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HomeMy WebLinkAbout3476 RESOLUTION NO.3 4 7 6 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF AUBURN, WASHINGTON, REPLACING RESOLUTION NO. 3420 TO CLARIFY THE AUTHORIZING LEASE BETWEEN AUBURN AND N. W. HANGARS, LLC. FOR 12,273 SQUARE FEET OF LAND AT AUBURN MUNICIPAL AIRPORT. WHEREAS, the City of Auburn passed Resolution No. 3420 on February 19,2002; and Whereas, the Lessee, N.W. Hangars, L.L.C. has reconfigured the intentional operation of the lease consistent with the attached lease document; and WHEREAS, NW. Hangars, LLC will construct aircraft hangars to be sold as condominium units; and WHEREAS, the City of Auburn Airport Master Plan has earmarked expanding the building of hangers at the Auburn Municipal Airport. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF AUBURN, WASHINGTON, DO ORDAIN as follows: Section 1. The Mayor of the City of Auburn is herewith authorized to execute a ground lease between the City of Auburn and N.W. Hangars, LLC. A copy of said ground lease is attached hereto as Exhibit "A" and incorporated herein by this reference, which lease replaces the lease authorized by Resolution No. 3420. Section 2. This Resolution shall be effective upon passage and signature hereon. Resolution 3476 May 30, 2002 Page I ~,( ,( ..' --' .--""" Dated and Signed this .:... day of June, 2002. ATTEST: ) ,t Danielle E. City Clerk niel B. Heid, City Attorney Resolution 3476 May 30, 2002 Page 2 CITY OF AUBURN ~G-~- PETER B. LEWIS MAYOR LEASE AGREEMENT BETWEEN City of Auburn and NW Hangars LLC 1819 S. Central Ave Suite 141 Kent, WA 98032 Dated: Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 1 CITY OF AUBURN ArnPORTHANGARLANDLEASEAGREEMENT THIS LEASE AGREEMENT, hereinafter referred to as "this Lease," is made as of ,2002, by and between the City of Auburn, a Washington municipal corporation, ereinafter referred to as "Lessor," and NW Hangars LLC hereinafter referred to as "Lessee." WIT N E SSE T H: 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 following 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 (12,273) Twelve Thousand Two Hundred Seventy 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 WRITTEN, MADE BY LESSOR OR ANY EMPLOYEE, AGENT OR REPRESENTATNE 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, LEAS ABILITY OR SUITABILITY FOR COMMERCIAL PURPOSES, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE OF THE PREMISES, OR THE PRESENCE OR ABSENCE OF ANY HAZARDOUS SUBSTANCES, Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 2 WASTES OR MATERIALS AS DEFINED BY STATE, FEDERAL OR LOCAL LAW, ALL OF WHICH WARRANTIES LESSOR HEREBY EXPRESSLY 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 (the "Term"). If Lessor, for any reason whatsoever, cannot deliver possession of the Premises to Lessee on the Commencement Date, Lessor shall 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. 2.A. MARKET ANALYSIS PERIOD Lessee shall have a period of ninety (90) days from the date of mutual execution of this Lease to perform an analysis of the market for its intended use of the Premises (the "Market Analysis Period"). If Lessee determines in its absolute and sole discretion that it is not satisfied with the market, Lessee may terminate this Lease by delivering written notice to Lessor on or before the end of the Market Analysis Period of its election to terminate the Lease due to market conditions. If Lessee timely notifies Lessor of its election to terminate this .Lease as provided herein, the Lease shall terminate as ofthe date of Lessor's receipt of Lessee's notice, the Security Deposit shall be refunded to Lessee, and the parties shall have no further obligations under this Lease; provided, however, that the Indemnification/Hold Harmless provisions of Section 10 of this Lease and the Costs and Attorneys' Fees provisions of Section 23 of this Lease shall survive any such termination. 3. PURPOSE (a) Lessee shall use the Premises only for the construction, management and maintenance of aircraft hangar buildings for primarily 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 30 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, Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 3 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 specifically 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: (l) At no time will aircraft be fueled inside any Improvements situated on the Premises; (2) Conducting of any use, business, or commercial activity other than Lessee's hangar operations and other aviation-related activities as are incidental and reasonably related thereto; (3) Use of the Premises as a residence or for ovemight sleeping; (4) Working on aircraft except within the legal limits allowed 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. 