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HomeMy WebLinkAboutACHA LeaseLEASE AGREEMENT BETWEEN City of Auburn and Aviation Properties Inc Dated May 31 2001 III j ftvj3 5 3 Lessor City of Auburn Lessee Aviation Properties Inc Page 1 Printed on May 31 2001 CITY OF AUBURN AIRPORT HANGAR LAND LEASE AGREEMENT THIS LEASE AGREEMENT hereinafter referred to as this Lease is made as of 3u li e 2001 by and between the City of Auburn a Washington municipal corporation hereinafter referred to as Lessor and AvrOVI frJf rfres r hereinafter referred to as Lessee WITNESSETH In consideration of their mutual covenants agreements and undertakings hereinafter contained the parties hereto do mutually agree to that which is hereinafter set forth upon and subject to the foJIowing terms conditions covenants and provisions 1 PROPERTY SUBJECT TO THIS LEASE AGREEMENT a For and in consideration of the rent and faithful performance by Lessee of the terms and conditions and the mutual covenants hereof Lessor does hereby lease to Lessee and Lessee does hereby lease from Lessor the property legally described on Exhibit A I hereinafter referred to as the Premises which Premises consist of approximately 147 766 square feet of Land as depicted on the Site Plan attached hereto as Exhibit A 2 Exhibit A I and Exhibit A 2 are hereby incorporated into this Lease by this reference The Premises are situated in the County of King State of Washington and are located at the Auburn Airport the Airport b Lessor represents and warrants that to the best of the City s knowledge without duty of inquiry there are no hazardous wastes or materials on in or under the Premises c LESSEE ACKNOWLEDGES AND AGREES THAT IT IS RELYING SOLELY ON ITS INSPECTION AND INVESTIGATION OF THE PREMISES AND ACCEPTS THE PROPERTY AS IS WHERE IS IN ITS PRESENT CONDITION WITH NO WARRANTIES OF ANY KIND EXPRESS OR IMPLIED EITHER ORAL OR WRlTTEN MADE BY LESSOR OR ANY EMPLOYEE AGENT OR REPRESENTATIVE OF LESSOR WITH RESPECT TO THE PHYSICAL CONDITION OF THE PREMISES LESSEE SHALL HAVE DETERMINED TO ITS SATISFACTION UPON ITS EXECUTION HEREOF THAT THE PREMISES CAN BE USED FOR THE PURPOSES IT INTENDS AND WHICH ARE PERMITTED UNDER THIS LEASE LESSEE ACKNOWLEDGES AND AGREES THAT NEITHER LESSOR NOR LESSOR S AGENT HAD MADE AND DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER WHATSOEVER WHETHER EXPRESS OR IMPLIED WITH RESPECT TO THE HABITABILITY LEASAB1L1TY OR SUITABILITY FOR COMMERCIAL PURPOSES MERCHANTABILITY OR FITNESS FOR A PARTICULAR Lessor City of Auburn Lessee Aviation Properties Inc Page 2 Printed on May 31 2001 PURPOSE OF THE PREMISES OR OTHER THAN AS PROVIDED IN SECTION 1 b HEREOF THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES WASTES OR MATERIALS AS DEFINED BY STATE FEDERAL OR LOCAL LAW ALL OF WHICH WARRANTIES LESSOR HEREBY EXPRESSL Y DISCLAIMS 2 TERM The term of this Lease shall be for fifty 50 years beginning on the date of mutual execution hereof hereinafter referred to as the Commencement Date and ending at midnight on the day prior to the fiftieth 50th anniversary of the Commencement Date unless sooner terminated pursuant to any provision of this Lease If Lessor for any reason whatsoever cannot deliver possession of the Premises to Lessee on the Commencement Date Lessor shaJI not be subject to any liability nor shall the validity of the Lease be affected provided the Term of this Lease shall commence on the date possession is actually tendered to Lessee but the Expiration Date shall not be adjusted If possession cannot be delivered within sixty 60 days of the Commencement Date Tenant may at its option terminate this lease without penalty and receive a refund of any payments made to Landlord within thirty 30 days of its notice of termination The word term whenever used herein refers to the initial term of this Lease and any valid extension s thereof 3 PURPOSE a Lessee shall use the Premises only for the construction management and maintenance of aircraft hangar buildings for the storage and maintenance of aircraft and to conduct such other aviation related activities as are incidental and reasonably related thereto Lessee may develop the Premises as a condominium pursuant to the provisions of Chapter 64 34 RCW the Condominium Act provided however that Lessee shall obtain Lessor s prior written approval which approval shall not be unreasonably withheld of the condominium declaration the Declaration and the survey map and plans the Survey Map and Plans that are required under the Condominium Act prior to the recording of the Declaration and the Survey Map and Plans against the Premises in the official records of King County Lessor shall have a period of 60 days within which to review such documents following the date upon which Lessee delivers to Lessor and to Lessor s counsel true copies of the proposed Declaration and Survey Map and Plans Lessor s approval of such documents shall be evidenced by a signed Consent of Lessor which Consent of Lessor shall be attached to the Declaration It is further understood that the above activities are the only type of activities to be conducted upon the Premises Lessee shall at all times operate on the Premises in a manner which will assure the safe lawful and healthful use of the Premises Lessee agrees that it will not disturb the Lessor or any other Lessee of the Lessor by making or permitting any disturbances or any unusual noise vibration or other condition on or in the Premises All such activities shall take place inside the hangars to be constructed b The following uses are specificaJIy prohibited on or from the Premises unless Lessor expressly authorizes such uses by Lessor s prior written consent which consent may be withheld in Lessor s sole and absolute discretion Lessor City of Auburn Lessee Aviation Properties 1nc Page 3 Printed on May 31 2001 1 At no time will aircraft be fueled inside any Improvements situated on the Premises 2 hangar operations thereto Conducting of any use business or commercial activity other than Lessee s and other aviation related activities as are incidental and reasonably related 3 Use of the Premises as a residence or for overnight sleeping 4 Working on aircraft except within the legal limits aJIowed by FAA for persons working on their own aircraft and 5 Servicing of aircraft by licensed aircraft mechanics unless they have a valid City of Auburn business registration and have obtained liability insurance with policy limits required to be maintained by Tenant elsewhere under this Lease or such lesser policy limits as may be otherwise approved by Lessor c No building structure or improvements of any kind shall be erected placed upon operated or maintained on the Premises nor shall any business or operation be conducted or carried on in violation of any ordinance law statute by law order or rule of any governmental agency having jurisdiction thereover d Upon mutual execution hereof Lessee may pursue construction and development of aircraft hangar buildings and related facilities collectively the Improvements pursuant to plans and specifications approved by Lessor and otherwise in accordance with Exhibit B attached hereto and by this reference incorporated herewith Lessee s plans and specifications shall include without limitation details of any right of way or taxi way entrances to be constructed by Lessee as well as the building materials for and design of the Improvements Lessor s approval of the plans and specifications shall not be unreasonably withheld Upon commencement of construction of the Improvements the Improvements shall be deemed to include and be part of the Premises for all purposes hereunder except as provided in Section 5 d hereof 4 RENT IMPOSITIONS LEASEHOLD EXCISE TAX It is Lessee s intent to develop the Premises as a phased condominium project which phases shall be legally described and shown on the Survey Map and Plans for such condominium project For purposes of this Section 4 the portion of the Premises that is to be developed first shall be defined as Phase I and the remaining portion of the Premises shall be defined as the Subsequent Phase s Lessee shall determine and provide Lessor with written notice of the legal descriptions and square footages of Phase 1 and the Subsequent Phase s prior to the Rent Commencement Date as hereinafter defined provided however that the square footage of Phase 1 shall be at least 61 020 square feet the Minimum Square Footage of Phase 1 In the event the Lessee does not determine and provide Lessor with notice of the legal descriptions and square footages of Phase 1 and the Subsequent Phase s prior to the Rent Commencement Date then the Minimum Square Footage of Phase I shall be used to determine the initial Base Monthly Rent as hereinafter Lessor City of Auburn Lessee Aviation Properties Inc Page 4 Printed on May 31 2001 defined provided however that the Base Monthly Rent shall be automatically adjusted to the amount that corresponds to the actual legal descriptions and square footages of Phase 1 and the Subsequent Phase s upon the date of the recording of the Survey Map and Plans for Phase 1 of the condominium proj ect if such date is after the Rent Commencement Date In the event the Premises are developed as a single phase project whether or not such project is a condominium the Rent provisions under this Section 4 for Phase 1 shall apply to the entire Premises a Commencing on the earlier to occur of i issuance of a building permit for Lessee s proposed Improvements for Phase 1 or ii one hundred twenty 120 days after mutual execution hereof provided that if Lessee fails to apply for a building permit within ninety 90 days following mutual execution hereof the foregoing I20 day period shall be reduced to ninety 90 days hereafter the Rent Commencement Date Lessee shall pay to Lessor in addition to taxes assessments and other charges required to be paid herein by Lessee Annual Base Rent as follows twenty two cents per square foot 22 square foot for the total square footage of Phase I the Phase 1 Base Rent plus ten cents per square foot 10 square foot for the total square footage of the Subsequent Phase s the Subsequent Phase s Base Rent such amounts cumulatively being the Annual Base Rent provided that commencing on the earlier to occur of i issuance of a building permit for Lessee s proposed Improvements for the Subsequent Phase or ii if there are multiple Subsequent Phases on issuance of the respective building permits for each such Subsequent Phase the Subsequent Phase Base Rent or if there are multiple Subsequent Phases then the respective portion of the Subsequent Phase Base Rent shall automatically increase to the then current amount for Phase 1 Base Rent provided further that not later than three 3 years after mutual execution hereof the entire Subsequent Phase s Base Rent shall be automatically increased to the then current amount for Phase 1 Base Rent whether or not Lessee has been issued building permits for Improvements on the Subsequent Phase s or any portion thereof Monthly Base Rent shall be 1 12 of the Annual Base Rent payable on or before the first Ist day of each calendar month thereafter to the City of Auburn Attn Finance Department 25 West Main Aubum WA 98001 without notice demand offset abatement or deduction of any kind On the date that Lessee executes this Lease Lessee shall deliver to Lessor the original executed Lease cash in the amount equal to one I month s Monthly Base Rent which shall be applied toward the Monthly Base Rent due for the first month for which Monthly Base Rent is payable hereunder the cash Security Deposit and all insurance certificates evidencing the insurance required to be obtained by Lessee under this Lease The term rent whenever used herein refers to all amounts required to be paid by Lessee hereunder Rent for any fractional part of a calendar month at the commencement or expiration or termination of the term shall be a prorated amount of the rent for a full calendar month based upon a thirty 30 day month b below Monthly Base Rent shall be subject to annual increases as provided in Section 5 c Commencing on the Lease Commencement Date Lessee shall pay any and all Impositions allocable to the Premises The term Impositions shall mean all real estate taxes to the extent any portion of the Premises and any improvements thereon are subject to real estate taxes water and sewer charges charges for public utilities local improvement or general or special Lessor City of Aubum Lessee Aviation Properties Inc Page 5 Printed on May 31 2001 benefit district assessments license and permit fees or other charges which shall or may during the Term be assessed levied charged confirmed or imposed by any public authority upon or accrue or become due or payable out of or on account of or become a lien on the Premises or any part thereof including without limitation all real property taxes allocable to the Improvements or for the use or occupancy of the Premises and any tax on receipt of rents The term Impositions shall expressly include statutory leasehold excise tax imposed by Chapter 82 29A RCW on the taxable rent payable by Lessee hereunder but shall exclude any income tax estate succession or inheritance taxes Either Lessee or Lessor may contest the validity or amount including the assessed valuation upon the Premises and any exemptions applicable to any portion thereof of any Imposition for which either is responsible in whole or in part and which such party in good faith believes is excessive improper or invalid In such event the payment thereof may be deferred during the pendency of such contest if diligently prosecuted but in no event shall Lessee allow a lien for any unpaid taxes which it is contesting