Document:

Exhibit 10.11

 

PURCHASE AGREEMENT #

DATED March 18, 2005

 

AN AIRCRAFT SUB-ASSEMBLY

MANUFACTURING AGREEMENT

 

BETWEEN

 

UTILICRAFT AEROSPACE INDUSTRIES, INC.

 

AND

 

METALCRAFT TECHNOLOGIES, INC.

 

 

TABLE OF CONTENTS

 

	
  CLAUSE

  	
   

  	
  Title

  	
   

  
	
  1.0

  	
   

  	
  DEFINITIONS

  	
   

  
	
  2.0

  	
   

  	
  PRODUCTS

  	
   

  
	
  3.0

  	
   

  	
  TERM
  OF AGREEMENT

  	
   

  
	
  4.0

  	
   

  	
  COMMITTED QUANTITY AND PRICE

  	
   

  
	
  5.0

  	
   

  	
  PURCHASE
  ORDER RELEASES

  	
   

  
	
  6.0

  	
   

  	
  DELIVERY

  	
   

  
	
  7.0

  	
   

  	
  TITLE
  AND RISK OF LOSS 

  	
   

  
	
  8.0

  	
   

  	
  TAXES

  	
   

  
	
  9.0

  	
   

  	
  TERMS
  OF PAYMENT

  	
   

  
	
  10.0

  	
   

  	
  EXCUSABLE DELAYS / FORCE MAJEURE

  	
   

  
	
  11.0

  	
   

  	
  TERMINATION

  	
   

  
	
  12.0

  	
   

  	
  INDEMNIFICATION
  

  	
   

  
	
  13.0

  	
   

  	
  RELEASE OF NEWS INFORMATION AND ADVERTISING

  	
   

  
	
  14.0

  	
   

  	
  PROGRAM
  MANAGEMENT

  	
   

  
	
  15.0

  	
   

  	
  DISCLOSURE
  OF INFORMATION

  	
   

  
	
  16.0

  	
   

  	
  GENERAL
  PROVISIONS

  	
   

  
	
  17.0

  	
   

  	
  DISPUTES

  	
   

  
	
  18.0

  	
   

  	
  GOVERNING
  LAW

  	
   

  
	
  19.0

  	
   

  	
  NOTICES

  	
   

  
	
  20.0

  	
   

  	
  ENTIRE
  AGREEMENT

  	
   

  
	
   

  	
  AUTHORIZING SIGNATURES

  	
   

  
	
   

  	
   

  	
   

  
	
  Attachment
  1

  	
   

  	
  STATEMENT
  OF WORK

  	
   

  
	
  Attachment
  2

  	
   

  	
  PRODUCT
  PRICING

  	
   

  
	
  Attachment
  3

  	
   

  	
  PROPRIETARY
  INFORMATION EXCHANGE AGREEMENT

  	
   

  
						

 

 

PURCHASE AGREEMENT #

 

THIS AIRCRAFT SUB-ASSEMBLY
MANUFACTURING AGREEMENT, aka “PURCHASE AGREEMENT #        , DATED [WHEN]” (hereinafter
“Agreement”) is entered into as of [WHEN] (hereinafter referred to as
“Effective Date”) by and between Utilicraft Aerospace Industries, Inc., a
Nevada corporation having a place of business in Lawrenceville, Ga (hereinafter
referred to as “UTILICRAFT”), and Metalcraft Technologies, Inc. (hereinafter
referred to as “Metalcraft”), a Utah corporation having a place of business in
[ILLEGIBLE] City, Utah.

 

UTILICRAFT and Metalcraft are separately referred to herein as “Party”
and collectively as “Parties”.

 

WITNESSETH

 

WHEREAS, UTILICRAFT is in the business of manufacturing and selling
aircraft; and

 

WHEREAS, Metalcraft is in the business of manufacturing and assembling
structural aircraft components and

 

WHEREAS,
UTILICRAFT desires to purchase structural aircraft details and assemblies for
installation in UTILICRAFT’S aircraft; and

 

WHEREAS, the
Parties consider it to be mutually advantageous that the work, prices, provisions
and terms governing the purchase by UTILICRAFT and sale by Metalcraft be set
forth in a non-exclusive Agreement.

 

NOW, THEREFORE, in consideration of the
mutual covenants herein contained, the Parties hereto agree as follows:

 

1.0          DEFINITIONS

 

1.1           For purposes of this Agreement the following terms shall have the meaning
indicated:

 

1.2           “Product” or “Products” shall mean details, assemblies, tools, and
manufacturing planning that meet specifications as set forth by UTILICRAFT.

 

1.3           “Specifications” shall mean the document(s) produced by UTILICRAFT that
delineates the functional, operational, and technical requirements of the
product.

 

2.0          PRODUCTS

 

2.1           This Agreement shall govern the purchase by UTILICRAFT and the sale by
Metalcraft as defined above and as set forth in the Attachments and
manufactured in accordance with the UTILICRAFT Specifications.

 

2.2           Metalcraft agrees that any engineering and/or tooling developed and
produced by Metalcraft as part of its performance of this Agreement and paid
for by UTILICRAFT will become the property of UTILICRAFT as existing patent
enhancements of the patents assigned by Mr. John J. Dupont to UTILICRAFT
under U.S. patent law and will be provided to UTILICRAFT, upon request at any
time, or if the Agreement is terminated for any reason.

 

3.0          TERM OF AGREEMENT

 

3.1           This Agreement shall become effective when
dated and signed by both parties. It shall remain in full force and effect for
seventy two (72) months or until UTILICRAFT has taken delivery and paid for the
Committed Quantity of Product, whichever comes later, unless otherwise
terminated in accordance with the provisions hereof or extended by both
parties.

 

4.0          COMMITTED QUANTITY AND PRICE

 

4.1           The invoice price of the Product(s) shall be based upon the UTILICRAFT’S
Committed Quantity in the purchase order(s) and the cumulative quantity level
of the Product(s) set forth in Attachment 2. Product Pricing, that are
purchased and delivered during the term of this Agreement. This includes all
aspects of Phase 1and Phase 2.

 

1

 

4.2           UTILICRAFT
will include the Metalcraft’s details and assemblies on the UTILICRAFT FF-1080 for
the term of this Agreement as long as Metalcraft meets all of the conditions of
this agreement and related purchase orders in addition to UTILICRAFT’S cost,
quality, and delivery, requirements.

 

5.0          PURCHASE ORDER

 

5.1           A
“Purchase Order” is an authorization from UTILICRAFT to construct and deliver
fuselages for a specific lot number and quantity of Aircraft.  The Purchase Orders issued by UTILICRAFT
Aircraft will have the following notation:

 

“This purchase
Order is subject to the terms and conditions of Purchase Agreement #        ,
dated         , 2005 between UTILICRAFT
and Metalcraft (“the Agreement”) and will incorporate these terms into the purchase order by reference.”

