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3.1 Ground Lease of the Property. Provided that all conditions precedent set forth in this Agreement have been satisfied or waived, City shall lease the Property to Developer in accordance with and subject to the terms, covenants and conditions of this Agreement and the Ground Lease, free and clear of all exceptions to title except: (a) the provisions and effects of the City Documents, (b) applicable building and zoning laws and regulations, (c) any lien for current taxes and assessments or taxes and assessments accruing subsequent to conveyance of the Property pursuant to the Ground Lease, (d) exceptions as shown on the preliminary title report for the Property ("Title Report") as reasonably approved by Developer, and (e) such other conditions, liens, encumbrances, restrictions, easements and exceptions as Developer may approve in writing, which approval shall not be unreasonably withheld. All of the foregoing are collectively hereinafter referred to as "Developer's Permitted Exceptions." 3.2 Intentionally omitted. 3.3 Escrow. City and Developer shall open escrow at the office of Title Company located at , California, or such other title company as the Parties may agree upon ("Escrow Agent" or "Title Company") in order to consummate the lease of the Property to Developer and the closing of escrow for the transactions contemplated hereby. 3.4 Costs of Closing and Escrow. Developer shall pay all title insurance premiums for policies Developer elects to purchase in connection with the acquisition of a leasehold interest in the Property and the financing of the Project, and Developer shall pay all recording fees, transfer taxes, escrow fees and closing costs incurred in connection with the acquisition of the leasehold interest in the Property and the financing of the Project. Developer shall pay for the cost of any lender's policy of title insurance that City elects to acquire in connection with the transactions contemplated hereby. Property taxes and assessments shall be prorated as of the Closing Date. City and Developer shall provide Escrow Agent with a copy of this Agreement, which together with such supplemental instructions as City or Developer may provide and which are consistent with the intent of this Agreement or which are otherwise mutually agreed upon by City and Developer, shall serve as escrow instructions for the Closing. Developer's expenses described in this Section may be paid with proceeds of the Predevelopment Loan, the Construction/Permanent Loan, or by other sources of financing. 3.5 Closing. The Closing Date shall be a date that is mutually acceptable to the Parties, consistent with Section 5.1, and which shall occur within thirty (30) days following the Developer's satisfaction or City's waiver of all conditions precedent to the leasing of the Property as set forth in Sections 3.7 and 3.8. Prior to the Close of Escrow, Developer shall deposit into escrow the City Documents to which Developer is a party, executed and acknowledged as applicable, and Developer's share of closing costs. Provided that all conditions precedent to Close of Escrow have been satisfied or waived, City shall deposit into escrow executed copies of the City Documents to which City is a party. On the Closing Date, the Escrow Agent shall cause the Memorandum, the Deed of Trust, and the Regulatory Agreement to be recorded in the Official Records. 3.6 Review of Title. City shall cause Title Company to provide Developer with a copy of the Title Report within sixty (60) days following the Effective Date. Developer shall OAK #4845-1087-0362 v5 10