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Site A-11/Vince PadillaAil HANGAR THIS Lease, made and entered into this 1st day of February, 2008, by and between the City of Kalispell, a municipal corporation, hereafter referred to as CITY, and North Country Holdings LLC, 723 5'- Ave E Suite 310 C, Kalispell, MT 59901, hereafter referred to as TENANT: W I T N E S S E T H: WHEREAS, the CITY operates the Kalispell City Airport, and WHEREAS, the CITY desires, in order to provide a source of income for airport maintenance and to increase the utilization of said airport, to lease tracts of land to various tenants in order that the tenants may erect structures for the storage and protection of aircraft based at said airport. NOW, THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS: 1. The City does hereby agree to lease to TENANT, and TENANT hires from City, those certain premises located at the Kalispell City Airport, Kalispell, Montana, which are specifically described in Exhibit "A°(Site location A-11) which is attached to this Lease and by this reference incorporated herein. 2. The term of this Lease shall be for twenty (20) years, commencing on the 1st day of February, 2008 and ending on the 30th day of January , 2028, unless sooner terminated by mutual agreement of the parties or by one of the parties under the specific provisions hereof. TENANT shall have the option to renew for up to two (2) additional successive terms of five (5) years each. CITY shall give TENANT sixty (60) days written notice prior to the end of each term and TENANT shall give CITY written notice of TENANT'S intention to exercise said option no later than thirty (30) days from the end of each term. Upon expiration of the forgoing terms, TENANT shall have the right of first refusal to an additional lease not to exceed five (5) years under such terms and conditions as may be agreed upon at such time. 3. TENANT agrees to pay to the CITY for the use and benefit of the CITY the sum of $.17(seventeen cents) per square foot per year for the projected building area, which for purposes of this provision shall be one hundred and fifty percent (150%) of the actual square footage occupied by the hangar, herein authorized, payable as follows: 2008 Airport Lease Page 1 of 9 a. Upon the commencement date, TENANT shall pay the pro- rata portion of the annual rent for the time period from the commencement date to July 1 next succeeding. b. On each July 1, TENANT, without demand, shall pay the annual rental to the next succeeding fiscal year. C. On July 1, at the commencement date of the fiscal year during which this Lease terminates, TENANT, without demand, shall pay the pro-rata portion of the annual rent for the time period from July 1 to the termination date of the Lease. d. During the initial twenty-year term of the lease, the annual lease payment shall increase 3% annually, from the previous year's payment. In the event TENANT elects to exercise his option to renew this lease for a subsequent five-year term, the annual lease payment shall be reviewed and reset by CITY. e. The Airport Manager or his designee will be responsible for the collection of lease payments or administrative fees for existing hangar and ground leases, and for adjustments to lease fees resulting from application of the criteria established in part (d), above. 4. TENANT agrees to construct one building for the purpose of housing light aircraft on said land, and TENANT further agrees to construct said building, together with access to runway, in accordance with the specifications contained in hangar construction and design standards. TENANT shall supply to CITY upon completion of the building appropriate invoices establishing the cost of construction of said building. a. TENANT shall have the right, upon the termination of this Lease, unless a lease for a further term be negotiated, to remove the hangar structure, but shall do so within 90 days and shall leave the premises in a restored condition, except that any paving shall be left. b. If TENANT does not remove said building within such allotted time, it shall then become the property of CITY without further action on the part of the CITY. C. TENANT may expand the square footage of any building constructed on the Airport site, subject however to the prior written consent of CITY. In the event CITY 2008 Airport Lease Page 2 of 9 approves any building expansion during the primary lease term or any extension thereof, TENANT'S lease payments shall be adjusted in accordance with the criteria set forth in 13. d. If the construction of a hangar is not commenced by February 1st, 2009 this lease will become null and void as to any and all provisions of this lease. 5. TENANT shall use said property for the storage of light aircraft and other lawful purposes necessarily incidental thereto and for no other purpose. a. TENANT may sublet the premises for aviation purposes, subject however to the prior written consent of CITY. Any such sublease shall be in writing and shall be reviewed by CITY prior to approval. b. CITY'S approval of any sublease shall not relieve TENANT of any obligation imposed by this agreement. TENANT shall provide to CITY a signed copy of the final sublease agreement for its file. C. Upon approval by CITY of any sublease, an administrative fee equal to 2% of the rental fee imposed by TENANT on the sublessee shall be paid by TENANT to CITY throughout the term of the sublease. This administrative fee shall terminate upon termination of the sublease. 6. TENANT shall have the right and privilege of sale, assignment or transfer of this Lease for the purpose defined in 15, hereof, upon written notice to the CITY stating the name and address of the proposed buyer, assignee, or transferee. a. If the CITY shall determine that said proposed buyer, assignee, or transferee is objectionable, any such reasonable objection shall be stated in writing to the TENANT within twenty (20) days after said notice. b. The CITY shall not unreasonably withhold consent to sell, assign, or transfer this Lease, but reserves the right to adjust the annual rental payments following assignment. 