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HomeMy WebLinkAbout10435RESOLUTION NO. 10435 A RESOLUTION APPROVING A GROUND LEASE AND OPERATING AGREEMENT BETWEEN THE CITY OF PUEBLO AND TRAVELAIRE SERVICE, INC. RELATING TO LAND AND BUILDINGS AT THE PUEBLO MEMORIAL AIRPORT AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1 The Ground Lease and Operating Agreement dated as of June 27, 2005 between the City of Pueblo and Travelaire Service, Inc. relating to land and buildings at the Pueblo Memorial Airport, a copy of which is attached hereto, having been approved as to form by the City Attorney, is hereby approved. SECTION 2 The President of the City Council is authorized to execute and deliver the Ground Lease and Operating Agreement in the name of the City of Pueblo and the City Clerk is directed to affix the seal of the City thereto and attest same. INTRODUCED July 11, 2005 BY Michael Occhiato Councilperson APPROVED: PRES1DENT 9F CITY C IL ATTESTED BY: CITY CLERK T o o Background Paper for Proposed RESOLUTION leo,op, tfI0(�-3S AGENDA ITEM # i DATE: July 11, 2005 DEPARTMENT: Law Department TITLE A RESOLUTION APPROVING A GROUND LEASE AND OPERATING AGREEMENT BETWEEN THE CITY OF PUEBLO AND TRAVELAIRE SERVICE, INC. RELATING TO LAND AND BUILDINGS AT THE PUEBLO MEMORIAL AIRPORT AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME ISSUE Should the City Council approve the Ground Lease And Operating Agreement between the City and Travelaire Service, Inc.? RECOMMENDATION City staff recommends approval of the Ground Lease and Operating Agreement. BACKGROUND Travelaire Service, Inc.'s ( "Travelaire ") current Ground Lease And Operating Agreement ( "Lease ") expires January 31, 2007 and the City and Travelaire have negotiated a new lease ( "Lease ") containing the following terms and conditions: (a) The Lease is for a term of 20 years starting January 31, 2007 and ending January 31, 2027. The term may be extended for an additional 10 years upon rental and other conditions mutually agreeable to City and Travelaire. (b) The Lease is for approximately 36,216 square feet of land and approximately 7,168 square feet of structures. The land and structures are referred to as "leased premises." (c) Travelaire will pay rent and other charges as follows: (1) rent of $302 per month for the land and $896 per month for the structures or $14,376 per year; and (2) Fuel flow fee of 60 per gallon of aviation fuel delivered to fuel tanks. The fuel flowage fee will be adjusted upon volume of aviation fuel delivered each lease year as follows: 6¢ for each gallon up to 1,000,000 gallons, 5¢ for the next 500,000 gallons and 4¢ for each gallon over 1,500,000 gallons. (3) 2% of Travelaire's monthly gross revenues on all sales and services, except revenue derived from sale of aviation fuel. Only revenue from aircraft charters that load passengers at the Airport is considered air charter service revenue. (4) Rent and fuel flowage fee will be increased biennially based upon the Consumer Price Index provided fuel flowage fee shall not be increased more than 10% for any 2 -year period and rent by not more than 5% for any 2 -year period. (5) Travelaire will pay a proportionate share of premium for City's storage tank pollution liability insurance. (6) Travelaire will spend $41,359 to construct additional structures or remodel existing structures prior to February 1, 2010, if not, rent for structures will increase to $1,195 per month retroactive to January 31, 2007. (7) If City receives an FAA grant which includes the refurbishing and /or resurfacing the adjacent ramp by March 1, 2014, Travelaire will pay to City $15,000 toward the cost of refurbishing and /or resurfacing the ramp. (d) Travelaire may use the leased premises as a facility for air charter services and other related aeronautical services and products. Travelaire must on a regular and continuous basis provide air charter services on the leased premises. (e) Travelaire shall be responsible for maintenance and repair of the leased premises. (f) Travelaire has the right to use one (1) aviation fuel tank located at City's fuel farm. Travelaire is responsible for quality control of fuel, loading and unloading fuel to and from the fuel tanks, maintenance of the aviation fuel tank and clean -up of fuel releases or spills whether caused by Travelaire, its officers, agents, employees, contractors or fuel suppliers. The lease of the fuel tanks may be terminated by City or Travelaire upon 90 days prior written notice. If terminated, City will negotiate in good faith with Travelaire to lease sufficient other land for Travelaire to construct and operate its own fuel storage facilities at a location mutually agreeable to City and Travelaire. (g) Travelaire's other lease of land and facilities east of the leased premises (Flying Winds Lease) will end September 22, 2012 and will not be -2- renewed or extended. (h) Title to all the structures, including new or remodeled, on the leased premises shall be and remain the property of the City. However, City will not be responsible for any defects in the structures and shall have no obligation or responsibility to maintain, repair or restore the structures, all such obligations and responsibilities are Travelaire's. (i) Travelaire shall maintain commercial and hangar keepers liability insurance in the amount of $1 million and to indemnify and save harmless City from all claims and liabilities arising from or growing out of Travelaire's negligent acts or omissions. City will maintain airport commercial general liability insurance in the amount of $1 million. The foregoing outlines some of the provisions of the Lease and reference to the Lease is made for specific language, further explanation, and additional provisions. FINANCIAL IMPACT See Background. -3- GROUND LEASE AND OPERATING AGREEMENT THIS LEASE made and entered into as of June 27, 2005 A.D. between the City of Pueblo, a municipal corporation, "Lessor", and Travelaire Service, Inc., a Colorado corporation, "Lessee ". WITNESSETH: WHEREAS, Lessor is the owner and operator of Pueblo Memorial Airport ( "Airport"), together with the land on which said Airport is situated, and WHEREAS, Lessee is desirous of leasing certain real property and having the right to use ramp space and fuel tanks on said Airport property for the purpose of the sale of aviation fuels. NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the parties agree as follows: 1. Land Parcel: Lessor hereby leases unto Lessee and Lessee hereby leases from Lessor for the term and upon the rental and conditions hereinafter stated, the real property, marked "leased premises" on the plot plan, Exhibit "A ", attached hereto and made a part hereof, situated in the County of Pueblo, State of Colorado, together with the following structures thereon which Lessee acknowledges are the property of Lessor: An approximately 6,400 square foot hangar and 768 square foot office building The term "leased premises ", as used in this Lease, means and includes the real property and structures described above as well as any improvements hereafter constructed or added thereto. Subject to Section 8, Lessor hereby leases to Lessee Jet -A Tank No. 4 having a capacity of 40,000 gallons (hereinafter the "fuel tank ") at Lessor's fuel farm located at the Airport (hereinafter the "fuel farm ") for the exclusive purpose of storing aviation fuel to be dispensed to aircraft using the Airport. The leased premises and fuel tank and Lessee's right to use same are subject to all easements, reservations, covenants, rights -of -way and restrictions of record. 