to attach to the Premises Each party agrees to join at the other s request in any such contest to the extent such joinder is prerequisite to such prosecution under statute regulation or administrative practice In connection with a judicial or administrative challenge to any assessment Lessee may take advantage of any stay in collection available under statute regulation or court or administrative order or rules Nothing herein contained however shall be so construed as to aUow such items to remain unpaid for such length of time as shall permit the Premises or any part thereof to be sold by any governmental city or municipal authority for the nonpayment of the same Within ten IO days after the amount of such contested item is finally determined to be due the party liable for such Imposition shall pay the amounts so determined together with the penalties interest and expenses associated with such contest d It is the intent of Lessee and Lessor that except as otherwise provided herein the rent due hereunder shall be absolutely net to Lessor and that Lessee shaU pay all costs expenses regarding the Premises whether specifically mentioned herein or not 5 ANNUAL PERIODIC RENT ADJUSTMENTS a Monthly Base Rent shaU be adjusted on January 1 st of every year beginning January 1 2002 during the lease term per this Section 5 Notwithstanding the foregoing Monthly Base Rent shall be adjusted on each fifth 5th year commencing on January 1 2007 to equal the fair market rental value of the Premises pursuant to the procedure set forth in Section 5 d below No such adjustment however shall reduce the amount of Monthly Base Rent below the amount of the respective Monthly Base Rent that is being adjusted b Definitions The adjusted Monthly Base Rent shall be determined in accordance with the formula set forth in Section 5 c below In applying the formula the following definitions apply 1 Bureau means the U S Department of Labor Bureau of Labor Statistics or any successor agency 2 Price Index means the Consumer Price Index for the month of August for all Urban Consumers AU Items Seatt1e Tacoma Bremerton issued from time to time by the Lessor City of Auburn Lessee Aviation Properties Inc Page 6 Printed on May 31 2001 Bureau or any other measure hereafter employed by the Bureau in lieu of the price index that measures the cost of living or if said Bureau should cease to issue such indices and any other agency of the United States should perform substantially the same function then the indices issued by such other agency c The adjusted Monthly Base Rent shall be determined by multiplying the Monthly Base Rent being adjusted by a multiplier equal to the change in the Price Index since the last adjustment computed as follows Percentage change in Price Index x current Monthly Base Rent Adjusted Monthly Base Rent d Each five 5 years commencing on January 1 2007 the Monthly Base Rent shall be revised based upon an appraisal establishing fair market rental value of the Premises excluding however the rental value of any Improvements constructed by Lessee Lessor will retain and pay the costs of an MAl appraiser The annual adjustment formula set forth in Sections 5 b c shall not be applied each such fifth 5th year Lessor may at its discretion utilize an appraisal completed within 12 months prior to the date of the periodic five year adjustment Additionally this appraisal may be used by Lessor for setting rates for leases other than this Lease In the event the Lessee disagrees with Lessor s appraisals the Lessee may at his or her own expense retain a second appraisal Lessor and Lessee will then attempt to negotiate a lease rate If these negotiations are unsuccessful the parties will mutually agree on the selection of an arbitrator The costs of arbitration shall be shared The arbitrator s determination shall be based upon the appraisals but in no event shall the new Monthly Base Rent be lower than the Monthly Base Rent in effect at the time of arbitration The decision of the arbitrator regarding increases shall be final 6 SECURITY DEPOSIT Simultaneously with Lessee s execution and delivery of this Lease Lessee shall deliver to Lessor as a Security Deposit for the faithful performance by Lessee ofits obligations under this Lease the amount of 2 078 04 which is equal to one I month s worth of Monthly Base Rent plus State Leasehold Tax payable at the initial rate set forth in Section 4 a above If Lessee is in default hereunder Lessor may but without obligation to do so use all or any portion of the Security Deposit to cure the default or to compensate Lessor for all damages sustained by Lessor in connection therewith Lessee shall immediately on demand pay to Lessor a sum equal to the portion of the Security Deposit so applied or used to replenish the amount of the Security Deposit held to increase such deposit to the amount initially deposited with Lessor At any time after Lessee has defaulted hereunder Lessor may require an increase in the amount of the Security Deposit required hereunder for the then balance of the Term and Lessee shall immediately on demand pay to Lessor such additional sums As soon as practicable after the expiration or termination of this Lease Lessor shall return the Security Deposit to Lessee less such amounts as are reasonably necessary as determined by Lessor to remedy Lessee s defau1t s hereunder or to otherwise restore the Premises to a clean and safe condition reasonable wear and tear excepted If the cost to restore the Premises exceeds the amount of the Security Deposit Lessee shall promptly deliver to Lessor any and all of such excess sums Lessor shall not be required to keep the Security Deposit separate from other funds and unless otherwise required by 1avv Lessee shall not be entitled to interest on the Security Deposit In no event or circumstance shall Lessee have the right Lessor City of Auburn Lessee Aviation Properties Inc Page 7 Printed on May 31 200 I to any use of the Security Deposit and specifically Lessee may not use the Security Deposit as a credit or to otherwise offset any payments required hereunder Lessor may elect in Lessor s sole discretion and if Lessee has not been in material default during the first twenty four 24 months of the Term hereof to refund the Security Deposit to Lessee at the end of the twenty fourth 24th Lease month 7 LATE CHARGES Lessee hereby acknowledges that late payments of rent or any other sums due hereunder will cause the Lessor to incur costs not otherwise contemplated by this Lease Accordingly if any installment of rent or any other sum due from Lessee is not received by the Lessor within ten 10 days after such amount shall be due then without any requirement for notice to Lessee Lessee shall pay the Lessor a late charge equal to 12 of the overdue amount The parties agree that such late charge represents a fair and reasonable estimate of the costs the Lessor will incur by reason of late payment by Lessee Acceptance of such late charge by the Lessor shall in no event constitute a waiver of Lessee s default with respect to such overdue amount nor prevent the Lessor from exercising any of the other rights and remedies granted hereunder In the event that a late charge is payable in this Lease or otherwise whether or not collected for three 3 installments of rent in any 12 month period then rent shall automatically become due and payable quarterly in advance rather than monthly notwithstanding any other provision of this Lease to the contrary In addition to the late charges provided for in this section interest shall accrue on rent or any other sums due hereunder at the rate of one and one half percent 1 and 12 per month from the date due until paid 8 OWNERSHIP OF IMPROVEMENTS DISPOSlTlON AT END OF LEASE During the Term of this Lease all improvements located on the Premises including without limitation all additions alterations and improvements thereto or replacements thereof and all appurtenant fixtures machinery and equipment installed therein shall be the property of Lessee At the expiration or earlier termination of this Lease all improvements and all additions alterations and improvements thereto or replacements thereof and all appurtenant fixtures machinery and equipment installed therein excluding trade fixtures and movable equipment shall automatically become the property of Lessor Upon expiration or earlier termination of this Lease or upon termination of Lessee s right to possession Lessee shall remove at its expense all personal property which may have been placed upon the Premises by Lessee Any such property not so removed from the Premises shall at the election of Lessor be retained by Lessor or may be removed and stored by Lessor at Lessee s expense and Lessor shall recover any costs and expenses from the Lessee resulting therefrom 9 INSURANCE COVERAGE a The Lessee and any sublessee or assignee of Lessee shall procure and maintain for the duration of the Agreement insurance against claims for injuries to persons or damage to property which may arise from or in connection with the Lessee s operation and use of the leased Premises including Commercial general liability insurance with coverage at least as broad as the Lessor City of Auburn Lessee Aviation Properties 1nc Page 8 Printed on May 31 2001 most commonly available ISO Commercial General Liability policy CG 00 01 with limits of liability no less than One Million Dollars 1 000 000 occurrence limit One Million Dollars 1 000 000 general aggregate limit with additional coverage for Aircraft Owned Lessor and its agents employees and officers shall be additional insureds b The Lessee s insurance coverage shall be primary insurance as respects Lessor Any insurance self insurance or insurance pool coverage maintained by Lessor shall be excess of the Lessee s insurance and shall not contribute with it c The Lessee s insurance shall be endorsed to state that no coverage shaH be canceled by either party except after thirty 30 days prior to written notice by certified mail return receipt requested has been given to Lessor All policies shall expressly provide if available that Lessor shall not be required to give notice of accidents or claims and that Lessor shaH have no liability for premiurns and be written by insurance companies having a Best s rating of A and X or equivalent which insurance companies shall otherwise be reasonably acceptable to Lessor d Lessee shall furnish Lessor with evidences of the insurance required to be carried by Lessee hereunder along with copies of policies and a copy of the amendatory endorsements including but not necessarily limited to the additional insured endorsement evidencing the insurance requirements of the Lessee e Policy limits shall be adjusted every five 5 years commencing on January I 2007 considering levels of inflation risk of loss premium expenses and other relevant factors in Lessor s commercially reasonable discretion f Lessor and Lessee hereby mutuaHy waive their respective rights of recovery against each other for any loss of or damage to either parties property to the extent that such loss or damage is insured by an insurance policy required to be in effect at the time of such loss or damage or which is actually carried by such party Each party shaH obtain any special endorsements if required by its insurer whereby the insurer waives its rights of subrogation against the other party This provision is intended to waive fuHy and for the benefit of the parties hereto any rights and or claims which might give rise to aright of subrogation in favor of any insurance carrier 10 INDEMNIFICA TIONHOLD HARMLESS The Lessee shall defend indemnify and hold harmless Lessor its officers officials employees and volunteers from and against any and all claims suits actions or liabilities for injury or death of any person or for loss or damage to property which arises out of Lessee s use of Premises or from the conduct of Lessee s business or from any activity work or thing done permitted or suffered by Lessee in or about the Premises except only such injury or damage as shaH have been occasioned by the gross negligence or willful misconduct of Lessor Solely for the purpose of effectuating Lessee s indemnification obligations under this Lease and not for the benefit of any third parties including but not limited to employees of Lessee Lessee specifically and expressly waives any immunity that may be granted it under applicable federal state or local Worker Compensation Acts Disability Benefit Acts or other employee benefit acts Furthermore Lessor City of Auburn Lessee Aviation Properties 1nc Page 9 Printed on May 31 2001 the indemnification obligations under this Lease shall not be limited in any way by any limitation on the amount or type of damages compensation or benefits payable to or for any third party under Worker Compensation Acts Disability Benefit Acts or other employee benefit acts The parties acknowledge that the foregoing provisions of this Section have been specifically and mutually negotiated between the parties 11 DAMAGE AND DESTRUCTION REPAIR In the event of damage to or destruction of the Improvements a If the cost of repairing or reconstructing the Improvements to the condition and form immediately prior to such damage or destruction does not exceed thirty three percent 33 of the then new replacement cost thereof then Lessee shall effect such repair and reconstruction of the Improvements so damaged or destroyed to substantially their condition prior to said damage or destruction All such work shall be carried out in accordance with plans and specifications prepared by a licensed architect or architects approve by Lessor acting reasonably if such an architect is reasonably