 

In the event
of any inconsistency between the terms and conditions of the Agreement and the
terms of a Purchase Order, Purchase Change Order, or Order Acknowledgment, the
terms and conditions of the Agreement shall prevail.

 

5.2           Metalcraft
is required to acknowledge
receipt and acceptance or rejection of a Purchase Order or purchase Order
Change Order within ten (10) days of receipt thereof.  Should Metalcraft reject the order, such
rejection must be in writing, delivered to UTILICRAFT by mail or facsimile and
must clearly state the reason(s) for doing so, to permit UTILICRAFT the election
to either correct or withdraw the order

 

7.0          TITLE AND RISK OF LOSS 

 

Shipping terms are described in Attachment 2.

 

8.0          TAXES

 

All duties and
taxes incurred prior to delivery of Product to UTILICRAFT and payable in the
country of manufacture and due under the laws of that country shall be borne by
Metalcraft. Metalcraft is liable for and shall pay all taxes, impositions,
charges and exactions imposed on or measured by this Agreement or any Purchase
Order released under this Agreement prior to delivery of Product to UTILICRAFT,
except those UTILICRAFT specifically agrees or is required by law to pay and
which are separately stated on Metalcraft’s invoice. Prices charged to UTILICRAFT
by Metalcraft shall not include any taxes, impositions, charges and exactions
for which UTILICRAFT has furnished an exemption certificate. UTILICRAFT shall
be responsible for all duties and taxes, which are incurred by the act of and
after delivery of Product to UTILICRAFT.

 

9.0          TERMS OF PAYMENT

 

9.1           UTILICRAFT
agrees to make timely payments as described in Attachment 2 via Automated
Clearing House (ACH) or Metalcraft shall be entitled to withdraw any undisputed
payments which become overdue from the deposit. 
Any payments received late for which a deposit withdrawal has been made
will be placed in the deposit to restore the deposit balance.

 

9.2           All
packing slips sent with the Product shall clearly state the Purchase Order
number, a clear description of the Product and the
established price.

 

2

 

10.0        EXCUSABLE
DELAYS / FORCE MAJEURE

 

Both parties
shall be excused for delays in performing and failures to perform to this
Agreement and any Purchase Order or other document Issued under this Agreement
to the extent that any such delay or failure results from any causes beyond their
control. Such causes may include, but are not restricted to, acts of God or of public enemy, strikes and other
labor disputes, epidemics, quarantine restrictions, acts of governments or
government regulations, public disorder, freight embargoes, unusually severe
weather, catastrophes of flood, fire, and explosion, affecting either
UTILICRAFT, Metalcraft or any supplier to Metalcraft, unless the goods or
services to be furnished by the supplier were obtainable from other sources in
sufficient time and at a reasonably comparable price to permit Metalcraft to
meet the required delivery schedule but in every case the failure to
perform must be beyond the control and without the fault or negligence of the
Party excused. Both Parties agree to make every reasonable effort to prevent
such occurrences from affecting this Agreement.

 

11.0        TERMINATION

 

11.1         Termination
for Default

 

11.1.1      For
Defaults caused by Metalcraft, UTILICRAFT may, by written notice of default to
Metalcraft and Metalcraft’s failure to cure the default within thirty (30) days
from receipt of written notice, terminate the whole or any part of any Purchase
Order and this Agreement in any one of the following circumstances: (i) If
Metalcraft fails to make delivery of the goods or to perform the services
required by this Agreement and/or a Purchase Order within the time specified
therein or any extension thereof except for failure to perform pursuant to Section 10.0
or (ii) If Metalcraft fails to perform any of the requirements or to perform
any of the other provisions of this Agreement and/or an Purchase Order, or so
fails to make progress as to endanger performance of this Agreement and/or a
Purchase Order in accordance with its terms and conditions, and does not cure
such failure within a period of thirty (30) days (or such longer period as
UTILICRAFT may authorize in writing) after receipt of notice from UTILICRAFT
specifying such failure except for failure to perform pursuant to Section 10.0.

 

11.1.2      In the event UTILICRAFT terminates this Agreement
and/or a Purchase Order in whole or in part as provided in subparagraph 11.1.1.
UTILICRAFT shall pay to Metalcraft all costs incurred prior to the date of any
termination pursuant to Section 11.1.

 

11.1.3      If
the failure to perform is caused by the default of Metalcraft or its
subcontractor, and if such default arises out of causes beyond the control of
both Metalcraft and the subcontractor as set forth in Section 10.0 and
without the fault or negligence of either of them, Metalcraft shall be compensated
for costs incurred prior to the notice of default plus a reasonable profit of
up to 10% and Metalcraft shall not be liable for any excess costs for failure
to perform, unless the goods or services to be furnished by the subcontractor/
supplier were obtainable from other sources in sufficient time and at a
reasonably comparable price to permit Metalcraft to meet the required delivery
schedule. The term “subcontractor(s)/ supplier” shall mean subcontractor(s)/
supplier at any tier.

 

11.1.4      If,
after notice of termination of a Purchase Order under the provisions of this
Paragraph, it is determined through the Alternative Dispute Resolution
processes described herein that Metalcraft was not in default under the
provisions above, or that the default was excusable under the provisions of
said paragraphs, the rights and obligations of the parties shall be the same as
if UTILICRAFT’S notice of termination had been issued for its convenience
pursuant to the “Termination for Convenience” paragraphs of this Agreement.

 

11.1.5      For
Defaults caused by UTILICRAFT, Metalcraft may, by written notice of default to
UTILICRAFT and UTILICRAFT’S failure to cure the default within thirty (30)
days, terminate the whole or any part of any Purchase Order and this Agreement
in any one

 

3

 

of the
following circumstances: (1) Failure to provide adequate engineering and
technical support on a timely basis in response to engineering changes and UTILICRAFT
technical information and (2) Failure to adhere to the payment terms as
outlined in Attachment 2.

 

11.2         Termination
for Insolvency- In the event of the institution of any proceedings by or
against either party in bankruptcy or insolvency or under any provision of the
Bankruptcy Act including, without limitation, proceedings under Chapter X and
XI thereof, or the appointment of a receiver or trustee or an assignment for
the benefit of creditors of said party, or the institution of any similar
proceedings, the other party may terminate this Agreement and all Purchase
Orders. Any termination under this Paragraph shall be deemed to be a
termination for default in accordance with the paragraph of this Agreement
entitled “Termination for Default.