2. Term The term of this Lease is for a period of twenty (20) years commencing midnight January 31, 2007 ( "commencement date ") and ending midnight on January 31, 2027, unless sooner terminated as herein provided. The term of this Lease may be extended for an additional ten (10) year period from midnight January 31, 2027 to midnight January 31, 2037 upon rental and other conditions mutually agreeable to Lessor and Lessee. Either Lessor or Lessee may request that negotiations for such extension be entered into on or after January 31, 2022. 3. Fee and Other Chaff: A. Lessee shall pay to Lessor monthly as rent for the land and structures covered by this Lease, the following amounts: $302.00 per month for the land portion of leased premises; and $896.00 per month for the structures located on the leased premises. In addition, Lessee shall pay a monthly fee to Lessor for the Lease herein granted of two percent (2 %) of Lessee's monthly gross revenues derived 6e from all sales, operations and services made, furnished or conducted on or from the leased premises, with the exception of revenue derived from the sale and dispensing of aviation fuel. Only revenue from aircraft charters that load passengers at the Airport will be considered as air charter service revenues derived under the terms of this paragraph. Lessee operates sales offices and leases hangars outside of the Airport, therefore, revenues derived from sales, operations and services conducted on those locations will not be included as revenue under this paragraph. B. Lessee shall also pay as rent and for the privilege to sell or dispense aviation fuel from the leased premises a monthly fuel flow fee of six cents ($.06) starting with the month of February 2007 and each month thereafter for each gallon of aviation fuel delivered, or caused to be delivered by Lessee to the fuel tank or, if, Lessee constructs its own fuel storage facilities, either alone of with other Lessees, or uses other fuel storage facilities at the Airport, delivered, or caused to be delivered by Lessee to such fuel storage facilities. The fuel flowage fee shall be adjusted based upon the volume of aviation fuel delivered each lease year (twelve consecutive calendar months starting with February 1 of one year and ending on the last day of January of the next year) as follows: six cents ($0.06) for each gallon up to 1,000,000 gallons; five cents ($0.05) for the next 500,000 gallons; and four cents ($0.04) for each gallon over 1,500,000 gallons. C. Such rent and fees shall be paid monthly without notice, offset or deduction on or before the tenth (10`") of the following month at the City of Pueblo Director of Finance's office and shall be accompanied with such reporting forms as the Director of Finance shall determine. Lessor shall have the right to examine and audit Lessee's and its subtenant's books and records to determine the accuracy of the fees and their calculation. D. Any rent or fees overdue for more than thirty (30) days will accrue interest at the rate of eight percent (8 %) per annum. E. The rent and fuel flowage fee shall be increased biennially based upon the consumer price index for all urban consumers, CPI -U (all items 1982 - 1984 =100) or comparable index if the Department of Labor changes or modifies the CPI -U or no longer publishes the CPI -U. The rent and fuel flowage fee shall be increased by a percentage equal to the percentage increase in the CPI -U during each preceding two -year period over the comparable CPI -U for the first month of each 2 -year period. If there is no percentage increase in the CPI -U for any preceding 2 -year period, the rent and fuel flowage fee will remain the same as the preceding 2 -year period for the next 2 -year period. In no event, shall the percentage increase for the fuel flowage fee be greater than ten percent (10 %) for any 2 -year period nor the percentage increase for the rent be greater than five percent (5 %) for any 2 -year period. F. So long as Lessee uses the fuel tank for storage of aviation fuel, Lessee shall pay annually to Lessor, on the anniversary dates of the commencement date, a proportional share of Lessor's cost for storage tank pollution liability insurance. Lessee's portion of such charges shall be in the ratio that the gallon capacity of fuel tank Lessee leases hereunder bear to the total gallon capacity of the fuel tanks in Lessor's fuel farm being used by Lessor, Lessee and other parties. -2- G. If Lessee does not spend Forty -One Thousand Three Hundred Fifty -Nine Dollars ($41,359.00) to construct additional structures or remodel existing structures on the leased premises at any time from date hereof to February 1, 2010, the monthly rent for the structures located on the leased premises shall be increased to $1,195.00 per month retroactive to February 1, 2007. Lessee shall on or before February 1, 2010 furnish to Lessor documentation reasonably satisfactory to Lessor that Lessee has spent $42,698.00 to construct additional structures or remodel existing structures on the leased premises. 4. Improvements and Use A. The leased premises shall be used and occupied by Lessee as a facility for air charter services and other related aeronautical services and products. B. Lessee shall maintain the leased premises in accordance with the requirements and regulations of Lessor and Lessor's fire code. Lessee shall be responsible for all costs, fees, charges, and penalties associated with the discharge or release of any hazardous material (including petroleum products) or mitigating the containment or removal of any contamination or hazardous material (including petroleum products) on, over and under the leased premises, fuel farm and ramp which is caused by Lessee, its officers, agents, employees, contractors or fuel suppliers. It is understood that Lessee is not responsible for any conditions, which may be determined to have been caused by parties other than Lessee, its officers, agents, employees, contractors or fuel suppliers, or caused or existing prior to February 1, 1987. The storage and accumulation of aviation fuel, flammables, explosive liquids, or solids, waste, debris or other hazardous materials within or on the leased premises, ramp or fuel farm shall be in an environmentally sound manner and comply with all Federal, State and Local laws and regulations. C. Lessee, at its sole cost and expense, may cause to be constructed and