required given the scope and nature of the work b If the cost of repairing or reconstructing the Improvements to the condition and form immediately prior to such damage or destruction exceeds thirty three percent 33 of the then new replacement cost thereof then Lessee may elect by written notice to Lessor given within sixty 60 days after the date of the damage to terminate this Lease provided that this Lease shall not terminate unless and until Lessee has at its cost and expense restored the Premises to grade level and removed all debris therefrom including all improvements above and below ground as and to the extent required by Lessor by written notice provided no later than thirty 30 days after Lessee s written election to terminate In no event shall Monthly Base Rent or any other form of rent be abated during such period of reconstruction andlorreStoration 12 ASSIGNMENT AND SUBLETTING a Except as set forth below neither this Lease nor any interest therein may be assigned mortgaged transferred or encumbered nor shall all or any part of the Premises be sublet each of which a Transfer without Lessor s prior written consent which Lessor may withhold or condition in its sole discretion provided however that if Lessee creates a condominium on the Premises as provided in this Lease and for so long as such condominium and the Condominium Association as hereinafter defined are in existence the Transfer of individual condominium units to unit owners and by unit owners or to tenants of unit owners other than Lessee shall not require the prior written consent of Lessor If Lessee is a corporation partnership limited liability company or any other entity any transfer of a controlling ownership or voting interest in such entity or any transfer or attempted transfer of this Lease by merger consolidation or liquidation shall be deemed a Transfer requiring Lessor s consent Transfers include without limitation one or more sales or transfers by operation of law or otherwise or creation of new stock by which an aggregate of more than fifty percent 50 of Lessee s stock or partnership or membership interests as applicable shall be vested in a party or parties who are nonstockho1ders or non partners or non members as applicable as of the date hereof provided that the foregoing shall not apply if Lessor City of Auburn Lessee Aviation Properties Inc Page 10 Printed on May 31 2001 Lessee s stock is listed on a recognized national stock exchange or is traded over the counter Transfers also include without limitation the assignment sale or transfer of any development rights or special declarant rights by Lessee as declarant under the Condominium Declaration if any except that in the event that Lessee proposes to grant a security interest in development rights or special declarant rights to facilitate construction financing of future phases of construction Lessor s consent shall not be unreasonably withheld As set forth in Section l2 b below Lessee intends to assign this Lease to a condominium association formed pursuant to Chapter 64 34 RCW the Condominium Association Any assignee or subtenant including the Condominium Association each a Transferee shall assume all of Lessee s obligations under this Lease and shall be jointly and severally liable with Lessee hereunder Consent of the Lessor to any Transfer shall not operate as a waiver of the necessity for consent to any subsequent Transfer In connection with each request for consent to a Transfer Lessee shall pay the reasonable cost of processing same including reasonable attorneys fees upon demand of Lessor If Lessor consents to any proposed Transfer Lessee may enter into the same but only upon the specific terms and conditions set forth in Lessee s Request for Consent any such Transfer shall be subject to and in full compliance with all of the terms and provisions of this Lease the consent by Lessor to any Transfer shall not relieve Lessee of any obligation under this Lease Lessor may require the Lessee and the Transferee to execute a Lessor s consent form and no Transfer shall be binding on Lessor unless Lessee and the transferee shall deliver to Lessor a fully executed counterpart of the docurnent effecting the Transfer b Notwithstanding the proVIsIons of Section 12 a above if Lessee creates a condominium on the Premises as provided in this Lease this Lease shall be automatically assigned to the Condominium Association upon the recording of the deed transferring Lessee s interest in the last condominium unit to a unit owner other than Lessee Upon the assignment of this Lease to the Condominium Association a novation shall occur such that the Condominium Association shall become absolutely and for all purposes substituted for the original Lessee under this Lease and the original Lessee shall have no further liability under this Lease If for any reason the condominium or the Condominium Association is terminated each and every partYVlTith an interest in the Premises at the time of such termination shall be jointly and severally liable as Lessee under this Lease and upon such termination any and all Transfers including the Transfer of any interest in the former condominium units shall be subject to the provisions of Section 12 a including Lessor s prior written consent which consent may be withheld in Lessor s sole and absolute discretion c Notwithstanding the provisions of Section 12 a above Lessee may sublet portions of the Premises provided that i each such subtenant maintains the insurance coverage required to be maintained by Lessee hereunder ii a copy of the documentation effecting such sublease shall be delivered to Lessor as soon as reasonably possible after the effective date thereof iii the subtenant shall be deemed to have agreed to comply with all of Lessee s obligations under this Lease applicable to the sublet premises and iv each such sublease shall be expressly subject and subordinate to the terms and conditions of this Lease 13 OFF STREET PARKING Lessor City of Auburn Lessee Aviation Properties Inc Page 11 Printed on May 31 2001 Lessee agrees not to use any public streets rights of way taxi lanes driveways or other properties not included in this Lease for the parking of vehicles Vehicles must be placed within the hanger when its aircraft is removed 14 ADVERTISING AND SIGNS No signs or other advertising matter symbols canopies or awnings shall be installed attached to or painted on the Premises without the prior written approval of the Lessor 15 LAWS AND REGULATIONS The Lessee agrees at its sole cost and expense to conform to comply with and abide by all lawful rules codes ordinances requirements orders directions laws and regulations of the United States the State of Washington and City of Auburn or agency of any of said entities including rules and regulations of Lessor including without limitation those relating to environmental matters now in existence or hereafter promulgated applicable to the Lessee s use and operation of said Premises including the construction of any improvements thereon and not to permit said Premises to be used in violation of any of said rules codes laws or regulations Lessee shall pay all costs expenses liabilities losses damages fines penalties claims and demands including reasonable counsel fees that may in any manner arise out of or be imposed because of the failure of Lessee to comply with the covenants ofthis section 16 ENVIRONMENTAL PROVISIONS a Lessee covenants to defend indemnify and hold Lessor harmless from any imposition or attempted imposition by any person upon Lessor of any obligation or cost liability of whatever form including without limitation damages claims governmental investigations proceedings or requirements attorney fees in investigation at trial or administrative proceeding or on appeal witness or consultant costs or any other liability to the extent that such liability arises from a violation or from the failure to satisfy a requirement of any environmental or land use law or regulation proximately resulting from use of the Premises during the term of this Lease and without regard to when the liability is asserted b Lessee has inspected the Premises and accepts it in its present condition Lessee shall not cause the premises to be contaminated in any way and in the event of contamination shall immediately report such contamination to Lessor and shall cause any such contamination to be remedied by that method recognized by Washington State Department of Ecology and shall indemnify and hold Lessor harmless from all costs involved in implementing the remedy c Any other provision of this Lease to the contrary notwithstanding Lessee s breach of any covenant contained in this Section 16 shall be an Event of Default empowering Lessor in addition to exercising any remedy available at law or in equity or otherwise pursuant to this Lease to terminate this Lease and to evict Lessee from the Premises forthwith or to terminate Lessee s right to possession only without terminating this Lease Lessor City of Auburn Lessee Aviation Properties Inc Page 12 Printed on May 31 2001 d Lessee shall notify Lessor within twenty four 24 hours of any release of a reportable quantity of any hazardous substance as that term is defined in CERCLA 42 USC 9601 et seq or the Washington Model Toxics Control Act or of the receipt by Lessee of any notices orders or communications of any kind from any governmental entity which relate to the existence of or potential for environmental pollution of any kind existing on or resulting from the use of the Premises or any activity conducted thereon If Lessee fails to comply with any of the requirements of this section Lessor may undertake without cost or expense to Lessor any actions necessary to protect Lessor s interest including steps to comply with such laws 17 MAINTENANCE I COMMIT NO WASTE Lessee shall at all times during the term of this Lease maintain the Premises and all improvements thereon in good condition and shall at its sole cost and expense keep the Premises clean and in a safe and sanitary condition and shall provide all necessary repairs and maintenance to the Premises Lessee agrees not to allow conditions of waste and refuse to exist on the premises Lessee shall conform to and comply with all valid ordinances regulations or laws affecting the Premises the Improvements or any other improvements on the Premises or the use thereof Lessor shall have no obligation whatsoever to keep maintain alter remodel improve repair decorate or paint the Improvements or any other improvements hereafter situated upon the Premises It is the intention of the parties that Lessee and not Lessor shall have the full responsibility and obligation for the repair and maintenance of the Improvements and other improvements hereafter situated upon the Premises and Lessee waives to the full extent allowed by law any right or remedy against Lessor based upon the condition of the Improvements or any improvements hereafter situated upon the Premises or any failure by Lessor or Lessee to repair or maintain the Improvements or any such improvements 18 ALTERA TIONS AND ADDITIONS Following completion of the initial phases of construction of Lessee s proposed Improvements Lessee shall not make any alterations improvements additions or utility installations in or about the Premises collectively Alterations without first obtaining the written consent of Lessor and where appropriate in accordance with plans and specifications approved by Lessor Any alterations required to be made to the Premises by any applicable building health safety fire nondiscrimination or similar law or regulation law shall be made at Lessee s sole expense and shall be subject to the prior written consent of Lessor Lessee shall reimburse Lessor for any sums expended for examination and approval or architectural or mechanical plans and specifications of the Alterations Lessor may require a lien and completion bond for such construction or require the improvements be removed at the expiration of the Term Lessor s approval of the plans specifications and working drawings for Lessee s alterations shall create no responsibility or liability on the part of Lessor for their completeness design sufficiency or compliance with all laws rules and regulations of governmental agencies or authorities Unless Lessor requires their removal all Alterations other than trade fixtures and movable equipment which may be made on the Premises shall become the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the term Lessor City of Auburn Lessee Aviation Properties Inc Page 13 Printed on May 31 2001 19 COVENANT OF QUIET ENJOYMENT Lessor agrees that if Lessee timely pays the rent and performs the terms and provisions hereunder Lessee shall hold and enjoy the Premises during the Term free of lawful claims by any party acting by or through Lessor subject to all other terms and provisions of this Lease 20 RECORDING AND MORTGAGING Lessee and Lessor agree to execute and record a short form or memorandum of this Lease with costs of preparation and recording paid by Lessee 21 UTILITIES a Lessee agrees to contract with the appropriate provider and pay for all public utilities which shall be used in or charged against the Premises and to hold the Lessor harmless from such charges Lessor shall cooperate at no charge to Lessor in the granting of easements and rights of way in through above and or under property owned and controlled by Lessor at the Airport and reasonably necessary for the provision of utilities to the Premises b Except to the extent caused by the gross negligence or intentional misconduct of Lessor or its agents employees or contractors failure by Lessor to any extent to furnish or