner"), as follows (all capitalized, undefined terms used herein shall have the meaning ascribed to them in Article I of this Indenture): WITNESSETH: WHEREAS,the Authority is authorized pursuant to the Marks-Roos Local Bond Pooling Act of 1985 (commencing with section 6584 of the Government Code of the State of California) (as in effect on the date of issuance and delivery of the Note, the "Act")to incur indebtedness to finance and refinance public capital improvements (as such term is defined in Article I of the Act); and WHEREAS, pursuant to and in accordance with the Act, the Authority desires to issue its San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note-2009(the"Note")in the principal amount of One Million Two Hundred Thousand Dollars($1,200,000)pursuant to this Indenture in order to finance the acquisition of the Fire Maintenance Facility at 120 South"D" Street, San Bernardino, California; and WHEREAS, the Note shall be secured by a Deed of Trust dated as of August 1, 2009,made by the Authority to the Note Owner ("Deed of Trust'); and WHEREAS,all things necessary to make the Note a valid,binding and legal obligation of the Authority according to the import thereof,and the creation,execution and delivery of this Indenture, and the creation,execution and issuance of the Note subject to the terms hereof,have in all respects been duly authorized. NOW, THEREFORE, THIS INDENTURE WITNESSETH: It is expressly declared,that the Note issued and secured hereunder is to be issued subject to the terms,conditions,stipulations,covenants,agreements, uses and purposes hereinafter expressed, and the Authority has agreed and covenanted, and does hereby agree and covenant with the Note Owner, as follows: 833-3640.6532.1 1 ARTICLE I DEFINITIONS Unless the context otherwise requires, the following words and phrases shall have the following meanings: "Act"means to the Marks-Roos Local Bond Pooling Act of 1985 (commencing with section 6584 of the Government Code of the State of California)as now in effect and as it may from time to time hereafter be amended or supplemented. "Authority"means the San Bernardino Joint Powers Financing Authority,a joint exercise of powers agency organized and existing under the laws of the State of California, and its successors and assigns. "Business Day" means a day on which banks in the State of California are not required or authorized by law to remain closed and on which the New York Stock Exchange is not closed. "Closing Date"means the date escrow on the Premises closes and the Premises is sold to the Authority. "Code"means the Internal Revenue Code of 1986,as amended. Each reference to the Code herein shall be deemed to include the United States Treasury Regulations promulgated thereunder. "Deed of Trust" means the Deed of Trust dated as of August 1, 2009, by the Authority to Note Owner for the benefit of the Note Owner. "Event of Default" means any occurrence or event specified in Section 5.01 hereof. "Indenture"means this Indenture and Loan Agreement dated as of August 1,2009,between the Authority and the Note Owner relating to the issuance of the Note,as amended or supplemented from time to time. "Mail" means first class mail by the United States Postal Service, postage prepaid, to the Note Owner at its address provided herein. "Note"means$1,200,000 San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note - 2009. "Note Owner" means the person or persons who own the Note. "Outstanding"or"outstanding"means,as of any given date,the amount of the Note which is unpaid. "Project'means the remodel and purchase of the Fire Department Maintenance Facility at 120 South "D" Street, San Bernardino, California. 833-3640-6532.1 2 "Premises"means that real property and appurtenances commonly known as 120 South"D" Street, San Bernardino, California, assessor's parcel No. 0136-122-60. "Revenues" means Rent. "State" means the State of California. ARTICLE II THE NOTE Section 2.01. Authority for and Issuance of the Notes. (a)There is hereby authorized under this Indenture the "San Bernardino Joint Powers Financing Authority, San Bernardino Fire Department Maintenance Facility Note - 2009," dated , 2009, maturing July 1, 2019. On Closing Date Authority shall pay Note Owner Four Hundred Thousand Dollars ($400,000). Commencing January 1,2010 through July 1,2014 interest shall be payable on January 1 and July 1 in the amount of Thirty Thousand Dollars ($30,000). (b) Authority has the option to extend the term of the Note for an additional five(5)years from July 1,2014 to July 1,2019,on the conditions hereinafter set forth. On or before May 1,2014, Authority shall notify Note Owner of Authority's election to exercise the option. In the event no such notice is given, principal and interest on the Note shall be due and payable in full on July 1, 2014. (c) In the event notice is provided as required herein,on January 1,2015,Authority shall pay Note Owner a total of One Hundred Twenty Seven Thousand Five Hundred Dollars($127,500) as follows: principal in the amount of One Hundred Thousand Dollars($100,000)and interest in the amount of Twenty Seven Thousand Five Hundred Dollars ($27,500). Note Owner may elect to waive the receipt of principal at that time;however,interest payments shall thereafter be calculated as if the principal had been reduced in the amount of One Hundred Thousand Dollars($100,000). In the event the aforesaid principal payment is not made,the principal balance on the Note shall remain the same. Commencing with the payment on July 1,2015 and continuing to July 1,2019,interest shall be payable on July 1, and January 1, of each year in the amount of Twenty-Seven Thousand Five Hundred Dollars ($27,500). On July 1, 2019, the final interest payment and all principal then outstanding shall be due and payable to the Note Owner by the Authority. Payment of principal and interest on the Note shall be made as set forth above, for as long as the Note is Outstanding, by check mailed by first class mail to the Note Owner at its address as indicated herein or as may be further designated by the Note Owner after the execution of this Indenture. 333-3640-6532.1 'J Section 2.02. Execution. The Note shall be executed on behalf of the Authority with the manual or facsimile signature of its Chairman or Vice Chairman and shall have impressed or imprinted thereon,by facsimile or otherwise,the official seal of the Authority, and shall be attested with the manual or facsimile signature of its Secretary or Assistant Secretary;provided that any such signature shall be manually ascribed if so required by applicable law. Section 2.03.- Note, Limited Obligations. The Note shall not be general obligation of the Authority but limited obligations payable solely from the Revenues which shall be used for no other purpose than to pay the principal of, premium, if any, and interest on the Note, except as may be otherwise expressly authorized in this Indenture. EACH AND EVERY COVENANT MADE HEREIN BY THE AUTHORITY IS PREDICATED UPON THE CONDITION THAT NEITHER THE AUTHORITY NOR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF SAN BERNARDINO, CALIFORNIA, WILL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF,PREMIUM,IF ANY, OR INTEREST ON THE NOTE, OR OTHER FEES AND EXPENSES PROVIDED HEREUNDER OR THE PERFORMANCE OF ANY PLEDGE, SECURITY AGREEMENT, OBLIGATION OR AGREEMENT CREATED BY OR ARISING UNDER THIS INDENTURE OR THE NOTE FROM ANY PROPERTY OTHER THAN THE REVENUES;AND,FURTHER THAT NEITHER THE NOTE NOR ANY SUCH OBLIGATION OR INDENTURE OF THE ISSUER SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF SAN BERNARDINO, CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER,OR AS A PLEDGE OF THE GENERAL CREDIT, FULL FAITH OR TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF. THE AUTHORITY HAS NO TAXING POWER. Section 2.04. Form of Note. The Note shall be substantially in the form set forth in Exhibit "A" hereto with such variations, omissions and insertions as are permitted or required by this Indenture. Section 2.05. Mutilated,Lost,Stoleu or Destroyed Note. In the event the Note is mutilated, lost,stolen or destroyed,the Authority may execute and deliver a new Note of the like date,maturity and denomination as that Note mutilated,lost,stolen or destroyed;provided that such mutilated Note shall first be surrendered to the Authority and,in the case the Note is lost, stolen or destroyed,there shall be first furnished to the Authority evidence of such loss,theft or destruction satisfactory to the Authority, together with indemnity to the Authority satisfactory to the Authority. In the event the Note shall be about to mature or have matured or been called for redemption, instead of issuing a replacement Note, the Authority may pay the same without surrender thereof upon receipt of indemnity satisfactory to the Authority. The Authority may charge the Owner of such Note its reasonable fees and expenses incurred pursuant to this section. Any replacement Note issued pursuant to this Section 2.05 shall constitute an original, contractual obligation of the Issuer to the extent provided in this Indenture(whether or not the Note was lost, stolen or destroyed and is at any time found by anyone). 833-3640-6532.1 4 ARTICLE III REDEMPTION OF NOTE Section 3.01 Optional Redemption of Note. The Note shall be subject to redemption by the Authority at any time prior to maturity,in whole or in part at any time at a redemption price equal to 100%of the principal amount thereof plus accrued interest to the redemption date. Section 3.02. Notice of Redemption. In the event the Note is called for redemption, the Authority shall provide notice to the Note Owner,which notice shall specify the redemption date and the amount of the Note to be redeemed. Such notice shall be given by Mail to the Note Owner at least thirty (30) days, but no more than sixty(60) days,prior to the date fixed for redemption. ARTICLE IV GENERAL COVENANTS Section 4.01. Payment of Principal Premium if any, and Interest No General Obligations: Priority of Lien. (a) The Authority covenants that it will promptly pay the principal of and interest on the Note issued under this Indenture at the place,on the dates and in the manner provided herein and in the Note, provided that the principal and interest on the Note are payable by the Authority solely from the Revenues,and nothing in the Note or this Indenture shall be considered as assigning or pledging any other funds or assets of the Authority other than the Revenues. (b) Each and every covenant made herein by the Authority is predicated upon the condition that the Authority shall not be liable for the payment of the principal of or interest on the Note or for the performance of any pledge, obligation or agreement undertaken by the Authority except to the extent that moneys pledged herein are sufficient therefor. In any event, neither the City of San Bernardino, California, the State, nor any political subdivision of the State shall be liable for the payment of the principal of or interest on the Note or for the performance of any pledge, obligation or agreement undertaken by the Authority. Section 4.02. Performance of Covenants by Authority; Due Execution. The Authority covenants that it will faithfully perform or cause to be performed at all times any and all covenants, undertakings,stipulations and provisions contained in the this Indenture and in all of its proceedings pertaining hereto. The Authority covenants that it is duly authorized under the Constitution and laws of the State, including particularly the Act to issue the Note and to execute this Indenture, and to pledge the Revenues hereby pledged in the manner and to the extent herein set forth. The Authority further covenants that all action on its part for the issuance of the Note and the execution and delivery of this Indenture have been duly and effectively taken,and that the Note in the hands of the Note Owner is and will be a valid and enforceable obligation of the Authority according to the terms thereof and hereof. However, such covenants are enforceable only to the extent of the Revenues derived from the Premises. 833.3640-6532.1 5 Section 4.03. Instruments of Further Assurance. The Authority covenants that it will do, execute,acknowledge and deliver, or cause to be done,executed,acknowledged an delivered,such indentures supplemental hereto and such further acts,instruments and transfers as may reasonably be required for the better assuring and confirming payment of the amounts pledged hereby. The Authority covenants and agrees that,except as herein and in the Deed of Trust provided, it will not sell, convey, assign, pledge, encumber or otherwise dispose of any part of the Revenues of the Premises. - Section 4.04. Recording and Filing; Further Instruments. The Authority shall cause to be recorded or filed, all necessary financing statements, including continuation statements, related to this Indenture,the Note and the Deed of Trust and all supplements hereto and thereto,and such other documents as may be necessary to be kept and filed in such manner and in such places as may be required by the law in order to perfect, preserve and protect fully the security of the Note Owner. Section 4.05. Arbitrage and Tax Covenants. The Authority will not directly or indirectly use or permit the use of proceeds of the Note,or any other funds of the Authority from whatever source derived,to acquire any investment,and it will not take or permit to be taken any other action,which would cause the Note to be characterized as an arbitrage bond within the meaning of Section 148 of the Code or which would otherwise cause the interest on the Note to be includable in gross income for federal income tax purposes. As necessary, the Authority will timely file a federal information return with respect to the Note as required by Section 149 (e) of the Code. Notwithstanding any provision of this Section, the Authority may rely conclusively on an opinion of Special Counsel in complying, or in any deviation from complying, with the provisions hereof. Section 4.06. Access to Books. All books and documents in the possession of the Authority relating to the Project and the Revenues shall at all reasonable times be open to inspection by Note Owner. Section 4.07. Taxes.Insurance and Maintenance. The Authority shall timely pay or cause to be paid all taxes and assessments due on the Premises and insurance premiums required under the Deed of Trust in connection with the Premises. The Authority shall also maintain and repair the Premises,as necessary. Notwithstanding the foregoing,the Authority shall have the right to dispute in good faith,any tax or governmental charge on the Premises, and in such event, may permit such tax or governmental charge to remain unsatisfied during such period of contest and any appeal therefrom, unless such contest or appeal shall materially endanger the Premises. 833-3640-6532.1 6 I ARTICLE V DEFAULTS AND REMEDIES Section 5.01. Events of Default. Each of the following events shall constitute an"Event of Default"hereunder with respect to the Note after the passage of sixty(60) days following written notice thereof provided to the Authority by the Note Owner: (i) a failure to pay the principal on the Note when the same shall become due and payable at maturity or upon redemption; (ii) a failure to pay an installment of interest on the Note when the same shall become due and payable; (iii) a failure by the Authority to observe and perform any other covenant, condition, agreement or provision (other than as specified in subparagraphs (i) and (ii) hereof) in the Note or in this Indenture on the part of the Authority to be observed or performed,unless the Authority and the Note Owner shall agree in writing to an extension of the aforementioned grace period prior to its expiration;provided,however that the Authority and the Note Owner shall be deemed to have agreed to an extension of such grace period if corrective action is initiated by the Authority within such grace period and is being diligently pursued; and (iv) the occurrence of an"Event of Default"under and as defined in the Deed of Trust. Section 5.02. Acceleration of Note: Other Remedies With Respect to the Note. (a) Upon the occurrence and continuance of an Event of Default described in Section 5.01 hereof,the Note Owner may by written notice to the Authority,declare the Note and all interest thereon to be immediately due and payable, whereupon the Note shall, without further action, become and be immediately due and payable, anything in this Indenture or in the Note to the contrary notwithstanding. (b) The provisions of the preceding paragraph are subject to the condition that if,after the principal of the Note shall have been so declared to be due and payable, and before foreclosure has been completed (i) the Authority shall deposit with the Note Owner a sum sufficient to pay all matured installments of interest on the Note and the principal of the Note which shall become due otherwise than by reason of such declaration(with interest on such principal), and(ii) all Events of Default hereunder with respect to such Note other than nonpayment of the principal of such Note which shall have become due by said declaration shall have been remedied,then,in every such case, upon the written consent of the Note Owner,such Event of Default shall be deemed waived and such declaration and its consequences rescinded and annulled; but no such waiver, rescission and annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy consequent thereon. 333-3640-6532.1 7 (c) Upon the occurrence and continuance of any Event of Default with respect to the Note, the following are the Note Owners sole remedies: (i) institute foreclosure proceedings against the Authority under the Deed of Trust; (ii) seek equitable relief to enjoin any acts or things which may be unlawful or in violation of the rights of the Note Owner hereunder; or (iii) file proofs of claim in any bankruptcy or insolvency proceedings related to the Authority or the Premises,necessary or appropriate to protect the interest of the Note Owner. (d) Notwithstanding anything herein to the contrary,the Note Owner shall not have any right, to institute a proceeding under the Bankruptcy Code seeking to adjudge the Authority insolvent or a bankrupt or seeking a reorganization of the Authority. (e) For all payments of principal and interest made after the tenth(10`h)day of the month, there shall be added a five (5%)percent penalty on the amount past due. (f) Nothing contained herein or in the Deed of Trust shall preclude any offset by the Authority in any action brought by the Note Owner hereunder, under the Note or Deed of Trust. Moreover, the Authority shall have the right to assert any and all defenses under State law in any action at law or in equity. Section 5.03. Cure by Note Owner. The Note Owner may,but shall not be obligated to,cure an Event of Default under this Indenture with respect to Note, including the advancing of funds required for taxes or insurance for the Premises. The amount of all advances made hereunder shall be added to the principal balance of the Note and shall bear interest at the rate provided in the Note. All advances shall be paid prior to release of any surplus funds to the Authority. Section 5.04. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Note Owner is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative in nature and may be asserted in the alternative,and shall be in addition to every other remedy given hereunder,or now or hereafter existing at law or in equity or by statute; provided, however, that any conditions set forth herein to the taking of any remedy to enforce the provisions of this Indenture or the Note,shall also be conditions to seeking any remedies under any of the foregoing pursuant to this Section. Section 5.05. No Waiver of Remedies. No delay or omission of the Note Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default, or any acquiescence therein; and every power and remedy given by this Article to the Note Owner may be exercised from time to time and as often as may be deemed expedient. Section 5.06. Severability of Remedies. It is the purpose and intention of this Article to provide rights and remedies to the Note Owner which may be lawfully granted under the provisions 333-3640-6532.1 8 of the Act, but should any right or remedy herein granted be held to be unlawful, the Note Owner shall be entitled, as above set forth, to every other right and remedy provided in this Indenture and by law. ARTICLE VI - MODIFICATION OF THIS INDENTURE, THE NOTE, THE DEED OF TRUST AND ANY OTHER DOCUMENTS Section 6.01. Limitations. This Indenture,the Note,the Deed of Trust or any document or agreement executed in connection with this Indenture may be modified upon the written consent of the Authority and Note Owner. Section 6.02. Effect of Supplemental Agreement. Upon the execution and delivery of any supplemental agreement pursuant to the provisions of this Article,this Indenture shall be,and shall be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations of the Authority and the Note Owner under this Indenture shall thereafter be determined,exercised and enforced under this Indenture subject in all respects to such modifications and amendments. Section 6.03. Opinion. Before the Authority shall enter into any modification,alteration,or amendment to or supplement of this Indenture,the Note or the Deed of Trust pursuant to this Article VI,there shall have been delivered to the Authority,an opinion of Special Counsel stating that such modification,alteration,amendment or supplement is authorized or permitted by this Indenture and the Act,complies with their respective terms,will,upon the execution and delivery thereof,be valid and binding upon the Authority in accordance with its terms and will not adversely affect the exclusion from the gross income of interest on the Note for federal income tax purposes. ARTICLE VII MISCELLANEOUS Section 7.01. Successors of the Authority. In the event of the dissolution of the Authority, all the covenants, stipulations,promises and agreements in this Indenture contained,by or on behalf of, or for the benefit of, the Authority, shall bind or inure to the benefit of the successors of the Authority from time to time and any entity,officer,board,commission,agency or instrumentality to whom or to which any power or duty of the Authority shall be transferred. Section 7.02. Parties in Interest. Except as herein otherwise specifically provided,nothing in this Indenture expressed or implied is intended or shall be construed to confer upon any person,from or corporation other than the Authority and the Note Owner any right,remedy or claim under or by reason of this Indenture,this Indenture being intended to be for the sole and exclusive benefit of the Authority and the Note Owner. Section 7.03. Severability. In case any one or more of the provisions of this Indenture, the Note or the Deed of Trust, shall, for any reason, be held to be illegal or invalid, such illegality or 833-3640-6532.1 9 invalidity shall not affect any other provision of this Indenture,the Deed of Trust or the Note, and this Indenture, this Deed of Trust, and Note shall be construed and enforced as if such illegal or invalid provisions had not been contained herein or therein. Section 7.04. No Personal Liability of Authority Officials. No covenant or agreement contained in the Note, Deed of Trust or in this Indenture shall be deemed to be the covenant or agreement of any official,officer,agent or employee of the Authority in his individual capacity,and neither the members of the Authority nor any official executing the Note shall be liable personally on the Note or be subject to any personal liability or accountability by reason of the issuance thereof. Section 7.05. Counterparts. This Indenture may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts shall together constitute but one and the same Indenture. Section 7.06. Governing Law. The laws of the State shall govern the construction and enforcement of this Indenture, Deed of Trust and of the Note issued hereunder. Section 7.07. Notices. Except as otherwise provided in this Indenture, all notices, certificates, requests, requisitions or other communications by the Authority or the Note Owner pursuant to this Indenture shall be in writing and shall be sufficiently given and shall be deemed given when mailed by registered mail, postage prepaid, addressed as follows: if to the Authority: San Bernardino Joint Powers Financing Authority 201 North "E" Street,Third Floor San Bernardino, California 92401 Attention: Agency Administrator if to the Note Owner: Tim J. Burgess 1625 Iowa Avenue Riverside, California 92507 Any of the foregoing may,by notice given hereunder to each of the others,designate any further or different addresses to which subsequent notices,certificates,requests or other communications shall be sent hereunder. Section 7.08. Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, shall not be a Business Day, such payment may, unless otherwise provided in this Indenture, the Deed of Trust or the Note be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Indenture, and no interest shall accrue for the period from and after such nominal date. 833.3640-6532.1 10 IN WITNESS WHEREOF, the Authority has caused this Indenture to be executed by its Chairman and its official seal to be impressed hereon and attested by its Secretary and the Note Owner have caused this Indenture to be executed on its behalf by its duly authorized representatives all as of the day and year first above written. [SEAL] San Bernardinoloint Powers Financing Authority By: Executive Director Attest: By: Its Secretary Note Owner By: Jim T. Burgess Approved as to form: Authority Counsel 833.3610.6532.1 l l EXHIBIT "A" FORM OF NOTE 833-3640-6532.1 12 $1,200,000 SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, SAN BERNARDINO CITY FIRE DEPARTMENT MAINTENANCE FACILITY NOTE 2009 DATE OF MATURITY DATE INTEREST RATE ORIGINAL ISSUE July 1,2019 5% August 1,2009 NOTE OWNER: TIM J. BURGESS,A SINGLE MAN PRINCIPAL ONE MILLION TWO HUNDRED THOUSAND DOLLARS AMOUNT: ($1,200,000) The San Bernardino Joint Powers Financing Authority, organized under the laws of the State of California, (the "Authority"), for value received, hereby promises to pay this promissory note which is designated the "San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note - 2009" (the "Note") to the Note Owner named above or any successor or assign, from the source and in the manner hereinafter provided and as provided in the Indenture and Loan Agreement dated as of August 1, 2009, by and between the Authority and the Note Owner ("Indenture"), in the principal sum of One Million Two Hundred Thousand Dollars ($1,200,000) plus interest at the rate per annum specified above. This Note is issued under and secured by the Indenture and a Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Financing Statement as of August 1, 2009 ("Deed of Trust'). The Indenture provides a description of the nature and extent of the security, the respective rights thereunder of the Note Owner and the Authority, the terms upon which the Note is issued and the definitions of certain terms used in this Note. (Capitalized terms not defined herein shall have the meanings given In the Indenture). This Note may not be offered or sold or otherwise transferred except pursuant to an exemption set forth in California Corporations Code Section 25102. Any sale or transfer of the Note, except a sale or transfer made pursuant to California Corporations Code Section 25102(f), shall require the prior written consent of the Authority. Any attempted sale of the Note in a manner inconsistent with this paragraph shall be void and shall not be binding on the Authority. Principal and interest on this Note shall be payable as provided herein, when due, for as long as the Note remains outstanding, in lawful money of the United States of America at the address indicated in the Indenture or at such other location as the Note Owner shall designate in writing to the Authority. Interest on the outstanding principal balance of this Note shall be calculated on the basis of a 360-day year of twelve 30-day months. If payment due hereunder is delinquent for ten (10) days, after the 100i day the Authority agrees to pay a late charge in the amount of five percent(5%)of the payment then due and unpaid in addition to said payment. t 4836-7765-2740.1 1 On Closing Date Authority shall pay Note Owner Four Hundred Thousand Dollars ($400,000). Commencing January 1, 2010 through July 1, 2014 interest shall be payable on January 1 and July I of each year in the amount of Thirty Thousand Dollars ($30,000). Authority does hereby have the option to on July 1, 2014, pay the principal then outstanding on the Note to Note Owner in full and terminate the Note, or to extend the term of the Note for an additional five (5) years from July 1, 2014 to July 1, 2019 on the conditions hereinafter set forth. On or before May 1, 2014, Authority shall notify Note Owner of Authority's election regarding the exercise of that option. If the Authority timely notifies the Note Owner that the Authority has elected to extend the term, then, on January 1, 2015, Authority shall make to the Note Owner a payment of principal in the amount of One Hundred Thousand Dollars ($100,000) and of interest in the amount of twenty-seven thousand five hundred dollars ($27,500) for a combined payment on that date of One Hundred Twenty-Seven Thousand Five Hundred Dollars ($127,500). Note Owner may elect to waive the receipt of principal at that time; however, interest payments shall thereafter be calculated as if the principal had been reduced in the amount of One Hundred Thousand Dollars ($100,000). Commencing with the payment on July 1, 2015 and continuing to July 1, 2019, interest shall be payable on July 1, and January 1, of each year in the amount of Twenty-Seven Thousand Five Hundred Dollars ($27,500). On July 1, 2019, the final interest payment and all principal then outstanding shall be due and payable to the Note Owner by the Authority. All payments shall be of interest only except as otherwise herein provided. This Note is issued by the Authority under the Indenture to finance the acquisition and renovation of the fire maintenance facility generally located at 120 South "D" Street, San Bernardino (the "Project"). Subject to the Indenture, the Authority has agreed to repay the loan solely from the Revenues (as defined in the Indenture) in the amounts and at the times sufficient to pay principal of and interest on this Note as the same shall become due and payable as set forth hereinabove. The Authority's obligation pursuant to the Indenture is evidenced by this Note. Pursuant to the Deed of Trust, the Authority has granted to the Note Owner a first lien on the real property comprising the Project (the "Premises"). Reference is hereby made to the Indenture and the Deed of Trust for a description of the agreements and covenants contained therein and a description of the Premises. This Note is not a general obligation of the Authority, but a limited obligation payable solely from the Revenues pledged pursuant to the Indenture, which shall be used for no other purpose than to pay the principal of, and interest on this Note, except as may be otherwise expressly authorized in the Indenture. EACH AND EVERY COVENANT MADE HEREIN BY THE AUTHORITY IS PREDICATED UPON THE CONDITION THAT NEITHER THE AUTHORITY NOR THE STATE OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF SAN BERNARDINO, CALIFORNIA, WILL IN ANY EVENT BE LIABLE FOR THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE NOTE, OR OTHER FEES AND EXPENSES PROVIDED HEREUNDER OR THE PERFORMANCE OF ANY PLEDGE, SECURITY AGREEMENT, OBLIGATION OR AGREEMENT CREATED BY OR ARISING UNDER THE INDENTURE OR THE NOTE 4836-7765.2740.1 2 FROM ANY PROPERTY OTHER THAN THE REVENUES AND THE PREMISES; AND FURTHER, THAT NEITHER THE NOTE NOR ANY SUCH OBLIGATION OR AGREEMENT OF THE AUTHORITY IN CONNECTION HEREWITH SHALL BE CONSTRUED TO CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY, THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF, INCLUDING THE CITY OF SAN BERNARDINO, CALIFORNIA, WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY PROVISION WHATSOEVER, OR AS A PLEDGE OF THE GENERAL CREDIT, FULL FAITH OR TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF. THE AUTHORITY HAS NO TAXING POWER. The Note shall be subject to redemption by the Authority prior to maturity, in whole or in part at any time at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date. In the event the Note is called for redemption, the Authority shall provide notice to the Note Owner, which notice shall specify the redemption date, the redemption price and the amount of the Note to be redeemed. Such notice shall be given by Mail to the Note Owner at least thirty(30) days, but no more than sixty (60) days, prior to the date fixed for redemption. If an "Event of Default," as defined in the Indenture shall occur, subject to the prior payment of this Note, the principal of the Note may be declared due and payable in the manner and with the effect provided in the Indenture. The Note Owner shall have no right to enforce the provisions of the Indenture or the Deed of Trust, to institute action to enforce the covenants therein, to take any action with respect to a default under the Indenture or to institute, appear in or defend any lawsuit or other proceeding with respect thereto, except as provided in the Indenture. It is hereby certified, recited and declared that all conditions, acts and things required by the Constitution and the statutes of the State of California and the Indenture, to exist, happen and be performed precedent to or in the issuance of this Note, do exist, have happened and have been performed in regular and due form as required by law. IN WITNESS WHEREOF, the Authority has caused this Note to be executed in its name and on its behalf by the signature of its Chairman and attested by the signature of its Secretary all as of the Date of Original Issue identified above. San Bernardino Joint Powers Financing Authority By: Chairman 4836-7765-2740.1 3 EXHIBIT"4" DEED OF TRUST EXHIBIT"4" DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FINANCING STATEMENT This DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FINANCING STATEMENT ("Deed of Trust') is made as of August 1, 2009 by the San Bernardino Joint Powers Financing Authority having an address at 201 North "E" Street, Third Floor, San Bernardino, California 92401 (Trustor"), to COMMONWEALTH LAND TITLE COMPANY, having an address at 275 West Hospitality Lane, San Bernardino, California 92408, as trustee ("Trustee") for the benefit of Tim J. Burgess, a single man (`Beneficiary"). (All capitalized terms not expressly defined in this Deed of Trust shall have the meanings given to them in that certain Indenture and Loan Agreement dated as of August 1, 2009,between Trustor and Beneficiary(the"Indenture")). WHEREAS, Trustor is a public body corporate and politic organized under the laws of the State of California and authorized pursuant to the Marks-Roos Local Bond Pooling Act of 1985 (commencing with section 6584 of the Government Code) (the "Act") (as in effect on the date of execution of this Deed of Trust) to incur indebtedness for the purpose of financing and acquisition of and rehabilitation of -public capital improvements (as such term is defined in Article I of the Act); and WHEREAS, among other things, Trustor has agreed to pledge the Premises, as hereinafter defined, as further security for repayment of the promissory note date as of August 1, 2009, made by Trustor for the benefit of Beneficiary, designated the San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note - 2009 (the "Note"). NOW, THEREFORE, in consideration of the obligations pledged under the Note to secure timely repayment thereof and in accordance with the terms, provisions and limitations of this Deed of Trust, and to secure the performance of the covenants and agreements contained herein, whether currently in effect or to be executed after the date hereof, and any other documents evidencing and securing the obligation secured hereby (collectively, the "Related Documents") to be performed by Trustor, Trustor, intending to be legally bound, does hereby irrevocably GIVE, GRANT, BARGAIN AND SELL ALIENATE, MORTGAGE, CONVEY, CONFIRM, TRANSFER AND ASSIGN TO TRUSTEE, ITS SUCCESSORS AND ASSIGNS, FOR THE BENEFIT OF BENEFICIARY, ITS SUCCESSORS AND ASSIGNS, IN TRUST, WITH POWER OF SALE, all of Trustor's estate, right, title and interest in and to that certain real property situated and, lying, and being in the City of San Bernardino, County of San Bernardino and State of California and more particularly described in Exhibit "A" attached hereto and incorporated herein by this reference(the"Premises"); TOGETHER, with all easements, rights of way, strips and gores of land, vaults, streets, alleys, water rights, mineral rights and rights used in connection therewith or as a means of access thereto, or to provide service thereto, privileges, franchises, development, air and other rights and appendages now or in the future belonging to or in any way appertaining to the Premises, including, without limitation, all tenements, hereditaments and appurtenances thereof 4847-6692-6596.1 1 - and thereto pertaining or belonging, and all underground and overhead passageways and licenses in connection therewith; TOGETHER with all of Trustor's right, title and interest in any and all of the Premises, and leases, subleases, management agreements, arrangements, _ concessions or agreements, written or oral, relating to the use and occupancy of the Premises or any portion thereof, now or hereafter existing or entered into, as any of the foregoing may be amended, extended, renewed or modified from time to time, which grant is made subsequent in time and priority to the rights granted to Beneficiary pursuant to Section 25 hereof, TOGETHER, with all rents, issues and profits of the Premises for so long and during all such time as Trustor may be entitled thereto (which are pledged primarily and on a parity with said real estate and not secondarily), which grant is made subsequent in time and priority to the rights granted to Beneficiary pursuant hereto; TOGETHER with all of Trustor's right, title and interest in and to any and all buildings, structures and improvements now or hereafter erected on the Premises, including, without limitation, buildings and structures, the fixtures, attachments, appliances, equipment, machinery and other articles attached to said buildings, all appraisals, engineering , soils, environmental and other reports and studies relating to the Premises, all permits, licenses and contract rights, warranties, guarantees, catalogues, tenant suppliers, advertising materials, it being understood that the enumeration of any specific articles of property shall in no way result in or be held to exclude any items of property not specifically mentioned, EXCEPT THAT THIS GRANT OF RIGHT DOES NOT EXTEND TO ANY SPECIALTY FIRE SERVICE APPARATUS INCLUDING THE FOLLOWING: TOGETHER,with all estate, interest, right, title, other claim or demand, including claims or demands with respect to the proceeds of insurance in effect with respect thereto, which Trustor now has or may hereafter acquire in or with respect to the Premises, and any and all awards made for the taking by eminent domain, or by any proceedings or purchase in lieu thereof, of the whole or any part of the Premises, including without limitation, any awards resulting from the change of grade of streets and awards for severance damages; and TOGETHER, with all proceeds and avails of the conversion, voluntarily or involuntarily, of any of the foregoing into cash or liquidated claims, including but not limited to proceeds of insurance and of any conveyance of the Premises or an part thereof, TO HAVE AND TO HOLD the Premises, together with all and singular of the rights, privileges, tenements, hereditaments and appurtenances thereto in any way incident or belonging unto the Trustee and to its successors or substitutes in trust and its and their assigns forever, FOR THE PURPOSE OF SECURING, in such order of priority as Beneficiary may elect, and without limiting the generality of the foregoing provisions of this Deed of Trust: (a) payment of all amounts due under the Note; (b) Payment of al sums advanced by Beneficiary or Trustee to protect the Premises; 4847-6692-6596.1 2 (c) Performance of every obligation, covenant or agreement of Trustor contained herein, in the Note, and in the Related Documents; (d) Performance of every obligation, covenant and agreement of Trustor contained in any agreement now of hereafter executed by Trustor which recites that the obligations thereunder are secured by this Deed of Trust; and (e) Compliance with and performance of each and every material provision of any declaration-of covenant, conditions and restrictions pertaining to the Premises or any portion thereof. All of the land, rights, estate and property hereinabove described, real, personal and mixed, whether affixed or annexed or not (except where otherwise herein specified), and all rights hereby conveyed and mortgaged are intended so to be as a unit and are hereby understood, agreed and declared to form a part and parcel of the real estate and to be appropriated to the use of the real estate, and shall for the purposes of the Deed of Trust be deemed to be real estate and conveyed and mortgaged hereby. Trustor covenants that: (1) it has good and marketable and insurable title and interest to the Premises and is lawfully seized of the Premises subject only to the Permitted Exceptions. "Permitted Exceptions" are those liens, encumbrances, conditions, restrictions, easements, rights of possession and leasehold interests affecting title waived in writing by the Beneficiary, (ii) it has good right, full power and lawful authority to convey and mortgage the same, and that it will warrant and forever defend the Premises and the quiet and peaceful possession of the same against the claims of all persons whomever; (iii) all leases, management agreements, licenses ( and other instruments hereinabove referred to and assigned and mortgaged hereby are valid and subsisting and in full force and effect and Trustor is not in default thereunder, Trustor has no knowledge of any default thereunder by any other party, and no written notice of default remaining uncured as of the date hereof has been given or received by Trustor; (iv) this Deed of Trust and the other Related Documents pertaining to the Premises when duly recorded in the appropriate public records create a valid and enforceable lien upon the Premises subject hereto and thereto securing the sums secured hereby and thereby, and, as of the date hereof, there are no defenses or offsets to this Deed of Trust or to any indebtedness secured hereby; and (v) each and every warrant and representation of Trustor contained in any part of the Related Documents was true, complete and correct in all material respects at the time made and remade, and does not omit any material fact necessary to make such warranty or representation not misleading. This Deed of Trust is given pursuant to the Note and the Related Documents. Each and every term and provision of the Note and the Related Documents including the rights, remedies, obligations, covenants, conditions, agreements, indemnities, representations and warranties of Trustor, are hereby incorporated by reference herein as though set forth in full and shall be considered a part of this Deed of Trust, and payment, fulfillment and performance thereof is secured hereby, and, in accordance with the Note and the Related Documents, any default under the Note and the Related Documents which continues beyond the applicable notice and cure period under the said documents shall constitute an "Event of Default" (as hereinafter defined) under this Deed of Trust entitling Beneficiary to all the remedies provided in this Deed of Trust, under the Note and the Related Documents, at law and in equity. tar 484766926596.1 3 Without limiting the generality of the foregoing, Trustor does hereby covenant and agree to carry out, perform, fulfill and observe each and every covenant, agreement, obligation and indemnity of Trustor set out in the Note and the Related Documents and Trustor specifically agrees for the benefit of Beneficiary, as follows: Maintenance Repair and Restoration of Improvements. Payment of Liens. Etc. 1. Trustor shall: (a) promptly repair, restore or rebuild, or cause to be repaired, restored or rebuilt, any buildings or improvements now or hereafter on the Premises which may become damaged or be destroyed; (b) constantly maintain or cause to be maintained the Premises in good condition and repair, without waste; ©) keep the Premises free from mechanics' liens or claims for lien' (d) pay when due any indebtedness which may be secured by a lien or charge on the Premises and comply with all requirements of all the Related Documents evidencing or securing such indebtedness, and, upon request, exhibit sat;sfactory evidence of the discharge of such prior lien or such compliance to Beneficiary; (e) comply with all requirements of law, municipal ordinances or restrictions of record and all other applicable laws, rules, regulations, directions, requirements, orders and notices of violation of any governmental or quasi-governmental agency, body or office with respect to the Premises and the operation or use thereof, (f) initiate or acquiesce in no zoning variation or reclassification of the Premises or any part thereof without Beneficiary's written consent; (g) pay each item of indebtedness and perform and fulfill each of the obligations secured by this Deed of Trust when due or required according to the terms hereof, the Note and Related Documents; (h) make no material alteration to or demolish any portion of the Premises, except as required by law or municipal ordinance or as contemplated by the Note; and (I) suffer or permit no change in the general nature of the occupancy of the Premises without Beneficiary's written consent. Payment of Taxes 2. Trustor shall pay, before any penalty attaches, all real property taxes and assessments, general and special, and all other taxes and assessments of any kind or nature whatsoever, including, without limitation, nongovernmental levies or assessments such as maintenance charges, levies or charges resulting from covenants, conditions and restrictions affecting the Premises, which are assess or imposed upon the Premises, or become due and payable, and which create, may create or appear to create a lien upon the Premises, or any part thereof, or upon any maintenance thereof, and shall pay special taxes, special assessments, water charges, sewer service charges and other utility charges which may become a charge or lien against the Premises when due and shall, upon written request, furnish to Beneficiary duplicate receipts therefore or other evidence of payment acceptable to Beneficiary. To prevent default hereunder, Trustor shall pay in full under protest, in the manner provided by statute, any tax or assessment which Trustor may decide to contest. Trustor shall not suffer, permit or initiate the joint assessment of any real and personal property which may constitute all or a portion of the Premises or suffer, permit or initiate any other procedure whereby the lien of the real property taxes and the lien of the personal property taxes shall be assessed, levied or charged to the Premises as a single lien. 4847669245961 4 Issuance and Premium Deposits 3. (a) Trustor shall maintain fire and extended coverage, casualty, liability and other policies of insurance relating to the Premises as required pursuant to the Note. All policies of insurance to be famished hereunder shall be in forms and from companies reasonably satisfactory to Beneficiary and in amounts as provided in the Note with mortgagee clauses attached to all policies in favor of Beneficiary and in form reasonably satisfactory to Beneficiary, and shall name Beneficiary as an additional insured, and shall include provisions requiring that the coverage evidenced thereby shall not be terminated (including termination for non-payment) or materially modified without thirty (30) days' prior written notice to Beneficiary and that no act or thing done by Trustor shall invalidate the policy as against Beneficiary. Trustor shall deliver all policies, including additional and renewal policies, together with evidence of payment of premiums thereon, to Beneficiary and in case of all insurance about to expire, shall deliver renewal policies not less than thirty(30) days prior to their respective dates of expiration. (b) Trustor shall not take out separate insurance concurrent inform or contributing in the event of loss with that required to be maintained hereunder unless Beneficiary is included thereon under a standard, non-contributory mortgagee clause acceptable to the Beneficiary. Trustor shall immediately notify Beneficiary whenever any such separate insurance is taken out and shall promptly deliver to Beneficiary the original policy or policies or such insurance. (9) In the event of foreclosure of this Deed of Trust or other transfer of title or assignment of the Premises in extinguishment, in whole, or in part, of the debt secured hereby, all right, title and interest of Trustor in and to all policies of insurance required by this Section 3 and covering solely the Premises or any portion thereof shall inure to the benefit of and pass to the successor in interest to Trustee or the purchaser or grantee of the Premises. Adiustment Of Losses with Insurer and Application of Proceeds of Insurance 4. (a) Trustor shall give prompt written notice to Beneficiary after the happening of a casualty to or in connection with the Premises or any part thereof the cost of which to repair, as reasonably estimated by Trustor, is Fifty Thousand Dollars ($50,000) or more, whether or not covered by insurance. In case of loss, Beneficiary shall have the right (but not the obligation) to settle any insurance claim filed for more than One Hundred Thousand Dollars ($100,000); provided, however, that if there does not exist a default under the Note, this Deed of Trust or any of the Related Documents, Trustor shall have the right to participate in and jointly settle any such insurance claims with Beneficiary, provided that Beneficiary shall have the sole right to settle any such insurance claims which are not settled jointly by Beneficiary and Trustor on of before ninety(90) days of each such loss, unless Trustor has been unable, despite diligent efforts on its part, to settle the claim in question within such ninety (90) day period, in which case such ninety (90) day period shall be extended for up to an additional sixty (60) days in order to give Trustor sufficient time to effect such settlement, on the condition that Trustor continue diligent efforts to achieve a settlement during any such extension period. Any claim filed for One Hundred Thousand Dollars ($100,000) or less shall be adjusted and settled by Trustor alone, provided that Beneficiary shall have the right to settle any such claims that Trustor has not settled on or before ninety (90) days after the date of such loss. Beneficiary is at all times 4847-6692-6596.1 5 authorized to collect and receive any insurance money. If Beneficiary may, and elects to, apply such proceeds in payment or reduction of the indebtedness secured hereby, whether due or not, and if the same are insufficient to pay such amount in full, then Benefciary may, at its option, declare the balance due and payable under the Note and this Deed of Trust to be due and payable forthwith and avail itself of any of the remedies provided for herein or in the Note in the case of a default. If Beneficiary may not, or does not elect to, apply the insurance proceeds to the indebtedness as set forth in the preceding sentence, such insurance proceeds shall be used to reimburse Trustor for the cost of rebuilding or restoration of the Premises. The Premises shall be so restored or rebuilt as to be of at least equal value and quality and substantially the same character as the Premises were prior to such damage or destruction. If Beneficiary elects to reimburse Trustor out of insurance proceeds, such proceeds shall be made available, from time to time, upon beneficiary being furnished with satisfactory evidence of the estimated cost of completion thereof and with such architect's certificates, waivers of lien, contractors' sworn statements and other evidence of cost and of payments as Beneficiary may require and approve. If the estimated cost of the work exceeds One Hundred Thousand Dollars ($100,000), Beneficiary shall also be furnished with all plans and specifications for such rebuilding or restoration as the Beneficiary may require and approve. (b) Any insurance proceeds paid to and held by Beneficiary to reimburse Trustor for the cost of rebuilding or restoration of the Premises shall be placed by Beneficiary in an interest bearing account selected by Beneficiary. An interest earned on such insurance proceeds shall be applied and disbursed in the same manner as such insurance proceeds and shall, for the purposes hereof, be deemed to be part of such insurance proceeds, except that if, after the completion of any such rebuilding or restoration, there remains any interest earned on such proceeds, same shall be disbursed to Trustor, provided that no default exists under this Deed of Trust or any of the Related Documents. C) In case of loss after foreclosure proceedings have been instituted, the proceeds of any such insurance policy or policies, if not applied as aforesaid to the rebuilding or restoring of the buildings or improvements, shall be applied in payment or reduction of the indebtedness secured hereby or in payment or reduction of the amount due in accordance with any decree of foreclosure that may be entered in any such proceedings, and the balance, if any shall be paid to the owner of the equity of redemption if it shall then be entitled to the same or as the court may direct. In the event of a foreclosure sale, Beneficiary is hereby authorized to assign, without the consent of Trustor, any and all such insurance policies to the purchaser at the sale, or take such other steps as Beneficiary may deem advisable to cause the interest of such purchaser to be protected by any of the said insurance policies. Tax 5. If, by the laws of the United States of America, or of any state or political subdivision having jurisdiction over Trustor, any tax is due or becom--s due in respect of the Note of the recording of this Deed of Trust, Trustor covenants and agrees to pay such tax in the manner required by any such law. Trustor further covenants to defend and hold harmless and agrees to indemnify Beneficiary, its successors or assigns, against any liability incurred by reason of the imposition of any tax in respect of the Note or the recording of this Deed of Trust. 