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11. Central School Lease - Approval of Purchase AgreementAgenda -April 28, 1997 AGENDA ITEM 11 - CENTRAL SCHOOL LEASE -APPROVAL OF PURCHASE AGREEMENT BACKGROUND/CONSIDERATION: I have enclosed a proposed option to lease and lease agreement that the staff composed for your consideration and the Historical Society's consideration. It was our intent to assure the City that the Historical Society would be able to operate and perform the maintenance requirements of a new building. The entire operations and maintenance of the building, after reconstruction, will be the responsibility of the Society. The Society must have raised $250,000 in cash prior to the lease agreement consideration. (I would suggest we may want to change n option to lease, paragraph 1-d should require that the $250,000 cash shall be placed in an escrow account for the City to insure that the funds are available.) RECOMMENDATION: Based upon your direction to proceed, we have attempted to protect the City by assuring the prior performance and potential cost coverages be addressed by the lease. I am not certain that there is any way that we can protect the City from a future failure to perform. A reversion to the City, if the worst happens, will place an unenviable decision and possible burden on the City. What will we do with the building? Will we be forced to operate it as a museum? Will we need to "rehab" the building to make it useful as an office complex for the City? To continue the process to complete the museum, I recommend approval of the lease Agenda -April 28, 1997 form presented (with the possible escrow account conditions). ACTION REQUIRED: A MOTION to approve the lease format is needed. OPTION TO LEASE AGREEMENT This Option to Lease Agreement, made and entered into on , 1997, by and between the City of Kalispell, a municipal corporation of the State of Montana, hereinafter referred to as CITY and the Northwest Montana Historical Society, a , organized and existing under the laws of the State of Montana, hereinafter SOCIETY, WITNESSETH: WHEREAS, The CITY for and in consideration of the sum of One Dollar and other valuable consideration ($1.00 and ovc) paid by the SOCIETY, the receipt and sufficiency of which is hereby acknowledged, does grant to the SOCIETY the exclusive option to lease.the within described premises owned by the CITY and commonly known as the Central School, more particularly described as follows: The East one-half (E %Z), Block 45, Kalispell Original Townsite, together with the building located thereon, for the purpose of operating a museum, together with exclusive concession right and privilege to charge admission, and to sell novelties, gifts, memorabilia, food products, and refreshments, and all other activities incidental to the primary purpose of operating a museum. NOW THEREFORE, the parties hereto agree as follows. The option to lease granted herein is subject to the following terms and conditions: 1. The option to lease the premises hereby granted to the SOCIETY shall become effective upon the date of execution of this Agreement, and shall be subject to the following terms and conditions: a. This shall terminate one (1) year after execution hereof, unless sooner exercised by SOCIETY in the manner hereinafter set forth; b. Any extensions hereof shall be effective only if made in writing by mutual agreement of the SOCIETY and the CITY; C. The CITY must agree to invest the sum, not to exceed, Two Million Five. Hundred Thousand Dollars ($2,500,000) for the purpose of designing and reconstructing said premises for use as a museum, and; d. CITY will not expend funds for other than architectural fees, unless and until SOCIETY, complies with ¶ e, and is\wp\society.wpd e. The SOCIETY, prior to exercising this Option, can demonstrate to the CITY that it has the requisite financial capability of operating said premises as a museum for a period of two years. For purposes of this Option, SOCIETY shall be considered to have met the financial viability requirements of this paragraph if the SOCIETY raises, and places in escrow, the sum of Two Hundred and Fifty Thousand Dollars ($250,000) cash, and has said sum available and earmarked only for the purpose of maintenance and operation of the museum. 2. If the SOCIETY fails to exercise the option to lease within the time prescribed, this Option shall lapse and the CITY may retain the stated consideration. 3. SOCIETY may not sell, transfer, assign or otherwise part with any or all of its rights under this Option Agreement. 