cause to be furnished the utilities or services described in this Lease or any cessation or interruption thereof resulting from any cause including without limitation mechanical breakdown overhaul or repair of equipment strikes riots acts of God shortages of labor or material compliance by Lessor with any voluntary or similar governmental or business guidelines governmental laws regulations or restrictions or any other similar causes shall not render the Lessor liable in any respect for damages to either person or property for any economic loss or other consequential damages incurred by Lessee as a result thereof be construed as an eviction of Lessee result in an abatement of rent or relieve Lessee from its obligation to perform or observe any covenant or agreement contained in this Lease 22 LIENS AND INSOLVENCY Lessee shall keep the Premises free from any liens In the event Lessee becomes insolvent voluntarily or involuntarily bankrupt or if a receiver assignee or other liquidating officer is appointed for the business of the Lessee then the Lessor may cancel this Lease at Lessor s option 23 COSTS AND ATTORNEYS FEES If by reason of default on the part of either party to this Lease agreement it becomes necessary to employ an attorney to recover any payments due hereunder or to enforce any provision of this Lease the prevailing party whether such party be the successful claimant or the party who successfully defended against the claim of the other party shall be entitled to recover a reasonable attorney s fee and to be reimbursed for such costs and expenses as may have been incurred by such prevailing party Lessor City of Auburn Lessee Aviation Properties Inc Page 14 Printed on May 31 2001 24 DEF AULT REMEDIES a Time is ofthe essence of this agreement b If i any rent or other payment due from Lessee hereunder remains unpaid for more than ten 10 days after the date it is due ii Lessee files a voluntary peti ion in bankruptcy or makes a general assignment to the benefit of or a general arrangement with creditors iii there is an involuntary bankruptcy filed against Lessee that has not been dismissed vvithin thirty 30 days of filing iv Lessee becomes insolvent or v a receiver trustee or liquidating officer is appointed for Lessee s business or vi if Lessee violates or breaches any of the other covenants agreements stipulations or conditions herein and such violation of breach shall continue for a period of thirty 30 days after written notice of such violation or breach is sent to Lessee then Lessor shall have the rights and remedies provided in this Section 24 in additional to any other right or remedy available at law or equity all notice and cure periods set forth above are in lieu of and not in addition to any notice required pursuant to applicable unlawful detainer eviction statutes c Upon any default under this Lease Lessor may reenter the Premises in the manner then provided by law and remove or put out Lessee or any other persons found therein No such reentry shall be construed as an election on Lessor s part to terminate this Lease unless a written notice of such intention is given to Lessee d Lessor may elect to re let the Premises or any part thereof upon such terms and conditions including rent term and remodeling or renovation as Lessor in its sole discretion may deem advisable To the fullest extent permitted by law the proceeds of any re1etting shall be applied first to pay Lessor all costs and expenses of such reletting including without limitation costs and expenses incurred in retaking or repossessing the Premises removing persons or property therefrom securing new Lessees and if Lessor maintains and operates the Premises the costs thereof second to pay any indebtedness of Lessee to Lessor other than rent third to the rent due and unpaid hereunder and fourth the residue if any shall be held by Lessor and applied in payment of other or future obligations of Lessee to Lessor as the same may become due and payable and Lessee shall not be entitled to receive any portion of such revenue e Lessor may also elect to terminate the Lease and all rights of Lessee by giving notice to Lessee of such election If Lessor elects to terminate the Lease Lessor shall have the right to reenter the Premises and remove all persons and to take possession of and remove all equipment and fixtures of Lessee in the Premises in the manner then provided by law Lessee hereby waives all damages that may be caused by Lessor s reentering and taking possession of the Premises or removing or storing the property thereof and Lessee shall save Lessor harmless therefrom If Lessor so elects to terminate the Lease Lessor may also recover from Lessee 1 The worth at the time of the award of the unpaid rent which had been earned at the time of termination Lessor City of Auburn Lessee Aviation Properties Inc Page 15 Printed on May 31 2001 II The worth at the time of the award of the amount by which the unpaid rent which would have been eamed after termination until the time of the award exceeds the amount of rental loss that the Lessee proves could have been reasonably avoided III The worth at the time of the award of the amount by which the unpaid rent for the balance of the term after the time of the award exceeds the amount of rental loss that the Lessee proves could be reasonably avoided IV Any other amount necessary to compensate the Lessor for all the detriment proximately caused by the Lessee s failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom and V At Lessor s election such other amounts in addition to or in lieu of the foregoing that may be permitted from time to time by applicable law The worth at the time of the award of the amounts referred to in paragraphs I and II above is computed by allowing interest at twelve percent 12 The worth at the time of the award of the amount referred to in paragraph III above is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award plus one percent 1 f Nothing in this Section 24 shall be deemed to affect Lessor s right to indemnification for liability or liabilities arising prior to termination of this Lease for personal injury or property damage under the indemnification provisions or other provisions of this Lease 25 PRIORITY a This Lease shall be subordinate to any mortgage or deed of trust now existing or hereafter placed upon the Premises created by or at the instance of Lessor and to any and all advances to be made thereunder and to interest thereon and all modifications renewals and replacements or extensions thereof Lessor s Mortgage and to any master lease hereafter placed against the Premises and to all modifications extensions and amendments thereof and thereto Lessee shall properly execute acknowledge and deliver documents which Lessor or the holder of any Lessor s Mortgage may require within ten 10 days after delivery by Lessor to effectuate the provisions of this Section 25 provided that such documents state that Lessee s rights this Lease will not be terminated so long as Lessee is not in default hereunder b Lessee shall be entitled to grant a first mortgage or first position deed of trust to an institutional lender on its leasehold interest under this Lease provided Lessee first provides Lessor with written notice of such proposed first mortgage or first position deed of trust Lessor agrees to make such reasonable modifications to this Lease as may be requested by any permitted leasehold mortgagee including without limitation the giving of notice of default by Lessee under the Lease to any such leasehold mortgagee the giving of a second notice before the Lease is terminated and the granting to such leasehold mortgagee of a new lease in the event this Lease is terminated Such Lessor City of Auburn Lessee Aviation Properties Inc Page 16 Printed on May 31 2001 modifications shall be generally in conformance with the model leasehold mortgage provisions promulgated by the American Bar Association 26 RETENTION OF AIRSPACE AND OTHER RlGHTS BY LESSOR a Lessor retains the public and private right of flight for the passage of aircraft in the airspace above the surface of the property hereinbefore described together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft now known or as hereinafter used for navigation of or flight in said airspace and for use of said airspace for taking off from landing on or operating at Aubum Municipal Airport b Lessor reserves the right to further develop or improve the landing area of the Airport as it sees fit regardless of the desires or view of the Lessee and without interference or hindrance c Lessor reserves the right but shall not be obligated to the Lessee to maintain and keep in repair the landing area of the Airport and all publicly owned facilities of the Airport together with the right to direct and control all activities of the Lessee in this regard d This Lease shall be subordinate to the provisions and requirements of any existing or future agreement between the Airport and the United States relative to the development operation and maintenance of the Airport e Lessee agrees to comply with the notification and review requirements covered in Part 77 of the Federal Aviation Regulation in the event any construction is planned for the Premises or in the event of any planned modification or alteration of any present or future Improvements or structure situated on the Premises f Lessee agrees that it will not erect nor permit the erection of any structure or object nor permit the growth of any tree on the Premises to exceed the established height contours In the event the aforesaid covenants are breached Lessor shall give written notice to the Lessee specifying the breach If Lessee does not take action to correct the breach within ten 10 days of receipt of said notice the Lessor reserves the right to enter upon the Premises hereunder and to remove the offending structure or object and cut the offending tree all of which shall be at the expense of Lessee g Lessee by accepting this Lease agrees that it will not make use of the Leased Premises in any manner which might interfere with the landing and taking off of aircraft from Aubum Airport or otherwise constitute a hazard In the event the aforesaid covenant is breached Airport reserves the right to enter upon the Premises hereby leased and cause the abatement of such interference at the expense of Lessee h It is understood and agreed that nothing herein contained shall be construed to grant or authorize the granting of an exclusive right within the meaning of Section 308a of the Federal Aviation Act of 1958 49 U S c Section 1349a Lessor City of Auburn Lessee Aviation Properties 1nc Page 17 Printed on May 31 2001 i This Lease and all the provisions hereof shall be subject to whatever right of the United States Government now has or in the future may have or acquire affecting the control operation regulation and taking over of the Aubum Airport by the United States during the time of the war or national emergency j Lessor reserves the right to take any action it considers necessary to protect the aerial approaches of the Auburn Airport against obstructions together with the right to prevent Lessee from erecting or permitting to be erected any building or other structure on the Premises which in the opinion of Airport or the Federal Aviation Administration would limit the usefulness of the Auburn Airport or constitute a hazard to aircraft k Lessee as well as Lessee s assignees and sublessees and the agents employees and customers thereof shall have the rights of access to and use of all areas and facilities of the Auburn Airport which are intended for the common use of all Lessees and occupants of the Auburn Airport including but not limited to the take off and landing areas taxi areas reasonable access thereto from the Premises and air control facilities 27 FEDERAL AVIATION ADMINISTRATION REQUIREMENTS a Lessee agrees 1 to prevent any operation on the Premises which would produce electromagnetic radiations of a nature which would cause interference with any existing or future navigational aid or communication aid serving Auburn Municipal Airport or which would create any interfering or confusing light or in any way restrict visibility at the Airport and 2 to prevent any use of the Premises which would interfere with landing or taking off of aircraft at Auburn Municipal Airport or otherwise constitute an aviation hazard b Lessor reserves the right during the term of this Lease or any renewal and or extension thereof to install air navigational aids including lighting in on over under and across the Premises in the exercise of any of the rights hereof Lessor agrees to give Lessee no less than ninety 90 days written notice of its intention to install such air navigational aids 28 SECURITY Airport shall have no obligation to provide security to the Premises If reasonably required by Lessor Lessee shall provide through the use of buildings structures walls fences and similar barriers or a combination thereof positive uninterrupted on site security at all times for the prevention of unauthorized pedestrian and vehicular access to the aircraft operating area AOA by way of the Premises and direct or indirect points of entry of the AOA to accommodate authorized individuals and authorized vehicles shall be controlled by Lessee in compliance with the FAA and Airport security requirements Lessee shall also provide security for on site facilities Lessee shall provide adequate lighting to provide for all night illumination of the Taxilane apron of Lessor City of Aubum Lessee Aviation Properties 1nc Page 18 Printed on May 31 2001 all buildings on the Premises including aprons aircraft tiedown areas vehicular