48476692-6596.1 6 Effect of Chanties in Law Regarding Taxation 6. In the event of the enactment after the date of this Deed of Trust of any law of the State of California or any political subdivision thereof deducting from the value of land for the purpose of taxation any lien thereon, or imposing upon Beneficiary the obligation to pay the whole or any part of the taxes or assessments or charges or liens herei•t required to be paid by Trustor, or changing in any way the laws relating to the taxation of deeds of trust or debts secured by deeds of trust or the Beneficiary's interest in the Premises, or any portion thereof, or the manner of collection of taxes, so as to adversely affect this Deed of Trust or the debt secured hereby, then, and in any such event, Trustor, upon demand by Beneficiary, shall pay such taxes or assessments, or reimburse Beneficiary therefor. Indemnification• Subrogation; Waiver of Offset 7. (a) If Trustee or Beneficiary is made a party to any litigation concerning the Note, this Deed of Trust or any of the Related Documents, the Premises or any part thereof or interest therein, or the occupancy of the Premises by Trustor, then Trustor shall indemnify, defend and hold harmless Trustee (to the extent permitted by law) and Beneficiary from and against any and all liability by reason of said litigation, including attorney's fees and expenses incurred by Trustee and Beneficiary as a result of any such litigation, whether or not any such litigation is prosecuted to judgment, or in any way arising out of such litigation, including, without limitation, any negotiation, whether or not successful, of any proposed settlement of any such litigation. Without limiting the generality of the immediately preceding sentence, each of Trustee and Beneficiary may employ an attorney or attorneys to protect its rights hereunder. (b) Trustor waives any and all right to claim or recover against Trustee, Beneficiary, their respective officers, employees, agents and representatives for loss of or damage to Trustor, the Premises, Trustor's property or the property of others under Trustor's control from any cause insured against, or required to be insured against by the provisions of this Deed of Trust and which may be insured against by law. (c) All sums payable by Trustor pursuant to the Note, this Deed of Trust or any of the Related Documents shall be paid without notice, demand, counterclaim, setoff, deduction or defense, and without abatement, suspension, deferment, diminution or reduction, and the obligations and liability of Trustor hereunder shall in no way be released, discharged or otherwise affected (except as expressly provided herein) by reason of: (l) any damage to or destruction of or any condemnation or similar taking of the Premises or any part thereof, (iii) any related title defect or encumbrance or any eviction from the Premises or any part thereof by title paramount or otherwise; (iv) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to Trustee or Beneficiary, or any action taken with respect to this Deed of Trust by any trustee or receiver of Beneficiary, or by any court, in any such proceeding; (v) any claim which Trustor has or might have against Trustee or Beneficiary; (vi) any default or failure on the part of Trustee or Beneficiary to perform or comply with any of the terms hereof or of any other agreement with Trustor; (vii) any other occurrence whatsoever, whether similar or dissimilar to the forgoing; whether or not 484766926596.1 7 Tmstor shall have notice or knowledge of any of the foregoing. Except as expressly provided herein, Trustor waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any sum secured hereby and payable by Trustor. Actions Affecting the Premises 8. Trustor shall appear in and contest any action or proceeding purporting to affect the security hereof or the rights or powers of Beneficiary or Trustee; and shall pay all costs and expenses, including costs of evidence of title and attorney's fees and expenses, in any such action or proceeding in which Beneficiary or Trustee may appear. Actions by Trustee or Beneficiary to Preserve Premises 9. If Trustor fails to make any payment or to do any act as in the manner provided in the Note or any of the Related Documents, Beneficiary and/or Trustee, each in its own discretion, without obligation to do so, without releasing Trustor from any obligation, and without notice to or demand upon Trustor, may make such demand or give such notice in such manner and to such extent as either may deem necessary to protect the security hereof. In connection therewith (but without limiting their general powers, whether conferred herein, in any of the Related Documents or by law), each of Beneficiary and Trustee shall have and are hereby given the right, but not the obligation: (a) to enter upon and take possession of the Premises; (b) to make additions, alterations, repairs and improvements to the Premises which they or either of them ma consider necessary or proper to keep the Premises in good condition and repair; (c) to appear and participate in any action or proceeding affecting or which may affect the security hereof or the rights or powers of the Beneficiary and Trustee; (d) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt which in the judgment of either may affect or appears to affect the security of this Deed of Trustor be prior or superior hereto; and (e) in exercising such powers, to employ counsel or other necessary or desirable consultants. Full Performance Required: Survival of Warranties 10. All representations, warranties and covenants of Trustor contained in the Note or made to Beneficiary in connection with the indebtedness secured hereby or contained in the Related Documents or incorporated by reference therein, shall survive the execution and delivery of this Deed of Trust and shall remain continuing obligations, warranties and representations of Trustor so long as any portion of the obligations secured by this Deed of Trust remain outstanding. Cumulative Security 11. No other security now existing, or hereafter taken, to secure the obligations secured hereby shall be impaired or affected by the execution of this Deed of Trust; and all such security shall be taken, considered and held as cumulative. The taking of other security, execution of partial releases of the security, or any extension of the time of payment of the 4847L692fi596.1 8 indebtedness secured hereby shall not diminish the force, effect or lien of this Deed of Trust and shall not effect or impair the liability of any maker, surety or endorser for the payment of said indebtedness. If Beneficiary at any time holds any other security for any of the obligations secured hereby, it may enforce the sale thereof or otherwise realize upon the same, at its option, either before, concurrently, or after a sale is made hereunder. AMoointment of Successor Trustee 12. Beneficiary may from time to time, by a written instrument executed and acknowledged by Beneficiary, mailed to Trustor and recorded in the county in which the Premises is located, and by otherwise complying with the provisions of the applicable law, substitute a successor or successors to any Trustee name herein or acting hereunder; and said successor shall, without conveyance from the predecessor Trustee, succeed to all title, estate, rights, power and duties of said predecessor. Liens 13. Trustor shall pay and promptly discharge, at Trustor's cost and expense, all liens, encumbrances and charges upon the Premises. If Trustor shall fail to remove and discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same, either by paying the amount claimed to be due, or by procuring the discharge of such lien, encumbrance or charge by depositing in a court a bond or the amount claimed, otherwise giving security for such claim, or by procuring such discharge in such manner as is or may be prescribed by law. Trustor shall, immediately upon demand therefor by Beneficiary, pay to Beneficiary an amount equal to all costs and expenses incurred by Beneficiary in exercising the foregoing right to discharge any such lien, encumbrance or charge. Trustee's Powers 14. At any time, or from time to time, without liability &.ej efor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the Note secured hereby for endorsement or the effect of this Deed of Trust upon the remainder of said Premises, the Trustee may: (a) consent in writing to the making of any map or plat thereof, (b) join in granting any easement thereon or (c) join in any extension agreement or any agreement subordinating the lien of charge hereof. Trustee Notice 15. Trustee is not obligate to notify any party hereto of any pending sale under any other deed of trust or of any action or proceeding in which Trustor, Beneficiary or Trustee shall be a party, unless brought by Trustee. 484766926596.1 9 Compensation and Indemnification of Trustee 16. Trustee shall be entitled to reasonable compensation for all services rendered or expenses incurred in the administration or execution of the trust hereby created and Trustor hereby agrees to pay the same. To the extent permitted by law, Trustee shall be indemnified, held harmless and reimbursed by Trustor for any liability, damage or expense, including attorneys' fees and-amounts paid in settlement, which Trustee may incur or sustain in connection with this Deed of Trust or in the doing of any act which Trustee is required or permitted to do by the terms hereof or bylaw, and shall be reimbursed therefor by Trustor promptly upon demand, unless such liability, damage or expense results from Trustee's acts constituting gross negligence or willful misconduct on the part of Trustee. Beneficiary's Powers 17. Without affecting the liability of any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Premises not then or theretofore released as security for the full amount of all unpaid obligations, Beneficiary may, from time to time and without notice: (a) release any person so liable, (b) extend the maturity or alter any of the terms of any such obligations, (D) grant other indulgences, (d) take or release any other or additional security for any obligation herein mentioned, or (e) make compositions or other arrangements with debtors in relation thereto. Effect of Extensions of Time and Amendments 18. If the payment of the indebtedness or the performance of any of the obligations secured by this Deed of Trust, or any part thereof, be extended or varied, or if any part of the security be released, all persons now or at any time hereafter liable therefor, or interested in the Premises, shall be held to assent to such extension, variation or release, and their liability and the lien and all provisions hereof shall continue in full force, the right of recourse, if any, against all such persons being expressly waived by Beneficiary notwithstanding such extension, variation or release. Any person or entity taking a junior deed of trust or lien upon the Premises or any interest therein, shall take said lien subject to the rights of Beneficiary herein to amend, modify and supplement this Deed of Trust, the Note, any other Related Document, or any other document or instrument evidencing or securing the indebtedness hereby secured, and to vary the rate of interest and the method of computing the same, and to impose additional fees and other charges, and to extend the maturity of said indebtedness, and to grant partial releases of the lien of this Deed of Trust, in each and every case without the lien of this Deed of Trust losing its priority over the rights of any such junior lien. Beneficiary's Performance of Default Acts: Subrogation 19. If Trustor fails to perform any of its covenants and agreements herein or in the Note or in any of the Related Documents within the time parameters set forth in the Note or any of the Related Documents, as the case may be, the, Beneficiary may elect, in its sole discretion, to make any payment or perform any act herein or therein required of Trustor, in any form and 4847-6692-6596.1 10 manner deemed expedient by Beneficiary, and may, but need not, make full or partial payments of principal or interest on prior encumbrances, if any, and purchase, discharge, compromise or settle any tax lien or other prior lien or title or claim thereof, or redeem from any tax sales or forfeiture affecting the Premises or contest any tax or assessment. All moneys paid for any of the purposes herein authorized and all expenses paid or incurred in connection therewith, including, without limitation, attorney's fees and expenses, and any other moneys advanced by Beneficiary to protect the-Premises and the lien hereof, shall be so much additional indebtedness secured hereby, and shall become immediately due and payable without notice. Inaction of Beneficiary shall never be considered as a waiver of any right accruing to it on account of any default on the part of Trustor. Should any amount paid out or advanced hereunder by Trustee, be used directly or indirectly to pay off, discharge or satisfy, in whole or in part, any lien or encumbrance upon the Premises or any part thereof on a parity with or prior or superior to the lien hereof, then as added security hereunder, the Beneficiary shall be subrogated to any and all rights, equal or superior titles, liens and equities, charges and indebtedness, however remote, regardless of whether said liens, charges and indebtedness are acquired by assignment or have been released of record by the holder thereof upon payment. Beneficiary and any person designated by the Beneficiary shall have the right, and is hereby granted the right, to enter upon the Premises for the foregoing purposes. Beneficiary's Reliance on Tax Bills, Etc. 20. Beneficiary in making any payment authorized by this Deed of Trust, in the Indenture, of the Note: (a) relating to taxes and assessments, may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale forfeiture, tax lien or title or claim thereof, or (b) for the purchase, discharge, compromise or settlement of any other prior lien, may do so without inquiry as to the validity or amount of any claim for lien which may be asserted. Events of Default i 21. Any of the following events shall be deemed an"Event of Default"hereunder: I (a) default shall be made in the payment of any amount due under the Indenture, when due; (b) default shall be made, with respect to nonmonetary covenants, agreements and obligations of Trustor hereunder and shall continue uncured for fifteen (15) days after written notice thereof from Beneficiary; provided, however, that if such failure by its nature cannot be cured within a fifteen (15) day period, then same shall not constitute an Event of Default so long as Trustor commences the cure of such default within such fifteen (15) day period and diligently prosecutes such cure to completion; or (c) any other default shall have occurred under the Indenture or Note or any of the Related Documents and the default shall not have been cured within any applicable grace period; or (d) any unpermitted transfer of title as described in this Deed of Trust. 48476692-6596.1 11 - Foreclosure: Expenses of Litigation: Indemnification 22. (a) Upon the occurrence of an Event of Default, the amounts due under the Indenture and other funds then held or to be received by Beneficiary under the provisions of the Indenture shall be payable without any presentment, demand, protest or notice of any kind to Trustor as and when such amounts become due. Thereafter Beneficiary, may in such order as Beneficiary,.in its sole discretion and as provided in the indenture, may elect: (1) either in person or by an agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and without regard to the adequacy of its security, and after 24 hours prior notice to the occupants, enter upon and take possession of the Premises, or any part thereof, in its own name or in the name of Trustee, and perform any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Premises, or any part thereof or interest therein, increase the income therefrom or protect the security hereof and, without or without taking possession of the Premises, sue for or otherwise collect the rents, issues and profits thereof, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including, without limitation, attorney's fees and expenses, in payment of any indebtedness secured hereby, all in such order as Beneficiary may determine. The entering upon and taking possession of the Premises, the collection of such rents, issues and profits or the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to possession of al or any portion of the Premises or the collection, receipt and application of rents, issu,;s or profits, Trustee or Beneficiary shall be entitled to exercise every right provided for herein or in any of the Related Documents or by law upon occurrence of any Event of Default, including the right to exercise the power of sale; (ii) commence and action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof; (iii) exercise the power of sale contained herein; (iv) exercise its rights under California Code of Civil Procedure Sections 726.5 or 736; or (v) exercise all other rights and remedies provided herein, in any of the Related Documents, in any other document or agreement now or hereafter securing all or any portion of the obligations secured hereby, or at law or in equity. (b) Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Indenture and such receipts and evidence of expenditures made and secured hereby as Trustee may require. 484766926596.1 12 (i) upon receipt of such notice from Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor a notice of default and election to sell ("Notice of Default") as is then required by law. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law, and after recordation of such Notice of Default and after notice of sale ("Notice of Sale") shall have been given as required by law, sell-the Premises at the time and place of sale fixed by it in said Notice of Sale, either as a whole, or in separate lots or parcels or items as Trustee shall deem expedient, and in such order as it may determine, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed or any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale and Trustor hereby covenants to warrant and defend the title of such purchaser or purchasers. (ii) Trustee shall apply the proceeds of sale I the priority set forth in Section 23 hereof. (iii) Subject to the provisions of California Civil Code Section 2924g, Trustee may postpone sale of all of any portion of the Premises by public announcement made at the time and place set forth in the Notice of Sale, and from time to time thereafter may further postpone such sale by public announcement or subsequently given Notice of Sale, and without fiuther notice may make such sale at the time fixed by the last postponement, or may, in its discretion, give a new Notice of Sale. Should Beneficiary in its discretion determine that more than one such sale or other disposition would be advantageous, Beneficiary may, at its option, cause the same to be conducted simultaneously, or successively on the same day, or at such different days or times and in such order as Beneficiary may deem to be in its best interest. (c) In connection with any foreclosure of the lien hereof or any action to enforce any other remedy of Beneficiary under this Deed of Trust, the Indenture or any of the Related Documents, Trustor agrees to pay all expenditures and expenses which may be paid or incurred by or on behalf of Beneficiary, including, without limitation, attorneys' fees and expenses, appraisers' fees, outlays for documentary and expert evidence, stenographers' charges, publication costs, and costs(which may be estimated as to items to be expended prior to the date of sale) of procuring all such policies, and similar data and assurances with respect to title and value as Beneficiary may deem reasonably necessary either to prosecute such suit or to evidence to bidders at any sale which may be had pursuant to such decree the true condition of the title to or the value of the Premises, and the right to such fees and expenses shall be enforceable whether or not such action is prosecuted to judgment. All expenditure and expenses of the nature mentioned in this Section 22, and such expenses and fees as may be incurred in the protection of the Premises and the maintenance of the lien of this Deed of Trust, including the fees and 4847-6692(596.1 13 expenses of any allomey employed by the Beneficiary in any litigation or proceeding affecting this Deed of Trust, the Indenture, any of the Related Documents or the Premises (including, without limitation, the occupancy thereof or any construction work performed thereon), including, without limitation, probate and bankruptcy proceedings, or in preparations for the commencement or defense of any proceedings, or in preparations for the commencement or defense of any proceeding or threatened suit or proceeding, whether or not an action is actually commenced, shall be immediately due and payable by Trustor and shall be secured by this Deed of Trust. (d) Without limiting the liability of Trustor as set forth above, Trustor shall indemnify Beneficiary and its officers, directors, employees, representative and agents, and hold them harmless from and against all claims, injury, damage, loss and liability of any and every kind to any persons or property by reason of: (1) the operation or maintenance of the Premises; and (ii) any other action or inaction by, or matter which is directly or indirectly the responsibility of Trustor. Annlication of Proceeds of Foreclosure Sale 23. The proceeds of any foreclosure sale of the Premises shall be distributed and applied in the following order of priority: (1) first, to payment of all costs and expenses incident to the Foreclosure proceedings, including, without limitation, the costs, fees and expenses of Trustee, attorneys' fees and expenses, the actual costs of publishing, recording, mailing and posting notice and all such items as are mentioned in the preceding Section 22; (b) second, to the cost of any search and/or other evidence of title procured in connection therewith and the transfer tax on any deed or conveyance; ©) third, to all sums expended under the terms hereof, not then repaid, with accrued interest at the rate provided herein; (d) fourth, to all other sums secured hereby, in such order as provided in the hndenture. Appointment of Receiver 24. Upon, or at any time after, the occurrence of an Event of Default hereunder, Beneficiary, as a matter of right, and without notice to Trustor or anyone claiming under Trustor, and without regard to the then value of the Premises or the adequacy of any security for the obligations then secured hereby, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Premises, and Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any time after an Event of Default has occurred hereunder and notice thereof has been provided to Trustor as required herein, a court of competent jurisdiction may appoint a receiver for the Premises. Such appointment may be made either before or after sale, without notice, without regard to the solvency or insolvency of Trustor at the time of application for such receiver and without regard to the then value of the Premises, and Beneficiary hereunder may be appointed as such receiver. Such receiver shall have power, until the later of (a) the expiration of the full statutory period of redemption (whether or not the Premises are redeemed), in the case of a 484766926596.1 14 deficiency after a duly conducted foreclosure sale, (b) the disbursement of all proceeds of the Premises collected by such receiver and the payment of all expenses incurred in connection therewith and (c) the termination of such receivership with the consent of Beneficiary or pursuant to an order of a court of competent jurisdiction: (1) to operate the Premises and collect the rents, issues and profits of the Premises; (ii) to extend or modify any then existing leases and agreement regarding the Premises and to make new leases and agreements, which extensions, medications and new leases and agreements may provide for terms to expire, or for options to extend or renew terms to expire, beyond the maturity date of the indebtedness secured hereunder and beyond the date of the issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale, it being understood and agreed that any such leases and agreements, and the options or other such provisions to be contained therein, shall be binding upon Trustor and all persons whose interests in the Premises are subject to the lien hereof and upon the purchaser or purchasers at any foreclosure sale, notwithstanding any redemption from sale, discharge of the indebtedness secured hereby, satisfaction of any foreclosure, decree or issuance of any certificate of sale or deed to any purchaser; and (iii) to exercise all other powers which may be necessary or are usual in such cases for the protection, possession, control, management and operation of the Premises during the whole of said period. The court, from time to time, may authorize the receiver to apply the net income in his hands in payment in whole or in part of: (A) the indebtedness secured hereby, or by any decree foreclosing this Deed of Trust, or any tax, special assessment or other lien which may be or may become superior to the lien hereof or of such decree, provided such application is made prior to the foreclosure sale; and (B) the deficiency in case of a sale and deficiency. Assierrment of Rents, Issues. Profits and Losses 25. (a) Trustor hereby sells, assigns and transfers absolutely unto Beneficiary all the rents, issues, profits and avails now due and which may hereafter become due under o by virtue of any lease, whether written or verbal, or any letting of, or of any agreement for the use or occupancy of, the Premises or any part thereof, which may have been heretofore or may be hereafter made or agreed to or which may be made or agreed to by Beneficiary under the powers herein granted, it being the intention hereby to establish an absolute and present transfer and assignment of all such rents, issues, profits, leases and agreements, and all the avails thereunder, to Beneficiary and not merely the passing of a security interest. Trustor hereby irrevocably appoints Beneficiary its true and lawful attorney, in its name and stead, with or without taking possession of the Premises, personally or by receiver as provided herein (it being understood that such power of attorney is coupled with an interest and irrevocable) at the option of Beneficiary at any time and from time to time, to demand, receive and enforce payment, to give receipts, releases and satisfactions, and to sue, in the name of Trustor, Trustee 484766925596.1 15 or Beneficiary, for all of said avails, rents, issues and profits arising from or accruing at any time hereafter, and all now due or that may hereafter become due, under each and every of the leases and agreements, written or verbal, or other tenancy existing, or which may hereafter exist, on the Premises, with the same rights and powers and subject to the same immunities, exoneration of liability and rights of recourse and indemnity as Bencficiary would have upon taking possession of the Premises hereunder. (b) Provided that there exists no Event of Default hereunder, under the Notes or any of the Related Documents, Trustor shall have the right under a revocable license granted hereby, and Beneficiary hereby grants to Trustor such a revocable license, to collect all of the rents arising from or out of the leases or any renewals or extensions thereof, or from or out of the Premises or an part thereof, as trustee for the benefit of Beneficiary. The license granted hereby shall be revoked automatically (and without the necessity of taking any other action) upon the occurrence of any such Event of Default. (c) Upon the occurrence of an Event of Default hereunder Beneficiary may, at its option, exercise (or cause the Trustee to exercise) its rights hereunder. If Beneficiary elects to exercise its rights hereunder, Beneficiary or Trustee may, at any time and without notice, either in person, by agency or by a receiver appointed by a court, enter upon and take possession of all or any portion of the Premises, enforce all leases, collect all rents (including, without limitation, attorneys' fees and expenses, and to any indebtedness then secured thereby, all in such order as Beneficiary may determine. In connection with the exercise by Beneficiary of its rights hereunder, Trustor agrees that Beneficiary shall have the right to specifically enforce such rights and to obtain the appointment of a receiver in accordance with the provisions hereof without regard to the value of the Premises or the adequacy of any security for the obligations then secured hereby. The collection of such rents or the entering upon and taking possession of the Premises, or the application thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default, or be deemed or construed to make Beneficiary a mortgagee-in-possession of the premises or any portion thereof. (d) Trustee represents and agrees that the amount of any rent paid shall be consistent with the terms and conditions of the Related Documents, and that except as authorized in the Notes, no payment of the rents to accrue for any portion of said Premises will be waived, released, reduced, discounted or otherwise discharged o compromised by Trustor. As between Trustor and Beneficiary, Trustor waives any rights of set off against any person in possession of any rent during repair of the Premises demised thereunder by reason of fire or other casualty, Trustor shall furnish to Beneficiary loss of rents insurance, the policies to be in amount and form as shall be satisfactory to the Beneficiary and written by such insurance companies as shall be reasonably satisfactory to the Beneficiary. Trustor agrees that it will not assign any of the rents or profits of the Premises, except to a purchaser or grantee of the Premises. (e) Nothing herein contained shall be construed as constituting Beneficiary a mortgagee-in-possession in the absence of the taking of actual possession of the Premises by Beneficiary. In the exercise of the powers herein granted Beneficiary, no liability shall be 484766926596.1 16 asserted or enforced against Beneficiary, all such liability being expressly waived and released by Trustor to the fullest extent permitted by law. Nothing contained herein, including, without limitation, the assignment provisions set forth above shall impose upon Beneficiary any duty to produce any rents, issues or profits or cause Beneficiary to: (I) be responsible for performing any of the obligations of Lessor under any lease, or (ii) be responsible or liable fro any waste or for any dangerous or defective conditions of the Premises, for negligence in the management, upkeep, repair or control of the Premises, or for any other act or omission by any other person. 