 

11.3         Termination
for Convenience- UTILICRAFT may, at any time by written notice, terminate all
or any part of any Purchase Order for UTILICRAFT’S convenience, in which event
Metalcraft agrees to stop work immediately as to the terminated portion of said
Purchase Order and to notify its subcontractor(s) to stop work, and protect and
preserve property in its possession in which UTILICRAFT or UTILICRAFT’S
Customer has an interest. If said Purchase Order is terminated, in whole or in
part, for UTILICRAFT’S convenience, Metalcraft shall be paid within 45 days of
the Issuance of said “Stop Work Order” an amount, which shall cover the
reasonable cost of Metalcraft’s actual performance of work under said Purchase
Order to the effective date of termination, plus a reasonable profit of up to
10%. If UTILICRAFT does not purchase the Product from another supplier, then no
amount shall be paid to Metalcraft for (i) any anticipatory profits related to
work under said Purchase Order not yet performed, or (ii) costs incurred
due to Metalcraft’s failure to terminate work as ordered on the effective date
of termination. If UTILICRAFT obtains the Product from another supplier or
produces the Product Internally, Metalcraft will be paid $20,000 for each and
every aircraft produced including all anticipated 528 aircraft.

 

11.4         The
rights and remedies of both parties provided in this section 11 shall not
be exclusive and are in addition to any other rights and remedies provided by law
or in equity or under this Agreement or a Purchase Order. Any termination of a
Purchase Order under this Paragraph shall not relieve either party of any
obligations and liabilities which may have arisen under any of the terms and
conditions of this Agreement or a Purchase Order prior to such termination,
including, but not limited to, paying all payments owed, latent defects, and
warranty obligations.

 

12.0        INDEMNIFICATION, SAFETY, AND INSURANCE

 

	
  12.1         Metalcraft shall be solely responsible
  for Metalcraft’s employees or agents for all purposes related to the contract.
  Without limiting the forgoing, Metalcraft shall maintain public liability and
  property damage insurance in reasonable limits to cover the obligations, liabilities
  and responsibilities of Metalcraft. Metalcraft shall also maintain proper
  worker’s compensation insurance covering Metalcraft’s employees. Accordingly,
  and independently of Metalcraft’s insurance obligations, Metalcraft shall indemnify
  and hold harmless UTILICRAFT, its officers and employees from any loss, cost,
  damage, expense or liability by reason of property damage or personal injury
  caused to or suffered by Metalcraft’s employees whether on premises occupied
  by or under control of UTILICRAFT. UTILICRAFT shall owe Metalcraft a
  reciprocal duty to be solely responsible for UTILICRAFT’S employees wherever
  located.

  

 

	
  12.2         Metalcraft shall
  maintain in full force and effect with insurer satisfactory product liability
  insurance, with adequate limits, which shall in no event, be less than
  fifteen million dollars ($15,000,000) per occurrence. This amount may be
  revised based on the total aircraft product liability and on establishing a
  revised value for Metalcraft based on their proportionate share.

  

 

12.3         As
between the Parties in connection with the performance of this contract, each
party shall be responsible for direct damages caused by its fault to third
parties, whether by punitive act, imprudence, neglect or want of skill.
Provided, however, that nothing in this Agreement shall

 

4

 

make Metalcraft responsible for the adequacy of the engineering,
which remains the responsibility of UTILICRAFT. 

 

13.0        RELEASE OF NEWS INFORMATION
AND ADVERTISING

 

13.1         Neither Party shall, without the prior
written consent of the other Party:

 

13.1.1      Make any news releases, public announcement,
denial or confirmation of any part of the subject matter of this Agreement or
related Purchase Order; or 

 

13.1.2      In any manner advertise or publish the fact
that the Parties have entered into this Agreement or placed any Purchase Orders
in connection therewith.

 

13.2         UTILICRAFT and Metalcraft shall, mutually
agree upon a sales and marketing plan where the promotion, marketing, and sales
of Products will be defined.

 

14.0        PROGRAM MANAGEMENT

 

14.1         Metalcraft will periodically update the Microsoft Project tracking sheet
previously provided to UTILICRAFT.

 

14.2         Metalcraft will participate in monthly program management reviews.

 

14.3         Metalcraft will provide weekly progress reports.

 

14.4         Metalcraft will use closed loop problem report and corrective action
system. 

 

15.0        DISCLOSURE OF INFORMATION

 

As mutually agreed upon between the parties, their directors, officers,
employees and agents, each Party shall preserve as confidential all information
pertaining to the Parties’ business and all technical and proprietary
information obtained between the Parties from each other in the performance of
this Agreement. This shall be governed by the Proprietary Information Exchange
Agreement between the Parties, Attachment 3, which is attached hereto and made
a part hereof.

 

16           GENERAL PROVISIONS

 

16.1         The invalidity in whole or in part of any provision of this Agreement
shall not affect the validity of any other provision of this Agreement unless
the invalidated portion is so central to the overall purpose of this Agreement
as to destroy its commercial purpose, in which case either Party shall have the
right to terminate this Agreement.

 

16.2         It is understood and agreed that neither Party hereto is, by this
Agreement or anything herein contained, constituted or appointed the agent or
representative of the other Party for any purpose whatsoever.  Nothing herein contained shall be deemed or
construed as granting to either Party any right or authority to assume or to
create any obligation or responsibility, express or implied, for or on behalf
of or in the name of the other Party, or to bind the other Party in any way or
manner whatsoever.

 

17           DISPUTES

 

17.1         Any dispute by UTILICRAFT of an invoice
amount prior to payment shall be submitted in writing (including via e-mail or
facsimile) before payment is due under Attachment 2, and the undisputed portion
of the invoice shall be paid without regard to the dispute. The parties then
shall work together to resolve the dispute as quickly as possible. Any part of
any invoice not disputed in writing prior to the time payment is due shall be
timely paid in full, but such payment shall not prevent UTILICRAFT from
receiving and adjustment and refund it may otherwise be entitled to.

 

17.2         In case of a dispute arising from the Agreement, the Parties’ sole remedy
shall be to conduct a mutually agreed upon form of Alternative Dispute
Resolution (“ADR”) [e.g., negotiation or mediation], through knowledgeable
representatives of each Party, with decision-making authority. If the Parties
are unable to resolve the matter through ADR, then the matter shall be

 

5

 

submitted to binding arbitration before a single arbitrator pursuant to
the Commercial Arbitration Rules of the American Arbitration Association.  The Parties shall share evenly all costs of
the ADR and arbitration. 