4. The Option herein granted shall be exercised in the following manner: a. On or before the termination date above, the SOCIETY shall execute the Lease Agreement, attached hereto as Exhibit "A", and in the event of such exercise the payment shall be applied to the consideration due from the SOCIETY under this Option Agreement. 5. It is further understood and agreed that time is of the essence in this Option Agreement, and that the Option must be exercised on or before the termination date, and if not so exercised, all rights of the SOCIETY granted by this Option shall cease, and the CITY may retain the consideration given by SOCIETY for this Option. IN WITNESS WHEREOF, the SOCIETY and the CITY have caused this Option Agreement to be executed on the day first above written. CITY OF KALISPELL Douglas D. Rauthe - Mayor NORTHWEST MONTANA HISTORICAL SOCIETY By: Its: i:lwplsociety.wpd 2 EXHIBIT "A" LEASE AGREEMENT This Lease made and entered into , 199_ is by and between the CITY OF KALISPELL, a municipal corporation, hereinafter CITY, and the NORTHWEST MONTANA HISTORICAL SOCIETY, a - organized and existing under the laws of the State of Montana, hereinafter SOCIETY: WHEREAS, The CITY is the owner of certain real property and the improvements situated thereon located in the City of Kalispell, more commonly referred to as the Central School; and WHEREAS, The SOCIETY is an organization created by citizens for the purpose of establishing and operating a historical museum within the City limits of Kalispell; and WHEREAS, The SOCIETY desires to lease from CITY the Central School premises in furtherance of its goal of establishing and operating a museum within the City of Kalispell. NOW, THEREFORE in consideration of the mutual agreements and covenants contained herein the parties hereto agree as follows: The CITY hereby leases to the SOCIETY and the SOCIETY hereby leases from the CITY that certain real property situated in the City of Kalispell, Flathead County, Montana, more particularly described as follows, to -wit: East'/2 , Block 45, Kalispell Original Townsite, excluding the parking lot on the North end of said '/2 block, together with the building situated thereon, commonly known as the Central School. 2. The term of this Lease shall be for a term of years commencing , 1997 and ending , 3. SOCIETY shall use the demised Premises only for purposes connected to and consistent with the operation of a public historical museum and related services and programs, including the exclusive concession, right and privilege to charge admission, and sell novelties, gift, memorabilia, food products and refreshments, i:\wp\society.wpd 3 provided however, that the SOCIETY may use the Premises for any other lawful purpose with the CITY'S advanced written consent, which consent shall not be unreasonably withheld. 4. CITY and SOCIETY acknowledge that the premises have received major structural improvements necessary for occupancy by the SOCIETY as a museum and SOCIETY acknowledges that said improvements have been accomplished. 5. The rent or rents to be paid to the CITY by the SOCIETY are in the amounts and on the basis and terms as follows: a. SOCIETY shall pay to the CITY as rent for the Premises the sum of ten dollars ($10.00) per year for each year during the term of this Lease. The rent shall be payable on or before , in each year. b. The SOCIETY shall be solely responsible for the costs of any and all special facilities, including City special assessments, equipment and materials, and services required by the SOCIETY, which by virtue of the SOCIETY'S occupancy of the premises, SOCIETY deems necessary for operation and maintenance of the premises as a museum. This however, does not grant to SOCIETY the right to make any structural alterations to the building or to the demised premises in general without the express prior written consent of the CITY, which consent shall not be unreasonably withheld. C. SOCIETY shall be solely responsible for all labor and services and materials necessary for SOCIETY'S use of premises, exterior building maintenance, grounds maintenance, and all interior building maintenance including, but not limited to, heating systems, ductwork, electrical systems, conduit, plumbing, sewer, and HVAC. d. SOCIETY shall keep an accurate account of all monies received through its operation upon the premises, and the CITY shall at all times have the right to audit such accounts and any records pertaining to the right to the accounts. 