26. INTENTIONALLY OMITTED Beneficiary's Right of Possession in Case of Default 27. (a) To the extent permitted by law, upon the occurrence of an Event of Default under this Deed of Trust, the Notes or any of the Related Documents, whether before or after the indebtedness secured hereby is declared to be due as aforesaid, or whether before or after the institution of legal proceedings to foreclose the lien hereof or before or after the sale thereunder, Trustor shall forthwith, upon demand of Beneficiary, surrender to Beneficiary and Beneficiary shall be entitled to take actual possession of the Premises or any part thereof, personally, or by its agent or attorneys. In such event Beneficiary in its discretion may, to the extent permitted by law, with or without force and with or without process of law, enter upon and take and maintain possession of all or part of said Premises, together with all documents, books records, papers and accounts of Trustor or the then owner of the Premises relating thereto, and may exclude Trustor, its agents or servants, wholly therefrom and may, as attorney in fact or agent of Trustor, or in its own name as Beneficiary and under the powers herein granted, hold, operate, manage and control the Premises and conduct the business, if any thereof either personally or by its agents, and with full power to use such measures, legal or equitable, as in its discretion or in the discretion of its successors or assigns may be deemed proper or necessary to enforce the payment or security of the avails, rents, issues and profits of the Premises, including actions for recovery of rent, actions in forcible detainer and actions in distress for rent, and with full power, in each case to the fullest sublease for any cause or on any ground which would entitle Trustor to cancel the same; (ii) subject to the provisions of any applicable non-disturbance or similar agreements, to elect to disaffirm any lease or sublease which is then subordinate to the lien hereof; (iii) to extend or modify any then existing leases and to make new leases, which extensions, modifications, and new leases may provide for terms to expire, or for options to lessees to extend or renew terms to expire, beyond the maturity date of the indebtedness hereunder and beyond the date of the issuance of a deed or deeds to a purchaser or purchasers at a foreclosure sale, it being understood and agreed that any such leases, and the options or other such provisions to be contained herein, shall binding upon Trustor and all persons whose interests in the Premises are subject to the lien hereof and upon the purchaser or purchasers at any foreclosure sale, notwithstanding any redemption from sale, discharge of the Deed of Trust indebtedness, satisfaction of any foreclosure decree or issuance of any certificate of sale or deed to any purchaser; (iv) to enter into any management, leasing or brokerage agreements covering the Premises; (v) to make all necessary or proper repairs, decorations, renewals, replacements, alterations, additions, betterments and improvements to the Premises as to it may seem judicious; (vi) to insure and reinsure the same and all risks incidental to Beneficiary's possession, operation and management thereof; and (vii) to receive all of such avails, rents, 484766926596.1 17 issues and profits; Trustor hereby granting full power and authority to exercise each and every of the rights, privileges and powers herein granted at any and all times hereafter, without notice to Trustor. (b) Beneficiary shall not be obligated to perform or discharge, nor does it hereby undertake to perform or discharge, any obligation, duty or liability under any lease. Trustor shall and does hereby agree to indemnify and hold Beneficiary harmless of and from any and all liability, loss or damage which it may or might incur by reason of its performance of any action authorized under this Section 27 and of an d from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements of Trustor, unless such liability, loss or damage results from Beneficiary's acts constituting gross negligence or willful misconduct on the part of Beneficiary. Should Beneficiary incur any such liability, loss or damage by its performance or nonperformance of actions authorized by this Section 27, or in the defense of any claims or demands, the amount thereof, including costs, expenses and reasonable attorneys' fees and expenses, together with interest on ay such amount shall be secured hereby, and Trustor shall reimburse Beneficiary therefor immediately upon demand. (c) Notwithstanding the foregoing, Beneficiary's reservation in this Section 27 of a right of possession of the Premises in the event of a default hereunder shall not be deemed to impose any requirement of possession in order to perfect the assignment of rents and leases contained herein, it being agreed and intended by Trustor that any and all assignments of rents and leases are perfected upon the execution of this Deed of Trust without necessity of any further action. Avnlication of Income Received by Beneficiary 28. Beneficiary, in the exercise of the rights and powers hereinabove conferred upon it by Section 23, Section 24 and Section 25 hereof, shall have full power to use and apply the rents, issues and profits of the Premises to the payment of or on account of the following, in such order as Beneficiary may determine: (a) to payment of all reasonable fees and expenses of the Beneficiary; 484766926596.1 1$ (b) to payment of all reasonable fees of the receiver approved by the court; (c) to payment of all prior or current real estate taxes and special assessments with respect to the Premises; (d) to payment of all premiums due for the insurance required by the provisions of this Deed of Trust; (e) to payment of expenses incurred for normal operation and maintenance of the Premises in such order of priority as Beneficiary shall deem proper, including, without limitation, the payment of management (which shall include reasonable compensation to Beneficiary and its agent or agents, if a management be delegated to an agent or agents), brokerage (which shall include leasing commissions and other compensation and expenses of seeking and procuring tenants and entering into leases) and attorneys' fees; (f) if received prior to any foreclosure sale of the Premises, then to Beneficiary for payment of the amounts and fees and expenses due to Beneficiary under the Notes. The rights and powers of Beneficiary under this Deed of Trust and the application of the avails, rents, issues and profits as provided above shall continue until expiration of the redemption period from any foreclosure sale, whether or not any deficiency remains after a foreclosure sale. Beneficiary's Right of Inspection 29. Beneficiary, or its agents, representatives or workers shall have the right to inspect the Premises and access thereto shall be permitted for the purpose of inspecting the same and for the purpose of performing any of the acts Beneficiary is authorized to perform hereunder or by law or under any of the Related Documents including, without limitation, the rights provided in California Civil Code Section 2929.5. Condemnation 30. (a) If any proceeding or action be commenced for the taking of the Premises, or any part thereof or interest therein, for public or quasi-public use or otherwise, or if the Premises are taken damaged by reason of any public improvement, or under the power of eminent domain or by condemnation or any transaction in lieu of condemnation, or in any other manner (in any such case a "Condemnation"), or should Trustor receive any notice or other information regarding such proceeding, action or Condemnation, Trustor shall give prompt written notice thereof to Beneficiary. Beneficiary shall be entitled at its option, without regard to the adequacy Of this security, to commence, appear in the prosecute in its own name any such action or proceeding and Beneficiary shall be entitled to make any compromise or settlement in connection with such Condemnation; provided, however, that if there does not exist a default 484766926596.1 19 under the Notes, this Deed of Trust or the other Related Documents, Trustor shall have the right to participate in the jointly settle with Beneficiary any such action or proceeding. Trustor's entire interest in all compensation, awards, damages, rights to action and proceeds awarded to Trustor by reason of any Condemnation (collectively, "Condemnation Proceeds") are hereby assigned, transferred and set over to Beneficiary, and Trustor agrees to execute such further assignments of such proceeds as Beneficiary or Trustor may require. (b) If Trustor is obligated to restore or replace the damaged or destroyed buildings or improvements under the terms of any lease or leases which are or may be prior to the lien of this Deed of Trust, and if such Condemnation does not result in cancellation or termination of such lease, then, provided Trustor is not then in default under this Deed of Trust, the Condemnation Proceeds shall be used to reimburse Trustor for the cost of rebuilding or restoring of buildings or improvements on the Premises. In all other cases, Beneficiary shall have the right, at its option, to apply the Condemnation Proceeds upon or in reduction of the indebtedness secured hereby, whether due or not, and if the same are insufficient to pay such amount in full, Beneficiary may, at its option, declare the amounts due under the Notes and this Deed of Trust to be due and payable as and when such amounts come due and avail itself of any of the remedies provided herein or in the Notes as in the case of a default. If the Condemnation Proceeds are required to be used as aforesaid to reimburse Trustor for the cost of rebuilding or restoring buildings or improvements on the Premises, or if Beneficiary elects that the Condemnation Proceeds be so used, and the buildings and other improvements shall be rebuilt or restored, the Condemnation Proceeds shall be paid out in the same manner as is provided in Section 4 hereof for the payment of insurance proceeds towards the cost of rebuilding or restoration of such buildings and other improvements. Any surplus which may remain out of the Condemnation Proceeds after payment of such cost of rebuilding or restoration shall, at the option of Beneficiary, be applied on account of the indebtedness secured hereby or be paid to any other party entitled thereto. If the, Condemnation Proceeds are not sufficient to repay the Notes in full and are not used as aforesaid to reimburse Trustor for the cost of rebuilding or restoring buildings or improvements on the Premises, Trustor shall immediately pay any remaining balance, together with accrued interest. Application or release of the Condemnation Proceeds as provided herein shall not cure or waive any default or notice of default hereunder or under any of the Related Documents or invalidate any act done pursuant to such notice. (c) Any Condemnation Proceeds paid to and held by Beneficiary to reimburse Trustor for the cost of restoration of the Premises shall be placed by Beneficiary in an interest bearing account selected by Beneficiary. Any interest earned on such Condemnation Proceeds shall be applied and disbursed in the same manner as such Condemnation Proceeds and shall, for the purposes hereof,be deemed to be part of such Condemnation Proceeds. (d) Trustor hereby specifically, unconditionally and irrevocably waives all rights of any property owner granted under California Code of Civil Procedure Section 1265.225(a), which provides for allocation of condemnation proceeds between a property owner and lienholder, and any law or successor statute of similar import. 48476692-6596.1 20 31. INTENTIONALLY OMITTED. Giving of Notice 32. Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and shall be deemed to have been properly given: (a) if hand delivered, on the day so delivered to the address set forth below; (b) if mailed, on the third Business day after the day on which it is deposited in the United States mails in the continental United States, registered or certified mail, postage prepaid, returned receipt requested, addresses as set forth below; ©) if by Federal Express or other reputable express courier services, overnight delivery, on the next Business Day after the date delivered to such express courier service, addressed as set forth below; or (d) if by telecopy transmission, on the day and at the time on which delivered to such party at the address and the telecopier number set forth below: If to Trustor: San Bernardino Joint Powers Financing Authority 201 North`B" Street, Third Floor San Bernardino, California 92401 Attention: Agency Administrator If to Trustee: Commonwealth Land Title Company 275 West Hospitality Lane San Bernardino, California 92408 If to Beneficiary: Tim J. Burgess Remedies Not Exclusive 33. No action for the enforcement of the lien or any provision hereof shall be subject to any defense which would not be good and available to the party interposing same in an action at law upon the Indenture. Trustee and Beneficiary, and each of them, shall be entitled to enforce payment and performance of any indebtedness or obligations secured hereby and to exercise all rights and powers under this Deed of Trust or other agreement or any laws now or hereafter in force, notwithstanding that some or all of the said indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement, whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect beneficiary's right to realize upon or enforce any other security now or hereafter held by Trustee, it being agreed that Trustee and Beneficiary, and each of them, shall be entitled to enforce this Deed of Trust an any remedy herein or in the Indenture, or any of the Related Documents or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or under the Deed of Trust, Indenture, or any of the Related Documents now or hereafter existing in law or in equity 48476692-6596.1 21 or by statute. Every power or remedy given hereby to Trustee and Beneficiary, and each of them, or to which they may be otherwise entitled, may be exercised, concurrently or independently, from time to time, and as often as it may be deemed expedient by Trustee and Beneficiary, and each of them, and Trustee and Beneficiary, or either of them, may pursue inconsistent remedies. No waiver of any default other than the default specified in the express waiver and that such waived default is waived only for the time and to the extent therein stated. No acceptance of any payment of any one or more delinquent installments shall constitute a waiver of the rights of Trustee or Beneficiary at any time thereafter to demand and collect payment of. (a) interest or(b) late charges, if any. Estoppel Affidavits Statements by Beneficiary 34. (a) Trustor, within fifteen (15) days after written request from Beneficiary, shall famish a written statement, duly acknowledged, setting forth the unpaid principal or, and interest on, the indebtedness secured hereby and whether or not any offset or defense exists against such indebtedness, and covering such other matters as Beneficiary may reasonably require. (b) Beneficiary shall furnish, upon request and subject to the provisions hereof, any statement regarding the obligations secured hereby or regarding the amounts held in any trust or reserve fund hereunder required by California Civil Code Section 2943. For any statement requested by Trustor regarding the obligations secured hereby, or regarding the amounts held in any trust or reserve fund established hereunder, Beneficiary may charge a reasonable fee, not to exceed the maximum amount permitted by law at the time of the request therefor. Trustor hereby requests that a copy of any Notice of Default and every Notice of Sale be mailed to it as provided by law at the address provided for in this Deed of Trust. Binding on Successors and Assigns 35. This Deed of Trust may not be changed or terminated orally. The covenants contained I this Deed of Trust shall tun with the Premises and shall bind Trustor, the successors and assigns of Trustor, all subsequent owners, encumbrancers, tenants and subtenants of the Premises, and all persons claiming under or through Trustor, and shall inure to the benefit of Beneficiary, the personal representative, successors and assigns of the Beneficiary and all subsequent holders of this Deed of Trust. No Third Parties Benefitted 36. This Deed of Trust is made and entered into for the sole protection and benefit of Trustee, Beneficiary and Trustor, their successors and assigns, and no other person or persons shall have any right to action hereon. Captions 37. The cover pages and the captions and headings of various paragraphs of this Deed of Trust are for convenience only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 484766926596.1 22 Security Agreement and Financing Statements 38. (a) Trustor and Beneficiary agree: (1) that this Deed of Trust shall constitute a "Security Agreement" within the meaning of the Code with respect to all sums on deposit with the Trustee (the "Deposits") and with respect to any property the (the "Property") included in the definition herein of the word "Premises" which may not be deemed to form a part of the real estate described in-Exhibit "A" or may not constitute a "fixture" (within the meaning of Code Section 9313), and all replacements of such Property, substitutions for such Property, additions to such Property, and the proceeds thereof(said Property, replacements, substitutions, additions . and the proceeds thereof being sometimes herein collectively referred to as the "Collateral"); (ii) that a security interest in and to the Collateral and the Deposits is hereby granted to the Beneficiary; and (iii) that the Deposits and all of Trustor`s right, title and interest therein are hereby assigned to Beneficiary, all to secure payment of the indebtedness and to secure performance by Trustor of the terms, covenants and provisions of the Notes, this Deed of Trust and the Related Documents. (b) If an Event of Default occurs hereunder, Beneficiary, pursuant to the appropriate provisions of the Code, shall have an option to proceed with respect to both the real property and the Collateral in accordance with its rights, powers and remedies with respect to the real property, in which event the default provisions of the Code shall not apply. The parties agree that if Beneficiary shall elect to proceed with respect to the Collateral separately from the real property, Beneficiary shall have all remedies available to a secured party under the Code and five (5) days' notice of the sale of the collateral shall be reasonable notice. The reasonable expenses of retaking, holding, preparing for sale, selling and the like incurred by Beneficiary shall include, but shall not be limited to, attorneys' fees and legal expenses incurred by Trustee. Trustor agrees that,without the written consent of Beneficiary, Trustor will not remove or permit to be removed from the Premises any of the Collateral, however, so long as Trustor is not in default hereunder, it shall be permitted to sell or dispose of the Collateral when obsolete, worn out, inadequate, unserviceable or unnecessary for use in the operation of the Premises, but only upon replacing the same or substituting for the same other Collateral at least equal in value and utility to the initial value and utility of the Collateral disposed of and in such a manner that said replacement or substituted collateral shall be subject to the security interest created hereby and that the security interest of Beneficiary shall be perfected and first in priority, it being expressly understood and agreed that all replacements thereof, substitutions therefor or additions thereto, unless Beneficiary otherwise consents, will be free and clear of liens, encumbrances, title retention devices and security interests of others. (c) Trustor and Beneficiary agree, to the extent permitted by law, that: (1) all of the goods described within the definition of the word "Property" herein are or are to be become fixtures on the land described in Exhibit "A;" (ii) this instrument, upon recording or registration in the real estate records of the proper office, shall constitute a "fixture filing" within the meaning of Code Sections 9313 and 9402; and (iii) Trustor is the record owner of the site described in Exhibit "A." The addresses of Trustor and Beneficiary are set forth in the introductory paragraph hereof. 4847-66926596.1 23 (d) This Deed of Trust shall be self operative with respect to the security interest granted in the Collateral, but Trustor agrees, upon request by Beneficiary from time to time, to execute, acknowledge and deliver to Beneficiary, a separate security agreement, financing statement or other similar security instruments, in a form satisfactory to Beneficiary, covering all property of any kind whatsoever owned by Trustor, as the case may be, which in the sole opinion of Beneficiary is essential to the operation of the Premises and which constitutes goods within the meaning of the Code or concerning which there may be any doubt whether the title to same has been conveyed by or security interest perfected by this Deed of Trust under the laws of the State of California, and will further execute, acknowledge and deliver or cause to be executed, acknowledged and delivered, any financing statement, affidavit, continuation statement or certificate or other documents as Beneficiary may request in order to perfect, preserve, maintain, continue and extend the security interest hereunder and the priority of this Deed of Trust and such security instrument. Trustor further agrees to pay to Beneficiary on demand all costs and expenses incurred by Beneficiary in connection with the preparation, execution recording, filling and refilling of any such document. Trustor shall from time to time, on request of Beneficiary, deliver to Beneficiary an inventory of the Collateral in reasonable detail. To the extent permitted by the provisions of the Code, now or hereinafter in effect, Trustor hereby authorizes Beneficiary, without the signature of Trustor, to execute and file any of the documents described in this Section 40 if Trustee shall determine that such are necessary and advisable in order to perfect Beneficiary's security interest in the Collateral. Beneficiary's Lien for Costs and Expenses 39. At all times, regardless of whether any funds have been disbursed, this Deed of Trust secures (in addition to any funds disbursed from time to time) the payment of any and all costs and expenses due to or incurred by Trustee or Beneficiary in connection with the Notes to be secured hereby. Acceptance by Trustee 40. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trust Irrevocable: No Offset 41. The trust created hereby is irrevocable by Trustor. No offset or claim that Trustor now or may in the future have against Beneficiary shall relieve Trustor from paying installments or performing any other obligations herein or secured hereby. Further Assurances 42. Trustor, Beneficiary and Trustee agree to do, and to cause to be done, such further acts and things and to execute and deliver, or to cause to be executed and delivered, such additional assignments, agreements, powers and instruments, and any of them may reasonably require or deem advisable to keep valid and effective the charges and lien hereof, to carry into effect the purposes of this Deed of Trust or to better assure and confirm unto any of them their 4847!692-6596.1 24 rights, powers and remedies hereunder; and, upon request by Beneficiary, shall supply evidence of fulfillment of each of the covenants herein contained concerning which a request for such evidence has been made. Truth-in-Lending - 43. Trustor represents and agrees that the obligation secured hereby is an exempt transaction under the Trust-in-Lending Act, 15 U.S.C. § 1601, et SeMc . Environmental Representations, Warranties and Covenants of Trustor 44. The Trustor hereby covenants and agrees to indemnify, defend and hold harmless the Beneficiary from and against any and all claims,judgments, damages, penalties, fines, costs and liabilities that arise directly or indirectly from or in connection with the presence, suspected presences, release or suspected release of any "hazardous materials," as defined by those or similar terms or which is regulated as such under any statute, ordinance, rule or regulation of any governmental authority having jurisdiction over the Project, in or from the Premises, whether into the air, soil, surface water or groundwater at the Premises, or any other violations, actual or alleged, of any of the statutes, laws, ordinances, rules or regulations of any governmental authority, subject to Beneficiary's warranties and representations set forth in the Purchase and Sale Agreement dated February 16, 1996. Governing Law 45. This Deed of Trust shall be govemed by the laws of the State of California. THE TRUSTOR ACKNOWLEDGES RECEIPT OF A TRUE COPY OF THIS DEED OF TRUST WITHOUT CHARGE. IN WITNESS WHEREOF, Trustor has executed this Deed of Trust on the day and year first above written. [The remainder of this page is intentionally left blank.] 4947-669265%.t 25 TRUSTOR PLEASE NOTE: UPON THE OCCURRENCE OF A DEFAULT, CALIFORNIA PROCEDURE PERMITS TRUSTEE TO SELL THE PREMISES AT A SALE HELD WITHOUT SUPERVISION BY ANY COURT AFTER EXPIRATION OF A PERIOD PRESCRIBED BY LAW. BY EXECUTION OF THIS DEED OF TRUST, YOU CONSENT TO SUCH PROCEDURE. BENEFICIARY URGES YOU TO GIVE PROMPT NOTICE OF ANY- CHANGE IN YOUR ADDRESS SO THAT YOU CAN RECEIVE ANY NOTICE GIVEN PURSUANT TO THIS DEED OF TRUST. San Bernardino Joint Powers Financing Authority By: Chairman Approved as to form: Authority Counsel 4841-6692-6596.1 26 rte... EXHIBIT "A" " LEGAL DESCRIPTION Property Address; 120 South"D" Street APN : 0136-122-60 THAT PORTION OF LOTS 1, 2 AND 3, BLOCK "D", THE PEPPERS, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 17 OF MAPS, PAGE 8, RECORDS OF SAID COUNTY, AND THAT PORTION OF D STREET, VACATED BY RESOLUTION 9848, RECORDED MAY 29, 1969 IN BOOK 7241, PAGE 713,OR DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT 1, BLOCK "D" OF THE PEPPERS, SUBDIVISION, SAID POINT ALSO BEING IN THE EAST LINE OF STODDARD AVENUE, (VACATED BY RESOLUTION 8506, RECORDED JANUARY 27, 1967 IN BOOK 6764, PAGE 380, OFFICIAL RECORDS) 60.00 FEET WIDE; THENCE SOUTH 164.91 FEET ALONG THE EAST LINE OF SAID VACATED STODDARD AVENUE; THENCE NORTH 890 59' 21" EAST 282.78 FEET TO A POINT ON A TANGENT CURVE CONCAVE TO THE NORTH WITH A RADIUS OF 20.00 FEET AND A RADIAL BEARING OF NORTH 00° 39"WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 640 59'21",AN ARC DISTANCE OF 22.69 FEET TO A TANGENT LINE; THENCE NORTH 250 00' 00" EAST, 71.88 FEET ALONG SAID TANGENT LINE TO A POINT ON A TANGENT CURVE CONCAVE TO THE WEST WITH A RADIUS OF 208.75 FEET AND A RADIAL BEARING OF NORTH 65° 00' 00" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 250 00' 00", AN ARC DISTANCE OF 91.08 FEET TO A POINT ON THE SOUTH LINE OF THE ATCHINSON, TOPEKA AND SANTA FE RAILROAD 50.00 FEET WIDE; THENCE SOUTH 890 59' 25" WEST 350.83 FEET ALONG SAID SOUTH LINE OF RAILROAD RIGHT OF WAY TO THE POINT OF BEGINNING. CONTAINS 54.409.2 SQUARE FEET, MORE OR LESS. EXHIBIT "5" LEASE AGREEMENT WITH RIGHT OF PURCHASE Dated as of August . 