installed upon the leased premises additional improvements in accordance with plans and specification approved by Lessor, including architectural approval, which consent will not be unreasonable withheld or arbitrarily delayed. The improvements shall be constructed in a good and workmanlike manner in accordance with the applicable laws, ordinances and building codes and pursuant to a building permit issued by the Regional Building Department. Lessee will not modify, alter, or improve any improvements upon the leased premises whether now existing or hereafter constructed without the prior written approval of Lessor, which approval shall not be unreasonably or arbitrarily denied or withheld. Lessee may paint any improvements upon the leased premises and the fuel tank with the approval of Lessor. D. Lessee grants to Lessor the right to enter the leased premises to do what is necessary for the purposes of repairing, replacing, and /or maintaining any and all utility lines under the leased premises which serve other uses at the Airport, it being understood that Lessor will repair, in a good and workmanlike fashion, any and all damage done to the leased premises as the result of work done hereunder. E. During the term of this Lease, Lessee shall on a regular and continuous basis provide air charter services upon the leased premises. In the event that Lessor, during the term of this Lease, adopts or has in effect any rules, regulations or minimum standards for airport aeronautical services, which require tenants at the Airport to provide one or more services to their customers, Lessee may only be -3- required to provide, on a regular and continuous basis thereunder, air charter services. Provided, however, in the event the Lessee becomes the sole entity at the Airport with the ability to perform the services of a fixed base operator and is requested by the City's Director of Aviation to perform those services customarily provided by a fixed base operator, Lessee agrees to provide such services, either independently or through the use of subcontractors approved by Lessor. Nothing contained in this Section or anywhere else in this Lease shall be construed to prohibit Lessee from providing on the leased premises any fixed - based operation activities, including sale of aviation fuels, fueling aircraft, aircraft maintenance, repairs, charter services, flight instruction, aircraft rental, aircraft sales and other activities normally associated with or incidental to a fixed -base operation. Lessee, with the consent of the City Manager of Lessor which consent shall not be unreasonably withheld, may provide upon the leased premises any lawful, fixed -based operation activities which do not interfere with the safety of the operation of Airport. F. Lessee acknowledges and agrees that Lessor's primary obligation is to operate the Airport for the use and benefit of the public and that the leased premises is a prime location for fixed -based operations at the Airport. Therefore, in view of the foregoing and long -term nature of this Lease, Lessee and Lessor shall meet at least annually to discuss Lessee's plans for the development and use of the leased premises, the types, kinds and classes of aeronautical activities then reasonably anticipated to be provided in the future, and Lessee's planned additions to and /or modifications of the leased premises. 5. Maintenance Obligation Lessee, at its expense, shall keep the leased premises, including utilities extended to the leased premises, in good repair and condition, and in a safe, sanitary, orderly, and sightly condition, ordinary wear and tear excepted. 6. Title to Improvements The structures leased to Lessee hereunder and any improvements constructed or erected hereunder by Lessee, excluding movable trade fixtures, shall constitute a part of the leased premises and therefore such structures and improvements cannot be removed from the land. Fee simple title to the structures are in the Lessor and fee simple title to subsequently constructed improvements shall vest with Lessor upon completion of construction of same, free of liens and encumbrances. Notwithstanding that title is in or vests in Lessor, Lessor shall not be responsible for any defects in the leased premises or structures and shall have no obligation or responsibility to maintain, repair, or restore the structures and other improvements on the leased premises; all such obligation and responsibility shall be that of Lessee. 7. Ramp Area Lessee acknowledges that the ramp area adjacent to the leased premises ( "ramp area') is currently in need of repairs and re- surfacing and accepts the ramp area in its present condition "AS IS" "WITH ALL ITS FAULTS ", without warranty or representation, express or implied, including, without limitation, any warranties of merchantability or fitness for a particular purpose or condition or usability in their present condition. Lessee agrees that Lessor shall have no obligation to upgrade, repair, re- surface or maintain the ramp area. Lessee shall pay to City Fifteen Thousand and No /100 Dollars ($15,000.00) within thirty (30) days after the City receives from the Federal Aviation Administration a grant award Me which includes and is used for refurbishing and /or resurfacing of the ramp area adjacent to the leased premises, provided such grant is received no later than March 1, 2014. 8. Fuel Tank A. The fuel tank and accessory equipment, including, but not limited to, pump, motor and fuel meter calibration for the fuel tank, is being leased "AS IS" "WITH ALL ITS FAULTS," without warranty or representation, express or implied, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or condition or usability in their present condition. B. Lessor has registered the above ground storage tanks located in its fuel farm with the Director of the Colorado Division of Oil and Public Safety pursuant to C.R.S. 5 -20 -.5 -105 and updated its Spill Prevention Control and Countermeasure (SPCC) Plan as required by law. Lessor shall continue to maintain compliance with those requirements. C. Lessee shall be responsible for quality control of fuel, loading and unloading fuel to and from the fuel tank and compliance with the SPCC Plan for the fuel farm and leased fuel tank. Lessee shall properly train its employees in the use of the fuel farm, fuel tank and the SPCC Plan. D. Except for structural repairs not caused by the acts or omissions of Lessee, its officers, agents, employees, contractors, or fuel suppliers, Lessee shall be responsible to maintain and keep in good and safe repair and working condition the fuel tank and accessory equipment, ordinary wear and tear excepted. Lessee will not be responsible for any reconstruction, remodeling, alteration or modification of the fuel tank or fuel farm required to meet environmental standards not currently satisfied unless caused by the acts or omissions of Lessee, its officers, agents, employees, contractors or fuel suppliers. If any such activity is required by the