COMMUNITY DEVELOPMENT AGENCY-2008

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automatically and without any act of Tenant or any third party become Landlord's property. Tenant shall surrender the Improvements to Landlord at the expiration of the term or earlier termination of this lease, free and clear of all liens and encumbrances, other than those, if any, permitted under this lease or otherwise created or consented to by Landlord. Tenant agrees to execute, acknowledge, and deliver to Landlord any instrument requested by Landlord as necessary in Landlord's opinion to perfect Landlord's right, title, and interest to the Improvements and the Premises. Section 5.07 Annual Self-Audit Report Beginning on the first anniversary of the date of City Council and Agency Board of Directors approval of this Lease, and continuing each year on said anniversary, Tenant shall deliver to Landlord an annual report setting forth in detail its construction, repair and replacement, and operation activities during the prior year, and describing its compliance, or lack thereof with the terms and provisions of this Lease. ARTICLE 6 ENCUMBRANCE OF LEASEHOLD ESTATE Section 6.01. Tenant's Iti~ht to Encumber Tenant may, at any time and from time to time during the term of this lease, encumber to any institutional lender regulated by state or federal authority (referred to in this lease as "Lender"), by deed of trust or mortgage or other security instrument, all of Tenant's interest under this lease and the leasehold estate hereby created in Tenant (referred to in this lease as a "Leasehold Encumbrance") for any purpose or purposes without the consent of Landlord. However, no Leasehold Encumbrance incurred by Tenant in accordance with this Section shall, and Tenant shall not have power to incur any encumbrance that shall, constitute in any way a lien or encumbrance on Landlord's fee interest in the Premises. Any Leasehold Encumbrance shall be subject to all covenants, conditions, and restrictions set forth in this lease and to all rights and interests of Landlord, except as is otherwise provided in this lease. Tenant shall give Landlord prior written notice of any Leasehold Encumbrance, together with a copy of the deed of trust, mortgage, or other security interest evidencing the Leasehold Encumbrance. Section 6.02. Notice to and Service on Lender Landlord shall mail to any Lender who has given Landlord written notice of its name and address, a duplicate copy of any and all notices Landlord may from time to time give to or serve on Tenant in accordance with or relating to this lease, such as any notice of default, notice of termination, or notice regarding any matter on which Landlord may predicate or claim a default. Any notices or other communications permitted by this or any other section of this lease or by law to be served on or given to Lender by Landlord shall be deemed duly served on or given to Lender when deposited in the United States mail, first-class postage prepaid, addressed to Lender at the last mailing address for Lender furnished in writing by Lender to Landlord. Section 6.03. Additional Right to Encumber Tenant may, at any time and from time to time during the term of this lease, encumber the Improvements to the California Department of the Youth Authority, pursuant to California Welfare and Institutions Code Section 990, et seq. Tenant may not encumber the Landlord's fee or remainder interest in the Premises.