2009 by and between San Bernardino Joint Powers Financing Authority as Lessor and the City of San Bernardino As Lessee a i Lease Agrtn[Purchase 8 6 09 final-Word doc.do< LEASE AGREEMENT WITH RIGHT OF PURCHASE Dated as of August , 2009 by and between San Bernardino Joint Powers Financing Authority as Lessor and the City of San Bernardino As Lessee 1 Lcasc Agrrnt Purchase 8 6 09 final-Word doc.doc TABLE OF CONTENTS ARTICLE I DEFINITIONS AND EXHIBITS Section 1.01. Definitions Section 1.02. Exhibits ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.01. Representations, Covenants and Warranties of the City Section 2.02. Representations Covenants and Warranties of Authority ARTICLE III THE NOTE Section 3.01. The Note Section 3.02. Payment of Proiect Costs ARTICLE IV AGREEMENT TO LEASE; TERMS OF LEASE AGREEMENT; LEASE PAYMENTS Section 4.01. Lease Section 4.02. Term of Aereement Section 4.03. Possession Section. 4.04. Lease Payments Section 4.05. Optional Prepayment Section 4.06. Ouiet Enioyment Section 4.07. Title ARTICLE V RIGHT OF PURCHASE 5.01. City shall have the right to purchase the Premises 5.02. Disposition of Purchase Proceeds by Authority ARTICLE VI MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 6.01. Maintenance, Utilities, Taxes and Assessments Section 6.02. Modification of Premises Section 6.03. Public Liability and Premises Damage Insurance Section 6.04. Fire and Extended and Coverage Insurance Section 6.05. Title Insurance Section 6.06. Insurance Net Proceeds Section 6.07. Installation of Personal Property Section 6.08. Liens Section 6.09. Tax Covenants Section 6.10. Report to California Debt Advisory Commission Section 6.11. Condemnation of Premises Section 6.12. Compliance with Law, Regulations, Etc. Section 6.13. Environmental Compliance ARTICLE VII DAMAGE,DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 7.01. Eminent Domain Section 7.02 Application of Proceeds Section 7.03 Abatement of Lease Payments in the Event of Damage or Destruction. ARTICLE VIII DISCLAIMER OF WARRANTIES; ACCESS Section 8.01. Disclaimer of Warranties Section.8.02. Rights of Access Section 8.03. Release and Indemnification Covenants ARTICLE IX ASSIGNMENT, SUBLEASING AND AMENDMENT Section 9.01. Assignment by the Authority Section 9.02. Assignment and Subleasing by City Section 9.03 Amendment ARTICLE X LEASE DEFAULT EVENTS AND REMEDIES Section 10.01. Lease Default Events Defined Section 10.02 Remedies on Default Section 10.03 No Remedy Exclusive Section 10.04 Each Party to Pay Its Own Attorney's Fees and Expenses Section 10.05 No Additional Waiver Implied by One Waiver Section 10.06. Trustee and Note Owner to Exercise Rights ARTICLE XI MISCELLANEOUS Section 11.01. Notices Section 11.02. Binding Effect Section 11.03. Severability Section 11.04.-Net-net-net Lease Section 11.05. Further Assurances and Corrective Instruments Section 11.06. Execution in Counterparts Section 11.07. Applicable Law Section 11.08. Authorized Representatives Section 11.09. Captions Section 11.10. Venue O LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease Agreement'), dated as of June 1, 2009 by and between the SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, a Joint exercise of powers agency organized and existing under the laws of the State of California, as lessor(the"Authority"), and the CITY OF SAN BERNARDINO, a municipal corporation and charter city organized and existing under its Charter and the laws of the State of California, as lessee (the "City"). WITNESSETH: WHEREAS, the City and the City of San Bernardino Redevelopment Agency (the "Agency")have formed the Authority under and pursuant to a joint exercise of powers agreement, by and between the City and the Agency under the provisions of Articles 1 through 4 (commencing with California Government Code section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the "Act') for the purpose of issuing bonds as defined in the Act; WHEREAS, the Authority is authorized under the Mark-Roos Local Bond Pooling Act of 1985 (commencing with section 6584 of the Act)to incur indebtedness to finance and refinance public capital improvements (as such term is defined in the Act)and the City is authorized pursuant to the laws of the State of California to enter into leasehold agreements for such purposes; and WHEREAS, the Authority issued its San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note -2009 (the "Note") in the principal amount of$1,200,000 in order to finance the purchase and improvement of a Fire Maintenance Facility (the "Premises"); and WHEREAS,the Authority made and entered the Indenture and Loan Agreement (the "indenture"), dated August , 2009 by and between the Authority and Tim J. Burgess, a single man, as further security for the Note; and WHEREAS, the Authority made that Deed of Trust, Security Agreement, Assignment of Leases and Rents and Financing Statement (the "Deed of Trust") bearing date of August , 2009 thereby giving and granting an interest in the Premises as security for the Note; and WHEREAS, the City will lease the Premises as provided in this Lease Agreement, such lease to the City being for the purpose (among others) of providing lease payments in the amounts sufficient to provide for the payment of the interest on the Note for the period of the Lease Agreement. z Lease Agrmt Purchase 8 6 09 final-Word doc.doc NOW, THEREFORE, for and in consideration of the promises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: ARTICLE I DEFINITIONS AND EXHIBITS Section 1.01. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease Agreement shall, for all purposes of this Lease Agreement, have the meanings ascribed to them in the Indenture and the Deed of Trust. Section 1.02. Exhibits. The following exhibits are attached to, and by this reference made of a part of, this Lease Agreement: Exhibit A: Description of the Premises Exhibit B: Description of the Facilities Exhibit C: Schedule of Lease Payments ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.01. Representations, Covenants and Warranties of the City. The City represents,covenants and warrants as follows: (a) Due Organization and Existence. The City is a municipal corporation and charter city duly organized and existing under its Charter and the laws of the State. (b) Authorization. The laws of the State authorize the City to enter into this Lease Agreement and to enter into the transactions contemplated hereby and to carry out its obligations hereunder, and the City has duly authorized and executed this Lease Agreement and (assuming due authorization, execution and delivery by the other parties)this Lease Agreement constitutes the legal, valid and binding agreements of the City, enforceable against the city in accordance with its terms. (c) No Violations. Neither the execution and delivery of this Lease Agreement, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms conditions or provisions of any restriction or any agreement or instrument to which City is now a party or by which the City is bound or constitutes a default under any of the foregoing, or results in the 3 Lease Agent Purchase 8 6 09 final-Word doc.doc creation or imposition of any lien, charge or encumbrances whatsoever upon any of the property or assets of the City, or upon the Premises, except Permitted Exceptions (as defined under Trustor Covenants of the Trust Deed). (d) Execution and Delivery. The City has duly authorized and executed this Lease Agreement in accordance with the laws of the State. (e) Premises Essential. The Premises is essential to the operations of the City. Section 2.02. Representations Covenants and Warranties of Authority. The Authority represents, covenants and warrants to the City as follows: (a) Due Organization and Existence. The Authority is a joint exercise of powers agency duly organized and existing under and by virtue of the laws of the State of California; has power to enter into this Lease Agreement; is possessed of full power to own and hold, improve and equip real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of this agreement and (assuming due authorization, execution and delivery by the other parties) such agreement constitutes the legal, valid and binding agreement of the Authority, enforceable against the Authority in accordance with its terms. (b) No Encumbrances. The Authority will not pledge the Lease Payments or other amounts derived from the Premises and from its other rights under this Lease Agreement, and will not mortgage or encumber the Premises, except as provided under the terms of this Lease Agreement, the Deed of Trust, or the Indenture. (c) No Violations. Neither the execution and delivery of this Lease Agreement, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the Authority is now a party or by which the Authority is bound, or constitutes a default under the foregoing, or results in the creation or imposition or any lien, charge or encumbrance whatsoever upon any of the property or assets of the Authority, or upon the Premises, except Permitted Exceptions. (d) No Assignments. Except as provided in the Deed of Trust, the Indenture, and otherwise expressly provided herein, the Authority will not assign this Lease Agreement, its right to receive Lease Payments from the City, or its duties and obligations hereunder to any other person, firm or corporation so as to impair or violate the representation, covenants and warranties contained in this Section 2.02. (e) Title to Site. The Authority warrants that it has acquired and is owner of a fee simple interest in the Premises, subject, however, to Permitted Exceptions. (f) Execution and Delivery. The Authority has duly authorized and executed this Lease Agreement in accordance with the laws of the State. a Lcwc Agrmt Purcha 8 6 09 final-Word doc.doc ARTICLE III THE NOTE Section 3.01. The-Note. The Authority has authorized the issuance of the Note pursuant to the Indenture in the principal amount of$1,200,000. The Authority has placed its interest in the Premises in trust with Trustee for the benefit of the Note Owner as Beneficiary. The City hereby approves the Indenture and the Deed of Trust and the assignment to the Trustee of the rights of the Authority assigned or purported to be assigned thereunder, and the issue of the Note by the Authority under and pursuant to the Indenture. Section 3.02. Payment of Project Costs. The Authority's lease payment for the Premises shall be made from the Lease Payments made to Authority by City hereunder. ARTICLE IV AGREEMENT TO LEASE; TERMS OF LEASE AGREEMENT; LEASE PAYMENTS Section 4.01. Lease. In consideration of the lease payments to be made by the City, and in consideration of the execution of this Lease Agreement by the Authority and the City,and for other good and valuable consideration,the Authority hereby leases to the City, and the City hereby leases from the Authority, the Premises, for the Term and upon the terms and conditions set forth in this Lease Agreement. Section 4.02. Term of Agreement. The obligation to make Lease Payments hereunder shall commence on the Closing Date and shall end on June 30, 2019, unless such term is earlier terminated as hereinafter provided and as otherwise provided in the Deed of Trust or the Indenture. Section 4.03. Possession.. The City hereby agrees to take possession of the Premises on or before August 1, 2009. Section. 4.04. Lease Payments. (a) Obligation to Pay. In consideration of the lease of the Premises from the Authority hereunder,the City agrees to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Premises during each Rental Period,the Lease Payments for the Premises in the respective amounts specified in Exhibit C hereto,to be due and payable on the respective Lease Payment Dates specified in Exhibit C hereto. The Lease Payments for the Premises payable in any Rental Period shall be for the use of the Premises for such Rental Period. s Lease Agrmt Purchase 8 6 09 final-Word doc.doc (b) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 4.04,the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate of twelve percent(12%) per annum. (c) Fair Rental Value. The Lease Payments for the Premises for each Rental Period shall constitute the total rental for the Premises for each Rental Period and shall be paid by the City in each Rental Period in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Premises during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments for the Premises do not exceed the fair rental value of the Premises. In making such determination, consideration has been given onto the obligations of the parties under this Lease Agreement, the uses and purposes which may be served by the Premises and the benefits therefrom which will accrue to the City and the general public. (d) Source of Payments; Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of the City. The City covenants to take such action as may be necessary to include all Lease Payments due hereunder in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Lease Payments. The covenants on the part of the City herein contained shall be deemed to be an shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such 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. (e) Assignment. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Note Owner, pursuant to the Indenture, for the benefit of the Note Owner, and the City hereby assents to such assignment. The Authority hereby directs the City and the City hereby agrees to pay the Note Owner at , or such other location specified by the Note Owner, all payments payable by the City pursuant to this Section. Section 4.05. Optional Prepayment. The City shall have the right at any to prepay all or any part of any of the Lease Payments. In the event the City deposits with the Trustee the full amount of any prepayment of the Lease Payments pursuant to this Section, the Authority shall at the request of the City forthwith take all steps that my be necessary under Section 3.01 of the Indenture to cause the redemption of all or a portion of Note under and in accordance with Section 3.01 of the Indenture. 6 Lease Agrmt Purchase 8 6 09 final-Word doc.doc Lease Payments due after any partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by the City to the Trustee and the Authority and which shall represent an adjustment to the schedule set forth in Exhibit C attached hereto taking into account said partial prepayment. Section 4.06. Ouiet Enioyment. During the Term of the Lease Agreement, the Authority shall provide the City with quiet use and enjoyment of the Premises, and the City shall, during such Term, peaceably and quietly have and hold and enjoy the Premises without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease Agreement. The Authority will, at the request of the City and at the City's cost,join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall have the right to inspect provided in Section 7.02. hereof. Section 4.07. Title. During the Term of the Lease Agreement, the Authority shall hold a leasehold in the Premises in any and all additions which comprise fixtures, repairs, replacements or modifications to the Premises, except for those fixtures, repairs, replacements or modifications which are added to the Premises by the City at its own expense and which may be removed without damaging the Premises and except for any items added to the Premises by the City pursuant to Section 5.07 hereof. ARTICLE V RIGHT OF PURCHASE 5.01 City shall have the right to purchase the Premises. The City shall at all times during the Term of this Lease Agreement have the right of purchase of the Premises from the Authority. Said right may be exercised by the City paying over to the City the full amount then required by the Authority to redeem the Noted under the terms as set forth in the Indenture. In addition, the City shall pay over to the City the full amount of the Lease Payments then due and owing or any pro rata share thereof. 5.02 Disposition of Purchase Proceeds by Authority. Upon the receipt from City of the payment described in Section 5.02, the Authority shall apply the sums so received to redeem the Note. Upon the payment of all sums and the conclusion of all proceedings for the Redemption of the Note and the termination of the Trust Deed, the Authority shall do all things necessary to as soon as possible provide good and marketable and insurable title and interest to the Premises to the City. Lease Agent Purchase 8 6 09 final-Word doc.doc ARTICLE VI MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 6.01. Maintenance, Utilities. Taxes and Assessments. Throughout the Term of the Lease Agreement, as part of the consideration for the rental of the Premises, all improvement, repair and maintenance of the Premises shall be the responsibility of the City and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Premises 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 Premises resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sub lessee thereof. In exchange for the Lease Payments herein provided,the Authority agrees to provide only the Premises, as hereinbefore more specifically set forth. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Premises or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years,the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease Agreement as and when the same become due. The City may, at the City's expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority shall notify the City that,in the opinion of Independent Counsel, by such nonpayment,the interest of the Authority in the Premises will be materially endangered or the Premises or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with security against any loss which may result from nonpayment, in a form satisfactory to the Authority and the Trustee. Section 6.02. Modification of Premises. The City shall, as its own expense, have the right to remodel the Premises or to make additions, modifications and improvements,to the Premises. All additions, modifications and improvements to the Premises, but not any additional buildings or improvements, shall thereafter comprise part of the Premises and be subject to the provisions of this Lease Agreement. Such additions,modifications and improvements shall not in any way damage the Premises or cause it to be used for purposes other than those authorized under the provisions of the State and Federal Law; and the Premises, upon completion of any additions,modifications and improvements made thereto pursuant to this Section 6.02, shall be of a value which is not substantially less than the value of the Premises immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or remain against the Premises for labor or materials 8 Lease Agrmt Purchase 8 6 09 final-Word doc.doc famished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City pursuant to this Section 5.02; provided that if any such lien is established and the City shall first notify or cause to be notified the Authority of the City's intention to do so,the City may in good faith contest any lien filed or established against the Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in a form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Section 6.03. Public Liability and Premises Damage Insurance. The City shall maintain or cause to be maintained, throughout the Term of the Lease Agreement a standard comprehensive general insurance policy or policies in protection of the City,the Authority and their respective members, officers, agents and employees. Said policy or policies shall provide the 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 Premises. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $5,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum, amount of$100,000 (subject to a deductible clause of not to exceed$25,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy or policies in the amount of$5,000,000(subject to a deductible clause of not to exceed$25,000) covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City; and may be maintained through a joint exercise of powers authority created for such purpose so long as any such carrier or joint exercise of powers authority is rated"A"or better by S&P. The Net Proceeds of such insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. Any required insurance may be in the form of self-insurance by the City. Section 6.04. Fire and Extended and Coverage Insurance. The City shall procure and maintain, or cause to be procured and maintained, throughout the Term, of the Lease Agreement, insurance against loss or damage to any structures constituting any part of the Premises by fire and lightning with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, if required, shall, as nearly as practicable, cover loss or damage by explosion,windstorm, riot, aircraft, vehicle damage, smoke and such other hazards as are normally covered by such insurance. Such insurance shall apply exclusively to the Premises and shall be in an amount equal to the greater of. (a)one hundred percent(100%)or the replacement costs of the structures constituting part of the Premises, or(b)the Outstanding principal amount of the Note. Such insurance may be subject to deductible clauses of not to exceed $100,000 for any one loss. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained through a joint exercise of 9 Lease Agrmt Purchase 8 6 09 final-Word doc.doc powers authority created for such purpose or in the form of self-insurance by the City. The Net Proceeds of such insurance shall be applied as provided to Section 56.02 (a)hereof. Section 6.05. Title Insurance. The City shall provide, at its own expense, on or before the Closing Date, a title insurance policy in the amount of not less than the aggregate principal amount of the Note, insuring the City's leasehold estate in the Premises, subject only to Permitted Exceptions. Section 6.06. Insurance Net Proceeds. Each policy or other evidence of insurance required by Sections 6.03, 6.04 and 6.05 hereof shall name the Authority, the City and the Trustee as insureds and the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. On or before August 1 of each year, the City shall certify to the Trustee that all policies of insurance and any statements of self-insurance are in conformance with the requirements of this Lease Agreement. The City shall pay or cause to be paid when due the premiums for all insurance required by this Lease Agreement. All such policies or other evidence of insurance shall provide that the Trustee shall be given thirty (30) days' notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance; herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee. Section 6.07. Installation of Personal Property. The City may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Premises. All such items of shall remain the sole property of the City, in which neither the Authority nor the Trustee shall have any interest and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Premises resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City from purchasing or leasing items to a installed pursuant to this Section 5.09 under a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as security interest shall attach to any part of the Premises. Section 6.08. Liens. Neither the City nor the Authority shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Premises, other than the respective rights of the Authority and the City as provided herein and Permitted Exceptions. Except as expressly provided in this Article VI,the City and the Authority shall promptly, at their own expense,take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage,pledge, lien, or claim. Section 6.09. Tax Covenants. Notwithstanding any other provision of this Lease absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Note will not 10 Lease Agnnt Purchase 8 6 09 final-Word doc.doc be, adversely affected for federal income tax purposes,the City covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as provided below. (a) Private Activity. The City and the Authority will not take or omit to take any action or make any use of the proceeds of the Note or of any other moneys or property which would cause the Note to be "private activity bonds"within the meaning of Section 141 of the Code. (b) Arbitrage. The City and the Authority will make no use of the proceeds of the Note or of any other amounts or property, regardless of the source, or take or omit to take any action which would cause the Note to be "arbitrage bonds"within the meaning of Section 148 of the Code. (c) Federal Guarantee. The City and the Authority will make no use of the proceeds of the Note or take or omit to take any action that would cause the Note to be"federally guaranteed"within the meaning of Section 149(b) of the Code. (d) Information Reporting. The City and the Authority will take or cause to be taken all necessary action to comply with the information reporting requirement of Section 149(e) of the Code. Section 6.10. Report to California Debt Advisory Commission. In accordance with �.� Section 6599.1(c) of the Government Code, the City shall notify the California Debt Advisory Commission by mail, postage prepaid, within ten(10) days the Authority fails to pay principal and interest payable on the Note on any scheduled payment date. The notice given pursuant to this Section 6.10 shall consist of a letter to the Commission stating (i) the name of the Authority and the Note and the date of sale of the Note, and , (ii)the scheduled payment. Section 6.11. Condemnation of Premises. The city hereby covenants and agrees,to the extent it may lawfully do so,that so long as any of the Note remains Outstanding, the City will not exercise the power of condemnation with respect to the Premises. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City should fail or refuse to abide by such covenant and condemns the Premises, the City will not take a position in any condemnation action that the appraised value of the Premises is less than the principal and interest components of the Note _ Outstanding through the date of redemption. Section 6.12. Compliance with Law. Regulations. Etc. (a) The City has, after due inquiry, no knowledge and has not given or received any written notice indicating that the Premises or the past or present use thereof or any practice, ® u Leese Ag'mt Purchase 8 6 09 final-Word doc.doc procedure or policy employed by it in the conduct of its business materially violates any applicable law, regulation, code, order,rule,judgment or consent agreement, including, without limitation, those relating to: zoning, building, use and occupancy, fire safety, health, sanitation, air pollution, ecological matters, environmental protection, hazardous or toxic materials, substances or wastes, conservation, parking, architectural barriers to the handicapped, or restrictive covenants or other agreements affecting title to the Premises (collectively, "Laws and Regulation"). Without limiting the generality of the foregoing; neither the City nor to the best of its knowledge, after due inquiry, any prior or present owner,tenant or subtenant of any of the Premises has, other than as set forth in subsections(a)and (b)of this Section or as may have been remediated in accordance wit Laws and Regulations, (i)used, treated, stored,transported or disposed of any material amount of flammable explosives, polychlorinated biphenyl compounds, heavy metals, chlorinated solvents, cyanide, radon, petroleum products, asbestos or any Asbestos Containing Materials, methane, radioactive materials, pollutants,hazardous materials, hazardous wastes, hazardous, toxic, or regulated substances or related materials, as defined in CERCLA, RCRA, CWA, CAA, TSCA and Title III, and the regulations promulgated pursuant thereto, and in all other Environmental Regulations applicable to the City , any of the Premises or the business operations conducted by the City thereon (collectively, "Hazardous Materials")on, from or beneath its Premises, (ii)pumped, spilled, leaked, disposed of, emptied, discharged or released (hereinafter collective referred to as "Release") any material amount of Hazardous Materials on, from or beneath the Premises, or (iii) stored any material amount of petroleum products at the Premises in underground storage tanks. (b) Excluded from the representations and warranties in subsection (a)hereof with respect to Hazardous Materials are those Hazardous Materials in those amounts ordinarily found in the inventory of or used in the operation of a governmental building, the use,treatment, storage, transportation and disposal of which has been and shall be in compliance with all Laws and Regulations. (c) No Property located in an area of high potential incidence of radon has an unventilated basement or subsurface portion which is occupied or used for any purpose other than the foundation or support of the improvements of such Property. Section 6.13. Environmental Compliance. (a) The City shall not use or permit the Premises or any part thereof to be used to generate, manufacture, refine,treat, store, handle, transport or dispose of, transfer,produce or process Hazardous Materials, except, and only to the extent, if necessary to maintain the improvements on the Premises and then, only in compliance with all Environmental Regulations, and any state equivalent laws and regulations, nor shall it permit, as a result of an intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee, guest, invitee, contractor, employee and agent, the storage, transportation, disposal or use of Hazardous Materials or the Release or threat of Release of Hazardous Materials on, from or beneath the Premises or onto any other property excluding, however, those Hazardous Materials in those amounts ordinarily found in the inventory of or used in the operation of a governmental lz Lease Agrmt Purchase 8 6 09 final-Word doc.doc building,the use, storage, treatment, transportation and disposal of which shall be in compliance with all Environmental Regulations. Upon the occurrence of any Release or threat of Release of Hazardous Materials so released, on, from or beneath the Premises or other property, in compliance with Environmental Regulations. Notwithstanding anything to the contrary contained herein, underground storage tanks shall only be permitted subject to compliance with subsection(c) and only to the extent necessary to maintain the improvements on the Premises. (b) The City shall comply with, and shall use its best efforts to assure that its tenant's, subtenants, agents, licensees, employees, contractors, and agents comply with, all Environmental Regulations and shall keep the Premises free and clear;provided,however that notwithstanding that a portion of this covenant is limited to the City's use of its best efforts, the City shall remain, solely responsible for ensuring such compliance and such limitation shall not diminish or affect in any way the City's obligations contained in subsection(c) hereof as provided in subsection(c)hereof. Upon receipt of any notice from any Person with regard to the Release of Hazardous Materials on, from or beneath the Premises,the City shall give prompt written notice thereof to the Authority, (and, in any event,prior to the expiration of any period in which to respond to such notice under any Environmental Regulation). (c) Irrespective of whether any representation or warranty contained in Section 5.15 is not true or correct, the City shall defend, indemnify, and hold harmless the Authority,the Trustee, and the Note Owner, its partners, depositors and each of its and their employees, agents, officers, directors,trustees, successors and assigns, from and against any claims, demands, penalties, fines, attorneys' fees (including, without limitation,attorneys' fees incurred to enforce the indemnification contained in this Section 5.16), consultants' fees, investigation and laboratory fees, liabilities, settlements(five(5) Business Days prior notice of which the Authority, or Trustee, as appropriate, shall have delivered to the City), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown,contingent or otherwise, occurring in whole or in part, arising out of, or in any way related to, (i)the presence, disposal, Release, threat of Release, removal, discharge, storage or transportation of any Hazardous Materials on, from or beneath the Premises, (ii)any personal injury (including wrongful death)or property damage (real or personal)arising out of or related to such Hazardous Materials,(iii) any lawsuit brought or threatened, settlement reached(five(5) Business Days prior notice of which the Authority, or the Trustee, as appropriate, shall have delivered to the City),or governmental order relating to Hazardous Materials on,from or beneath any of the Premises, (iv)any violation of Environmental Regulations or subsection(a)or(b)hereof by it or any of its agents,tenants, employees, contractors, licensees, guests, subtenants or invitees, and (v)the imposition of any governmental Lien for the recovery of environmental cleanup or removal costs. To the extent that the City is strictly liable under an Environmental Regulation, its obligation to the Authority,and the Note Owner and the other indemnities under the foregoing indemnification shall likewise be without regard to fault on its part with respect to the violation of any Environmental Regulation which results in liability to any indemnitee. Its obligations and liabilities under this Section 5.16(c) shall survive any foreclosure of the security interest in the Premises or the delivery of any instrument in lieu of foreclosure, and the satisfaction of the Note. 13 Lease Agrmt Purchase 8 6 09 final-Word doc.doc ARTICLE VII DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 7.01. Eminent Domain. If all of the Premises shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain,the Term of the Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Premises shall be taken permanently , or if all of the Premises or any part thereof shall be taken temporarily under the power of eminent domain, (a)this Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b)there shall be a partial abatement of Lease Payment in an amount to be agreed upon by the City and the Authority such that the resulting Lease Payment for the Premises represent fair consideration for the use and occupancy of the remaining usable portion of the Premises. Section 7.02 AAplication of Proceeds. (a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Premises by fire or other casualty shall be applied as set forth in Section 4 of the Deed of Trust. (b) From Eminent Domain Award. The Net Proceeds of any eminent domain award resulting from any event described in Section 30 of the Deed of Trust. Section 7.03 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(other than by eminent domain which is hereinbefore provided for) there is substantial interference with the use and occupancy by the City of the Premises and any portion thereof. The amount of such abatement shall be the difference between the stated Lease Payment for such period and pro rata rental value of the portions of the Premises not damaged or destroyed. 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. 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. The City shall use its best efforts to provide sufficient construction funds to insure completion of the reconstruction, repair,restoration, modification and improvement of the Premises. 14 Lease Agmt Purchase 8 6 09 final-Word doc.doc ARTICLE VIII DISCLAIMER OF WARRANTIES; ACCESS Section 8.01. Disclaimer of Warranties. The Authority makes no warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any purpose or fitness for the use contemplated by the City of the Premises, or any other representation or warranty with respect to the Premises. In no event shall the Authority or its assigns be liable for incidental, indirect, special or consequential damages in connection with or arising out of this Lease Agreement,the Deed of Trust, or the Indenture for the existence, furnishing, functioning or the City's use of the Premises. Section 8.02. Rights of Access. The City agrees that the Authority, any Authorized Representative of the Authority,the Authority's successors or assigns, and the Insurer, shall have the right at all reasonable times to enter upon and to examine and inspect the Premises. The City further agrees that the Authority, and Authorized Representative of the Authority, the Authority's successors or assigns, and the Insurer shall have such rights of access to the Premises as may be reasonably necessary to cause the proper maintenance of the Premises in the event of failure by the City to perform its obligations hereunder. Section 8.03. Release and Indemnification Covenants. To the extent permitted by law, the City shall and hereby agrees to indemnify and save the Authority, the Insurer and the Trustee and their respective officers, agents, successors and assigns harmless from and against all claims, losses and damage, 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 Premises by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease Agreement, (c)any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Premises, (d) any act or negligence of any sublessee of the City of the Premises, (e) the acquisition, construction, and equipping of the Premises or(f)the Trustee's acceptance or administration of the trust under the Indenture and the Deed of Trust,of the exercise or performance of any of its powers or duties under the Indenture, the Deed of Trust, and hereunder. No indemnification is made under this Section 8.03 or elsewhere in this Lease Agreement for willful misconduct, negligence, or breach of duty under this Lease Agreement by the Authority or the Trustee,their officers, agents, employees, successors or assigns. The Trustee's rights to compensation, reimbursement and indemnification shall survive its resignation or removal and termination of this Lease Agreement. ARTICLE IX ASSIGNMENT, SUBLEASING AND AMENDMENT Section 9.01. Assignment by the Authority. The Authority's rights under this Lease �1 Agreement, including the right to receive and enforce payment of the Lease Payments to be is Lease Agnnt Purchase 8 6 09 final-Word doc.doc made by the City under this Lease Agreement, have been assigned, transferred and sold to the Trustee without recourse for the benefit of the Note Owner pursuant to the Indenture and Deed of Trust, to which assignment, transfer and sale the City hereby consents. Section 9.02. Assignment and Subleasing by City. This Lease Agreement may not be assigned by the City. The City may sublease the Premises or any portion thereof, but only with the written consent of the Authority, and the Insurer, and 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; (b) The City shall,within thirty(30) days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) No such sublease by the City shall cause the Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) The City shall furnish the Authority and Trustee with a written opinion of Bond Counsel stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Note that is issued as tax-exempt obligation to become included in gross income for federal income tax purposes. Section 9.03 Amendment. This Lease Agreement may be amended in the same manner in which the Indenture may be amended pursuant to Section 6.02 of the Indenture. ARTICLE X LEASE DEFAULT EVENTS AND REMEDIES Section 10.01. Lease Default Events Defined. The following shall be "Lease Default Events" under this Lease Agreement: (a) Failure by the City to pay any Lease Payment required to be paid hereunder at the time specified herein. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under this Lease Agreement,other than as referred to in paragraph(a)of this Section 10.01, for a period of thirty(30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority, the Trustee, or the Note Owner; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Authority, the Trustee and the Note Owner shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is 16 Lease Agent Purchase 8 6 09 final-Word doc.doc corrected, provided further that no such grace period shall be extended for more than sixty(60) days without prior written consent of the Insurer. (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 Act, as amended,or under similar acts which may hereafter be enacted. Section 10.02 Remedies on Default. Whenever any Lease Default Event referred to in Section 10.01 hereof shall have happened and be continuing, it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement; provided, however,that notwithstanding any contrary implication of anything herein or in the Indenture,there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. Each and every covenant hereof to be kept and performed by the City is expressly made a condition and upon the breach thereof the Authority may exercise any and all rights of entry and re-entry upon the Premises, and also, at its option, with or without such entry, may terminate this Lease Agreement; provided however that no such termination shall be effected either by operation of law or acts of the parties hereto, except only in the manner herein expressly provided. In the event of such default and notwithstanding any re-entry by the Authority, the City shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained and, in any event, such rent and/or damages shall be payable to the Authority at the time and in the manner as herein provided, to wit: (a) In the event the Authority does not elect to terminate this Lease Agreement in the manner hereinafter provided for in subparagraph(b) of this Section 10.02, 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 Premises, or, in the event the Authority is unable to re-lease the Premises, then for the full amount of all Lease Payments to the end of the Term of the Lease 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 Premises 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 Premises in the event of default by the City in the performance of any covenants herein contained to be performed by the City and to remove all personal property whatsoever situated upon the Premises to place such property in storage or other suitable place in the County of San Bernardino, for the account of and expense of the City, and the City hereby exempts and agrees, to the extent permitted by law, to save harmless the Authority from any costs, loss or damage O17 Lease Agtmt Purchase 8 6 09 final-Word doc.doc whatsoever or arising or occasioned by any such entry upon and re-leasing of the Premises 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 hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Premises as herein provided and all claims for damages that may result from the destruction of or injury to the Premises and all claims for damage to or loss of any property belonging to the City that may be in or upon the Premises. 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 Premises 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 further waives the right to any rental obtained by the Authority in excess of the Lease Payments and hereby conveys and releases such excess to the Authority as compensation for the Authority for its services in—re-leasing the Premises. (b) Upon the occurrence of a Lease Default Event hereunder, the Authority may terminate this Lease Agreement and re-lease all or any portion of the Premises; provided, however, that no such re-letting shall in any way cause interest payable to the Note Owner with respect to the Note (to the extent such Note is issued as a tax-exempt obligation)to be included in gross income for purposes of federal income taxation. In the event of the termination of this Lease Agreement by the Authority at its option and in the manner hereinafter provided on account of default by the City(and notwithstanding any re-entry upon the Premises by the Authority in any manner whatsoever or the re-leasing of the Premises), 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. Any surplus received by the Authority from such re-leasing shall be the absolute property of the Authority and the City shall have no right thereto,except that the City shall be entitled to a credit against the Lease Payments for the full amount of rentals received by the Authority from the Premises . Neither notice to pay rent or to deliver up possession of the premises given pursuant to law nor any proceeding in unlawful detainer taken by the Authority shall of itself operate to terminate this Lease Agreement, and no termination of this 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 Premises or of the remainder of the Term of this Lease Agreement 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. Notwithstanding any other provisions of this Lease Agreement,the City may not terminate this Lease Agreement as a remedy for a violation by the Authority of any covenant or duty imposed on the Authority hereunder. 18 Lease Ag nt Purchase 8 6 09 final-Word doc.doc Section 10.03 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 any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law. Section 10.04 Each Party to Pay Its Own Attorney's Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, each party shall bear its own attorney's fees and expenses. Section 10.05.No Additional Waiver Imbed by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other occurrence of a breach hereunder whether the other occurrence of a breach is as to the same or a different agreement. Section 10.06. Trustee and Note Owner to Exercise Rights. Such rights and remedies as are given to the Authority under this Article IX have been assigned by the Authority to the Trustee under the Deed of Trust or the Indenture,to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee, and the Note Owner as provided in the Indenture or the Deed of Trust. In addition to the rights and remedies assigned by the Authority to the Trustee, to the extent that the Indenture, the Trust Deed and this Lease Agreement confer upon or gives or grants to the Trustee any right, remedy or claim under or by reason of the Indenture,the Trust Deed, or Lease Agreement, the Trustee is hereby explicitly recognized as being a third party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given, or granted. ARTICLE XI MISCELLANEOUS Section 11.01. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail in first class form with postage fully prepaid: 19 Lease Agnut Purchase 8 6 09 final-Word doc.doc If to the City: City of San Bernardino 300 North "D" Street San Bernardino, California 92418 Attention: If to the Authority: San Bernardino Joint Powers Financing Authority 201 North"E" Street San Bernardino, California 92401 Attention: Agency Administrator If to Trustee: Commonwealth Land Title Company 275 West Hospitality Lane San Bernardino California 92408 The Authority, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications shall be sent. Section 11.02. Binding Effect. This Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 11.03. Severability. In the event any provision of this Lease Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 11-04. Net-net-net Lease. This Lease Agreement shall be deemed and constructed to be a"net-net-net lease" and the City hereby agrees that the Lease Payments shall be an absolute return to the Authority, free and clear of any expenses, charges, or set-offs whatsoever. Section 11.05. Further Assurances and Corrective Instruments. The Authority and the City agree 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 Premises hereby leased or intended so to be or for carrying out the expressed intention of this Lease Agreement. Section 11.06. Execution in Counterparts. This Lease Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 20 Leasc Agent Purchase 8 6 09 final-Word doc.doc Section 11.07. Applicable Law. This Lease agreement shall be governed by and construed in accordance with the laws of the State of California. Section 11.08. Authorized Representatives. Whenever under the provisions of this Lease Agreement approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval or such request shall be given for the Authority by an Authorized Representative of the Authority and for the City by an Authorized Representative of the City, and any party hereto shall be authorized to rely upon any such approval or request. Section 11.09. 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. Section 11.10. Venue The parties hereto agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated either in the State courts located in the County of San Bernardino, State of California or the U.S. District Court for the Central District of California, Riverside Division. The aforementioned choice of venue is intended by the parties to be mandatory and not permissive in nature. IN WITNESS WHEREOF, the Authority has caused this Lease Agreement to be executed in its corporate name by its duly authorized officers and sealed with its corporate seal; and the City has caused this Lease Agreement to be executed in its name by its duly authorized officers and sealed with its corporate seal, as of the date first above written. City of San Bernardino San Bernardino Joint Powers Financing Authority By By Mayor Executive Director Approved as to form Approved as to form James Penman Authority Counsel City Attorney il Leue Agrmt Purchase 16 19 final-Word doc.doc EXHIBIT "A" LEGAL DESCRIPTION Property Address: 120 South"D" Street APN : 0136-122-60 THAT PORTION OF LOTS 1, 2 AND 3, BLOCK "D", THE PEPPERS, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 17 OF MAPS, PAGE 8, RECORDS OF SAID COUNTY, AND THAT PORTION OF D STREET, VACATED BY RESOLUTION 9848, RECORDED MAY 29, 1969 IN BOOK 7241, PAGE 713, OR DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT 1, BLOCK "D" OF THE PEPPERS, SUBDIVISION, SAID POINT ALSO BEING IN THE EAST LINE OF STODDARD AVENUE, (VACATED BY RESOLUTION 8506, RECORDED JANUARY 27, 1967 IN BOOK 6764, PAGE 380, OFFICIAL RECORDS) 60.00 FEET WIDE; THENCE SOUTH 164.91 FEET ALONG THE EAST LINE OF SAID VACATED STODDARD AVENUE; THENCE NORTH 890 59' 21" EAST 282.78 FEET TO A POINT ON A TANGENT CURVE CONCAVE TO THE NORTH WITH A RADIUS OF 20.00 FEET AND A RADIAL BEARING OF NORTH 00° 39" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 640 59' 21", AN ARC DISTANCE OF 22.69 FEET TO A TANGENT LINE; THENCE NORTH 250 00' 00" EAST, 71.88 FEET ALONG SAID TANGENT LINE TO A POINT ON A TANGENT CURVE CONCAVE TO THE WEST WITH A RADIUS OF 208.75 FEET AND A RADIAL BEARING OF NORTH 650 00' 00" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 250 00' 00", AN ARC DISTANCE OF 91.08 FEET TO A POINT ON THE SOUTH LINE OF THE ATCHINSON, TOPEKA AND SANTA FE RAILROAD 50.00 FEET WIDE; THENCE SOUTH 890 59' 25" WEST 350.83 FEET ALONG SAID SOUTH LINE OF RAILROAD RIGHT OF WAY TO THE POINT OF BEGINNING. CONTAINS 54.409.2 SQUARE FEET, MORE OR LESS. EXHIBIT `B" DESCRIPTION OF FACILITIES Leased facilities consists of that certain real property, structures, fixtures and appurtenances located at 120 S. "D" Street, San Bernardino, California, known as Assessor's Parcel No. 136- 122-60, more specifically described as, but not limited to: 1.35 acre (58,606 square feet) site area, containing a Class"C" concrete tilt up building, approximately 21,420 square in total area, and all fixtures and appurtenances thereto. Building consists of 19,080 warehouse space, 1,080 square feet of garage space, and 1,260 square feet of office space. Leased Facilities shall include all exterior paving,walkways, landscaping and fencing and appurtenances thereto. EXHIBIT °C" SCHEDULE OF LEASE PAYMENTS Due Date Lease Payment Close of Escrow $400,000.00 01/01/2010 $30,000.00 07/01/2010 $30,000.00 01/01/2011 $30,000.00 07/01/2011 $30,000.00 01/01/2012 $30,000.00 07/01/2012 $30,000.00 01/01/2013 $30,000.00 07/01/2013 $30,000.00 01/01/2014 $30,000.00 Then: Option one: 07/01/2014 $1,200,000.00 Or: Option two: 07/01/2014 $100,000.00 01/01/2015 $27,500.00 07/01/2015 $27,500.00 01/01/2016 $27,500.00 07/01/2016 $27,500.00 01/01/2017 $27,500.00 07/01/2017 $27,500.00 01/01/2018 $27,500.00 07/01/2018 $27,500.00 01/01/2019 $27,500.00 07/01/2019 $1,127,500.00 I RESOLUTION NO. COPY 2 RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING AND 3 DIRECTING THE EXECUTION OF A LEASE-WITH RIGHT OF PURCHASE AGREEMENT BETWEEN THE SAN BERNARDINO JOINT POWERS FINANCING 4 AUTHORITY AND THE CITY, RELATIVE TO PROPERTY LOCATED AT 120 SOUTH "D" STREET, SAN BERNARDINO, FOR A CITY FIRE DEPARTMENT 5 MAINTENANCE FACILITY. 6 WHEREAS, the City of San Bernardino desires to lease and acquire that certain parcel 7 of real property located 120 South "D" Street in said City, being a portion of real property 8 commonly known as Assessor's Parcel Number 0136-122-60, and more fully described in 9 10 Exhibit "1" attached hereto and made a part hereof, relative to the relocation of the Fire 11 Department's maintenance facility; and 12 WHEREAS, The San Bernardino Joint Powers Financing Authority ("JPFA") has 13 approved the execution of various documents to finance the proposed acquisition through the 14 JPFA and the JPFA will hold title to the said real property; and 15 WHEREAS, the City of San Bernardino desires to lease and purchase the property from 16 the JPFA, as set forth in the Lease-With Right of Purchase Agreement, a copy of which is 17 18 attached hereto as Exhibit "2" and made a part hereof. 19 NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AS FOLLOWS: 20 21 SECTION 1. That the Mayor of the City is hereby directed and authorized to execute a 22 Lease-With Right of Purchase Agreement between the JPFA and the City of San Bernardino, 23 relative to said real property described herein. 24 SECTION 3. That said Agreement shall be null and void if either party fails to execute 25 26 the documents within ninety (90) days of the date of adoption of this Resolution. 27 28 08n2i2009 1 13 2�s� RESOLUTION OF THE CITY OF SAN BERNARDINO AUTHORIZING AND DIRECTING THE EXECUTION OF A LEASE-WITH RIGHIT OF PURCHASE AGREEMENT BETWEEN THE SAN 1 BERNARDINO JOINT POWERS FINANCING AUTHORITY AND THE CITY, RELATIVE TO PROPERTY LOCATED AT 120 SOUTH "D" STREET, SAN BERNARDINO, FOR A CITY FIRE 2 DEPARTMENT MAINTENANCE FACILITY. 3 1 HEREBY CERTIFY that the foregoing resolution was duly adopted by the 4 5 Mayor and Common Council of the City of San Bernardino at a 6 meeting thereof held on the day of 2009, by the 7 following vote, to wit: 8 Council Members: AYES NAYS ABSTAIN ABSENT 9 10 ESTRADA 11 BAXTER 12 BRINKER 13 SHORETT 14 KELLEY 15 JOHNSON 16 17 MCCAMMACK 18 19 City Clerk 20 21 The foregoing resolution is hereby approved this day of 2009. 22 23 PATRICK J. MORRIS, Mayor 24 Approved as to form: 25 26 27 IJ , ES F. PENMAN, City Attorney 28 08/12/2009 2 EXHIBIT"]" Legal description of Property EXHIBIT 641" LEGAL DESCRIPTION Property Address: 120 South "D" Street APN: 0136-122-60 THAT PORTION OF LOTS 1, 2 AND 3, BLOCK "D", THE PEPPERS, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 17 OF MAPS, PAGE 8, RECORDS OF SAID COUNTY, AND THAT PORTION OF D STREET, VACATED BY RESOLUTION 9848, RECORDED MAY 29, 1969 IN BOOK 7241, PAGE 713, OR DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT 1, BLOCK "D" OF THE PEPPERS, SUBDIVISION, SAID POINT ALSO BEING IN THE EAST LINE OF STODDARD AVENUE, (VACATED BY RESOLUTION 8506, RECORDED JANUARY 27, 1967 IN BOOK 6764, PAGE 380, OFFICIAL RECORDS) 60.00 FEET WIDE; THENCE SOUTH 164.91 FEET ALONG THE EAST LINE OF SAID VACATED STODDARD AVENUE; THENCE NORTH 890 59' 21" EAST 282.78 FEET TO A POINT ON A TANGENT CURVE CONCAVE TO THE NORTH WITH A RADIUS OF 20.00 FEET AND A RADIAL BEARING OF NORTH 000 39" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 640 59' 21", AN ARC DISTANCE OF 22.69 FEET TO A TANGENT LINE; THENCE NORTH 250 00' 00" EAST, 71.88 FEET ALONG SAID TANGENT LINE TO A POINT ON A TANGENT CURVE CONCAVE TO THE WEST WITH A RADIUS OF 208.75 FEET AND A RADIAL BEARING OF NORTH 650 00'00" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 250 00' 00", AN ARC DISTANCE OF 91.08 FEET TO A POINT ON THE SOUTH LINE OF THE ATCHINSON, TOPEKA AND SANTA FE RAILROAD 50.00 FEET WIDE; THENCE SOUTH 890 59' 25" WEST 350.83 FEET ALONG SAID SOUTH LINE OF RAILROAD RIGHT OF WAY TO THE POINT OF BEGINNING. CONTAINS 54.409.2 SQUARE FEET, MORE OR LESS. EXHIBIT 442" LEASE AGREEMENT WITH RIGHT OF PURCHASE Dated as of August , 2009 by and between San Bernardino Joint Powers Financing Authority as Lessor and the City of San Bernardino As Lessee 1 Lease Agrmt Purchase 8 6 09 final-Word doc.doc LEASE AGREEMENT WITH RIGHT OF PURCHASE Dated as of August , 2009 by and between San Bernardino Joint Powers Financing Authority as Lessor and the City of San Bernardino As Lessee r^ I Lease Agmrt Purchase 8 6 09 final-Word doc.doc TABLE OF CONTENTS ARTICLE I DEFINITIONS AND EXHIBITS Section 1.01. Definitions Section 1.02. Exhibits ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.01. Representations. Covenants and Warranties of the City Section 2.02. Representations Covenants and Warranties of Authority ARTICLE III THE NOTE Section 3.01. The Note Section 3.02. Payment of Proiect Costs ARTICLE IV AGREEMENT TO LEASE; TERMS OF LEASE AGREEMENT; LEASE PAYMENTS Section 4.01. Lease Section 4.02. Term of Aereement Section 4.03. Possession Section. 