6. Except as otherwise permitted by this Lease Agreement, the SOCIETY covenants not to do or suffer any demolition, waste or damage, disfigurement or injury to the demised premises or the building or any part of it, or permit or suffer any overloading of its structural members or floors. SOCIETY shall permit the authorized representatives of CITY to enter the demised premises or any part of it at all times during usual business hours after reasonable notice under the circumstances prevailing for the purpose of making reasonable inspections. iAwplsociety.wpd 4 7. All portions of the sidewalks and passageways, and all ways of access to public utilities of the premises shall be kept unobstructed by the SOCIETY and shall not be used for any purpose other than ingress and egress to and from the premises. The doors, stairways or openings into any place in the structure, including hallways, corridors and passageways shall in no way be obstructed by the SOCIETY. 8. SOCIETY shall indemnify and save harmless the CITY from all losses, costs and expenses (including attorneys' fees) arising out of any liability, claim of liability, for injuries to persons or property sustained or claimed to have been sustained by anyone, by reason of the use or occupancy of the premises, whether such use is authorized or not, or by any act or omission of the SOCIETY or any of its officers, agents, employees, patrons, guests or invitees, and SOCIETY shall pay for any damage to the property of CITY, or loss or theft of property, done or caused by such persons. 9. SOCIETY shall provide the CITY at the time of the execution of this Lease Agreement a comprehensive liability insurance policy, including liability and property damage, written by a company approved by the CITY, covering premises, operation and productions in amounts as stipulated below: For any one person:-------- $750,000.00 For any one accident:------ $1,500,000.00 Property Damage:---------- $ 50,000.00 a. In the event the CITY is not named as an additional named insured on SOCIETY'S insurance policies, the policies shall contain a provision waiving all subrogation rights against the CITY. b. Certified copies of above policy or a certificate evidencing its existence or a binder shall be delivered to the CITY upon execution of this Lease Agreement. In the event a binder is delivered, it shall be replaced with 30 days by a certified copy of the policy. Each copy or certificate shall contain a valid provision or endorsement that the policy may not be canceled, terminated, or modified without giving 30 days' written notice to the CITY. C. A renewal insurance policy shall be delivered to the CITY not less than 30 days prior to a policy's expiration date except for any policy expiring on or after the termination date of this Lease Agreement. is\wp\society.wpd 5 10. In the event any portion of the Central School Museum leased to the SOCIETY is not vacated at the end of the term of this Lease Agreement, the CITY is authorized to remove from the premises, at the expense of the tenant, all the property of any kind which may be occupying a portion of the museum on which the term of this Lease Agreement has expired, and the CITY shall not be liable for any damages to or loss of such property sustained either during its removal or storage and the CITY, its agents, employees, and officials, are released from all claims for such loss or damage. Upon termination of this Lease Agreement, the SOCIETY will deliver to the CITY the premises in as good condition as they shall be found at the beginning of the term of this Lease Agreement, except for normal wear and tear. 11. It is agreed that all receipts and funds received by the SOCIETY in operation of the museum are the property of the SOCIETY. 12. The CITY assumes no responsibility for any property placed in the premises, and the CITY is released and discharged from any and all liabilities for any loss, injury or damages to person or property that may be sustained by reason of the occupancy of the premises under this Lease Agreement; and all guards or other protective services desired are the responsibility of the SOCIETY. Further, it shall be the sole responsibility of SOCIETY to procure insurance against losses to any museum contents, including but not limited to, furnishings and fixtures, equipment, museum display items and artifacts, and any and all other property placed in the demised premises by the SOCIETY, its agents, employees, and representatives.. 13. CITY shall have the power and authority to terminate this lease for any of the following reasons: a. Recission by mutual consent of the parties; b. For violations of any of the terms and conditions of this lease; C. For using the demised premises for any purpose other than those authorized by this lease or for any other misuse of the premises. 