 

18           GOVERNING LAW

 

18.1         This Agreement and all Purchase Orders
released hereunder shall be construed, interpreted and applied in accordance
with the laws of the State of Utah

 

19           NOTICES

 

19.1         All notices and other communications required or authorized hereunder
shall reference this Agreement and applicable Purchase Order and shall be given
in writing by mail, facsimile or hand-carried to the respective Party as
follows:

 

	
  To UTILICRAFT:

  	
   

  	
  To Metalcraft:

  
	
  Utilicraft Aerospace
  Industries, Inc.

  	
   

  	
  Metalcraft Technologies Inc.

  
	
  554 Briscoe Blvd

  	
   

  	
  498 North 2774 West

  
	
  Lawrenceville, Ga 30045

  	
   

  	
  Cedar City, Utah 84757

  
	
  Attn: John Dupont

  	
   

  	
  Attn: Chuck Taylor and David
  Grant

  
	
  Phone: 678-376-0898

  	
   

  	
  Phone (435) 586-3871.

  
	
  Fax: 678-376-9093

  	
   

  	
  Fax: (435) 586-0289

  

 

2.0          ENTIRE AGREEMENT

 

20.1         All prior negotiations and understandings
regarding the subject matter hereof are merged into the provisions of this Agreement, which, together
with the Attachments, attached hereto by reference, and any Purchase Order(s)
released hereunder, shall constitute the entire agreement between the Parties.
No modifications, waivers or amendments shall be valid unless in writing and
signed by the Parties hereto. 

 

IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives.

 

	
  Utilicraft Aerospace Industries, Inc.

  	
   

  	
  Metalcraft Technologies, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John Dupont

  	
   

  	
   

  	
  By:

  	
  /s/ Chuck Taylor

  	
   

  
	
   

  	
  John Dupont

  	
   

  	
   

  	
  Chuck Taylor

  
	
   

  	
   

  	
   

  
	
  Title: President and CEO

  	
   

  	
  Title: Vice President

  
	
  Utilicraft Aerospace
  Industries, Inc.

  	
   

  	
  Metalcraft
  Technologies, Inc.

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  March 21, 2005

  	
   

  	
   

  	
  Date:

  	
  March 18, 2005

  	
   

  
											

 

6

 

ATTACHMENT
1

 

FUSELAGE STATEMENT OF WORK FOR AMERICAN
UTILICRAFT

 

Phase 1- - FAA
CERTIFIED AIRCRAFT- 1 Test Article

 

During Phase
1 of the program (which includes all activities up to and through the FAA
Certification of an aircraft) both Parties anticipate that engineering
requirements will be fluid and that there will continue to be a significant
number of engineering changes that will take place during this phase of the
program. Paperwork and quality requirements will also be more intensive in this
part of the program than in Phase 1 of the program. This is also the phase of
the program where production tooling will begin to be acquired which will
generate significant cost and risk to the entire team. The proposal for Phase 2
recognizes and attempts to address some of these risks.

 

MANUFACTURING.  Metalcraft will manufacture the detail and assemblies as listed below.

 

1.     Nose Section. MTI will manufacture and
assemble the nose section that includes the structural portions located
forward of the forward bulkhead.  This does not include the radome transparencies
or any of the avionics suite.

 

2.     Center Fuselage section. This section includes
all structural components aft from the forward bulkhead to the beginning of the
Aft section. MTI will provide the detail parts and assembly Jigs, and [ILLEGIBLE] assemble the Center
Fuselage Section in Cedar city.

 

3.     Aft Fuselage Section. This section includes
the structural components located aft of the Center fuselage including the
vertical stabilizer and horizontal stabilizer.  This section will most likely be delivered
in three sub assemblies, the Aft Fuselage, the Vertical Stabilizer, and the
Horizontal Stabilizer.  However, this may
change as the engineering is finalized

 

4.     Additional Assistance. Metalcraft will
provide oversight and assistance to UTILICRAFT in New Mexico during the mating
process of the Forward, Center and Aft sections into the assembled fuselage as
requested by UTILICRAFT.

 

PROGRAM MANAGEMENT.   During
Phase 1, Metalcraft’s Program manager with help to insure that certification
requirements are met.  Metalcraft has
significant experience in documentation requirements for certification of new
aircraft. Program management will play an important role in making sure all
requirements are met. Because of expected engineering changes during Phase 1 of
the program, the interface between UTILICRAFT and Metalcraft’s program
management will be a very high priority. The Program Manager will have direct
line authority to the Vice President of Programs for Metalcraft to insure
access and communication at the highest levels of Metalcraft.

 

ENGINEERING.  During
Phase 1 of the program Metalcraft anticipates that engineering requirements
will be fluid and that there will continue to be a significant number of
engineering changes that will take place during this phase of the program. Metalcraft’s
engineering will work very closely with UTILICRAFT’S engineering organization
react as quickly as possible to design changes in order to mitigate costs
associated with scrap and rework, Metalcraft will provide all necessary
engineering documentation to insure that FAA/DAR’s will accept parts
manufactured and assembled by Metalcraft. However, UTILICRAFT will at all times
retain ultimate control of and responsibility for all engineering.

 

QUALITY. 
Metalcraft’s Quality organization will provide necessary paperwork
including, but not limited to, FAA Form 8130-9(Statement of Conformity), to
ensure that all parts manufactured and assembled by Metalcraft will meet
certification requirements.

 

TOOLING.  Phase
1 tooling will be purchased by UTILICRAFT from Metalcraft or other suppliers as
UTILICRAFT deems appropriated.

 

FACILITIES.  Metalcraft
will assemble the required assemblies in Metalcraft’s Plants located in Cedar
City, Utah.

 

TRANSPORTATION.  For
Phase 1, UTILICRAFT will pay for the crating and shipping cost from Metalcraft’s
facility in Cedar City, Utah to the UTILICRAFT facility in New Mexico as required.
Metalcraft

 

7

 

will
coordinate arrangements with a transportation company that both UTILICRAFT and
Metalcraft agree upon.

 

OTHER ITEMS

 

On site work at the New Mexico Facility -

 

CONSOLIDATED PROCUREMENT

 

Both parties agree that we should evaluate the possibility of
aggregating the total metals requirements including sheet stock, tubing, extrusions, bar stock, etc for the “airframe
structure” and determine the possible
impact of UTILICRAFT procuring this material on a volume basis to optimize
pricing and delivery. The
concept encompasses UTILICRAFT entering into a Master agreement with the mills
or major distributor(s) and
establishing pricing that the airframe structure suppliers would use. The
suppliers would issue purchase orders defining the delivery requirements that
would use these negotiated prices. 