2008 Airport Lease Page 3 of 9 C. After sale or assignment by TENANT of its interest here, TENANT shall be relieved from liability for rental payments accruing thereon, and the buyer, assignee, or transferee shall thereafter be liable. d. Transferee under this paragraph shall only acquire the balance of the term of the lease and shall be subject to all terms and conditions of this lease, including the obligation to provide CITY with proof of insurance coverage as required by 18. 7. If, for any reason, the CITY discontinues aviation operations on Kalispell City Airport site, the CITY may terminate this lease and may elect to pay TENANT the unamortized portion of the cost of the hangar, herein authorized to be built. That amortization is to be computed on a straight-line basis over the period from the completion of the improvement up to 15 years. 8. TENANT shall hold harmless and indemnify the CITY from any and all liability claims of any kind or nature, whatsoever, arising out of the erection or expansion of the building upon the premises contemplated, herein, or the use of said premises by TENANT or TEN 's invitees or licensees. a. As evidence of TEN 's covenant herein, TENANT at TENANT expense shall keep in force, during the term of this Lease, insurance, issued by an insurance company, licensed to do business in Montana, protecting the CITY against all liabilities, judgments, costs, damages and expenses which may accrue against, be charged to, or recovered from the CITY, by reason of damage to property of, injury to or death of any person or persons on account of any matter or thing which may occur on the demised premises. b. Policy or policies in the amount of Seven Hundred and Fifty Thousand Dollars ($750,000.00) with respect to any one person, and One Million and Five Hundred Thousand Dollars ($1,500,000.00) with respect to any one occurrence shall be held. Said insurance policy shall name the CITY, its officers, employees and agents as additional named insureds, and shall not be canceled or materially changed without at least thirty (30) days prior notice to the CITY, and shall be subject to approval as to coverage by the CITY. 2008 Airport Lease Page 4 of 9 c. Proof of insurance coverage required by this Lease shall be provided by TENANT to CITY at the time of execution of this agreement. CITY reserves the right at any time during the primary lease term or any extension thereof, to require TENANT to provide to CITY proof of continued insurance coverage. d. Policy limits are subject to change in accordance with 12-9-108, MCA, ALimitations on Governmental Liability for Damages in Tort.@ TENANT shall file certificates of said insurance with the CITY, and said insurance shall be in full force and effect, throughout the term of this Lease. e. Failure or refusal by the TENANT to obtain or maintain said insurance as required hereunder shall constitute a material breach of this Lease and, in such event, CITY, in its sole discretion, may terminate this Lease without liability to TENANT hereunder, or elect to obtain like coverage and the cost for such coverage shall be paid by TENANT. 9. TENANT shall be responsible for acquiring whatever insurance TENANT deems necessary to safeguard TENANT'S interest in the TEN 's building, herein authorized, and personal property stored in said building, and TENANT expressly covenants and agrees to assert no claim against CITY as a result of the loss or damage to the building or personal property belonging to TENANT or anyone else resulting from the action of any third party. a. TENANT herein covenants and agrees to take whatever steps TENANT sees fit to take in protecting TENANT'S property and persons from loss or damage as a result of vandalism, malicious mischief, theft or kindred losses, and agrees to assert no such claim against the CITY incident thereto. b. All losses suffered by TENANT resulting from criminal activity or others shall be reported to the police. The CITY assumes no responsibility for such losses. 10. In the event that soils or other material are found on the leased site that are AHazardous or Deleterious Substances@ as defined by the Montana Comprehensive Environmental Cleanup and Responsibility Act, '75-10-701 et seq. MCA (ACECRA@), AHazardous Substances@ as defined by the Comprehensive Environmental Response, Compensation and Liability Act, 42 USC '9600, et seq. (ACERCLA@), AHazardous 2008 Airport Lease Page 5 of 9 Waste@ as defined by the Montana Hazardous Waste and Underground Storage Tank Act, '75-10-401 et seq., MCA or the Solid Waste Disposal Act, as amended by the Resource Conservation Recovery Act, 42 USC '6901 et seq., or which require special remediation or disposal or disposal pursuant to any other applicable law, TENANT shall excavate, handle and dispose of such soils or other material only in compliance with such statutes and regulations. a. In the event TENANT leaves any of the above described materials on the property, the CITY may, at its option, have wastes properly disposed of and assess the costs of removal, storage, transport and disposal to TENANT. b. All Hazardous Materials must be appropriately labeled and stored. C. In the event Hazardous Materials are spilled upon the property, it is the responsibility of TENANT to have the spill cleaned up according to State and Federal laws and regulations. In the event that drains or floor sumps are contaminated, it will be the responsibility of TENANT to clean up those systems. d. TENANT is aware that there are significant penalties for improperly disposing of wastes or submitting false information, including the possibility of fine and imprisonment for knowing violations. TENANT must comply with all state, federal and local laws pertaining to the handling and storage of hazardous materials. 11. No construction or installation of any underground fuel storage tank dispensing system shall be allowed upon the premises. 