Lessor or if Lessor is required to make structural or other repairs to or replace the fuel tank or any other fuel tanks located at the fuel farm for any reason, including fire or other casualty, or if Lessor is required to remediate or remove any contamination or hazardous materials (including petroleum products) at or from the fuel farm, Lessor may, at its sole option, either (1) complete, at its cost, the required activities, replacement, or repairs, (2) negotiate a cost - sharing arrangement with Lessee to complete the required activities, replacement, and repairs, or (3) upon thirty (30) days prior written notice, terminate the fuel tank lease and Lessee's right to store aviation fuel in the fuel tank. In the event the Lessor terminates the fuel tank lease as provided in (3) above, Lessor will, at the request of Lessee, negotiate in good faith with Lessee to lease sufficient land to construct and operate its own farm storage facilities for its own use at a location mutually agreeable to Lessor and Lessee. E. Lessee shall (1) maintain fuel meter calibration on the fuel tank and provide semi - annual testing and copies thereof to the Lessor. (2) provide filters, hoses and nozzles required for the fuel tank. (3) immediately notify the Lessor of any fuel release or spills during the loading or unloading of the fuel storage tank or when fueling or maintaining aircraft. Lessee shall be responsible for clean up to the -5- satisfaction of Lessor of any such fuel releases or spills whether caused by Lessee, its officers, agents, employees, contractors, or fuel suppliers. F. Lessor shall maintain storage tank pollution liability insurance covering the fuel tank located within its fuel farm which are being used by Lessor, Lessee and other parties. Lessee shall be named as an additional insured with respect to the fuel tank it leases under this Lease. Such insurance shall be in limits of $1 million each incident, $1 million aggregate, with a $10,000 deductible. G. Lessee's mobile refuelers (fuel trucks) and Lessee's use thereof shall meet and comply with all applicable EPA spill prevention control and countermeasure regulations including, if required, drafting and implementing SPCC Plan therefor. 9. Sians Lessee shall not erect, paint or maintain any signs whatsoever upon the leased premises without first securing the written consent of Lessor, which consent shall not be unreasonably withheld or arbitrarily delayed. Any such signs shall comply with all ordinances and regulations of Lessor or standards which might be developed by the Department of Aviation. Lessee shall not erect, paint or maintain any signs whatsoever upon the ramp area, fuel farm or fuel tank. 10. Right of Inspection Lessor reserves and retains for its officers, employees and authorized representatives the right to enter the leased premises during reasonable business hours, and after prior notice, for the purpose of inspecting and protecting the leased premises, and of doing any and all things which Lessor may deem necessary for the proper general conduct and operation of the Airport, and in the exercise of Lessor's police power. 11. Taxes and Licenses Lessee covenants and agrees to pay promptly all valid taxes and other government charges of whatever nature assessed against or applicable to the leased premises or fuel tank or Lessee or Lessee's property or operations thereon. Lessee also covenants and agrees not to permit any mechanic's or material man's lien to be filed against the leased premises or fuel tank, or any part or parcel thereof by reason of any work or labor performed or materials furnished by any contractor, subcontractor, mechanic or material man. Lessee further covenants and agrees to pay promptly when due all bills, debts and obligations incurred by it in connection with its operations on the leased premises and fuel tank, and not to permit the same to become delinquent and to suffer no lien, mortgage, judgment or execution to be filed against the leased premises or fuel tank which will be in any way an impairment of the rights of Lessor under this Lease Agreement. 12. Indemnification Lessee assumes the risk of loss or damage to the leased premises and property thereon, and on the ramp area and fuel farm, whether from windstorm, fire, earthquake, snow, water run -off, or any other causes whatsoever. Lessee covenants and agrees that it will indemnify and save harmless Lessor, its officers, agents and employees from all demands, claims, costs, causes of action or judgments, and from all expenses incurred by Lessor, in investigating or resisting the same, including reasonable attorney fees, arising from or growing out of the negligent acts or omissions of Lessee, its contractors, agents, members, stockholders, employees, invitees, servants, subtenants, fuel suppliers, successors or assigns in connection with its use or occupancy or their use or occupancy of any portion of the Airport, including the leased premises, ramp area, fuel farm and fuel tank. The provision of this Section and Section 4.13. shall survive the termination of this Lease. 13. Insurance and Damane A. At all times during the term of this Lease Agreement, and of any renewal or extension hereof, Lessee agrees that it will, at its own costs and expense, provide and keep in force commercial liability insurance which includes personal injury, products liability, hangar keepers liability, and property damage with a combined single limit of not less than one million dollars ($1,000,000). Lessee shall insure the structures and other improvements, except fuel tank, in an amount equal to their full insurable value naming Lessor as a loss payee. Lessor shall provide workers' compensation insurance complying with the Colorado Workers' Compensation Act. Lessee shall provide Lessor with copies showing proof of such insurance and subsequent renewals or changes as might occur during the term of this Lease. With respect to any insured loss to the leased premises, structures and property thereon, including aircraft, Lessee releases Lessor, it's officers, agents, and employees from any claim or liability Lessee may have on account of such loss and waives any right of subrogation which might otherwise exist in or occur to any person on account thereof. Lessor shall provide and keep in force airport commercial general liability insurance which covers the fuel farm, with a combined single limit of not less that one million dollars ($1,000,000.00). Lessor shall provide Lessee with copies showing proof of such insurance and subsequent renewals or changes as might occur during the term of this Lease. B. Such polices shall provide that they may not be materially changed, altered, or canceled by the insurer during its terms without first giving ten (10) days written notice by certified or registered United States mail to the parties to this Lease. C. The parties shall not violate the terms or prohibitions of any insurance policy herein required to be furnished. D. If the structures or other