4. RENT; IMPOSITIONS & LEASEHOLD EXCISE TAX (a) Commencing on the earlier to occur of (i) issuance of a building permit for Lessee's proposed Improvements, or (ii) one hundred twenty (120) days after Lessee provides Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 4 written notice to Lessor that it is satisfied with the results of the Market Analysis Period, as outlined in paragraph 2A hereinabove (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, Monthly Base Rent of Four Hundred Nine and 10/100 ($409.10) ("Monthly Base Rent"). Monthly Base Rent shall be payable on or before the first (1st) day of each calendar month thereafter to the City of Auburn, Attn: Finance Department, 25 West Main, Auburn, W A 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 (1) 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 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. Notwithstanding the foregoing, Lessor represents and warrants to Lessee that all City of Auburn fees related to the City's Storm Drainage System have been or shall be paid as an operating expense of the airport and shall not be included as an Imposition under this Lease. 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 allow such items to remain unpaid for such length of time as shall permit the Premises, or any part thereof, to be Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 5 sold by any governmental, city or municipal authority for the nonpayment of the same. Within ten (10) 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 the rent due hereunder shall be absolutely net to Lessor and that Lessee shall pay all costs expenses regarding the Premises whether specifically mentioned herein or not. 5. ANNUAL PERIODIC RENT ADJUSTMENTS (a) Monthly Base Rent shall be adjusted on January 1st of every year beginning January 1, 2004 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, 2009, to equal the "fair market rental value" of the Premises, pursuant to the procedure set forth in Section 5(d) below. No annual or fifth (5th) year 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, All Items (Seattle- Tacoma-Bremerton) issued from time to time by the 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 1,2009, 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 MAI 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 6 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 ofthis Lease, Lessee shall deliver to Lessor, as a Security Deposit for the faithful performance by Lessee of its obligations under this Lease, the amount of Four Hundred Nine and 10/100 ($409.10), which is equal to one (1) month's worth of Monthly Base Rent 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 default( 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 law, Lessee shall not be entitled to interest on the Security Deposit. In no event or circumstance shall Lessee have the right 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 7 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 1/2%) per month from the date due until paid. 8. OWNERSHIP OF IMPROVEMENTS; DISPOSITION AT END OF LEASE (a) 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, 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. (b) Upon termination of the Lease, the City will determine if it wishes to lease the hangar under then-current terms and rates. If such rental is approved by the City, first right of refusal shall be offered to former condominium occupants in good standing. Requests should be made to the City in writing, six months prior to the termination ofthe Lease. 9. INSURANCE COVERAGE (a) The Lessee and any sublessee, assignee or licensee 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 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; provided, however, that in the event Lessee or any sublessee, assignee or licensee of Lessee uses the Premises or any aircraft kept thereon in the operation of a business (which business shall be first registered with Lessor), Lessor may require additional insurance related to such business, the amount of which insurance coverage shall be in Lessor's sole and absolute discretion and shall be obtained prior to the operation of such business on the Premises. Lessor and its agents, employees and officers shall be additional insureds. Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 8 (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 shall 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 shall have no liability for premiums; 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, 2009, considering levels of inflation, risk of loss, premium expenses, and other relevant factors in Lessor's commercially reasonable discretion. (f) Lessor and Lessee hereby mutually 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 shall 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 fully, and for the benefit of the parties hereto, any rights and/or claims which might give rise to a right of subrogation in favor of any insurance carrier. 10. INDEMNIFICATION/HOLD 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 ofPrernises, 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 shall have been occasioned by the sole 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, 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 9 acts. The parties acknowledge that the foregoing prOVlSlons 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 ofthe 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 and/or restoration. 