 

Phase 2-PRODUCTION AIRCRAFT

 

During Phase 2 or the early production phase of the program, Metalcraft
anticipates that engineering changes will be minimal. Metalcraft anticipates that UTILICRAFT will have
done all it can to engineer the UTILICRAFT
FF - 1080 aircraft for ease of manufacture and lowest cost production.
Metalcraft will aid UTILICRAFT
in the achievement of this goal. Design responsibility for the aircraft will
always belong to UTILICRAFT.
Metalcraft believes that there will continue to be some learning curve issues
through the early part of production but as the program continues, more
efficient fabrication and assembly methods will become apparent that will help Metalcraft meet cost targets. 

 

MANUFACTURING.  For Phase 2, Metalcraft will manufacture and
assemble the following sub-assemblies.

 

1.     Nose
Section. This section includes the structural portions located forward of
the forward bulkhead. This does not include the radome, transparencies or any
of the avionics suite.

 

2.     Center
Fuselage Section, This section includes all structural components aft from
the forward bulkhead to the beginning
of the Aft section. MTI will provide the detail parts and assembly jigs, and [ILLEGIBLE]
assembly of the Center Fuselage Section at Metalcraft’s facilities in
Cedar City.

 

3.     Aft
Fuselage Section. This section includes the structural components located
aft of the Center fuselage including the vertical stabilizer and horizontal
stabilizer. This section will most likely be delivered in three sub
assemblies, the Aft Fuselage, the Vertical Stabilizer, and the Horizontal
Stabilizer. However, this may change as the engineering is finalized.

 

4.     Additional
Assistance. Metalcraft will provide oversight and assistance during the
assembly and wing mating process to UTILICRAFT in New Mexico as requested.

 

PROGRAM MANAGEMENT.  During
Phase 2, Metalcraft’s Program Manager will help to insure that production goals
are met. He/She will help insure that components are delivered to UTILICRAFT’S
final assembly facility per the schedule that UTILICRAFT requires.
Periodic program reviews and site visits will ensure success and will keep UTILICRAFT
apprised of any issues that may affect the program. The Program Manager will
continue to have direct line authority to the Vice President of Programs for Metalcraft
to insure access and communication at the highest levels of Metalcraft.

 

ENGINEERING.  During
Phase 2 of the program,
Metalcraft engineering will insure that all UTILICRAFT specifications are met during
production and assembly of the UTILICRAFT FF-1080 to the extent of the
production and assembly under the control or supervision of Metalcraft.

 

QUALITY.  Metalcraft’s Quality organization will assure
that all UTILICRAFT requirements and Metalcraft internal standards are met
during the fabrication and assembly of production aircraft.

 

TOOLING.  Production rate tooling purchased by
UTILICRAFT from Metalcraft or other suppliers as deemed appropriated.

 

FACILITIES.  Metalcraft will assemble the fuselage in
Metalcraft’s Plant located in Cedar City, Utah.

 

MTI ___ UTILICRAFT __

 

8

 

TRANSPORTATION.  For Phase 2, Metalcraft and UTILICRAFT will
develop a cost effective strategy for crating and shipping of the product that
will include Metalcraft providing transportation of the fuselage.

 

9

 

ATTACHMENT 2

 

FUSELAGE
PRICING & PAYMENTS FOR UTILICRAFT – UTILICRAFT FF-1080

 

PRICING FOR PHASE 1.   Phase
1 is for the 1 FAA conformed fuselage and related parts or tooling as described
below.

 

Parts and Assemblies
Pricing. All
charges will begin upon Utilicraft Aerospace Industries, Inc.  UTILICRAFT issuing an Authorization to
Proceed document for Phase 1. Below are the key elements and methodologies.

 

1.              Fixed Weekly Program
Management Fee - This fee will include
the elements that would normally make up a portion of the overhead added to the
hourly rate.  Included in the fee would
be:

 

1.               Program Manager

2                  Executive Review

3                  Accounting Functions

 

This fee will
be charged weekly at the rate of $4,000 until Phase 1 is complete.

 

2.              Manufacturing Rate. All production, assembly, and inspection
hours will be billed at an hourly rate that does not include the overhead
components listed in number one above. The rates for each process are listed
below.

 

1.               Sheet Metal Production – $52.50 

2.               Machining Production - $68.75 

3.               Assembly and Inspection – $51.35

 

Metalcraft can offer these great economical rates because it is not
billing for the overhead items covered in the Fixed Program Management Fee and
because Metalcraft is not adding scrap, rework, and redesign rebuilds into the
basic hourly rate. These rates still contain charges for machine amortization,
utilities, and other items that make up further overhead components in the
hourly rate. Given Metalcraft’s current wrap rate is $76.00 per hour, this
approach should save UTILICRAFT significant amounts money.

 

2.              Engineering Rate.  Metalcraft
will charge $65.00 per hour for engineering work.

 

3.              Travel Costs.  Metalcraft
will bill UTILICRAFT for all out of pocket costs associated with travel to and
from UTILICRAFT by management or engineers. Travel to suppliers will be covered
in the 8% administrative fee.  Metalcraft
will use advance purchase ticket purchases, travel coach class, not exceed $35
per day food, stay in in-expensive hotels, and use what ever means are possible
to keep these costs to a minimum.

 

4.              Tooling Rate. Tool manufacturing will be billed at $68.00
per hour. If Metalcraft must
procure tooling from an outside supplier, the tools will be billed at cost plus
8%. All tools that have an estimated cost over $5,000 must have UTILICRAFT
approval in writing prior to beginning work on the tool.

 

5.              Outside Processing. Outside processing that is required to
support schedule constraints or missing capabilities will be billed to
UTILICRAFT at cost plus a small 8% administration fee.

 

6.              Material.  Material will be purchased by Metalcraft and
the cost will be passed on to UTILICRAFT with a small administration fee of 8%.

 

7.              Cost Data Collection. Metalcraft will provide all the necessary
data to determine the actual costs for this phase.

 

8.              The FOB is Metalcraft’s factory, accordingly UTILICRAFT will be responsible for
the cost of shipping & insurance.

 

10

 

9.              Cost Tracking -
Metalcraft will work with UTILICRAFT to provide bi-weekly updates to UTILICRAFT’S
budgetary estimate.

 

10.       BILLING AND PAYMENTS -
All billing will be bi-weekly involving with net 10 day payment from invoice
date. Invoice will be processed every other Friday with payment due ten days
from that Friday. Payment will be made through a Electronic Check (ACH) payment
method.