improvements (the "Improvements "), except the fuel tank, are damaged or destroyed by fire or other casualty, Lessee shall within one hundred twenty (120) days from the occurrence of such casualty either (1) repair and restore the damaged or destroyed Improvements, (2) demolish the damaged or destroyed Improvements, restore the leased premises to their original condition, and terminate this Lease, in which event the net proceeds of the property damage insurance required to be provided by Lessee pursuant to Section 13.A. shall be retained by Lessor, or (3) demolish the damaged or destroyed Improvements and commence construction of replacement Improvements, and thereafter complete such construction within nine (9) months from the occurrence of such casualty. All repairs to or restoration of Improvements and /or construction of replacement Improvements shall be in compliance with applicable laws and codes, and in accordance with plans and specifications therefore approved by Lessor, which approval will not be unreasonably withheld. Except in the event of (2) above, the net proceeds of property damage insurance provided by Lessee pursuant to Section 13.A. shall be released by City and paid to Lessee for the purpose of Lessee repairing, restoring or replacing improvements damaged or destroyed by such insured fire or other casualty. Rent shall be proportionately abated during the period from the date of the occurrence of such casualty to the completion of repairs, restoration or -7- replacement based upon the square feet of the improvements damaged by such casualty. 14. Waivers No provision of this Lease may be waived except by an agreement signed by the waiving party. A waiver of any term or provision shall not be construed as a waiver of any other term or provision. Should Lessee hold over the use of or continue to occupy the leased premises after the termination or cancellation of this Lease, such holding over shall be deemed merely a tenancy for successive monthly terms upon the same conditions as provided in this Lease subject to termination upon thirty (30) days prior written notice. 1s. Inconvenience During Construction Lessee recognizes that from time to time it will be necessary for Lessor to initiate and carry forward programs of construction, reconstruction, expansion, relocation, maintenance and repair at and to the Airport in order that the Airport and its facilities may be suitable for the volume and character of air traffic and flight activity which will require accommodation, and that such construction, reconstruction, expansion, relocation, maintenance, and repair may inconvenience or interrupt Lessee's operations at the Airport. Lessee agrees that no liability shall attach to Lessor, its officers, agents, employees, contractors, subcontractors and representatives by reason of such inconvenience or interruption, and for and in further consideration of the premises, Lessee waives any right to claim damages or other consideration therefore, provided, however, that this waiver shall not extend to, or be construed to be a waiver of, any claim for physical damage to property resulting from negligence or willful misconduct of Lessor, its officers, agents, employees, contractors, subcontractors and representatives. 16. Place and Manner of Payments In all cases where Lessee is required by this Lease Agreement to pay any rentals, rates, fees or other charges or to make other payments to Lessor, such payments shall be made at the office of the Director of Finance of the City of Pueblo, or at such other place as Lessor may hereafter designate by notice in writing to Lessee and shall be made in legal tender of the United States and any check shall be received by Lessor subject to collection. Lessee agrees to pay any bank charges made for the collection of any such checks. 17. Assignments and Subletting A. Lessee shall not assign this Lease or any interest therein nor sublet the leased premises or any portion thereof without the prior written consent of Lessor, which consent shall not be unreasonably or arbitrarily withheld, delayed, or denied. Any assignment or subletting without the prior written consent of Lessor shall be void. No assignment or subletting of this Lease or the leased premises shall release or discharge Lessee from its obligations under this Lease. B. Lessee, with the consent of Lessor, may sublet space in the structures on the leased premises to a Subtenant or Subtenants pursuant to a written sublease, which shall contain among other provisions the following: (1) The sublease shall be subject to and governed by the basic covenants and provisions of this Lease. Subtenant shall abide by all of the other terms and conditions thereof applicable to the leased premises and use 10 thereof. The sublease may be for a lesser term than specified in Section 2 and for a rental greater than that specified in Section 3. (2) The Subtenant shall maintain and keep in force commercial liability insurance as described in Section 13.A. with a combined single limit not less than one million dollars ($1,000,000). Such insurance requirement may be complied with by Subtenant's coverage under Lessee's master liability insurance policy. (3) An Indemnification provision, substantially the same as set forth in Section 12 hereof. (4) The sublease shall not become effective until an executed copy thereof is delivered to Lessor's Department of Aviation. C. Notwithstanding A or B above, Lessor may deny its consent to any assignment or sublease if Lessor in its sole discretion determines based upon written information supplied to Lessor by Lessee at least sixty (60) days prior to the effective date of such assignment or sublease that the proposed assignee or subtenant has failed to demonstrate the ability to perform this Lease or the proposed sublease in a competent and financially responsible manner. Failure of Lessee to provide adequate written information concerning the assignee or subtenant sufficient for Lessor to make such determination shall be, in and of itself, a sufficient basis for the Lessor to deny its consent to any proposed assignment or sublease. Lessor shall inform Lessee in writing whether it grants or denies its consent to the proposed assignment or sublease. Consent to one assignment or subletting for use by any other person shall not be deemed consent to any subsequent assignment or subletting. D. Lessor consents to Lessee assigning its leasehold estate created hereby (the "Leasehold Estate ") to a financial institution (the "Lender "), as collateral security for the repayment of a construction and /or permanent loan from Lender to Lessee (the "Loan "). For purposes of such Loan, Lessor further consents to Lessee mortgaging or otherwise encumbering its right, title and interest in the improvements as security for the Loan (the "Mortgage "), provided, however, that at no time shall Lessors interest and title in and to the leased premises and improvements be or become subordinate or subject to such Loan and Mortgage. If