4.04. Lease Payments Section 4.05. Optional Prepayment Section 4.06. Ouiet Enjoyment Section 4.07. Title ARTICLE V RIGHT OF PURCHASE 5.01. City shall have the right to purchase the Premises 5.02. Disposition of Purchase Proceeds by Authority ARTICLE VI MAINTENANCE;TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 6.01. Maintenance, Utilities. Taxes and Assessments Section 6.02. Modification of Premises Section 6.03. Public Liability and Premises Damage Insurance Section 6.04. Fire and Extended and Coverage Insurance Section 6.05. Title Insurance �r Section 6.06. Insurance Net Proceeds Section 6.07. Installation of Personal Propert y Section 6.08. Liens Section 6.09. Tax Covenants Section 6.10. Report to California Debt Advisory Commission Section 6.11. Condemnation of Premises Section 6.12. _Compliance with Law, Regulations, Etc. Section 6.13. Environmental Compliance ARTICLE VII DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 7.01. Eminent Domain Section 7.02 Application of Proceeds Section 7.03 Abatement of Lease Payments in the Event of Damage or Destruction. ARTICLE VIII DISCLAIMER OF WARRANTIES; ACCESS Section 8.01. Disclaimer of Warranties Section 8.02. Rights of Access Section 8.03. Release and Indemnification Covenants ARTICLE IX ASSIGNMENT, SUBLEASING AND AMENDMENT Section 9.01. Assignment by the Authori ty Section 9.02. Assignment and Subleasing by City Section 9.03 Amendment ARTICLE X LEASE DEFAULT EVENTS AND REMEDIES Section 10.01. Lease Default Events Defined Section 10.02 Remedies on Default Section 10.03 No Remedy Exclusive Section 10.04 Each Party to Pay Its Own Attomev's Fees and Expenses Section 10.05 No Additional Waiver Implied by One Waiver Section 10.06. Trustee and Note Owner to Exercise Rights ARTICLE XI MISCELLANEOUS Section 11.01. Notices Section 11.02. Binding Effect Section 11.03. Severability Section 11.04. Net-net-net Lease Section 11.05. Further Assurances and Corrective Instruments Section 11.06. Execution in Counterpart s Section 11.07. AAnnlicable Law Section 11.08. Authorized Representatives Section 11.09. Captions Section 11.10. Venue LEASE AGREEMENT THIS LEASE AGREEMENT (this "Lease Agreement'), dated as of June 1, 2009 by and between the SAN BERNARDINO JOINT POWERS FINANCING AUTHORITY, a Joint exercise of powers agency organized and existing under the laws of the State of California, as lessor(the "Authority"), and the CITY OF SAN BERNARDINO, a municipal corporation and charter city organized and existing under its Charter and the laws of the State of California, as lessee(the "City"). WITNESSETH: WHEREAS, the City and the City of San Bernardino Redevelopment Agency (the "Agency") have formed the Authority under and pursuant to a joint exercise of powers agreement, by and between the City and the Agency under the provisions of Articles 1 through 4 (commencing with California Government Code section 6500) of Chapter 5 of Division 7 of Title 1 of the California Government Code (the"Act') for the purpose of issuing bonds as defined in the Act; WHEREAS, the Authority is authorized under the Mark-Roos Local Bond Pooling Act of 1985 (commencing with section 6584 of the Act) to incur indebtedness to finance and refinance public capital improvements (as such term is defined in the Act) and the City is authorized pursuant to the laws of the State of California to enter into leasehold agreements for such purposes; and WHEREAS, the Authority issued its San Bernardino Joint Powers Financing Authority, San Bernardino City Fire Department Maintenance Facility Note -2009 (the "Note") in the principal amount of$1,200,000 in order to finance the purchase and improvement of a Fire Maintenance Facility (the "Premises"); and WHEREAS, the Authority made and entered the Indenture and Loan Agreement (the "indenture"), dated August , 2009 by and between the Authority and Tim J. Burgess, a single man, as further security for the Note; and WHEREAS, the Authority made that Deed of Trust, Security Agreement, Assignment of Leases and Rents and Financing Statement (the "Deed of Trust") bearing date of August , 2009 thereby giving and granting an interest in the Premises as security for the Note; and WHEREAS, the City will lease the Premises as provided in this Lease Agreement, such lease to the City being for the purpose (among others) of providing lease payments in the amounts sufficient to provide for the payment of the interest on the Note for the period of the Lease Agreement. 2 Lease Agmn Purchase 8 609 final-Word doc.doc NOW, THEREFORE, for and in consideration of the promises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows: ARTICLE I DEFINITIONS AND EXHIBITS Section 1.01. Definitions. Unless the context clearly otherwise requires or unless otherwise defined herein, the capitalized terms in this Lease Agreement shall, for all purposes of this Lease Agreement, have the meanings ascribed to them in the Indenture and the Deed of Trust. Section 1.02. Exhibits. The following exhibits are attached to, and by this reference made of a part of, this Lease Agreement: Exhibit A: Description of the Premises Exhibit B: Description of the Facilities Exhibit C: Schedule of Lease Payments © ARTICLE II REPRESENTATIONS, COVENANTS AND WARRANTIES Section 2.01. Representations. Covenants and Warranties of the City. The City represents, covenants and warrants as follows: (a) Due Organization and Existence. The City is a municipal corporation and charter city duly organized and existing under its Charter and the laws of the State. (b) Authorization. The laws of the State authorize the City to enter into this Lease Agreement and to enter into the transactions contemplated hereby and to carry out its obligations hereunder, and the City has duly authorized and executed this Lease Agreement and (assuming due authorization, execution and delivery by the other parties) this Lease Agreement constitutes the legal, valid and binding agreements of the City, enforceable against the city in accordance with its terms. (c) No Violations. Neither the execution and delivery of this Lease Agreement, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms conditions or provisions of any restriction or any agreement or instrument to which City is now a party or by which the City is bound or constitutes a default under any of the foregoing, or results in the 3 Lease Agrmt Purchase 8 6 09 final-Word doc.doc creation or imposition of any lien, charge or encumbrances whatsoever upon any of the property or assets of the City, or upon the Premises, except Permitted Exceptions (as defined under Trustor Covenants of the Trust Deed). (d) Execution and Delivery. The City has duly authorized and executed this Lease Agreement in accordance with the laws of the State. (e) Premises Essential. The Premises is essential to the operations of the City. Section 2.02. Representations Covenants and Warranties of Authority. The Authority represents, covenants and warrants to the City as follows: (a) Due Organization and Existence. The Authority is a joint exercise of powers agency duly organized and existing under and by virtue of the laws of the State of California; has power to enter into this Lease Agreement; is possessed of full power to own and hold, improve and equip real and personal property, and to lease and sell the same; and has duly authorized the execution and delivery of this agreement and (assuming due authorization, execution and delivery by the other parties) such agreement constitutes the legal, valid and binding agreement of the Authority, enforceable against the Authority in accordance with its terms. (b) No Encumbrances. The Authority will not pledge the Lease Payments or other amounts derived from the Premises and from its other rights under this Lease Agreement, and will not mortgage or encumber the Premises, except as provided under the terms of this Lease Agreement, the Deed of Trust, or the Indenture. (c) No Violations. Neither the execution and delivery of this Lease Agreement, nor the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction or any agreement or instrument to which the Authority is now a party or by which the Authority is bound, or constitutes a default under the foregoing, or results in the creation or imposition or any lien, charge or encumbrance whatsoever upon any of the property or assets of the Authority, or upon the Premises, except Permitted Exceptions. (d) No Assignments. Except as provided in the Deed of Trust, the Indenture, and otherwise expressly provided herein, the Authority will not assign this Lease Agreement, its right to receive Lease Payments from the City, or its duties and obligations hereunder to any other person, firm or corporation so as to impair or violate the representation, covenants and warranties contained in this Section 2.02. (e) Title to Site. The Authority warrants that it has acquired and is owner of a fee simple interest in the Premises, subject, however, to Permitted Exceptions. (0 Execution and Delivery. The Authority has duly authorized and executed this Lease Agreement in accordance with the laws of the State. a Lease Agrml Purchase 9 6 09 final-Word doc.doc ARTICLE III THE NOTE Section 3.01. The Note. The Authority has authorized the issuance of the Note pursuant to the Indenture in the principal amount of$1,200,000. The Authority has placed its interest in the Premises in trust with Trustee for the benefit of the Note Owner as Beneficiary. The City hereby approves the Indenture and the Deed of Trust and the assignment to the Trustee of the rights of the Authority assigned or purported to be assigned thereunder, and the issue of the Note by the Authority under and pursuant to the Indenture. Section 3.02. Payment of Project Costs. The Authority's lease payment for the Premises shall be made from the Lease Payments made to Authority by City hereunder. ARTICLE IV AGREEMENT TO LEASE; TERMS OF LEASE AGREEMENT; LEASE PAYMENTS Section 4.01. Lease. In consideration of the lease payments to be made by the City, and in consideration of the execution of this Lease Agreement by the Authority and the City, and for other good and valuable consideration, the Authority hereby leases to the City, and the City hereby leases from the Authority, the Premises, for the Term and upon the terms and conditions set forth in this Lease Agreement. Section 4.02. Term of Agreement. The obligation to make Lease Payments hereunder shall commence on the Closing Date and shall end on June 30, 2019, unless such term is earlier terminated as hereinafter provided and as otherwise provided in the Deed of Trust or the Indenture. Section 4.03. Possession. The City hereby agrees to take possession of the Premises on or before August 1, 2009. Section. 4.04. Lease Payments. (a) Obligation to Pay. In consideration of the lease of the Premises from the Authority hereunder, the City agrees to pay to the Authority, its successors and assigns, as rental for the use and occupancy of the Premises during each Rental Period, the Lease Payments for the Premises in the respective amounts specified in Exhibit C hereto, to be due and payable on the respective Lease Payment Dates specified in Exhibit C hereto. The Lease Payments for the Premises payable in any Rental Period shall be for the use of the Premises for such Rental Period. s Lease Agrmt Purchase 8 6 09 final-Word doc.doc (b) Rate on Overdue Payments. In the event the City should fail to make any of the payments required in this Section 4.04, the payment in default shall continue as an obligation of the City until the amount in default shall have been fully paid, and the City agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate of twelve percent (12%) per annum. (c) Fair Rental Value. The Lease Payments for the Premises for each Rental Period shall constitute the total rental for the Premises for each Rental Period and shall be paid by the City in each Rental Period in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Premises during each Rental Period. The parties hereto have agreed and determined that the total Lease Payments for the Premises do not exceed the fair rental value of the Premises. In making such determination, consideration has been given onto the obligations of the parties under this Lease Agreement, the uses and purposes which may be served by the Premises and the benefits therefrom which will accrue to the City and the general public. (d) Source of Payments: Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of the City. The City covenants to take such action as may be necessary to include all Lease Payments due hereunder in each of its budgets during the Term of the Lease Agreement and to make the necessary annual appropriations for all such Lease Payments. The covenants on the part of the City herein contained shall be deemed to be an shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of the City to take such action and do such things as are required by law in the performance of the official duty of such 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. (e) Assignment. The City understands and agrees that all Lease Payments have been assigned by the Authority to the Note Owner, pursuant to the Indenture, for the benefit of the Note Owner, and the City hereby assents to such assignment. The Authority hereby directs the City and the City hereby agrees to pay the Note Owner at , or such other location specified by the Note Owner, all payments payable by the City pursuant to this Section. Section 4.05. Optional Prepayment. The City shall have the right at any to prepay all or any part of any of the Lease Payments. In the event the City deposits with the Trustee the full amount of any prepayment of the Lease Payments pursuant to this Section, the Authority shall at the request of the City forthwith take all steps that my be necessary under Section 3.01 of the Indenture to cause the redemption of all or a portion of Note under and in accordance with Section 3.01 of the Indenture. 6 Lease Agrmt Purchue 8 6 09 final-Word doc.doc Lease Payments due after any partial prepayment shall be in the amounts set forth in a revised Lease Payment schedule which shall be provided by, or caused to be provided by the City to the Trustee and the Authority and which shall represent an adjustment to the schedule set forth in Exhibit C attached hereto taking into account said partial prepayment. Section 4.06. Quiet Enjoyment. During the Term of the Lease Agreement, the Authority shall provide the City with quiet use and enjoyment of the Premises, and the City shall, during such Term, peaceably and quietly have and hold and enjoy the Premises without suit, trouble or hindrance from the Authority, except as expressly set forth in this Lease Agreement. The Authority will, at the request of the City and at the City's cost,join in any legal action in which the City asserts its right to such possession and enjoyment to the extent the Authority may lawfully do so. Notwithstanding the foregoing, the Authority shall have the right to inspect provided in Section 7.02. hereof. Section 4.07. Title. During the Term of the Lease Agreement, the Authority shall hold a leasehold in the Premises in any and all additions which comprise fixtures, repairs, replacements or modifications to the Premises, except for those fixtures, repairs, replacements or modifications which are added to the Premises by the City at its own expense and which may be removed without damaging the Premises and except for any items added to the Premises by the City pursuant to Section 5.07 hereof. ARTICLE V RIGHT OF PURCHASE 5.01 City shall have the right to purchase the Premises. The City shall at all times during the Term of this Lease Agreement have the right of purchase of the Premises from the Authority. Said right may be exercised by the City paying over to the City the full amount then required by the Authority to redeem the Noted under the terms as set forth in the Indenture. In addition, the City shall pay over to the City the full amount of the Lease Payments then due and owing or any pro rata share thereof. 5.02 Disposition of Purchase Proceeds by Authority. Upon the receipt from City of the payment described in Section 5.02, the Authority shall apply the sums so received to redeem the Note. Upon the payment of all sums and the conclusion of all proceedings for the Redemption of the Note and the termination of the Trust Deed, the Authority shall do all things necessary to as soon as possible provide good and marketable and insurable title and interest to the Premises to the City. Lease Agrmt Purchase 8 6 09 final-Word doc.doc ARTICLE VI MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 6.01. M_ aintenance, Utilities. Taxes and Assessments. Throughout the Term of the Lease Agreement, as-part of the consideration for the rental of the Premises, all improvement, repair and maintenance of the Premises shall be the responsibility of the City and the City shall pay for or otherwise arrange for the payment of all utility services supplied to the Premises 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 Premises resulting from ordinary wear and tear or want of care on the part of the City or any assignee or sub lessee thereof. In exchange for the Lease Payments herein provided, the Authority agrees to provide only the Premises, as hereinbefore more specifically set forth. The City shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to the Authority or the City affecting the Premises or the respective interests or estates therein;provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years,the City shall be obligated to pay only such installments as are required to be paid during the Term of the Lease Agreement as and when the same become due. �. The City may, at the City's expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless the Authority shall notify the City that, in the opinion of Independent Counsel, by such nonpayment, the interest of the Authority in the Premises will be materially endangered or the Premises or any part thereof will be subject to loss or forfeiture, in which event the City shall promptly pay such taxes, assessments or charges or provide the Authority with security against any loss which may result from nonpayment, in a form satisfactory to the Authority and the Trustee. Section 6.02. Modification of Premises. The City shall, as its own expense, have the right to remodel the Premises or to make additions, modifications and improvements, to the Premises. All additions,modifications and improvements to the Premises, but not any additional buildings or improvements, shall thereafter comprise part of the Premises and be subject to the provisions of this Lease-Agreement. Such additions,modifications and improvements shall not in any way damage the Premises or cause it to be used for purposes other than those authorized under the provisions of the State and Federal Law; and the Premises, upon completion of any additions, modifications and improvements made thereto pursuant to this Section 6.02, shall be of a value which is not substantially less than the value of the Premises immediately prior to the making of such additions, modifications and improvements. The City will not permit any mechanic's or other lien to be established or remain against the Premises for labor or materials 8 Lease Agmt Purchase 8 6 09 final-Word docdoc furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by the City pursuant to this Section 5.02;provided that if any such lien is established and the City shall first notify or cause to be notified the Authority of the City's intention to do so, the City may in good faith contest any lien filed or established against the Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide the Authority with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in a form satisfactory to the Authority. The Authority will cooperate fully in any such contest, upon the request and at the expense of the City. Section 6.03. Public Liability and Premises Damage Insurance. The City shall maintain or cause to be maintained, throughout the Term of the Lease Agreement a standard comprehensive general insurance policy or policies in protection of the City, the Authority and their respective members, officers, agents and employees. Said policy or policies shall provide the 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 Premises. Said policy or policies shall provide coverage in the minimum liability limits of $1,000,000 for personal injury or death of each person and $5,000,000 for personal injury or deaths of two or more persons in each accident or event, and in a minimum, amount of$100,000 (subject to a deductible clause of not to exceed$25,000) for damage to property resulting from each accident or event. Such public liability and property damage insurance may, however, be in the form of a single limit policy or policies in the amount of$5,000,000 (subject to a deductible clause of not to exceed$25,000)covering all such risks. Such liability insurance may be maintained as part of or in conjunction with any other liability insurance coverage carried by the City; and may be maintained through a joint exercise of powers authority created for such purpose so long as any such carrier or joint exercise of powers authority is rated "A"or better by S&P. The Net Proceeds of such insurance shall be applied toward extinguishment or satisfaction of the liability with respect to which the insurance proceeds shall have been paid. Any required insurance may be in the form of self-insurance by the City. Section 6.04. Fire and Extended and Coverage Insurance. The City shall procure and maintain,or cause to be procured and maintained, throughout the Term, of the Lease Agreement, insurance against loss or damage to any structures constituting any part of the Premises by fire and lightning with extended coverage and vandalism and malicious mischief insurance. Said extended coverage insurance, if required, shall, as nearly as practicable, cover loss or damage by explosion, windstorm,dot aircraft,vehicle damage,smoke and such other hazards as are - -- - normally covered by such insurance. Such insurance shall apply exclusively to the Premises and shall be in an amount equal to the greater of. (a) one hundred percent (100%)or the replacement costs of the structures constituting part of the Premises, or(b) the Outstanding principal amount of the Note. Such insurance may be subject to deductible clauses of not to exceed $100,000 for any one loss. Such insurance may be maintained as part of or in conjunction with any other insurance coverage carried by the City, and may be maintained through a joint exercise of 9 Lease Agrmt Purchase 9 6 09 final-Word doc.doc powers authority created for such purpose or in the form of self-insurance by the City. The Net _ . Proceeds of such insurance shall be applied as provided to Section 56.02 (a) hereof. Section 6.05. Title Insurance. The City shall provide, at its own expense, on or before the Closing Date, a title insurance policy in the amount of not less than the aggregate principal amount of the Note, insuring the City's leasehold estate in the Premises, subject only to Permitted Exceptions. Section 6.06. Insurance Net Proceeds. Each policy or other evidence of insurance required by Sections 6.03, 6.04 and 6.05 hereof shall name the Authority, the City and the Trustee as insureds and the Trustee as loss payee so as to provide that all proceeds thereunder shall be payable to the Trustee. On or before August 1 of each year, the City shall certify to the Trustee that all policies of insurance and any statements of self-insurance are in conformance with the requirements of this Lease Agreement. The City shall pay or cause to be paid when due the premiums for all insurance required by this Lease Agreement. All such policies or other evidence of insurance shall provide that the Trustee shall be given thirty(30) days' notice of each expiration, any intended cancellation thereof or reduction of the coverage provided thereby. The Trustee shall not be responsible for the sufficiency or adequacy of any insurance; herein required and shall be fully protected in accepting payment on account of such insurance or any adjustment, compromise or settlement of any loss agreed to by the Trustee. Section 6.07. Installation of Personal Property. The City may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Premises. All such items of shall remain the sole property of the City, in which neither the Authority nor the Trustee shall have any interest and may be modified or removed by the City at any time provided that the City shall repair and restore any and all damage to the Premises resulting from the installation, modification or removal of any such items. Nothing in this Lease Agreement shall prevent the City from purchasing or leasing items to a installed pursuant to this Section 5.09 under a lease or conditional sale agreement, or subject to a vendor's lien or security agreement, as security interest shall attach to any part of the Premises. Section 6.08. Liens. Neither the City nor the Authority shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage,pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Premises, other than the respective rights of the Authority and the City as provided herein and Permitted Exceptions. Except as expressly provided in this Article VI, the City and the Authority shall promptly, at their own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. The City shall reimburse the Authority for any expense incurred by it in order to discharge or remove any such mortgage, pledge, lien, or claim. Section 6.09. Tax Covenants. Notwithstanding any other provision of this Lease absent an opinion of Bond Counsel that the exclusion from gross income of interest on the Note will not is Lease Agrmt Purchase 8 6 09 final-Word doc.doc be, adversely affected for federal income tax purposes, the City covenants to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income and specifically covenants, without limiting the generality of the foregoing, as provided below. (a) Private Activity. The City and the Authority will not take or omit to take any action or make any use of the proceeds of the Note or of any other moneys or property which would cause the Note to be "private activity bonds" within the meaning of Section 141 of the Code. (b) Arbitrage. The City and the Authority will make no use of the proceeds of the Note or of any other amounts or property, regardless of the source, or take or omit to take any action which would cause the Note to be "arbitrage bonds"within the meaning of Section 148 of the Code. (c) Federal Guarantee. The City and the Authority will make no use of the proceeds of the Note or take or omit to take any action that would cause the Note to be "federally guaranteed" within the meaning of Section 149(b) of the Code. (d) Information Reporting. The City and the Authority will take or cause to be taken all necessary action to comply with the information reporting requirement of Section 149(e) of the Code. Section 6.10. Report to California Debt Advisory Commission. In accordance with Section 6599.1(c)of the Government Code, the City shall notify the California Debt Advisory Commission by mail, postage prepaid, within ten(10) days the Authority fails to pay principal and