14. If there is default or violation of any of the covenants or conditions in this Lease Agreement involving the failure of the SOCIETY to keep the demised premises in good condition and repair in accordance with the provision of this Lease Agreement, or to take any action required by the terms of the Lease Agreement, then the CITY shall have the right to, but shall not be required, to make good any default of the SOCIETY. Nothing in this Lease Agreement shall imply any duty upon the part of the CITY to do any work which, under any provisions of this Lease Agreement, the SOCIETY is required to perform, and the performance of it by the CITY shall not constitute a waiver of SOCIETY'S default in failing to perform it. The CITY may, iAwplsociety.wpd 6 during the progress of any work elected to be performed by it on the demised t _ premises or the building, enter with contractors, agents, and employees and keep and store upon the demised premises and in the building or any part of it all necessary materials, tools and equipment. The CITY shall not in any event be liable for any inconvenience, annoyance, disturbance, loss of business or other damage of or to the SOCIETY by reason of bring materials, supplies and equipment into or through the building during the course of work, and the obligations of the SOCIETY under this Lease Agreement shall not be affected in any manner whatsoever, provided that the CITY uses reasonable care under the circumstances prevailing to avoid unnecessary inconvenience, annoyance, disturbance, loss of business or other damages of or to the SOCIETY. 15. To the extent not prohibited by law, all expenses, including reasonable attorney fees and court costs, incurred by the CITY by reason of any default by the SOCIETY (whether or not any proceeding is instituted) or in connection with any action or proceeding affecting this Lease Agreement or demised premises, shall be paid to the CITY by the SOCIETY on demand. Conversely, the SOCIETY shall be entitled to similar expenses incurred because of the CITY'S default, without default on the SOCIETY'S part. 16. All sums advanced by the CITY pursuant to § § 14 and 15 and all necessary incidental expenses, and attorney's fees in connection with the performance of any acts shall be deemed additional rent and shall be promptly payable by the SOCIETY, in the respective amounts so advanced by the CITY. This reimbursement shall be made on demand. Conversely, the SOCIETY shall be entitled to receive from the CITY prompt payment or reimbursement on any sum due and owing from the CITY to the SOCIETY. 17. Any notice which the CITY may desire to give the SOCIETY shall be deemed sufficiently given if the notice is in writing and sent by certified mail addressed to the SOCIETY, at , or at the latest substituted by the SOCIETY in writing to the CITY, or left at such address or delivered to the SOCIETY'S representative at the premises; and the time of giving of the notice shall be the time when the notice is mailed, left or delivered as proved herein. Any notice from the SOCIETY to the CITY shall be validly given if sent by certified mail addressed to CITY MANAGER, P.O. Box 1997, Kalispell, MT 59903-1997, or at such other address and the CITY shall designate by notice to the SOCIETY. 18. Time is of the essence in this Lease Agreement. 19. Upon termination of this lease, SOCIETY shall peaceably yield up and surrender the possession of the demised premises to CITY or its agents, or to subsequent lessees or grantees. i:lwp\society.wpd 7 20. SOCIETY waives all claims for compensation for any loss or damage sustained by reason of any defect, failure, or impairment of the water or sewer system, electrical system leading to or on the premises. In the event the premises or any part thereof is damaged by fire or if for any other reason, including strikes, failure of utilities or any act of God which, in the judgement of the CITY, renders fulfillment of this Lease Agreement by the CITY impossible, the SOCIETY releases the CITY and its agents from all demands, claims, and causes of actions arising from any of these causes. 21. Traffic control and parking on or near the demised premises under this Lease Agreement shall be subject to approval of the CITY'S Public Works Department and the Kalispell Parking Commission. 22. This Lease Agreement shall and its terms and conditions shall be binding upon and inure to the benefit of the respective parties their heirs, successors and assigns. IN WITNESS WHEREOF, the CITY and the SOCIETY have caused this Lease Agreement to be executed the day and year first above written. is\wp\society.wpd 8