parking lots and pedestrian walkways surrounding the Premises Lessee may but need not employ security persons If at any time during the term of this Lease additional security requirements are imposed on the Airport by the FAA or any other agency having jurisdiction over Airport Lessee agrees to comply with said security requirements at Lessee s sole expense upon being notified of such requirements in writing by Airport If Airport is fined by FAA for a security violation caused by negligence of Lessee or any of Lessee s sub Lessees Lessee shall immediately reimburse Airport upon demand 29 INSPECTION ACCESS AND NOTICE Lessor and any of its agents shall at any time upon reasonable notice to Lessee have the right to go upon and inspect the Premises and Improvements erected or constructed or in the course of being erected or constructed repaired added to rebuilt or restored thereon Lessor shall have the right to serve or to post and to keep posted on the Premises or on any part thereof any notice permitted by law or by this Lease any other notice or notices that may at any time be required or permitted by law or by this Lease Airport shall not be liable in any manner for any inconvenience disturbance loss of business or other damages arising out of Lessor s entry on the Premises as provided in this Section except for such damage that is caused directly by or through the gross negligence of Lessor their employees agents or representatives 30 NON DISCRIMINA TlON a Lessee for himself his heirs personal representatives successors in interest and assigns as a part of the consideration hereof does hereby covenant and agree that in the event facilities are constructed maintained or otherwise operated on the Premises described in this lease agreement for a purpose for which a Department of Transportation DOT program or activity is extended or for another purpose involving the provision of similar services or benefits the Lessee shall maintain and operate such facilities and services in compliance with all other requirements imposed pursuant to Title 49 Code of Federal Regulations DOT Sub title A Office of the Secretary Part 21 Non discrimination in Federally Assisted Programs of the Department of Transportation Effectuation of Title VI of the Civil Rights Act of 1964 and as said Regulations may be amended b Lessee for himself his personal representatives successors in interest and assigns as a part of the consideration hereof does hereby covenant and agree that I no person on the grounds of race color sex or national origin shall be excluded from participation in denied the benefits of or be otherwise subjected to discrimination in the use of said facilities 2 that in the construction of any improvements on over or under the Premises and the fumishing of services thereon no person on the grounds of race color sex or national origin shall be excluded from participation in denied the benefits of or be otherwise subjected to discrimination and 3 that the Lessee shall use the Premises in compliance with all other requirements imposed by or pursuant to Title 49 Code of Federal Regulations DOT Sub title A Office of the Secretary Part 21 Non discrimination in Federally Assisted Programs of the Department of Transportation Effectuation of Title VI of the Civil Rights Act of 1964 and as said Regulations may be amended Lessor City of Auburn Lessee Aviation Properties Inc Page 19 Printed on May 31 2001 c In the event of breach of any of the above non discrimination covenants Lessor shall have the right to terminate this Lease agreement and to re enter and repossess said Premises and the facilities thereon and hold the same as if said lease agreement has never been made or issued This provision does not become effective until the procedures of 49 CFR Part 21 are followed and completed including expiration of appeal rights d Lessee shall furnish its accommodations and or services on a fair equal and not unjustly discriminatory basis to all users thereof and it shall charge fair reasonable and not unjustly discriminatory prices for each unit or service provided that Lessee may be allowed to make reasonable and nondiscriminatory discounts rebates or other similar types of price reductions to volume purchasers e Noncompliance with Section 30 d above shall constitute a material breach thereof and in the event of such noncompliance Lessor shall have the right to terminate this Lease and the estate hereby created without liability therefor or at the election of the Lessor or the United States either or both said Governments shall have the right to judicially enforce the provisions of said Section 30 d f Lessee agrees that it shall insert the above five subsections in any lease license or sublease agreement by which said Lessee grants a right or privilege to any person firm or corporation to render accommodations and or services to the public on the Premises herein leased g The Lessee assures that it will undertake an Affirmative Action program as required by 14 CFR Part 152 Sub part E Sub part E to ensure that no person shall on the grounds of race creed color national origin or sex be excluded from participating in any employment activities covered in Sub part E The Lessee assures that no person shall be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by this Sub part E The Lessee assures that it will require that its covered suborganizations provide assurances to the Lessee that they similarly wil1 undertake Affirmative Action programs and that they wil1 require assurances from their suborganizations as required by Sub part E to the same effort 31 NOTICES All notices hereunder may be hand delivered delivered by recognized national overnight courier service or sent via U S First Class mail postage prepaid to the following addresses LESSOR City of Auburn 25 West Main Auburn WA 98001 LESSEE Aviation Properties lnc Box 6820465 Douglas Crescent Langley BC V3A4B6 Following the condominiumization of the Premises by Lessee notices due hereunder shall be served upon any officer of the condominium association or upon its Registered Agent in the manner provided by law Lessor City of Auburn Lessee Aviation Properties Inc Page 20 Printed on May 31 2001 Notices given by hand delivery or by overnight delivery as aforesaid shall be deemed given when delivery is made or refused Notices given by U S First Class mail shall be deemed given two 2 business days after depositing in the mail 32 MISCELLANEOUS a No Brokers Lessee represents and warrants to Lessor that it has not engaged any broker finder or other person who would be entitled to any commission or fees in respect of the negotiation execution or delivery of this Lease and shall indemnify and hold harmless Lessor against any loss cost liability or expense incurred by Lessor as a result of any claim asserted by any such broker finder or other person on the basis of any arrangements or agreements made or alleged to have been made by or on behalf of Lessee b Non Waiver Waiver by Lessor of any term covenant or condition herein contained or any breach thereof shall not be deemed to be a waiver of such term covenant or condition or of any subsequent breach of the same or any other term covenant or condition herein contained c Estoppel Certificates Lessee shall from time to time upon written request of Lessor execute acknowledge and deliver to Lessor or its designee a written statement certifying that i this Lease is in full force and effect and has not been assigned or amended in any way or specifying the date and terms of agreement so affecting this Lease ii this Lease represents the entire agreement between the parties as to this leasing that all obligations under this Lease to be performed by the Lessor have been satisfied iii on this date there are no existing claims defenses or offsets which the Lessee has against the enforcement of this Lease by the Lessor or if so the material facts pertaining thereto iv no Rent has been paid more than one month in advance and that no security has been deposited with Lessor or if so the amount thereof and v such other items as Lessor shall reasonably request It is intended that any such statement delivered pursuant to this Section may be relied upon by a prospective purchaser of Lessor s interest or holder of any mortgage upon Lessor s interest in the Premises If Lessee shall fail to respond within ten 10 days of receipt by Lessee of a written request by Lessor as herein provided Lessee shall be deemed to have given such certificate as above provided without modification and shall be deemed to have admitted the accuracy of any information supplied by Lessor to a prospective purchaser or mortgagee and to have certified that this Lease is in full force and effect that there are no uncured defaults in Lessor s performance that the security deposit is as stated in the Lease and that not more than one month s Rent has been paid in advance d Force Majeure Except for the payment of Rent Additional Rent or other sums payable by Lessee to Lessor time periods for Lessee s or Lessor s performance under any provisions of this Lease shall be extended for periods of time during which Lessee s or Lessor s performance is prevented due to circumstances beyond Lessee s or Lessor s control including without limitation strikes embargoes shortages of labor or materials governmental regulations acts of God war or other strife Lessor City of Auburn Lessee Aviation Properties Inc Page 21 Printed on May 31 2001 e Severabilitv If any term covenant or condition of this Lease or part thereof or the application thereof to any person or circumstance is to any extent invalid or unenforceable the remainder of this Lease and or the remainder of any such term covenant or condition or the applicability of such term covenant or condition to persons or circumstances other than those to which it is held invalid or unenforceable shall not be affected thereby and each term covenant or condition or part thereof of this Lease shall be valid and be enforced to fullest extent permitted by law f Authoritv Each party hereto warrants that it has the authority to enter into this Lease and to perform its obligations hereunder and that aU necessary corporate action to authorize this transaction has been taken and the signatories by executing this Lease warrant that they have the authority to bind the respective parties 33 RIGHTS OF ACCESS During the Term hereof and during any extension or renewal thereof Lessor shall continuously provide to Lessee rights of pedestrian and vehicular ingress and egress to the Premises from the nearest public road or highway Lessor shall further continuously provide to Lessee rights of aircraft access to the taxiway s leading to the runway s of the airport and shall maintain any such roadway s and taxiway s in reasonable conditions of repair suitable for the normal intended uses of such facilities Lessor City of Auburn Lessee Aviation Properties Inc Page 22 Printed on May 31 2001 34 SIGNATURE By signing in the space below the LESSEE ACKNOWLEDGED HAVING READ AND UNDERSTOOD AND AGREES TO THE CONTENTS OF THIS AGREEMENT IN WITNESS WHEREOF the parties hereto have executed this Lease LESSOR THE CITY OF AUBURN a Washington municipal corporation By IJ fiPrintNameIeRe Title fta By Print e Bill Vandenberg for Aviation Properties Inc LESSEE Lessor City of Auburn Lessee Aviation Properties Inc Page 23 Printed on May 3 1 2001 STATE OF WASHINGTON ss COUNTY OF KING Lv 11 I certify that I know or have satisfactory evidence that C h trlll Eo oH is the person who appeared before me and said person acknowledged that said person signed this instrument on oath stated that said person was authorized to execute the instrument and acknowledged it as the r V of the City of Auburn a Washington municipal corporation to be the e and voluntary act of such mumclpa1 corporatIOn for the uses and purposes mentioned in the instrument Dated this 1 0 d yJ J i J e lNE0 Q S101V 01i 1 it NOTARl J ZJ I 0 C PuBLIC iI l iI o1A 29 foqW 2001 Cd t t fiAWE 62 A ignature of Notary r It E 15 Vel 4 1 Legibly P t or Stamp Name of Notary Notary public and for the state of Washington residing at IJ I1111 fJ W fl My appointment expo s tJ 2t LJ 3 STATE OF WASHINGTON COUNTY OF KI VI 5 ss I certify that 1 know or have satisfactory evidence that c is the person who appeared before me and said person acknowledged that said person sig d this instrument and acknowledged it to be said person s free and voluntary act for the uses and purposes mentioned in the instrument Dated this 7Yit rid vI If ru ne 2001 elL t nv f U UYL 1 Signature of Notary Ii 0 Illl e 13Nl 0L Q lSIOIV01i0NOTARlJ zJ0tnI I Q C I Ul1LlV iI A 0 J I 1A 2 l W Legibl rint or Stamp Name of Notary No public in and for the e of Washington resldmg at II II t1 C li vi I LV A My appointment expires IJ 21 1 3 Lessor City of Aubum Lessee Aviation Properties Inc Page 24 Printed on May31 2001 Exhibit A I Legal Description of Premises LEASE AREA NORTH OF 23RD STREET NE BETWEEN D AND E THAT PORTION OF LOTS 22 23 24 25 26 AND 27 OF MARDEL ADDITION NO 2 AS RECORDED IN VOLUME 79 OF PLATS PAGE 1 RECORDS OF KING COUNTY WASHINGTON TOGETHER WITH THAT PORTION OF D STREET NE AS SHOWN ON SAID PLAT OF MARDEL ADDITION NO 2 QUIT CLAIMED TO THE CITY OF AUBURN AIRPORT DEPARTMENT AS RECORDED UNDER AUDITOR S FILE NO 8211050440 AND SURPLUSED BY CITY OF AUBURN RESOLUTION NO 1 730 DESCRIBED AS FOLLOWS BEGINNING AT THE NORTHWEST CORNER OF SAID MARDEL ADDITION NO 2 THENCE SOUTH 89 21 15 EAST ALONG THE NORTH BOUNDARY OF SAID MARDEL ADDITION NO 2 A DISTANCE OF 303 80 FEET THENCE SOUTH 00 31 30 WEST 484 07 FEET THENCE NORTH 88 58 22 WEST 309 37 FEET TO A POINT LOCATED 307 5 FEET EAST MEASURED AT RIGHT ANGELS OF THE