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 shall not be unreasonably withheld; 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 nonstockholders or non-partners or non-members, as applicable, as of the date hereof (provided that the foregoing shall not apply if 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 10 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 constmction, Lessor's consent shall not be unreasonably withheld. As set forth in Section 12(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 document effecting the Transfer. Individual unit owners may provide short term use of their hangar unit on condition that the term is less than 36 months and a rental form is executed and will acknowledge subordination to the City of Auburn ground lease herein, and that a recorded copy of this Ground Lease is attached as an exhibit. The Lessee will keep a copy of all current rental agreements for review if requested and a "Notice of Occupancy". Such notice will be provided to the Airport Manager on or before the commencement of the rental term and must include the unit number, owner's name, address and phone number, together with the renter's name, address, day phone number and emergency phone number, type of aircraft and aircraft registration number. If the renter is a corporation, the notice will include the names and addresses ofthe President, Secretary and Treasurer. (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 party with 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page II 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 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 ofthis 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. Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 12 (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. (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 / 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. ALTERATIONS AND ADDITIONS Following completion of the initial 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. To the extent Lessor incurs any costs in its examination and approval of the architectural and mechanical plans and specifications for the Alterations, which costs have not been previously reimbursed by Lessee to Lessor through the City of Auburn's permitting process, Lessee shall reimburse Lessor for any such additional Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 13 sums expended for examination and approval of such plans and specifications. 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. 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, subj ect 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 ofthis 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit Aa Page 14 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. 24. DEFAULT; REMEDIES (a) Time is of the 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 petition 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 within 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 reletting 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. Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 15 (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, and no such reentry shall be considered a forcible entry. 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 oftermination; (II) The worth at the time of the award of the amount by which the unpaid rent which would have been earned 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; (N) 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 16 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 modifications shall be generally in conformance with the model leasehold mortgage provisions promulgated by the American Bar Association. 26. RETENTION OF AIRSPACE AND OTHER RIGHTS 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 Auburn 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 17 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 Auburn 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). (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 Auburn 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 18 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 adequate lighting to provide for all-night illumination of the Taxilane apron of 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, and such additional security requirements apply to the Premises, Lessee agrees to comply with said security requirements that affect the Premises, 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 four (4) weeks advance, written 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. Provided, however, that in the event the Lessor determines, in its sole and absolute discretion, that an emergency situation exists on or adjacent to the Premises, no advance notice to Lessee is required and Lessor may immediately go upon and inspect the Premises. Provided further, that Lessee agrees to allow Lessor to inspect the Premises on an annual basis at an agreed upon date and time, preferably the same date and time that any inspection by the local fire marshal occurs. 