 

11.       Cash Deposit –
Utilicraft will maintain on deposit with MTI $100,000 to raitigate the risk of non-payment
of invoices. As the program progresses, the amount of the deposit will be
adjusted if necessary from time to time to maintain the
deposit amount at a level at least four times the highest bi-weekly Invoice
amount in the immediately preceding three months. Such adjustments shall be
made within ten (10) days after either Party makes a written demand
therefore upon the other party. The deposit will be placed in a segregated Metalcraft
Account, deposited at State Bank of Southern Utah with the interest thereon
credited to UTILICRAFT. In order to provide security to Metalcraft’s suppliers,
Metalcraft may from time to time pledge some or all of the deposits to
State Bank of Southern Utah as security collateral for letters of credit issued
on behalf of Metalcraft to specific suppliers, and UTILICRAFT understands and
consents to such use.

 

12.       Tooling – UTILICRAFT
will contract with Metalcraft to supply the manufacturing and assembly tooling
for Phase 2 and Phase 3. UTILICRAFT can, at their discretion, contract with
other tooling suppliers to support schedule as required. Prices for tools
will be provided to UTILICRAFT and UTILICRAFT will issue authorizations prior
to any work beginning.

 

13.       Scrap –Metalcraft shall be entitled to bill for all labor and materials used in
good faith and shall not deduct scrap unless the scrap results from bad faith
or gross negligence.

 

PRICING FOR PHASE 2. Metalcraft
will price individual parts and assemblies during Phase 2 of the contract. The price of each part will be determined by
Metalcraft based upon the average time and materials required to produce the
part under Phase 1, with a reasonable allowance for occasional scrap dependant
upon the difficulty of producing the part, using the current price of materials
plus 8% for profit and handling, and Metalcraft’s customary hourly “wrap” rates
for labor. Such prices shall become controlling (subject to adjustment to under
the Escalation provisions hereof) unless objected to in writing by UTILICRAFT
within thirty (30) days after UTILICRAFT is notified of Metalcraft’s pricing of
the subject part. If UTILICRAFT objects to the price of any part, UTILICRAFT
shall suggest a good faith price for the part. The Parties shall then attempt
to agree upon a final price, but if they are unable to do so within thirty (30)
days, the matter shall be submitted to dispute resolution. Prior to such
resolution, Metalcraft shall have the option of manufacturing and invoicing the
part using normal procedures based upon UTILICRAFT’s price subject to
retroactive adjustment when the final price is determined. The estimated number
of fuselages to be purchased through 2012 is 528. It is understood that market
pressures may accelerate or decelerate the rate of delivery. It is agreed that
Metalcraft will manufacture all required detail parts and major fuselages
assemblies as described herein for the production aircraft up to the projected
quantity of 528. The quantity may be increased by mutual agreement.

 

ESCALATION CLAUSE –The base prices are in 2nd quarter 2004 dollars and are subject to adjustment using the indices
and formulas outlined below for both Phase 1 and Phase 2 with respect to labor
and for Phase 2 only with respect to Materials.

 

Indices to be
used for adjusting the base price shall be from the United States Department of
Labor, Bureau of Labor Statistics Monthly Publications. 

 

For Labor:

 

•                 United
States Department of Labor, Bureau of Labor Statistics, National Employment,
Hours, and Earnings, Standard Industrial Classification Code 3728, Aircraft
Parts and Equipment not elsewhere classified.

 

11

 

For Material:

 

•                  United
States Department of Labor, bureau of Labor Statistics, Producer Price Index –
Commodities, Series ID: WPU108, Miscellaneous Metal Products.

 

The calculation of the adjustment shall be made in accordance with the
following formula:

 

	
  •

  	
  Pn =

  	
  Po + Po (A Md + B Ld)

  
	
   

  	
   

  	
   

  	
  Mo

  	
  Lo

  

 

•                  Pn
=                Contractual price to be
invoiced to UTILICRAFT; this price remains valid for all scheduled deliveries
within a calendar year (n).  For the base
year, Pn = Base Price.

 

•                  Po
=                Constant Base Price in
2003 (year) Dollars.

 

•                  A+B
=            1.

 

•                  A
= Proportion of Material for the part or job.

 

•                  Md
=              Mn – Mo.

 

•                  Mn
=              Average of Material Index
for the months of January to June of the year n-1.

 

•                  Mo
=              Average of material index
for the months of January to June of the year prior to the base year.

 

•                  B
=                  Proportion of Labor for
the part or job.

 

•                  Ld
=                Ln – Lo.

 

•                  Ln
=                Average of Labor Index
for the months of January to June of the year n-1.

 

•                  Lo
=                Average of Labor Index
for the months of January to June of the year prior to the base year.

 

In the event the indices
specified herein are discontinued or significantly altered, appropriate
adjustment shall be made by the parties to put the escalation calculation on a
comparable basis to the indices calculated before the change.

 

All the calculations shall be
done to the fourth decimal place and not rounded.  The price Pn shall be rounded to the nearest
cent.

 

All economical indices used for
calculations shall be the last indices received by download from the U.S.
Government in November for the year n-1. 
Metalcraft shall provide a price list for Pn by the first week of
December.  UTILICRAFT shall review for
concurrence and respond within ten (10) days of receipt of Metalcraft prices
with modified Purchase Orders.

 

12

 

ATTACHMENT 3

 

PROPRIETARY INFORMATION EXCHANGE AGREEMENT

 

1.             This Agreement, effective as of the latest
signatory date, is entered into between
UTILICRAFT AEROSPACE INDUSTRIES, INC. (UTILICRAFT) and METALCRAFT TECHNOLOGIES, INC., (Metalcraft).
The purpose of this Agreement is to provide for the disclosure to Metalcraft of
UTILICRAFT proprietary and/or competition sensitive information pertaining to
UTILICRAFT products, intellectual property, design data electronic or
otherwise, and UTILICRAFT business plans (UTILICRAFT Proprietary and/or
Competition Sensitive Information). By entering into this Proprietary
Information and Non-Competition Agreement, and not withstanding the proper
exchange of UTILICRAFT Proprietary and/or Competition Sensitive Information,
Metalcraft agrees it does not intend to develop and manufacture a new aircraft
based upon the design of the FF-10680 for a period of 10 years from the date of
this agreement.

 

2.             All UTILICRAFT Proprietary and/or
Competition Sensitive Information disclosed in writing, verbally, or otherwise,
by UTILICRAFT, to
Metalcraft shall be clearly identified in writing or verbally as UTILICRAFT Proprietary
and/or Competition Sensitive at the time of disclosure. In the event UTILICRAFT
discloses UTILICRAFT Proprietary and/or Competition Sensitive Information to
Metalcraft, and fails to identify it in the manner described herein above,
UTILICRAFT shall promptly inform Metalcraft that such information is deemed
UTILICRAFT Proprietary and/or Competition Sensitive and shall provide
Metalcraft with a brief written description of such information within sixty
(60) days of such disclosure, identifying therein the manner, place of such
disclosure and date when such disclosure was made.