PAINTED CENTERLINE OF THE MAIN RUNWAY FOR THE CITY OF AUBURN AIRPORT THENCE NORTH 00 39 04 EAST ALONG A LINE PARALLEL WITH SAID PAINTED CENTERLINE OF THE MAIN RUNWAY 482 01 FEET THENCE SOUTH 80 21 15 EAST 449 FEET TO THE POINT OF BEGINNING CONTAINING 149175 SQUARE FEET MORE OR LESS 3425 ACRES Lessor City of Auburn Lessee Aviation Properties 1nc Page 25 Printed on May 31 2001 EX I I iTO AIRPORT LEASE AGREIMENT I i i 1iIi 26TH ST N E I r I Ilr IrI1U I IIlLI UII I I I nUII w p I II I i 307 5 FROM I CENTERLINE OF RUNWr I IIIIII I II I I I I i II I i II1IIIIIIIII I i IIIIIlI I I I III I i I I i I I IiiIII I I I J I 100 w if w J 0 r a r ii Exhibit A 2 Site Plan S 8921 15 E 308 29 t I t t t I t 1 I t I t I 1 I j zl t t 1 t t I t t t f Io Lease Area 149 175 Square Feet 3425 Acres W Iz 309 37 I I I I I I i I I I I I I IUl N 88 58 22 W f LEGEND LIMITS OF lEASE AREA BEARINGS DISTANCES SHOWN EXISTING EDGE OF PAV tlENT ao EXISTING B FT HIGH SECURITY CYCLONE FENCE Lessor City of Aubum Lessee Aviation Properties Inc Page 26 Printed on May 3 1 2001 Exhibit A 3 Site Plan 0 0 J Ui lS 0 t s fpn r n n c j 0 IjORSrIl CIi U IT I I III I tI III BLOG 6 BLOG BLOC 4 BLDG 3 BLOC 2 1 BLOG 7 b Phase 113 ph s 2 t tz i II II f I f II 0 lL IOilL DJ n n o n I rn I r n i I I III Q I iIPhltse I J I t l V I 4 I 0 I n n n n n n n 0 I IMANDOORBillG8BLOC1MANDOORJ J j i 4 waDE DOOR PJ H I tf 50 MOE ODOR ITtRSUNIrOHlyTHISUNITONty LANDSCAPEO AREA LANDSCAPED AREA J 1 4 0 4 6 ml WAlR N E 3o d f1 IITER Lessor City of Auburn Lessee Aviation Properties Inc Page 27 Printed on May 31 2001 Exhibit B Construction of Improvements 1 General Lessee may construct on the Premises certain new improvements which may include aircraft hangar buildings consistent with the description in the Lease the Improvements The term Improvements shall also mean and include any replacement structures or improvements which may be constructed on the Premises during the term from time to time The Improvements shall be constructed at Lessee s sole cost and expense As used in this Lease the term Commencement of Construction shall mean the date upon which Lessee has obtained all necessary permits and approvals for construction of the Improvements and has begun demolition or construction activity on the Premises As used in this Lease the term Completion Date means the date upon which a certificate of occupancy has been issued by the City of Auburn for the Improvements permitting occupancy and use thereof by Lessee 2 No Fuel Facilities Lessee shall not install facilities for the purpose of fueling aircraft on the Premises On Site Fuel Facilities as defined herein without prior written approval from the Airport Director s Office On Site Fuel Facilities as used in this Lease shall be defined as fuel tanks piping gauges pumps utility lines monitoring equipment computer card lock systems and all other equipment and materials including the fuel used in said system that are related to the storing and dispensing of fuel Approval of the installation of the On Site Fuel Facilities shall not be granted unless all conditions deemed necessary or desirable by Lessor are satisfied 3 No Smoking Lessee shall install and maintain No Smoking signs within each of the Hangars on the Premises 4 Plans The Improvements shall be subject to Lessor s prior approval All architectural engineering and other design fees shall be paid by Lessee Lessee shall use its architect engineers and other design professionals all of whom shall comply with any applicable licensing or governmental requirements in the state in which the Premises are situated Lessee shall provide to Lessor all plans for any desired Improvements in form suitable for permit application collectively the Working Drawings The Working Drawings shall include architectural structural plumbing mechanical electrical and fire protection drawings as required Working Drawings and all changes thereto shall be subject to Lessor s reasonable written approval If Lessor denies its approval it shall specify the reasons for doing so in reasonable detail 5 Permits Lessee shall be solely responsible for obtaining and complying with all permits approvals or licenses required for the construction and erection of any structure on the Premises If Lessee fails to obtain and comply with such permits then Lessee accepts full responsibility for any and all costs incurred by the Lessor including actual attorney s fees occasioned by Lessor pursing Lessee s default for its failure to obtain and or comply with such permits Lessee agrees to hold the Lessor harmless from any liability and to fully reimburse expenses ofthe Lessor for Lessee s failure to obtain and or fully comply with any necessary permit Lessor City of Auburn Lessee Aviation Properties lnc Page 28 PrintedonMay31 200I 6 Funding Assurances Prior to Commencement of Construction Lessee shall provide Lessor with a evidence reasonably satisfactory to Lessor that all funding necessary for development and construction of the Improvements has been secured or committed and b a guaranty of completion in form and substance satisfactory to Lessor and issued or provided by a guarantor acceptable to Lessor providing for lien free completion of the Improvements in accordance with the Plans 7 Contractor Lessee shall contract with an experienced qualified general contractor Contractor for construction of the Improvements that is reasonably acceptable to Lessor 8 Insurance The Contractor shall obtain and maintain in force at all times during which construction is in progress on the Premises the following insurance coverages with an insurance company or companies authoriZed to do business in the State where the Premises are located a Workmen s Compensation To the extent required by law b Empioyer s Liability Insurance with a limit of not less than 500 000 00 c Commercial General Liability at least 1 000 000 Combined Single Limit including Personal Injury Contractual and Products Completed Operations Liability naming Lessor and Lessee as additional insured Coverage must be primary and non contributing and include the following i Premises Operations ii Elevators and Hoists iii Independent Contractor iv Contractual Liability assumed under the construction contract v Completed Operations Products vi Explosion Underground and Collapse XUC Coverage d Automobile Liability Including Owned Hired and Nonowned licensed vehicles used in connection with performance of the construction work of at least 1 000 000 per occurrence 3 000 000 general aggregate including umbrella limits Coverage must include thefollowing i Owned vehicles ii Leased vehicles iii Hired vehicles iv Non owned vehicles e Procure or cause contractor to procure and maintain installation floater insurance to protect against the risk ofphysical damage until acceptance of the construction work f Furnish the Lessor with certificates of insurance evidencing such coverage prior to the commencement of the construction work All insurance shall be carried in companies reasonably acceptable to the Lessor Lessor City of Auburn Lessee Aviation Properties Inc Page 29 Printed on May 31 2001 g The following statement shall appear in each certificate of insurance provided Lessor by Lessee hereunder It is agreed that in the event of any material change in cancellation or non renewal of this policy the Company shall endeavor to give ten 10 days prior notice to the City of Auburn Washington h During construction of Lessee s Improvements both parties shall give prompt notice to the other of all losses damages or injuries to any person or to property ofLessee Lessor or third parties Lessor or Lessee shall promptly report to the other all such claims of which that party has notice whether related to matters insured or uninsured No settlement or payment for any claim for loss injury or damage or other matter as to which one party may have an obligation for any payment or reimbursement shall be made by the other without the written approval ofthe affected party i The carrying of any of the insurance required hereunder shall not be interpreted as relieving the insuring party of any responsibility to the other party and the other party does not waive any rights that it may have against the other party andor its representatives for any expense and damage to persons and property tangible and intangible from any cause whatsoever with respect to the insuring party s work j Lessor and Lessee shall assist and cooperate with any insurance company ill the adjustment or litigation of all claims arising under the terms ofthis Section 9 No Liens Lessee shall keep the Premises free from any liens ansmg out of work performed materials furnished to or obligations incurred by Les ee Lessee further covenants and agrees that any mechanic s or materialmen s liens filed against the Premises or against the Improvements for work claimed to have been done for or materials claimed to have been fumished to Lessee shall be discharged by Lessee by bond or otherwise within ten 10 days after filing and prior to termination of this Lease at the sole cost and expense of Lessee Should Lessee fail to discharge any lien of the nature described in this paragraph Lessor may at Lessor s election pay such claim or post a bond or otherwise provide security to eliminate the lien as a claim against title and the cost thereof shall be immediately due from Lessee as rent under this Lease 10 Hold Harmless Lessee shall indemnify defend and hold harmless Lessor and the Premises from and against all claims and liabilities arising by virtue of or relating to construction of the Improvements and any other improvements or repairs made at any time to the Premises including repairs restoration and rebuilding and all other activities of Lessee on or with respect to the Premises If Lessee is required to defend any action or proceeding pursuant to this section to which action or proceeding Lessor is made a party and Lessor reasonably believes that the interests of Lessee and Lessor conflict or are divergent then Lessor shall also be entitled to appear defend or otherwise take part in the matter involved at its election by counsel of its ovvn choosing and to the extent Lessor is indemnified under this section Lessee shall bear the cost of Lessor s separate defense including reasonable attomeys fees 11 Progress Reports From and after the Commencement of Construction and through the Completion Date Lessee shall provide to Lessor monthly progress reports consisting of at a Lessor City of Auburn Lessee Aviation Properties Inc Page 30 Printed on May 31 2001 minImum a the then current construction schedule prepared by the Contractor including the expected Completion Date and b notice of any laborer s or materialmen s liens filed against the Premises 12 As Built Drawings Survev Within thirty 30 days following the Completion Date for any Improvements Lessee shall deliver to Lessor two 2 copies of complete as built drawings of the Improvements or marked up construction drawings which may consist of the Plans annotated with field notes identifYing all changes made thereto in the course of construction and a copy of the Survey Map and Plans for the Condominium prepared by a licensed surveyor certified to Lessor and showing the location of the Improvements all easements and utilities including underground utilities 13 Condition ofImprovements Lessee assumes full responsibility for the design construction and condition of the Improvements and any improvements constructed on the Premises during the Lease Term and Lessee hereby fully releases Lessor from any and all liability relating thereto Lessor City of Aubum Lessee Aviation Properties Inc Page 3 I Printed on May 3 I 2001 AMENDMENTS TO LEASE AGREEMENT BETWEEN CITY OF AUBURN AND AVIATION PROPERTIES INC DATED MAY 31 2001 This document the AmendmenJamendsthat certain Lease Agreement between the City of Auburn a municipality of the Slate of Washing10n and Aviation Properties Inc a Washington corporation WHEREAS the City of Auburn Auburn and Aviation Properties Inc API entered into a Lease Agreement entitled City of Auburn Airport Hangar Land Lease Agreement dated June 8 2001 a memorandum of which was recorded with the Auditor of King County Washington under Auditor s File No 20020627002407 on the 27th day of June 2002 and WHEREAS the City of Auburn Airport Hangar Land Lease Agreement the Lease contemplates that API will construct real property improvements on the leasehold consisting of buildings to be used as hangars for aircraft and related uses and the condominium units thereinafter sold to third parties and WHEREAS the Lease contemplates that API will be required to obtain construction financing to acquire the materials and to construct the real property improvements and WHEREAS the Lease specifically provides for amendment to accommodate construction lending THEREFORE Auburn API and Bank NorthWest the Bank do hereby agree warrant undertake and acknowledge as follows 1 Lease The Lease is between Auburn as Lessor and API as Lessee and has been filed of record as noted above The Lease is in full force and effect and there is no existing default on the part of either party The Lease contemplates that API will construct hangars for the storage of aircraft and related uses under a condominium 1 regime The condominiums when constructed are to be sold to third parties The condominiums will be owned by third parties but are constructed upon land owned by Auburn which is leased to API for the purpose of the condominium development project 2 Construction Lender The Lease conternplates that API will require construction financing to develop the condorninium hangar project The Bank has agreed to provide the financing for the construction