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3.5 Permitted Exceptions to Title. As soon as reasonably possible after the Opening of Escrow, Escrow Holder shall cause First American Title Insurance Company, in its capacity as title insurer ("Title Company"), to deliver to Buyer and Seller a current preliminary title report ("Title Report") together with legible copies of all underlying documents referenced therein (together with the Title Report, the "Title Documents"). The term "Permitted Exceptions" as used in this Agreement shall mean all of the following: (a)the Grant Deed; (b) non-delinquent real property taxes and assessments; (c) items and exceptions created by or with the written consent of Buyer, including documents to be recorded pursuant to this Agreement, and (d) the title exceptions shown on the Title Report but excluding any (i) "Disapproved Exceptions"as defined below that Seller,in its sole discretion, agrees to remove prior to the Close of Escrow as provided below and (ii) all monetary liens and monetary encumbrances on the Property, other than non-delinquent real property taxes and assessments which will be removed (meaning removal from title and not the issuance of an endorsement in connection therewith by the Title Company) from title by Seller at its sole cost and expense prior to the Close of Escrow. If Buyer objects to any title exceptions in its sole and absolute discretion ("Disapproved Exceptions")Buyer shall deliver written notice("Objection Notice")of same to Seller within ten (10)business days of delivery of the initial Title Report to Buyer. Seller shall act in good faith and reasonably to resolve any title exception in the Objection Notice. If Buyer fails to deliver an Objection Notice but delivers a "Notice of Approval" Buyer shall be deemed to have approved title to the Property subject to the Permitted Exceptions. If Buyer delivers an Objection Notice regarding a title exception and Seller, by delivery of written notice to Buyer within five (5)business days following receipt of the Objection Notice elects not to remove a material Disapproved Exception (Seller's failure to respond to a Buyer Objection Notice shall be deemed such an election) Buyer's sole remedies shall be with respect to the delivery of a Notice of Approval or delivery or deemed delivery of a Notice of Termination. 3.6 Title Insurance. Seller shall cause the Title Company to commit to issue to Buyer at the Close of Escrow a standard coverage ALTA Owner' s policy of title insurance with mechanics lien endorsement (Seller shall provide, any indenmity or other agreement required by the Title Company as a condition to the issuance of the mechanics lien endorsement) ("Title Policy")insuring fee title to the Property vested in Buyer subject only to the Permitted Exceptions, with coverage in an amount equal to the Purchase Price. If Buyer requires an extended coverage ALTA Owners policy of title insurance Buyer shall pay the difference in cost between the standard and extended coverage and the cost of any endorsements(other than a mechanics lien endorsement issued in connection with the standard coverage Title Policy which shall be at the cost of Buyer) ("Buyer Title Costs"). Considering Seller is a City, Seller shall not be responsible for any costs related to the Title Policy or extended coverage ("Seller Title Costs"). 3.7 Possession. Seller shall deliver possession of the Property to Buyer at the Close of Escrow subject only to the Permitted Exceptions and free of any tenancies and/or third party claims of use or ownership. 3.8 Taxes, Assessments and Prorations. 3.8.1 Taxes. Only to the extent the Seller pays any property taxes or assessments on the Property, all current general and special taxes and assessments on the Property shall be prorated by Escrow Holder based upon the latest available information as shown in the -5-