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-DISCRIMINATION (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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 19 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 furnishing 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 subj ected 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. (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 fumish 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 20 covered suborganizations, provide assurances to the Lessee that they similarly will undertake Affirmative Action programs, and that they will 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: NW Hangars LLC 1819 S. Central Avenue Ste 141 Kent, W A 98032 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. Notices given by hand-delivery or by ovemight 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) Estoooel 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; (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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 21 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 Maieure. 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. (e) Severability. 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 all 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. (g) Binding Upon Successors. This agreement shall be binding upon and inure to the benefit of the heirs, administrators, executors, successors in interest and assigns of each of the parties hereto except that there shall be no transfer of any interest to any of the parties hereto except pursuant to the terms of this Agreement. Any reference in this Agreement to a specifically named party shall be deemed to apply to any successor heir, administrator, executor or assign of such party who has acquired an interest in compliance with the terms of the Agreement, or under law. 33. SIGNATURE By signing in the space below, the LESSEE ACKNOWLEDGED HAVING READ AND UNDERSTOOD AND AGREES TO THE CONTENTS OF THIS AGREEMENT. [Signatures on following page.] Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 22 IN WITNESS WHEREOF, the parties hereto have executed this Lease. LESSOR: THE CITY OF AUBURN, a Washington municipal 'mppmti~ "= .-/' '-~ By: > Print Name: P ter B. Lewis Title: N\~~ LESSEE: NW Hangars LLC ~ ~ By: j, ~ Print Name: (;::.yo U""" Approved as to form: ~ Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 23 STATE OF WASHINGTON ss. COUNTY OF KING I certify that I know or have satisfactory evidence that Pc f ef 1). L e C<J )' S 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 11tf.~()r of the City of Auburn, a Washington municipal corporation, to be the free and voluntary act of such mumclpal corporatIon for the uses and purposes mentioned in the instrument. /'i11 Dated this _.....,....,~" ----E.' DA , .,..~ .,...... ~\I .:' 'v .....ON EXp". -1",.', "/.Iv.. <;" f~', '? I ;'......'.1 :::.'" . oy (\":'. " ~":>- ~'.~ ,~~p ;1)', I 1"'-'::0 ",0; . I ,~:o ,.- G :. I ~o:..o ",S?;V "'/65 / . ' <:).1'..- t', '." (!),. 't " 10_'2-'" " if" ",~J;.j~'Of~j,.s~/ \\\"'...............--- (Signature of Notary) f ' , "))a~^,fc!{v b ':1 a.J:al11 (Legibly Print or Stamp Name of Notary) Notary publj9. in and or (he state of Washington, residing at C !I{ '>!C t-J My appointment expires ;. 2 ,i;'cJ3 STATE OF WASHINGTON COUNTY OF j!, vJ V ss. I certify that I know or have satisfactory evidence that :::5OhVt,J r is the person who appeared before me, and said person acknowledged that said person si ed 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 1/:!L :"10. \,\ -I". . A$'" '::-,:<-, ...... '.;;..11 ';D"'~~.;';\ON E'.~.:o/::'1'", I (Signature of Notary) ,.,,- '1: . '? I "~ ",,,flY 0'. ~ il '" 1/ .~ ~O_"""'r (Il'~-.!pa Yl,'e!(e b ,.I)CC,ct/ Jt..-) ptJ~~\)U 0-J.: ~ f (Legibly Print or Stamp Name of Notary) ", ,. C ",,:>' .sjJotary public in and fo( the state of Washington, \,.:.....;;'(~ residing at ~.Vil,( W1C-f.a tu ,\,.,~~,~~~~--,- My appointment expires /tf.--2S.o3 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 24 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Exhibit A-I Legal Description of Premises [Attach] Page 25 ~~~~ SOUTH HANGER LEASE THAT PORTION OF THE NORTHWEST QUARTER OF SECTION 7, TOWNSHIP 21 NORTH, RANGE 5 EAST, W. M. DESCRIBED AS FOLLOWS: BEGINNING AT THE BRASS SURFACE MONUMENT AT THE CENTERLINE OF "E" STREET NE AND 22nd STREET NE TO WHICH A BRASS SURFACE MONUMENT ON THE CENTERLINE OF "E" STREET NE BEARS SOUTH 00039'35" WEST, 913.86 FEET; THENCE SOUTH 00039'35" WEST ALONG SAID CENTERLINE OF "E" STREET NE, 805.10 FEET; THENCE NORTH 89022'30" WEST, 243.32 FEET TO THE TRUE POINT OF BEGINNING; THENCE CONTINUING NORTH 89022'30" WEST, 287.08 FEET: THENCE NORTH 00039'19" EAST, 42.00 FEET; THENCE SOUTH 89022"30" EAST, 297,68 FEET; THENCE SOUTH 00036'02" WEST ALONG THE EXTENDED WEST WALL OF THE EXISTING HANGER BUILDING, 20.37 FEET; THENCE CONTINUING ALONG SAID WEST WALL OF THE EXISTING HANGER BUILDING, SOUTH 89009'22" WEST, 10.77 FEET; THENCE CONTINUING ALONG SAID WEST WALL OF THE EXISTING HANGER BUILDING AND ALONG SAID EXISTING WEST WALL OF THE EXISTING HANGER BUILDING EXTENDED, SOUTH 00"16'52" WEST, 21.35 FEET TO THE TRUE POINT OF BEGINNING, CONTAINING 12273 SQUARE FEET (0.282 ACRES) MORE OR LESS Resolution 3476 Exhibit A-l Exhibit A-2 Site Plan [Attach] Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 ~ Exhibit A Page 26 L . -~ r M :t> r:.J1 M :t> ;:d M :t> , , N 00'39'19" E 42.00' .... t\J t\J -oJ UJ Ul .0 Z c:: ~ (,1 ro [\)\0 ro ro ' '%J [\)\0 J> -....I[\) \0 ' , [\) ~ -....I[\) "" o ' ~ . [\) roW :' ()\ , n ,0 roW , 0 0 ~ t\J fTl CD (,1 t\J (,1 0 > 0 ('l , 0 ::0 W [; 0 ~ , ~ .... Ul [\)0 Z ~ of'12 z t;':l U1 [\)r\l W ' CD t::'j .... ~ ":!