Lessee so assigns its Leasehold Estate and mortgages or otherwise encumbers its interest in the Improvements, the Lender or any subsequent holder of the Loan may cause the Mortgage to be foreclosed in any lawful manner, or by instrument of conveyance in lieu of foreclosure, acquire Lessee's title and interest in and to the Leasehold Estate and Improvements subject to the terms, covenants and provisions of this Lease. Lessor hereby further agrees to recognize the leasehold mortgagee or any purchaser of the mortgaged leasehold at foreclosure in the same manner as an "assignee" under this Lease. Such assignee shall be bound by the term of this Lease, including, but not limited to, the curing of all defaults. Notwithstanding the foregoing, no mortgagee or trustee or anyone that claims by, through or under a leasehold mortgage shall, by virtue thereof, acquire any greater right in the leased premises and in any building or improvement thereon than Lessee then had under this Lease, and provided further that any leasehold mortgage and the indebtedness secured thereby shall at all time be and remain inferior and subordinate to all of the conditions, covenants and obligations of this Lease and to all of the rights of Lessor hereunder. In no event shall Lessee, its heirs, 91 successors, mortgagee or assignees have the right to encumber, subordinate or render inferior in any manner Lessor's fee simple title in and to the leased premises. Any such leaseholder mortgagee or assignee, at its option, at any time before the rights of Lessee shall have been terminated, may pay any of the rents due hereunder or may do any other act or thing or make any other payment required of Lessee by the terms of this Lease, or may do any act or thing which may be necessary and proper to be done in the observance of the covenants and conditions of this Lease to prevent the termination of this Lease so as to prevent a forfeiture of the rights of Lessee hereunder as the same would have been if done and performed by Lessee instead of by such leasehold mortgagee or assignee. Provided Lessor has received written notice of a leasehold mortgage and copy of all leasehold mortgage documents, during such time as Lessee's leasehold estate is subject to a leasehold mortgage, this Lease may not be modified or voluntarily surrendered without the prior written consent of the leasehold mortgagee; provided further, that this Lease may be terminated without the consent of the leasehold mortgagee if a default or other cause for termination under this Lease occurs and is not corrected or satisfied in accordance with the terms and conditions of the Lease. 18. Agreement with United States This Lease is subject and subordinate to the terms, reservations, restrictions, provisions, and conditions of the deed of conveyance from the United States Government to Lessor and of any other existing or future agreement between Lessor and the United States, relative to the use, operation or maintenance of the Airport and its appurtenant facilities, the execution of which has been or may be required as a condition precedent to the participation by any Federal Agency in the extensions, expansions, maintenance or development of said Airport and facilities. 19. Lessee's Default A. Any one of the following shall constitute an event of default by Lessee hereunder: (1) Failure of Lessee to pay in full all delinquent installments of fees, rent, additional rent, or pro rata portion of fuel farm insurance for a period of thirty (30) days after written notice and demand therefore are given by Lessor to Lessee. (2) Failure of Lessee to perform or comply with any obligation, covenant or agreement of Lessee hereunder other than the payment of money for a period of thirty (30) days after written notice specifying such failure is given by Lessee to Lessor, except that if such obligation, covenant or agreement is not capable of being performed within said thirty (30) day period, Lessee shall not be in default if Lessee shall commence such performance within said thirty (30) day period and thereafter prosecute the same with diligence and continuity to completion. B. In the case of the continuing event of default by Lessee, Lessor shall have the following remedies in addition to all other rights and remedies provided by law or in equity including without limitation, damages and specific performance: -10- (1) Terminate this Lease by sixty (60) days prior written notice given to Lessee specifying the date of termination and Lessee shall within said sixty (60) day period vacate the leased premises and surrender possession thereof to Lessor. (2) Without terminating this Lease, retake possession of the leased premises and relet the leased premises or any part thereof for such term or terms and upon such other conditions as Lessee in its reasonable judgment shall determine. If the rent, fees and other charges are less than those provided for herein, Lessee shall be responsible and liable for any deficiency between the amount of the rent, fees and charges provided for herein and those received through such reletting. Lessor shall not be responsible or liable for any failure to relet the leased premises or any part thereof, or failure to collect any rent, fees or other charges due upon such reletting. No notices from Lessor hereunder or under a forcible entry and detainer statute or similar law shall constitute an election by Lessor to terminate this Lease unless such notice specifically so states. Lessor reserves the right following any such reentry and /or reletting to exercise its right to terminate this Lease as provided in (1) above. 20. Notices All notices, required to be given to Lessor hereunder, shall be in writing and be sent by certified mail to City Manager, 1 City Hall Place, Pueblo, Colorado, 81003, and to Airport Administration Office, 31201 Bryan Circle, Pueblo, Colorado 81001. All notices required to be given to Lessee hereunder shall be in writing and sent by certified mail, addressed to Rocky Devencenty, Travelaire Service, Inc., 525 Skyway Lane, Pueblo, CO 81001, provided, that the parties, or either of them, may designate in writing from time to time subsequent or supplementary persons or address in connection with said notices. The effective date or service of any such notice shall be the date such notice is mailed by Lessee or Lessor. 21. Law, Rules and Regulations A. Lessee, its officers, agents and employees shall faithfully observe and comply with all applicable federal, state and local laws, rules, regulations and ordinances now existing or hereafter adopted relating to the use and occupancy of the Airport or leased premises, ramp area or fuel farm, including without limitation Chapter 1 of Title III of the Pueblo Municipal Code. B. Lessee, its officers, agents and employees shall faithfully observe and comply with all minimum standards and rules regulating operations and activities from and upon the Airport adopted from time to time by Lessor; provided, however, that Lessee shall not be required under any circumstances to provide more services or products than are required of it pursuant to Section 4E hereof. Such minimum standards and rules shall not be applied arbitrarily, discriminatorily, or unreasonably. Except with respect to matters of public health and safety, if any provision of this Lease shall conflict with any provision of the minimum standards and rules adopted or amended by Lessor after commencement date, the conflicting provision of this Lease shall control. 