of the improvements under certain terms and condi1ions including this Amendment to the Lease Auburn agrees that Bank and Bank s undertaking satisfies the requirements of Paragraph 6 a of Exhibit B to the Lease regarding Funding Assurances 3 Pertinent Documents This Amendment takes into account the Lease and the Condominium Declara1ion for Auburn Airport Hangar Condominium to be submitted by API and approved by Auburn which will be recorded with the King County Auditor in due course Additionally API and its principals have executed the following documents the Loan Documents a Corporate resolution to borrow grant collateral b Business Loan Agreement c Promissory Note d Commercial Guaranty of Bill Vanderberg e Commercial Guaranty of Gordon Estrada f Deed of Trust g Assignment of Rents h Security Agreement and Financing Sta1ement i Hazardous Substances Certificate and Indemnity Agreement j Agreement to Provide Insurance k Disbursement Request and Authorization and I Notice of Final Agreement 4 ObliQation and Limitation on ObliQation of Bank Bank undertakes to make the loan to API in conformance wi1h the foregoing Loan Documents upon their proper execution delivery and recording as appropriate the Condominium Declaration the Lease and this Amendment which Auburn and API warrant is the first and only 2 amendment to the Lease As between the parties they agree that the Lease and this Amendment shall supersede the Condominium Declaration so long as rights of third parties are not thereby affected Nothing set forth in this Amendment shall obligate Bank to perform any obliga1ion due from API to Auburn but Bank may perform any such obligations and duties including the payment of rent to protect the financial interests of the Bank and its interest in the security for the obligation of API to Bank all as set forth in Paragraph 6 below 5 Specific Amendments The following are references to paragraphs and provisions of the Lease to the extent that such Lease provisions are identified and otherwise constitute amendmen1s revisions or modifications to the Lease to wit 5 1 Assignment and Subletting Notwithstanding the provisions of Paragraph 12 or other provisions of the Lease to the contrary the rights of Bank to assume and acquire the rights of API as Lessee under the Lease are as otherwise provided in the Lease and in this Amendment In particular the assumption of API s posi1ion rights and obligations under the Lease do not require Auburn s prior written consent where the assignment is in foreclosure of Bank s financial interest except to 1he extent of Auburn s approval and acceptance of this Amendment to be accomplished in the manner otherwise provided in this Amendment or the Lease To the extent that Paragraph 12 provides for a novation as between API a condominium association or a unit owner such novation shall not affect Bank s security or rights with regard to 1he collateral for the loan and shall not constitute a release of any obligation of API and its principals who execute guarantees on behalf of API 5 2 Priority Paragraph 25 a is amended or clarified to 1he extent that Auburn warrants that there is no existing mortgage deed of trust or other Financial Encumbrance against the real property which is the subject of 1he Lease and that Auburn will not cause or allow any new Financial Encumbrance to arise except as shall be subordinate to the security of Bank 5 3 Lender Security With regard to Paragraph 25 b this Amendment memorializes the prospective grant of a first position deed of trust between API as grantor and Bank as beneficiary and Chicago Title Insurance Company of Bellingham 3 as trustee In addition this Amendment constitutes the notice of such proposed first position deed of trust and this Amendment constitutes partial satisfaction of Lessor s agreement to make reasonable modifications to the Lease as requested by Bank 6 Bank s Relationship to Auburn and API as Deed of Trust Beneficiarv 6 1 Right of API to Grant Financial Encumbrance API as Lessee and its successors and assigns shall have the unrestricted right to grant financial encumbrances against its interests under the Lease to Bank subject however to the terms conditions and limitations of this Paragraph 6 As used herein Financial Encumbrance shall mean a mortgage or deed of trust on the Leasehold Esta1e Leasehold Estate shall mean the estate of API created by the Lease upon and subject to all the terms and conditions of the Lease but expressly excluding Auburn s fee simple interest in the land described in Exhibit A 1 of the Lease it being the intent and understanding of Auburn API and Bank that Auburn s fee simple interest in the land shall not be subordinate to Bank s Financial Encumbrance Any such Financial Encumbrance shall be subordinate to the rights of Auburn as set forth in accordance with all the terms and conditions of the Lease except as provided to the contrary in this Amendment 6 2 Notice of Loan Documents By this Amendment API and Bank notify Auburn of the pending grant of a Financial Encumbrance to Bank by API API acknowledges that it remains obligated to provide Auburn notice of an intended grant of a subsequent Financial Encumbrance 6 3 Protection of Bank So long as Bank s Financial Encumbrance shall remain unsatisfied of record the following provision shall apply a No cancellation surrender or modification of the Lease shall be effective as to Bank unless consented to in writing by Bank provided thaI such consent shall not be required in the event of a termination of the Lease in accordance with this Section 6 3 b Auburn upon providing API any notice of i default under the Lease ii a termination of the Lease or 4 iii a matter on which Auburn may predicate or claim a default shall at the same time provide a copy of such notice to Bank No such notice by Auburn to API shall be deemed to have been duly given unless and until a copy thereof has been so provided to Bank From and after the date such notice has been given to Bank Bank shall have the same period for remedying any default or acts or omissions which are the subject matter of such notice or causing the same to be remedied as is given API after the giving of such notice to API plus in each instance the additional periods of time specified in subsections c and d of this Section 6 3 to remedy commence remedying or cause to be remedied the defaults or acts or omissions which are specified in such notice Auburn shall accept such performance by or at the instigation of Bank as if the same had been done by API API authorizes Bank to take any such action at Bank s option and does hereby authorize entry upon the Premises by Bank for such purpose c Anything contained in the Lease to the contrary notwithstanding if any default shall occur which entitles Auburn to terminate the Lease Auburn shall have no right to terminate the Lease unless following the expiration of the period of time given API to cure such default or the act or omission which gives rise to such default Auburn shall provide notification to Bank a Termination No1ice of Auburn s intent to so 1erminate at leas1 thirty 30 days in advance of the proposed effective date of such termination if such default is capable of being cured by the payment of money and at least ninety 90 days in advance of the proposed effective date of such 1ermina1ion if such default is not capable of being cured by the payment of money the Termination Notice Period The provisions of Section 6 3 d shall apply only if during such thirty 30 or ninety 90 day Termination Notice Period Bank shall i notify Auburn of Bank s desire to nullify such notice ii payor cause to be paid all Rent and other payments then due and in arrears and which may become due during the Termination Notice Period as specified in the Termination Notice to Bank iii comply or in good faith with reasonable diligence and continuity commence to comply with all non monetary requirements of 1he Lease then 5 in default and reasonably susceptible of being complied with by Bank provided however that Bank shall not be required during such Termination Notice Period to cure or commence to cure any default consisting of API s failure to satisfy and discharge any lien charge or encumbrance against API s interest in the Lease or the Premises junior in priority to 1he lien of the Financial Encumbrance held by Bank and iv any notice to be given by Auburn to Bank pursuant to any provision of this Section 6 3 shall be deemed properly addressed if sent to the Bank at the address provided below in Paragraph 7 d i If Auburn shall elect to terminate the Lease by reason of any default of API and Bank shall have proceeded in the manner provided for by Section 6 3 c the specified date of the termination of the lease as fixed by Auburn in its Termination Notice shall be extended for a period of six 6 months provided that Bank shall during such six 6 months A payor cause to be paid the Rent and other monetary obligations of API under the Lease as the same become due and continuous good faith efforts to perform all of API s other obligations under the Lease including during any period during which Bank is en1itled to possession of the Premises the obligation to operate and maintain the Improvements and the Premises in accordance with the Lease excepting obligations of API to satisfy or otherwise discharge any lien charge or encumbrance against API s interest in the Lease or the Leasehold Estate junior in priority to the lien of the Financial Encumbrance held by Bank and past non monetary obligations then in default and not reasonably susceptible of being cured by Bank and B if not enjoined or stayed take steps to acquire or sell API s interest in the Lease by foreclosure of the Financial Encumbrance or other appropriate means and prosecute the same with due diligence ii If at the end of such six 6 month period Bank is complying with Section 6 3 d i the Lease shall not then terminate and the time for completion by Bank of its proceedings shall continue so long as Bank is enjoined or stayed and thereafter for so long as Bank proceeds to complete steps to acquire or sell 6 API s interest in 1he Lease by foreclosure of the Financial Encumbrance or by other appropriate means with reasonable diligence and continuity Nothing in this Section 6 3 d however shall be construed to extend the Lease beyond the original term thereof or to require Bank to continue such foreclosure proceedings after the default has been cured If the default shall be cured and Bank shall discontinue such foreclosure proceedings the Lease shall continue in full force and effect as if API had not defaulted under the Lease iii If Bank is complying with this Section 6 3 d upon the acquisition of API s Leasehold Estate herein by Bank or its designee or any other purchaser at a foreclosure sale or otherwise and the discharge of any lien charge or encumbrance against API s interest in the Lease or the Premises which is junior in priority to the lien of the Financial Encumbrance held by the Bank and which API is obligated to sa1isfy and discharge by reason of the terms of the Lease this Lease shall continue in full force and effect as if API had not defaulted under this Lease iv For the purposes of this Section 6 3 the granting of a Financial Encumbrance to Bank shall not be deemed to constitute an assignment or transfer of the Lease or the Leasehold Estate nor shall Bank as such be deemed to be an assignee or transferee of the Lease or the Leasehold Estate so as to require Bank as such to assume the performance of any of the terms covenants or conditions on the part of API 10 be performed hereunder but the purchaser at any sale of the Lease and of the Leasehold Estate in any proceedings for the foreclosure of Bank s Financial Encumbrance or the assignee or transferee of 1he Lease of the Leasehold Estate under any instrument of assignment or transfer in lieu of the foreclosure of Bank s Financial Encumbrance shall be deemed to be an assignee or transferee within the meaning of this Section 6 3 and shall be deemed to have agreed to perform all the terms covenants and conditions on the part of API to be performed hereunder from and after the date of such purchase and assignment If Bank shall become the holder of the Leasehold Estate and if the Premises shall have been or become materially damaged on before or after the date of such purchase and assignment Bank or such designee shall be obligated to repair replace or reconstruct the Improvements only to the extent 7 of the net insurance proceeds received by Bank or such designee by reason of such damage However should such net insurance proceeds be insufficient to repair replace or reconstruct the Improvements to the extent required by the Lease and should Bank or such designee choose not to fully reconstruct the Improvements 10 the extent required by the Lease such failure shall entitle Auburn to terminate the Lease and the net insurance proceeds shall be distributed first to Bank and then to other parties in accordance with their respective interests v Bank or olher acquirer of the Leasehold Estate pursuant to foreclosure assignment in lieu of foreclosure or other proceedings may upon acquiring API s Leasehold Estate without further consent of Auburn sell and assign the Leasehold Estate on such terms and to such persons and organizations as are acceptable to Bank or other acquirer and thereafter be relieved of all obligations under the Lease provided that the assignor shall have complied with all the requirements described in Section 6 3 d i A above and further provided such assignee has delivered to Auburn its written assignment to be bound by all the provisions of the Lease including any and all restrictions