 

3.             Metalcraft agrees to make
reasonable efforts to avoid the misuse, disclosure or dissemination of
UTILICRAFT Proprietary and/or Competition Sensitive Information. Reasonable efforts
shall mean efforts which are at least equivalent to those which Metalcraft uses
to protect its own business confidential, proprietary and/or competition
sensitive information. Metalcraft also agrees not to use UTILICRAFT Proprietary
and / or Competition Sensitive Information, or any other information provided
by UTILICRAFT, in any manner whatsoever to commercially compete with
UTILICRAFT. 

 

4.             Each employee or other affiliated person (s)
of Metalcraft having access to the Proprietary and/or Competitive Sensitive Information
shall be informed of the provisions of this Agreement.

 

5.             The obligation of Metalcraft with respect to handling
UTILICRAFT Proprietary and/or Competition Sensitive Information as set forth in
this Agreement is not applicable to any information:

 

A.                                   In
the public domain; or

 

13

 

B.                                     Rightfully known
by Metalcraft, provided such knowledge was derived from a source other than
UTILICRAFT; or

 

C.                                     Disclosed with the
written approval of UTILICRAFT; or

 

D.                                    Disclosed by
UTILICRAFT to a third party, without restriction; or

 

E.                                      Previously independently
developed, and documented as such, by Metalcraft.

 

6.             No
license is granted by UTILICRAFT to Metalcraft with respect to pending or
issued patents, Intellectual property, or proprietary and/or competitive
sensitive data or information or any other protected information of UTILICRAFT
or any other party, except for use of same to produce products sold to UTILICRAFT.

 

7.             Nothing
in this Agreement shall grant to Metalcraft the right to make commitments of
any kind, for or on behalf of UTILICRAFT. This Agreement is not intended to be, nor shall it be
construed as, a Joint venture, partnership, or any other form of business
organization.

 

8.             This
Agreement shall (unless extended by mutual written agreement) terminate at the
earlier of the following events:

 

A.                                   Three (3) years
after the effective date of this Agreement, or

 

B.                                     Thirty (30) days
after written notice provided by either party to the other.

 

Termination,
however, shall not affect the rights and obligations with respect to use,
disclosure, and dissemination of the UTILICRAFT Proprietary and/or Competition
Sensitive Information disclosed under this Agreement prior to termination.

 

9.             Upon termination of this Agreement
and/or upon UTILICRAFT’s request, Metalcraft will promptly return all known
copies of UTILICRAFT Proprietary and/or Competitive Sensitive Information held
by Metalcraft. Five years after such termination and/or return, Metalcraft’s
liability in damages for inadvertent or purposeful use or disclosure
of UTILICRAFT Proprietary and/or Competition Sensitive Information provided
under this Agreement shall cease.

 

10.           The exclusive points of contact with
respect to notices to be given, concerning the transmission and control of
UTILICRAFT Proprietary and/or Competition Sensitive Information exchanged
hereunder, when necessary, are designated by the respective parties as follows:

 

14

 

	
  For:

  	
   

  	
  UTILICRAFT AEROSPACE INDUSTRIES, INC. 

  John J. Dupont 

  President, CEO 

  554 Briscoe Blvd
 Lawrenceville, GA 30045

  
	
   

  	
   

  	
   

  
	
  For:

  	
   

  	
  METALCRAFT TECHNOLOGIES, INC. 

  Chuck Taylor 

  Vice President 

  498 North 2774 West

  Cedar City, Ut 84720

  

 

The official
points of contact between Metalcraft and UTILICRAFT, whether such official
contact is written or verbal, is restricted to the officials named above.

 

11.           This Agreement supersedes all similar
prior agreements and amendments thereto, contains the entire agreement between
the parties, and exclusively defines the rights and duties of the parties
relative to protection of UTILICRAFT Proprietary and/or Competitive Sensitive Information
disclosed hereunder.  This Agreement may
be modified, amended or extended at any time by written agreement signed by the
parties hereto. The invalidity of any provision of this Agreement shall not
result in the invalidity of the whole Agreement.

 

12.           In the event of a breach of this
agreement, UTILICRAFT shall be entitled to avail itself of all legal and
equitable remedies available, including injunctive relief.

 

13.           This Agreement shall be governed by
the laws of the State of Delaware excluding that body of law relating to
Conflicts of Law.

 

 

This
Agreement, consisting of three pages including this signature page, is
executed by the respective parties’ duly authorized representatives or corporate
officers.

 

15

 

	
  FOR:  UTILICRAFT AEROSPACE INDUSTRIES, INC.

  	
   

  	
  FOR:  METALCRAFT TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   /s/ John J. Dupont

  	
   

  	
   

  	
    /s/ Chuck Taylor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:     John J.
  Dupont

  	
   

  	
      By:     Chuck
  Taylor

  
	
  Title: Chairman, President - CEO

  	
   

  	
  Title:     Vice
  President

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  March 21, 2005

  	
   

  	
   

  	
   

  	
  Date:

  	
  March 18, 2005

  	
   

  	 

													

 

16Exhibit 10.12

 

Double Eagle II Airport

Ground Lease

 

Utilicraft Aerospace
Industries, Inc.

 

Table of Contents

 

	
  Section 1.

  	
  Recitals

  	
   

  
	
  Section 2.

  	
  Definitions

  	
   

  
	
  Section 3.

  	
  Term

  	
   

  
	
  Section 4.

  	
  Premises

  	
   

  
	
  Section 5.

  	
  Use of Premises

  	
   

  
	
   

  	
  5.1

  	
  Limited Use

  	
   

  
	
   

  	
  5.2

  	
  Termination of Use

  	
   

  
	
   

  	
  5.3

  	
  Warranties of Tenant

  	
   

  
	
  Section 6.

  	
  First Refusal Right

  	
   

  
	
   

  	
  6.1

  	
  Exercise of First Refusal
  Right

  	
   

  
	
   

  	
  6.2

  	
  Termination of First Refusal
  Right

  	
   

  
	
  Section 7.

  	
  Rents and Fees

  	
   

  
	
   

  	
  7.1

  	
  Ground Rent

  	
   

  
	
   

  	
  7.2

  	
  Ground Rent Adjustment

  	
   

  
	
   

  	
  7.3

  	
  Total City Expenses Fee

  	
   

  
	
   

  	
  7.4

  	
  Other Airport Fees

  	
   

  
	
   

  	
  7.5

  	
  Rents and Fees Prorated

  	
   

  
	
   

  	
  7.6

  	
  Place of Payment

  	
   

  
	
   

  	
  7.7

  	
  Late Payment Fees

  	
   

  
	
  Section 8.