22. F.A.A. Lease Requirements A. Lessor reserves the right, without any obligation on its part to do so, to develop, modify, change, improve or abandon the Airport or any part thereof, as it may -11- determine in its sole discretion, at any time, regardless of the desires or view of Lessee, and without interference or hindrance from Lessee or liability to Lessee. B. Lessor reserves the right, without any obligation on its part to do so, 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 Lessee in this regard. C. This Lease shall be subordinate to the provisions and requirements of any existing or future agreement between Lessor and the United States, relative to the use, development, operation, or maintenance of the Airport. D. Lessee shall comply with the notification and review requirements covered in Part 77 of the Federal Aviation Regulations with respect to the construction of any structure or building on the leased premises, or in the event of any planned modification or alteration of any present or future building or structure on the leased premises. E. It is understood and agreed that nothing contained in this Lease shall be construed to grant or authorize the granting of an exclusive right within the meaning of Section 308 of the Federal Aviation Act. F. Lessor reserves for the use and benefit of the public, a right of flight for the passage of aircraft in the airspace above the surface of the leased premises and ramp area, together with the right to cause in said airspace such noise as may be inherent in the operation of aircraft now known or hereafter used for navigation or flight in said airspace, and for use of said airspace for landing on, taking off from, or operations on or over the Airport. G. Lessee by accepting this Lease expressly agrees for itself, its successors and assigns that it will not erect nor permit the erection of any structure, building or object nor permit the growth of any tree on the leased premises to a height not to exceed thirty -five (35) feet above ground level. In the event the aforesaid covenant is breached, Lessor reserves the right to enter upon the leased premises and to remove the offending structure or object and cut the offending tree, all of which shall be at the expense of the Lessee. H. Lessee shall not make use of the leased premises, ramp area or fuel tank in any manner which might interfere with the landing and taking off of aircraft at Airport or otherwise constitute a hazard to aviation. In the event the aforesaid covenant is breached, Lessor reserves the right to enter upon the leased premises, ramp area and fuel tank and cause the abatement of such interference at the expense of the Lessee. If during the term of this Lease, all or part of the leased premises or fuel tank should be taken or threatened to be taken for any public or quasi - public use under any governmental law or by right of eminent domain, or sold to the condemning authority under threat of condemnation, this Lease shall terminate and the proceeds, if any, from such taking or sale shall be allocated between Lessor and Lessee in accordance with applicable condemnation law. J. Lessor reserves the right to grant and to take easements or rights of way in, under, over and across the leased premises, in which event, Lessor shall only be entitled to compensation for damages to improvements of the Lessee destroyed -12- or damaged thereby, but not to damages for loss of use of the leased premises or ramp. K. Lessee agrees to annually complete and submit a Department of Transportation - Federal Aviation Administration Airport Activity Survey (FAA Form 1800 -31) that documents Lessee's air taxi - commercial passenger enplanements for each calendar year. L. Lessee agrees to annually report on certificated air carrier aircraft that it services. The report shall detail the aircraft registration number, manufacturer, make and model, and aircraft owner. This information will be used by the Airport to determine the Airport's eligibility for federal airport improvement program grants and will only be shared with the Federal Aviation Administration. 23. Nondiscrimination Assurances A. The Lessee, for itself, its successors and assigns, as a part of the consideration hereof, does hereby covenant and agree as a covenant running with the land that in the event facilities are constructed, maintained, or otherwise operated on the leased premises, for a purpose for which Department of Transportation program or activity is extended or for another purpose involving the provision of similar services or benefits, the Lease shall maintain and operate such facilities and services in compliance with all requirements imposed pursuant to 49 CFR, Part 21, Nondiscrimination in Federally Assisted Programs of the Department of Transportation, and as the regulations may be amended. B. The Lessee, for itself, its successors and assigns, as a part of the consideration hereof, does hereby covenant and agree as a covenant running with the land that (i) no person on the grounds of race, color, religion, sex, disability or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of the leased premises; (ii) that in construction of any improvements on, over or under such land and the furnishing of services thereon, no person on the grounds of race, color, religion, sex, disability, or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination; and (iii) that the Lessee shall use the leased premises in compliance with all other requirements imposed by or pursuant to 49 CFR, Part 21, Non - discrimination in Federally Assisted Programs of the Department of Transportation, and as the regulations may be amended. C. The Lessee assures that it will undertake an affirmative action program as required by 14 CFR, Part 152, Subpart E, to insure that no person shall on the grounds of race, creed, color, religion, disability, national origin or sex be excluded from participating in any contracting, leasing or employment activities covered in 14 CFR, Part 152, Subpart 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 subpart. The Lessee assures that it will require that its 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 14 CFR, Part 152, Subpart E, to the same effect. D. Lessee agrees to operate the leased premises for the use and benefit of the public and to furnish good, prompt and efficient services adequate to meet all the demands for its services at the Airport, to furnish service on a fair, equal and not -13- unjustly discriminatory basis to all users thereof, and to charge fair, reasonable, and not unjustly discriminatory prices for each unit of service, provided that Lessee may be allowed to make reasonable and nondiscriminatory discounts, rebates or other similar types of price reductions to volume purchasers. 