~ 01>'" ::u w '" . u:!~ ....t\J """ . t\J o . -.2 -oJ 01> .0 :::a ....(,1 '" [\) ~ -.Jro -I> ":!\O W , W 0 \0 [\) t;':l W t::'j -I> ::u z ~ ro """ \0 co . , Resolution 3476 [\) I ~xhibi t [\) A-2 W 0 Exhibit B Construction of Improvements I. 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. Lessor agrees to allow Lessee the right to remove the S.W. wall that extends from hangar building no, 8 onto Lessee's "Premises". Lessee agrees to remove the wall in accordance with a plan prepared and stamped by a licensed architectural engineer and approved by Lessor. Lessor agrees to allow Lessee to build foundation footings for the hangar buildings that extend beyond the "Premises", onto the taxiways, no more that two feet. Lessee agrees to replace any taxiway asphalt disrupted by this process, to the satisfaction and approval of the Lessor. 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. Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 27 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 of the Lessor for Lessee's failure to obtain and/or fully comply with any necessary permit. 6. Funding Assurances. Prior to Commencement of Construction, Lessee will provide the following to Lessor: (a) a list of the individuals who will be purchasing seventy (70%) percent of the hangar units from Lessee and that have deposited fifty (50%) percent of the purchase price, which Lessee intends to utilize for the costs of development and construction of the Improvements; and (b) a copy of the escrow instructions to the escrow agent holding the funds referenced in subsection (a) above (the "Escrow Instructions"), which Escrow Instructions shall be approved by Lessor prior to the Commencement of Construction, such approval not to be unreasonably withheld. Lessee shall also provide Lessor with the name, phone number and address of the escrow agent holding funds for the construction/purchase of the hangar units, along with the escrow number, so that Lessor may confirm at any time during the course of construction that there are sufficient funds to complete construction of the Improvements. 7. Contractor. In the event Lessee intends on using a general contractor for the construction of the Improvements, Lessee shall contract with an experienced, qualified general contractor ("Contractor") that is reasonably acceptable to Lessor. Lessee or its general contractor shall complete all Improvements in a good and workmanlike manner. 8. Insurance. Lessee or its general 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 - Statutory Limits for the State in which the work is to be performed, together with "ALL STATES," "VOLUNTARY COMPENSATION" AND ''FOREIGN COMPENSATION" coverage endorsements; (b) Employer'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) (ii) (iii) (iv) Premises - Operations Elevators and Hoists Independent Contractor Contractual Liability assumed under the construction contract Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 28 (v) Completed Operations - Products (vi) Explosion, Underground and Collapse (XUC) Coverage (d) Automobile Liability - Including Owned, Hired and Non-owned 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 the following: (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 of physical 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. (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 of Lessee, 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 of the 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 and/or 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 in the adjustment or litigation of all claims arising under the terms of this Section. 9. No Liens. Lessee shall keep the Premises free from any liens arising out of work performed, materials furnished to, or obligations incurred by Lessee. 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 Lessor: City of Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 29 furnished to Lessee, shall be discharged by Lessee, by bond or otherwise, within thirty (30) 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 own choosing, and to the extent Lessor is indemnified under this section, Lessee shall bear the cost of Lessor's separate defense, including reasonable attorneys' fees. II. 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 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: Survey. 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 of Improvements. 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 Auburn Lessee: N.W. Hangers, LLC. Resolution 3476 - Exhibit A Page 30