12. Any utility services required by TENANT's building or for its use shall be obtained by TENANT at TENANT's expense. 13. a. TENANT agrees that upon completion the building will be maintained in good order, repair and safe condition and in compliance with the law. TENANT shall make any and all additions to, or alterations or repairs in and about the land and/or improvements which may be required and, in doing so, TENANT shall observe and comply with all existing or future public laws, ordinances and regulations applicable to the land or public airport land upon which the leased premises are located. 2008 Airport Lease Page 6 of 9 b. TENANT shall maintain an area of ten (10) feet from the exterior walls of the hangar or of the median point between hangars if there is less than twenty (20) feet between hangars, free from brush and weeds. If TENANT fails to keep and maintain the leased premises and improvements as required hereunder, CITY may in its discretion following written notice undertake to do or have done such and any expenses incurred by CITY shall be paid by TENANT. C. TENANT shall not store personal property, equipment of any kind, or vehicles, outside of the hangar. 14. TENANT shall be responsible for all taxes levied upon the structure erected hereunder and any equipment or property located therein. The land is owned by the CITY and is exempt from taxes, and the CITY agrees to maintain such tax exempt status. 15. TENANT shall comply with all State and Federal laws and regulations and with the Operating Regulations of the City of Kalispell. CITY shall have the right, through its agents or employees, for reasonable ingress and egress to inspect premises to ascertain that the terms of this Lease are being adhered to. 16. Notices to CITY shall be sent by certified mail, postage prepaid to City Manager, City of Kalispell, P.O. Box 1997, Kalispell, MT 59903-1997, and notices to TENANT shall be sent by certified mail, postage prepaid to: Vince Padilla North Country Holdings LLC 723 51h Ave E Suite 310C Kalispell, MT 59901 406-270-6692 17. TENANT shall have the right to cancel and terminate this Lease and any obligations arising hereunder by written notice to the CITY delivered within 60 days hereafter. 18. CITY reserves the right to further develop or improve, or not develop or improve, the landing area of the airport as it sees fit, regardless of the desires or view of the TENANT, and without interference or hindrance. 19. This Lease shall be subordinate to the provisions and requirements of any existing or future Lease between the 2008 Airport Lease Page 7 of 9 CITY and the United States, relative to the development, operation or maintenance of the airport. 20. TENANT agrees to comply with the notification and review requirements covered by Part 77 of the Federal Aviation Regulations in the event any future structure or building is planned for the leased premises, or in the event of any planned modification or alteration of any present or future building or structure situated on the leased premises. 21. It is mutually agreed and understood that if TENANT should fail to make the annual lease payments as described above, or fail to perform any condition or covenant or condition of this Lease or fail to maintain the leased premises in a manner satisfactory to the CITY, and such condition or conditions exist for more than ninety (90) days after written notice is given to the TENANT, CITY may then terminate and end this Lease and re-enter and retake possession of the premises. All buildings and improvements placed on the premises shall thereupon revert to the CITY. This paragraph shall not apply to failure of TENANT to obtain or maintain insurance under &8, above. 22. It is mutually agreed that this Lease shall inure to the benefit of and be binding upon the respective parties, their heirs, successors and assigns. It is further agreed that time is of the essence of this Lease. 23. Any change or modification of this Lease, in order to be effective, must be in writing and signed by the respective parties. 24. In the event either party to this Lease shall be required to bring an action against the other party to enforce this Lease, or any portion thereof, the prevailing party shall be entitled to reasonable attorney's fees and cost therefore in addition to any damages that might be awarded. 25. Tenant will abide by all rules and regulations established by the City of Kalispell for the City Airport. 2008 Airport Lease Page 8 of 9 IN WITNESS WHEREOF, said CITY has caused this Lease to be signed on its behalf by the Man a er of said CITY and said TENANT has executed this Lease this %', % 'day of i/ CTTY OF KATJSPFT,T, B STATE OF MONTANA ) ss County of Flathead ) imager i Tenant On this ,' day of ?✓ -., 2008, before me a Notary Public in and for the State of Montana, personally appeared �`r��'6 known to me to be the person whose name is subscribed -'to the foregoing instrument, and acknowledged to me that he/she executed the same. IN WIT I have hereunto set my hand and affixed my Notarial Seal, the day an , fir`?' ve written. .. �� �'11............ STATE OF MONTANA , A 2z Notary Public, ate of Montana Residing at My Commission expires %8IC aft-A;.4 07`z / ss County of Flathead ) )q , On this / day of + 200 before me, a Notary Public in and for the State of Montana, per nally a geared C�.1>/_. known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he/she executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Notarial Seal, the day and year first above written. Notary Public, ate of Montana Residing at My Commission expires 3 2008 Airport Lease Page 9 of 9 - S ► s II 1111 tl IIS111111`sl11III HI +I 1 / aC +�� �� SIInI&'U 1111!lo-ISl,�I'.ItHiHluttltit. .'`\J / �.3. 0 / :• FI'�__•T F_--_ / Ali\j WOr�yi�' / � F'nt• '� I.' `.� is ;��` u. Gfls�isl rs . � ]. P �f LEM A SHEET TIRE AIRPORT LAYOUT i PLAN . F -- —I = I G FOg Ll I I-!" #!-_J m PROJECT TRIE P. PORRYU OCT.15,M ♦T �Fee, KALISPELL CITY �E y cEJRv 03W,10U AIRPORT TT R. 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