24. Miscellaneous A. This Lease and all of its covenants and provisions shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors, subtenants and approved assigns. B. No waiver by Lessor of any failure by Lessee to comply with any term or condition of this Lease shall be or shall be construed to be a waiver by Lessor of any other failure by Lessee to comply with any term or condition of this Lease Agreement. C. This Lease and any amendments hereto are subject to prior approval of the Federal Aviation Administration. D. Lessee is leasing the leased premises "AS IS" "WITH ALL ITS FAULTS" in its present condition. Lessor makes no representation or warranties with respect to the present or future condition, or suitability for a particular use of the leased premises or the Airport. Lessor shall be under no obligation to maintain the Airport or any part thereof in a particular location or condition. If the Airport shall permanently close or relocate, the use restrictions stated in Section 4 shall not apply, and the Lessee may use the leased premises for any lawful use or purpose allowed by the then existing Pueblo Municipal Code, or in the alternative, Lessee may terminate this Lease upon thirty (30) days prior written notice given to Lessor. E. In the event of any litigation arising under this Lease, the court shall award the prevailing party its costs and expenses of litigation including without limitation, reasonable attorney and expert witness fees. Venue for any such litigation or other proceedings arising under this Lease shall be Pueblo County, Colorado. 25. Flying Winds Lease Lessee understands that the City will not renew or extend the term of the Pueblo Memorial Airport Lease Agreement of September 22, 1980 between Flying Winds, Inc. and Lessor ( "Flying Wind's Lease ") which expires September 22, 2010, and that Lessee as assignee of Flying Winds, Inc.'s interest in and to the Flying Wind's Lease will vacate the leased premises under the Flying Wind's Lease and surrender possession thereof to Lessor on September 22, 2010 as provided in the Flying Wind's Lease. 26. Current Lease The Land Lease and Operating Agreement dated January 26, 1987 and all amendments thereto, between Lessor and Lessee, the term of which expires January 31, 2007, shall terminate and be cancelled on midnight January 31, 2007 and Lessor and Lessee shall be released and discharged from all future obligations thereunder. 27. Fuel Tank Lease Notwithstanding any provision of this Lease to the contrary, this Lease and all its applicable provisions shall become effective upon date hereof with respect to and for the fuel tank. This Lease with respect to and for the fuel tank may be terminated by either party upon ninety (90) MEN days prior written notice given to the other party specifying the date of termination. If either Lessor or Lessee terminates this Lease with respect to and for the fuel tank, Lessor will, at the request of Lessee, negotiate in good faith with Lessee to lease sufficient land to construct and operate its own fuel storage facilities for its own use at a location mutually agreeable to Lessor and Lessee. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written. LESSOR: City of Pueblo, a Mu icipal Corporati t B4Y obert D. S filling, r. Title: President of City Council Attest: City A'-Irk Approved as to form: reef City Attorney -15- LESSEE: Travelaire Service, Inc. P.K. nail with 1 brass ssher F.L.S. No. 16128 0 N 24 /Y 2 5 2 aea o ea�J� EXHIBIT A ��o� 1 et No. 4 rebar with yellow N 88'35'12' 180.55' Plastic cap P.L.S. No. 16128 156.17 1 24.28 I I °. s ot` P oe�ot� a 'b a � � P at 1 ` 11N J" o ' Pct 1a I� Z" 40' 20' 0 I Q H o I a SCA = Found con, 3 1/4' /so cast iron r: I I I (R) =Dimension Trovelaire I I i doted Janu I I I I I I I I I _ I POINT OF BE61NI No. 4 rebor with yellow ;c cap P.L.S. No. 16128 S Found ConcrRid monument with 3 1 4' lead and brass tack in rcost ;ran monument box b N n Q1 44 I(0 �'.. 40 W31'26V 181-61" Set P.K. nail with 1" brass wosher P.L.S.- No. 16128 5 �i. I �J� I air. 975.66 I Found concrete mon 3 114' lead and br cast iron mo, Magnuson N 8 6'27'3 9E 108_5.66' centerlin e / $ E 114 comer Section 25 Avenue round concrete monument with • 3 114' Wed and brass tack in 1 cast iron monument box I �so 1 895.66' I ' Q+ddI19 ��M�Y >. ". �•p. " i'.. � t' _SR � rt++s .� - � •. � ..� P•- 015.04 �: , b', r .', .. _ _ EXHIBIT A A parcel of land located within a portion of Parcel N of Pueblo Memorial Airport Industrial Park Subdivision, located within a portion of the E 112 of the NE 1/4 of Section 25. Township 20 South, Range 64 West of the Sixth Principal Meridian, said parcel being more particularly described as follows: BEORtNRM. at a point from which the E 114 comer of said Section 15 bears S 41 E (bearings based on the centerline of Walt Bassett Avenue. from its centerline intersection with Keeler Parkway to its centerline intersection with Reyes Street, assumed to War N 88'2639T. with all bearings contained herein being relative thereto), a distance of 931.64 fee(: thence S 80'31'26'W a distance of 181.61 feet; thence N O1'2350'W a distance of 285.10 feet; thence N WJ5'12T a distance of 180.55 feet; thence S 0176'.37'E a distance of 284.90 feet to the PORK OF BEGJIWAYS. Pueblo County. Colorado. Said parcel contains. 1.181 acres. 4 ROCKY L MANCK a Professional Land Surveyor registered in the State of Colorado. hereby certify that a survey or the land described above was done by me or under my responsible charge in July 1999 and complies with the minimum standards for Land Surveys and Plots as set forth in Section 38 -51 -1081 at. seq. C.R.S. 1994 (as amended). - a �- PROFESSIONAL LAND R NO. 10728 NOTM I) A search for recorded rights of way and easements was not done at the clients request. 1) Bearings based on the centerline of Walt Bassett Avenue (formerly American Avenue) from its centerline intersection with Keeler Parkway to its centerline intersection with Reyes Street, monumented at each end with a concrete monument with a food and brass tack in a cost iron range box, as platted in the Pueblo Memorial Airport Industrial Park Subdivision, recorded in Book 2536 at Page 669 in the records of the Pueblo County Clerk and Recorder, assumed to bear N 88'26'39T- NOTICE According to C.R.S. 13 -80 -105, you must commence any legal action based upon any defect in this survey within three years after you first discover such defect. In no event may any action based upon any defect in this survey be commenced mom than ten years from the date of the certificate show 120' sit: P� j.. 1 1 l R i t I 2 _ em u!°^ - I-WrAl Lot 30 a. "°"" 14 won Bagwell • ans'19 A ~Yd i ► -, Lot 31 - X Lot 33 me _ �Q Q GbI e MONUMENTATION fnAt lA 1MV7 • .