on further assignments alienation subletting and further transfers of its interest hereunder vi Notwithstanding any other provisions of the Lease any sale of the Lease and the Leasehold Estate and any proceedings for the foreclosure of Bank s Financial Encumbrance or the assignment or transfer of the Lease and of the Leasehold Estate in lieu of the foreclosure of Bank s Financial Encumbrance shall be deemed to be a permitted sale transfer or assignment of the Lease and of the Leasehold Estate e In the event of the termination of the Lease as a result of API s default Auburn shall in addition 10 providing the notices of default and termination as required in Sections 6 3 b and c provide Bank with written no1ice that the Lease has been terminated Final Termination Notice together with a statement of all sums which would at that time be due under the Lease but for such termination and of all other defaults if any then known to Auburn Auburn agrees to enter into a new Lease New Lease of the Premises with Bank or its designee for the remainder of the term of the 8 Lease effective as of the date of termination at the same Rent and upon the terms covenants and conditions of the Lease provided i Bank shall make written reques1 upon Auburn for such New Lease within thirty 30 days after the date Bank receives Auburn s Final Termination Notice if any default specified in such notice can be cured by the payment of money or within sixty 60 days after the date Bank receives Auburn s Final Termination Notice if no such defaul1 is capable of being cured by the payment of money ii Bank shall payor cause to be paid to Auburn at the time of the execution and delivery of such New Lease any and all sums which would have at the time of execution and delivery thereof be due pursuant to the Lease including interest as required under the 1erms of the Lease but for such termination and in addition thereto all reasonable expenses including reasonable attorney s fees which Auburn shall have incurred by reason of such termination and the execution and delivery of the New Lease and which have not otherwise been received by Auburn from API or other parties in interest under API iii Bank or such designee shall agree to remedy any of API s defaults of which Bank was notified by Auburn s Final Termination Notice and which are reasonably capable of being so cured by Bank or such designee iv any New Lease made pursuant to this Section 6 3 e shall have the same priority as the Lease and the Lessee under such New Lease shall have the same right title and interest in and to the Premises and the Existing Improvements and improvements thereon as API had under the Lease as of the date of the New Lease and v if not satisfied or olherwise released the priority of Bank s Financial Encumbrance shall not be affected f If the holder of another Financial Encumbrance shall request a New Lease Auburn shall enter in10 such New Lease with the party whose Financial Encumbrance is superior in priority Auburn without liability to API or Bank may rely upon a mortgagee title insurance policy or similar policy or guarantee issued by a 9 responsible title insurance company doing business in King County as the basis for determining the appropriate party entitled to such New Lease and the party which executes the New Lease shall indemnify defend and hold Auburn harmless from and against any claims by API or the holders of other Financial Encumbrances with respect to such de1ermination Provided nothing set forth in 1he Lease or this Amendment shall authorize API to grant another financial encumbrance except as may be allowed by the Loan Documents g Nothing herein contained shall require Bank as a condition of its exercise of rights hereunder to cure any default of API which by its terms is not reasonably susceptible of being cured by Bank or such designee in order to comply with the provisions of Section 6 3 c and d or as a condition of entering into the New Lease provided for by Section 6 3 e The financial condition of Bank or its successor to API s interest under the Lease or a New Lease shall not be a consideration in the determination of the reasonable susceptibility of cure of the default No default or Event of Default the cure of which and no obligation of API the performance of which requires possession of the Premises shall be deemed reasonably susceptible of cure of performance by Bank or a successor to APIs interest under the Lease or a New Lease not in possession of the Premises provided such holder is otherwise complying with the requirements described in Seclion 6 3 d above nor shall Bank be required to cure the bankruptcy insolvency or any related or similar condition of API h API s share of the proceeds arising from an exercise of the power of eminent domain shall be disposed of as provided for by Bank s Financial Encumbrance i A Standard Mortgagee Clause naming Bank may be added to any and all insurance policies required to be carried by API under the Lease on condition that the insurance proceeds are to be applied in the manner specified in the Lease and the terms of the Financial Encumbrance shall so provide except that the Financial Encumbrance may provide a manner for the disposition of such proceeds if any otherwise payable directly to API but no such proceeds if any which are supposed to be payable jointly to Auburn and API 10 0 API and Auburn shall give Bank notice of any arbitration or legal proceedings between Auburn and Bank involving obligations under the Lease Bank shall have the right to intervene within sixty 60 days after receipt of such notice of arbitration or legal proceedings in any such proceedings to be made a party to such proceedings and the parties hereto do hereby consent to such intervention Bank after intervening in any such proceedings shall not be entitled to receive an award of attorney s fees from Auburn Bank as an intervening party shall be bound by the outcome of such proceedings In the event that Bank shall no1 elect to intervene or become a party in any such proceedings Auburn and API shall give Bank notice of and a copy of any award or decision made in any such proceedings which shall be binding on Bank if it has not intervened after receipt of notice of such proceedings k So long as Bank s Financial Encumbrance is in existence unless Bank otherwise expressly consents in wri1ing or Auburn shall have terminated the Lease in accordance with the terms hereof the fee title to the Premises and the Leasehold Estate of API therein created by the Lease shall not merge but shall remain separate and distinct notwithstanding the acquisition of said fee title and said Leasehold Estate by Auburn or by API or by any third party by purchase or otherwise I Notices from Auburn to Bank shall be mailed to the address furnished Auburn in Paragraph 7 below and those from Bank to Auburn shall be mailed to the address designated in Paragraph 31 of the Lease Such notices demand and requests shall be given in the manner described in the Lease and shall in all respects be governed by the provisions of the Lease m No payment to Auburn by Bank shall constitute agreement that such payment was in fact due under 1he terms of the Lease and Bank having made any payment to Auburn pursuant to Auburn s wrongful improper or mistaken notice or demand shall be entitled to the return of any such payment or portion thereof provided written demand therefor shall have been delivered not later than one 1 year after the date of such payment n In the event of any proceeding by either Auburn or API under the United States Bankruptcy Code Tille 11 U S C as now or hereafter in effect 11 i If the Lease is rejected in connection with bankruptcy proceeding by API or a trustee in bankruptcy for API such rejection shall be deemed an assignment by API to Bank of the Leasehold Estate and all of API s interest under the Lease in the nature of an assignment in lieu of foreclosure and the Lease shall not terminate and the Bank shall have all rights as if such bankruptcy proceeding had not occurred unless Bank shall reject such deemed assignment by notice in writing to Auburn within thirty 30 days following rejection of the Lease by API or APIs trustee in bankruptcy If any court of competition jurisdiction shall determine that the Lease shall have been terminated notwithstanding 1he terms of the preceding sentence as a result of rejection by API or the trustee in connection with any such proceeding the rights of Bank to a New Lease from Auburn pursuant to Section 6 3 e hereof shall not be affected thereby Ii If the Lease is rejected by Auburn or by Auburn s trustee in bankruptcy A API shall not have the right to treat the Lease as terminated excep1 with the prior written consent of Bank and the right to treat as terminated in such even1 shall be deemed assigned to Bank whether or not specifically set forth in Bank s Financial Encumbrance so that the concurrence in writing of API and Bank shall be required as a condition to treating the Lease as terminated in connection with such proceeding B If the Lease is not treated as terminated in accordance with Section 6 3 n i above then the Lease shall continue in effect upon all the terms and conditions se1 forth herein including rent but excluding the requirements that are not then applicable or pertinent to the remainder of the term thereof Thereafter API or its successors shall be entitled to any offsets against rent payable hereunder for any damages arising from such rejection and any such offset properly made shall not be deemed a default under the Lease The lien of Bank s Financial Encumbrance then in effect shall extend to the continuing possessory rights of API following such rejection with the same priority with respect to Bank as it would have enjoyed had such rejection not taken place 12 0 The rights of Bank hereunder shall not diminish any right or claim of Auburn against API 64 Assignment by Bank Notwithstanding any other provisions of the Lease if Bank or other successor in interest shall acquire title to API s interest in the Lease by foreclosure or other sale pursuant to a Financial Encumbrance thereon or by assignment in lieu of foreclosure or by an assignment from a designee or wholly owned subsidiary corpora1ion of Bank or under a New Lease pursuant to this Paragraph 6 Bank may assign such Lease and shall thereupon be released from all liability for the performance or observance of the covenants and conditions of such Lease contained on API s part to be performed and observed from and after the date of such assignment provided that the assignee of Bank shall have assumed the Lease in accordance with its terms 7 Notice Any notice to be given by Auburn or API to Bank in the manner provided for notices in Paragraph 31 of the Lease shall be given as follows Bank Northwest Main Office 100 Grand Avenue P O Box 1038 Bellingham WA 98225 8 Definitions Words and phrases used in this Amendment which have the first letter of the word or the first letter of each word in 1he phrase capitalized are defined terms Such words or terms shall have the meanings given to them by this Amendment or by the Lease if not defined in this Amendment DATED this OJyi day of oliOW 2002 City of Auburn A Washington Stat unicipality Its 1 Y 1 q IAl By 13 Aviation Properties Inc A Washington Corporation BY ItS p 1 d J Bank NorthWest 14 RETURN TO TITLE OF DOCUMENT AF OF AFFECTED DOCUMENT GRANTOR GRANTEE ABBREV LEGAL DESCRIPTION TAX PARCEL NO MEMORANDUM OF GROUND LEASE CITY OF AUBURN AVIATION PROPERTIES INC P1N SW 14 SW 14 SEC 6 TSHP 21N RSE P1N NW 14 NW 14 SEC 7 TSHP 21N RSE 5143200070 MEMORANDUM OF GROUND LEASE NOTICE IS HEREBY GIVEN that on the g day of CITY OF AUBURN a Washington Municipal Corporation as Lessor and AVIATION PROPERTIES INC a Washington Corporation as Lessee executed a Ground Lease wherein Lessor agreed 10 lease 10 Lessee and Lessee agreed 10 lease from Lessor the Premises designated therein and descnbed more fully below for the Term designated therein and descnbed below 1 PREMISES The following descnbed real estate situate in King County Washington See attached Exlnbit A 2 TERM The term ofthe Ground Lease is 50 years commencing on June 8 2001 and endingatmidnightonJune72051unlessextendedorearlierterminatedpursuanttothetermsoftheGroundLease 3 PURPOSE OF MEMORANDUM OF GROUND LEASE This Memorandum is prepared tosatisfytherecordationrequirementsofSection20oftheGroundLeaseandisnotintendedtomodifyorsupplementtheGroundLesseinanyway 4DATEDthis day of I 2002 LESSOR CITY OF AUBURN aWashington Municipal Corporation LESSEE AVIATION PROPERTIES INC a Washington Corporation By Its jJF J 1 STATE OF WASHINGTON ss COUNTY OF KING Ihereby certify that Iknow or have satisfactory evidence that fel LewtS is the person who appeared before me and said person acknowledged that she signed this instrument on oath stated that s he was authorized to execute the instrument and acknowledged it as the Mayor of the CityofAuburnaWashingtonMunicipalCorporationtobethefreeandvoluntaryactofsuchpartyfortheuses and purposes mentioned in the instrument DATED 2002 fv j8 1vON1 Ii 01pRY l o o 0 pUe0G lf I 0 2 f hII QFN STATEOFWASHINGTON ss COUNTY OF KING tlISd NOTARY PUBUC for the State of WashingtoI1 My Commission expires Jtl zS1J3 Ihereby certify that Iknow or have satisfactory evidence that Ill I 1 is the person who appeared before me and said person acknowledged that s Signed this ent on oath stated that s he was authorized to execute he instrument and ackn edged it as he PreSident of Aviation Properties Inc aWashington Corporation to be he free and v untary act of such party for he uses and purposes mentioned in he instrument DATED lf 2002 PUBUC for the State of My Commission 2