interest payable on the Note on any scheduled payment date. The notice given pursuant to this Section 6.10 shall consist of a letter to the Commission stating(i) the name of the Authority and the Note and the date of sale of the Note, and , (ii) the scheduled payment. Section 6.11. Condemnation of Premises. The city hereby covenants and agrees, to the extent it may lawfully do so, that so long as any of the Note remains Outstanding, the City will not exercise the power of condemnation with respect to the Premises. The City further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if the City should fail or refuse to abide by such covenant and condemns the Premises, the City will not take a position in any condemnation action that the appraised value of the Premises is less than the principal and interest components of the Note Outstanding through the date of redemption. Section 6.12. Compliance with Law. Regulations. Etc. (a) The City has, after due inquiry, no knowledge and has not given or received any written notice indicating that the Premises or the past or present use thereof or any practice, n Lease Agrmt Purchase 8 6 09 final-Word doc.doc procedure or policy employed by it in the conduct of its business materially violates any applicable law, regulation, code, order, rule,judgment or consent agreement, including,without limitation, those relating to: zoning, building, use and occupancy, fire safety, health, sanitation, air pollution,ecological matters, environmental protection, hazardous or toxic materials, substances or wastes, conservation, parking, architectural barriers to the handicapped, or restrictive covenants or other agreements affecting title to the Premises (collectively, "Laws and Regulation"). Without limiting the generality of the foregoing, neither the City nor to the best of its knowledge, after due inquiry, any prior or present owner, tenant or subtenant of any of the Premises has, other than as set forth in subsections(a) and (b) of this Section or as may have been remediated in accordance wit Laws and Regulations, (i) used, treated, stored, transported or disposed of any material amount of flammable explosives, polychlorinated biphenyl compounds, heavy metals, chlorinated solvents, cyanide, radon, petroleum products, asbestos or any Asbestos Containing Materials, methane, radioactive materials, pollutants, hazardous materials, hazardous wastes, hazardous, toxic, or regulated substances or related materials, as defined in CERCLA, RCRA, CWA, CAA, TSCA and Title III, and the regulations promulgated pursuant thereto, and in all other Environmental Regulations applicable to the City , any of the Premises or the business operations conducted by the City thereon(collectively, "Hazardous Materials")on, from or beneath its Premises, (ii) pumped, spilled, leaked, disposed of, emptied, discharged or released (hereinafter collective referred to as "Release") any material amount of Hazardous Materials on, from or beneath the Premises, or(iii) stored any material amount of petroleum products at the Premises in underground storage tanks. (b) Excluded from the representations and warranties in subsection (a) hereof with respect to Hazardous Materials are those Hazardous Materials in those amounts ordinarily found in the inventory of or used in the operation of a governmental building, the use, treatment, storage, transportation and disposal of which has been and shall be in compliance with all Laws and Regulations. (c) No Property located in an area of high potential incidence of radon has an unventilated basement or subsurface portion which is occupied or used for any purpose other than the foundation or support of the improvements of such Property. Section 6.13. Environmental Compliance. (a) The City shall not use or permit the Premises or any part thereof to be used to generate, manufacture, refine, treat, store, handle, transport or dispose of, transfer, produce or process Hazardous Materials, except, and only to the extent, if necessary to maintain the improvements on the Premises and then, only in compliance with all Environmental - -- - - - Regulations, and any state equivalent laws and regulations, nor shall it permit, as a result of an intentional or unintentional act or omission on its part or by any tenant, subtenant, licensee, guest, invitee, contractor, employee and agent, the storage, transportation, disposal or use of Hazardous Materials or the Release or threat of Release of Hazardous Materials on, from or beneath the Premises or onto any other property excluding, however, those Hazardous Materials in those amounts ordinarily found in the inventory of or used in the operation of a governmental lz Lease Agrmt Purchase 8 6 09 final-Word doc.doc building, the use, storage, treatment, transportation and disposal of which shall be in compliance with all Environmental Regulations. Upon the occurrence of any Release or threat of Release of Hazardous Materials so released, on, from or beneath the Premises or other property, in compliance with Environmental Regulations. Notwithstanding anything to the contrary contained herein, underground storage tanks shall only be permitted subject to compliance with subsection(c) and only to the extent necessary to maintain the improvements on the Premises. (b) The City shall comply with, and shall use its best efforts to assure that its tenant's, subtenants, agents, licensees, employees, contractors, and agents comply with, all Environmental Regulations and shall keep the Premises free and clear; provided, however that notwithstanding that a portion of this covenant is limited to the City's use of its best efforts, the City shall remain, solely responsible for ensuring such compliance and such limitation shall not diminish or affect in any way the City's obligations contained in subsection (c)hereof as provided in subsection(c) hereof. Upon receipt of any notice from any Person with regard to the Release of Hazardous Materials on, from or beneath the Premises, the City shall give prompt written notice thereof to the Authority, (and, in any event, prior to the expiration of any period in which to respond to such notice under any Environmental Regulation). (c) Irrespective of whether any representation or warranty contained in Section 5.15 is not true or correct, the City shall defend, indemnify, and hold harmless the Authority, the Trustee, and the Note Owner, its partners, depositors and each of its and their employees, agents, officers, directors, trustees, successors and assigns, from and against any claims, demands, penalties, fines, attorneys' fees (including, without limitation, attorneys' fees incurred to enforce the indemnification contained in this Section 5.16), consultants' fees, investigation and laboratory fees, liabilities, settlements (five(5) Business Days prior notice of which the Authority, or Trustee, as appropriate, shall have delivered to the City), court costs, damages, losses, costs or expenses of whatever kind or nature, known or unknown, contingent or otherwise, occurring in whole or in part, arising out of, or in any way related to, (i) the presence, disposal, Release, threat of Release, removal, discharge, storage or transportation of any Hazardous Materials on, from or beneath the Premises, (ii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to such Hazardous Materials, (iii) any lawsuit brought or threatened, settlement reached (five (5) Business Days prior notice of which the Authority, or the Trustee, as appropriate, shall have delivered to the City),or governmental order relating to Hazardous Materials on, from or beneath any of the Premises, (iv) any violation of Environmental Regulations or subsection (a) or(b) hereof by it or any of its agents, tenants, employees, contractors, licensees, guests, subtenants or invitees, and (v)the imposition of any governmental Lien for the recovery of environmental cleanup or removal costs. To the extent that the City is strictly liable under an Environmental Regulation, its obligation to the Authority, and the Note Owner and the other indemnities under the foregoing indemnification shall likewise be without regard to fault on its part with respect to the violation of any Environmental Regulation which results in liability to any indemnitee. Its obligations and liabilities under this Section 5.16(c) shall survive any foreclosure of the security interest in the Premises or the delivery of any instrument in lieu of foreclosure, and the satisfaction of the Note. 13 Lease Agrmt Purchase 8 6 09 final-Word doc.doc ( ARTICLE VII DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 7.01. Eminent Domain. If all of the Premises shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of the Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Premises shall be taken permanently , or if all of the Premises or any part thereof shall be taken temporarily under the power of eminent domain, (a) this Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there shall be a partial abatement of Lease Payment in an amount to be agreed upon by the City and the Authority such that the resulting Lease Payment for the Premises represent fair consideration for the use and occupancy of the remaining usable portion of the Premises. Section 7.02 Application of Proceeds. (a) From Insurance Award. The Net Proceeds of any insurance award resulting from any damage to or destruction of the Premises by fire or other casualty shall be applied as set forth in Section 4 of the Deed of Trust. (b) From Eminent Domain Award. The Net Proceeds of any eminent domain award resulting from any event described in Section 30 of the Deed of Trust. Section 7.03 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(other than by eminent domain which is hereinbefore provided for)there is substantial interference with the use and occupancy by the City of the Premises and any portion thereof. The amount of such abatement shall be the difference between the stated Lease Payment for such period and pro rata rental value of the portions of the Premises not damaged or destroyed. 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. 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. The City shall use its best efforts to provide sufficient construction funds to insure completion of the reconstruction, repair,restoration, modification and improvement of the Premises. ® 14 Lease Ag nt Purchase 8 6 09 final-Word dm dm j ARTICLE VIII DISCLAIMER OF WARRANTIES; ACCESS Section 8.01. Disclaimer of Warranties. The Authority makes no warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any purpose or fitness for the use contemplated by the City of the Premises, or any other representation or warranty with respect to the Premises. In no event shall the Authority or its assigns be liable for incidental, indirect, special or consequential damages in connection with or arising out of this Lease Agreement, the Deed of Trust, or the Indenture for the existence, furnishing, functioning or the City's use of the Premises. Section 8.02. Rights of Access. The City agrees that the Authority, any Authorized Representative of the Authority, the Authority's successors or assigns, and the Insurer, shall have the right at all reasonable times to enter upon and to examine and inspect the Premises. The City further agrees that the Authority, and Authorized Representative of the Authority, the Authority's successors or assigns, and the Insurer shall have such rights of access to the Premises as may be reasonably necessary to cause the proper maintenance of the Premises in the event of failure by the City to perform its obligations hereunder. Section 8.03. Release and Indemnification Covenants. To the extent permitted by law, the City shall and hereby agrees to indemnify and save the Authority, the Insurer and the Trustee and their respective officers, agents, successors and assigns harmless from and against all claims, losses and damage, 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 Premises by the City, (b) any breach or default on the part of the City in the performance of any of its obligations under this Lease Agreement, (c)any act or negligence of the City or of any of its agents, contractors, servants, employees or licensees with respect to the Premises, (d) any act or negligence of any sublessee of the City of the Premises, (e) the acquisition, construction, and equipping of the Premises or(f) the Trustee's acceptance or administration of the trust under the Indenture and the Deed of Trust, of the exercise or performance of any of its powers or duties under the Indenture, the Deed of Trust, and hereunder. No indemnification is made under this Section 8.03 or elsewhere in this Lease Agreement for willful misconduct, negligence, or breach of duty under this Lease Agreement by the Authority or the Trustee, their officers, agents, employees, successors or assigns. The Trustee's rights to compensation, reimbursement and indemnification shall survive its resignation or removal and termination of this Lease Agreement. ARTICLE IX ASSIGNMENT, SUBLEASING AND AMENDMENT Section 9.01. Assignment by the Authority. The Authority's rights under this Lease Agreement, including the right to receive and enforce payment of the Lease Payments to be Is Lease Agrmt Purchase 8 6 09 final-Word doc.doc made by the City under this Lease Agreement, have been assigned, transferred and sold to the Trustee without recourse for the benefit of the Note Owner pursuant to the Indenture and Deed of Trust, to which assignment, transfer and sale the City hereby consents. Section 9.02. Assianment and Subleasing by City. This Lease Agreement may not be assigned by the City. The City may sublease the Premises or any portion thereof, but only with the written consent of the Authority, and the Insurer, and 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; (b) The City shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to the Authority and the Trustee a true and complete copy of such sublease; (c) No such sublease by the City shall cause the Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and (d) The City shall furnish the Authority and Trustee with a written opinion of Bond Counsel stating that such sublease is permitted by this Lease Agreement and the Indenture, and will not cause the interest on the Note that is issued as tax-exempt obligation to become included in gross income for federal income tax purposes. Section 9.03 Amendment. This Lease Agreement may be amended in the same manner in which the Indenture may be amended pursuant to Section 6.02 of the Indenture. ARTICLE X LEASE DEFAULT EVENTS AND REMEDIES Section 10.01. Lease Default Events Defined. The following shall be "Lease Default Events" under this Lease Agreement: (a) Failure by the City to pay any Lease Payment required to be paid hereunder at the time specified herein. (b) Failure by the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under this Lease Agreement,other than as referred to in paragraph (a) of this Section 10.01, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the City by the Authority, the Trustee, or the Note Owner; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Authority, the Trustee and the Note Owner shall not unreasonably withhold their consent to an extension of such time if corrective action is instituted by the City within the applicable period and diligently pursued until the default is 16 Lease Agrmt Purchase 8 6 09 final-Word doc.doe corrected, provided further that no such grace period shall be extended for more than sixty(60) days without prior written consent of the Insurer. (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 Act, as amended, or under similar acts which may hereafter be enacted. Section 10.02 Remedies on Default. Whenever any Lease Default Event referred to in Section 10.01 hereof shall have happened and be continuing, it shall be lawful for the Authority to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement;provided, however, that notwithstanding any contrary implication of anything herein or in the Indenture, there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then in default to be immediately due and payable. Each and every covenant hereof to be kept and performed by the City is expressly made a condition and upon the breach thereof the Authority may exercise any and all rights of entry and re-entry upon the Premises, and also, at its option, with or without such entry, may terminate this Lease Agreement; provided however that no such termination shall be effected either by operation of law or acts of the parties hereto, except only in the manner herein expressly provided. In the event of such default and notwithstanding any re-entry by the Authority, the City shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained and, in any event, such rent and/or damages shall be payable to the Authority at the time and in the manner as herein provided, to wit: (a) In the event the Authority does not elect to terminate this Lease Agreement in the manner hereinafter provided for in subparagraph (b)of this Section 10.02, 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 Premises, or, in the event the Authority is unable to re-lease the Premises, then for the full amount of all Lease Payments to the end of the Term of the Lease 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 Premises or the exercise of any other remedy by the Authority. The City hereby irrevocably appoints the- Authority as the agent and attomey-in-fact of the City to enter upon and re-lease the Premises in the event of default by the City in the performance of any covenants herein contained to be performed by the City and to remove all personal property whatsoever situated upon the Premises to place such property in storage or other suitable place in the County of San Bernardino, for the account of and expense of the City, and the City hereby exempts and agrees, to the extent permitted by law, to save harmless the Authority from any costs, loss or damage 17 Lease Agrsnt Purchase 8 6 09 final-Word doc.doc whatsoever or arising or occasioned by any such entry upon and re-leasing of the Premises 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 hereby waives any and all claims for damages caused or which may be caused by the Authority in re-entering and taking possession of the Premises as herein provided and all claims for damages that may result from the destruction of or injury to the Premises and all claims for damage to or loss of any property belonging to the City that may be in or upon the Premises. 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 Premises 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 further waives the right to any rental obtained by the Authority in excess of the Lease Payments and hereby conveys and releases such excess to the Authority as compensation for the Authority for its services in—rc-leasing the Premises. (b) Upon the occurrence of a Lease Default Event hereunder, the Authority may terminate this Lease Agreement and re-lease all or any portion of the Premises; provided, however, that no such re-letting shall in any way cause interest payable to the Note Owner with respect to the Note (to the extent such Note is issued as a tax-exempt obligation) to be included in gross income for purposes of federal income taxation. In the event of the termination of this Lease Agreement by the Authority at its option and in the manner hereinafter provided on account of default by the City (and notwithstanding any re-entry upon the Premises by the Authority in any manner whatsoever or the re-leasing of the Premises), 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. Any surplus received by the Authority from such re-leasing shall be the absolute property of the Authority and the City shall have no right thereto, except that the City shall be entitled to a credit against the Lease Payments for the full amount of rentals received by the Authority from the Premises . Neither notice to pay rent or to deliver up possession of the premises given pursuant to law nor any proceeding in unlawful detainer taken by the Authority shall of itself operate to terminate this Lease Agreement, and no termination of this 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 Premises or of the remainder of the Term of this Lease Agreement 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. Notwithstanding any other provisions of this Lease Agreement, the City may not terminate this Lease Agreement as a remedy for a violation by the Authority of any covenant or duty imposed on the Authority hereunder. 18 Lease Apron Purchase 8 6 09 final-Word doc.doc Section 10.03 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 any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law. Section 10.04 Each Party to Pay Its Own Attorney's Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the nondefaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, each party shall bear its own attorney's fees and expenses. Section 10.05. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other occurrence of a breach hereunder whether the other occurrence of a breach is as to the same or a different agreement. Section 10.06. Trustee and Note Owner to Exercise Riphts. Such rights and remedies as are given to the Authority under this Article IX have been assigned by the Authority to the Trustee under the Deed of Trust or the Indenture, to which assignment the City hereby consents. Such rights and remedies shall be exercised by the Trustee, and the Note Owner as provided in the Indenture or the Deed of Trust. In addition to the rights and remedies assigned by the Authority to the Trustee, to the extent that the Indenture, the Trust Deed and this Lease Agreement confer upon or gives or grants to the Trustee any right, remedy or claim under or by reason of the Indenture, the Trust Deed, or Lease Agreement, the Trustee is hereby explicitly recognized as being a third party beneficiary hereunder and may enforce any such right, remedy or claim conferred, given, or granted. ARTICLE XI MISCELLANEOUS Section 11.01. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received 48 hours after deposit in the United States mail in first class form with postage fully prepaid: 19 Lease Agrmt Purchase 8 6 09 final-Word doc.doc If to the City: City of San Bernardino 300 North "D" Street San Bernardino, California 92418 Attention: If to the Authority: San Bernardino Joint Powers Financing Authority 201 North "E" Street San Bernardino, California 92401 Attention: Agency Administrator If to Trustee: Commonwealth Land Title Company 275 West Hospitality Lane San Bernardino California 92408 The Authority, the City and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications shall be sent. Section 11.02. Binding Effect. This Lease Agreement shall inure to the benefit of and shall be binding upon the Authority and the City and their respective successors and assigns. Section 11.03. Severability. In the event any provision of this Lease Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 11.04. Net-net-net Lease. This Lease Agreement shall be deemed and constructed to be a"net-net-net lease" and the City hereby agrees that the Lease Payments shall be an absolute return to the Authority, free and clear of any expenses, charges, or set-offs whatsoever. Section 11.05. Further Assurances and Corrective Instruments. The Authority and the City agree 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 Premises hereby leased or intended so to be or for carrying out the expressed intention of this Lease Agreement. Section 11.06. Execution in Counterparts. This Lease Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. ® 20 Lease Agrmt Purchase 8 6 09 final-Word doc.doc Section 11.07. Applicable Law. This Lease agreement shall be governed by and construed in accordance with the laws of the State of California. Section 11.08. Authorized Representatives. Whenever under the provisions of this Lease Agreement approval of the Authority or the City is required, or the Authority or the City is required to take some action at the request of the other, such approval or such request shall be given for the Authority by an Authorized Representative of the Authority and for the City by an Authorized Representative of the City, and any party hereto shall be authorized to rely upon any such approval or request. Section 11.09. 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. Section 11.10. Venue The parties hereto agree that all actions or proceedings arising in connection with this Agreement shall be tried and litigated either in the State courts located in the County of San Bernardino, State of California or the U.S. District Court for the Central District of California, Riverside Division. The aforementioned choice of venue is intended by the parties to be mandatory and not permissive in nature. IN WITNESS WHEREOF, the Authority has caused this Lease Agreement to be executed in its corporate name by its duly authorized officers and sealed with its corporate seal; and the City has caused this Lease Agreement to be executed in its name by its duly authorized officers and sealed with its corporate seal, as of the date first above written. City of San Bernardino San Bernardino Joint Powers Financing Authority By By Mayor Executive Director Approved as to form Approved as to form James Penman Authority Counsel City Attorney 21 Lease Agrmt Purchase 8 6 09 final-Word doc.doc EXHIBIT "A" LEGAL DESCRIPTION Property Address: 120 South"D" Street APN : 0136-122-60 THAT PORTION OF LOTS 1, 2 AND 3, BLOCK "D", THE PEPPERS, IN THE CITY OF SAN BERNARDINO, COUNTY OF SAN BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 17 OF MAPS, PAGE 8, RECORDS OF SAID COUNTY, AND THAT PORTION OF D STREET, VACATED BY RESOLUTION 9848, RECORDED MAY 29, 1969 IN BOOK 7241. PAGE 713, OR DESCRIBED AS FOLLOWS: BEGINNING AT THE NORTHWEST CORNER OF LOT 1, BLOCK "D" OF THE PEPPERS, SUBDIVISION, SAID POINT ALSO BEING IN THE EAST LINE OF STODDARD AVENUE, (VACATED BY RESOLUTION 8506, RECORDED JANUARY 27, 1967 IN BOOK 6764, PAGE 380, OFFICIAL RECORDS) 60.00 FEET WIDE; THENCE SOUTH 164.91 FEET ALONG THE EAST LINE OF SAID VACATED �,.. STODDARD AVENUE; THENCE NORTH 890 59' 21" EAST 282.78 FEET TO A POINT ON A TANGENT CURVE CONCAVE TO THE NORTH WITH A RADIUS OF 20.00 FEET AND A RADIAL BEARING OF NORTH 00° 39"WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 640 59'21", AN ARC DISTANCE OF 22.69 FEET TO A TANGENT LINE; THENCE NORTH 250 00' 00" EAST, 71.88 FEET ALONG SAID TANGENT LINE TO A POINT ON A TANGENT CURVE CONCAVE TO THE WEST WITH A RADIUS OF 208.75 FEET AND A RADIAL BEARING OF NORTH 650 00' 00" WEST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 250 00' 00", AN ARC DISTANCE OF 91.08 FEET TO A POINT ON THE SOUTH LINE OF THE ATCHINSON, TOPEKA AND SANTA FE RAILROAD 50.00 FEET WIDE•, THENCE SOUTH 890 59' 25" WEST 350.83 FEET ALONG SAID SOUTH LINE OF RAILROAD RIGHT OF WAY TO THE POINT OF BEGINNING. CONTAINS 54.409.2 SQUARE FEET, MORE OR LESS. EXHIBIT `B" DESCRIPTION OF FACILITIES Leased facilities consists of that certain real property, structures, fixtures and appurtenances located at 120 S. "D" Street, San Bernardino, California, known as Assessor's Parcel No. 136- 122-60, more specifically described as, but not limited to: 1.35 acre (58,606 square feet) site area, containing a Class"C"concrete tilt up building, approximately 21,420 square in total area, and all fixtures and appurtenances thereto. Building consists of 19,080 warehouse space, 1,080 square feet of garage space, and 1,260 square feet of office space. Leased Facilities shall include all exterior paving, walkways, landscaping and fencing and appurtenances thereto. r"~ EXHIBIT "C" SCHEDULE OF LEASE PAYMENTS Due Date Lease Payment Close of Escrow $400,000.00 01/01/2010 $30,000.00 07/01/2010 $30,000.00 01/01/2011 $30,000.00 07/01/2011 $30,000.00 01/01/2012 $30,000.00 07/01/2012 $30,000.00 01/01/2013 $30,000.00 07/01/2013 $30,000.00 01/01/2014 $30,000.00 Then: Option one: 07/01/2014 $1,200,000.00 Or: Option two: I 07/01/2014 $100,000.00 01/01/2015 $27,500.00 07/01/2015 $27,500.00 01/01/2016 $27,500.00 07/01/2016 $27,500.00 01/01/2017 $27,500.00 07/01/2017 $27,500.00 01/01/2018 $27,500.00 07/01/2018 $27,500.00 01/01/2019 $27,500.00 07/01/2019 $1,127,500.00 O