  	
  Security Deposit

  	
   

  
	
  Section 9.

  	
  Insurance

  	
   

  
	
   

  	
  9.1

  	
  General Requirements

  	
   

  
	
   

  	
  9.2

  	
  Approval of Insurance

  	
   

  
	
   

  	
  9.3

  	
  Commercial General Liability
  Including Automobile

  	
   

  
	
   

  	
  9.4

  	
  All Risk Property Coverage

  	
   

  
	
   

  	
  9.5

  	
  Environmental Impairment
  Liability

  	
   

  
	
   

  	
  9.6

  	
  Contractor Bond and
  Insurance

  	
   

  
	
   

  	
  9.7

  	
  Builders Risk Insurance

  	
   

  
	
   

  	
  9.8

  	
  Additional Insured

  	
   

  
	
   

  	
  9.9

  	
  Workers’ Compensation
  Insurance

  	
   

  
	
   

  	
  9.10

  	
  Self-Insurance
  Retention/Deductible

  	
   

  
	
   

  	
  9.11

  	
  Additional Requirements

  	
   

  
	
   

  	
  9.12

  	
  Failure to Maintain
  Insurance

  	
   

  
	
  Section 10.

  	
  Other Agreements

  	
   

  
	
   

  	
  10.1

  	
  AOA Agreement

  	
   

  

 

1

 

	
   

  	
  10.2

  	
  Concession Agreement

  	
   

  
	
  Section 11.

  	
  Termination of Lease

  	
   

  
	
   

  	
  11.1

  	
  Termination by City: 15-Day
  Cure Period

  	
   

  
	
   

  	
  11.2

  	
  Termination by City: 30-Day
  Cure Period

  	
   

  
	
   

  	
  11.3

  	
  Termination by Tenant:
  30-Day Cure Period

  	
   

  
	
  Section 12.

  	
  Financial Responsibility

  	
   

  
	
   

  	
  12.1

  	
  Taxes, License, Debts

  	
   

  
	
   

  	
  12.2

  	
  Tax Payment Verification

  	
   

  
	
   

  	
  12.3

  	
  Liens

  	
   

  
	
  Section 13.

  	
  Performance by City Upon
  Failure by Tenant

  	
   

  
	
  Section 14.

  	
  Construction of Improvements

  	
   

  
	
   

  	
  14.1

  	
  Improvements

  	
   

  
	
   

  	
  14.2

  	
  Approval by Director

  	
   

  
	
   

  	
  14.3

  	
  Construction Plans and
  Specifications

  	
   

  
	
   

  	
  14.4

  	
  Permits, License, and
  Approvals

  	
   

  
	
   

  	
  14.5

  	
  Notice to Proceed,
  Construction Bonds, and Insurance

  	
   

  
	
   

  	
  14.6

  	
  Contractor Indemnification

  	
   

  
	
   

  	
  14.7

  	
  Coordination of Construction

  	
   

  
	
   

  	
  14.8

  	
  Delay in Completion

  	
   

  
	
   

  	
  14.9

  	
  Certificate of Occupancy

  	
   

  
	
   

  	
  14.10

  	
  As-built/Certified Drawings

  	
   

  
	
   

  	
  14.11

  	
  Improvements by Tenant to
  Remain Throughout Term

  	
   

  
	
   

  	
  14.12

  	
  Ownership of Improvements

  	
   

  
	
   

  	
  14.13

  	
  Removal of Unapproved
  Improvements

  	
   

  
	
   

  	
  14.14

  	
  Future Improvements

  	
   

  
	
  Section 15.

  	
  Tenant Equipment

  	
   

  
	
   

  	
  15.1

  	
  Provision of Tenant
  Equipment

  	
   

  
	
   

  	
  15.2

  	
  Installation/Construction of
  Tenant Equipment

  	
   

  
	
   

  	
  15.3

  	
  Installation/Construction
  Bonds

  	
   

  
	
   

  	
  15.4

  	
  Installation/Construction
  Indemnification

  	
   

  
	
   

  	
  15.5

  	
  Ownership of Tenant
  Equipment

  	
   

  
	
  Section 16.

  	
  Operational Requirements

  	
   

  
	
  Section 17.

  	
  Maintenance by City

  	
   

  
	
  Section 18.

  	
  Maintenance and Utilities by
  Tenant

  	
   

  
	
   

  	
  18.1

  	
  Operational Maintenance

  	
   

  
	
   

  	
  18.2

  	
  Improvement Maintenance

  	
   

  
	
   

  	
  18.3

  	
  Janitorial Maintenance

  	
   

  
	
   

  	
  18.4

  	
  Utilities

  	
   

  
	
  Section 19.

  	
  Tenant Improvements and
  Personal Property

  	
   

  
	
   

  	
  19.1

  	
  Tenant Improvements

  	
   

  
	
   

  	
  19.2

  	
  Personal Property

  	
   

  
	
  Section 20.

  	
  Surrender of Premises

  	
   

  
	
   

  	
  20.1

  	
  Removal of Personal Property

  	
   

  

 

2

 

	
   

  	
  20.2

  	
  Removal Damages

  	
   

  
	
   

  	
  20.3

  	
  Ownership of Fixtures Not
  Removed

  	
   

  
	
  Section 21.

  	
  Signs

  	
   

  
	
   

  	
  21.1

  	
  Criteria

  	
   

  
	
   

  	
  21.2

  	
  Installation

  	
   

  
	
   

  	
  21.3

  	
  Removal

  	
   

  
	
   

  	
  21.4

  	
  Signage Indemnification

  	
   

  
	
  Section 22.

  	
  Depreciation and Investment
  Credit for Federal Income Tax Purposes

  	
   

  
	
  Section 23.

  	
  Damage or Destruction of
  Leasehold Improvements

  	
   

  
	
   

  	
  23.1

  	
  Tenant’s Notification

  	
   

  
	
   

  	
  23.2

  	
  Tenant’s Obligation

  	
   

  
	
   

  	
  23.3

  	
  Insurance Proceeds

  	
   

  
	
   

  	
  23.4

  	
  Non-Abatement
  of Rents and Fees

  	
   

  
	
  Section 24.

  	
  Condemnation

  	
   

  
	
   

  	
  24.1

  	
  Partial
  Taking

  	
   

  
	
   

  	
  24.2

  	
  Total
  Taking

  	
   

  
	
   

  	
  24.3

  	
  Termination
  of Lease

  	
   

  
	
  Section 25.

  	
  Hazardous
  Materials

  	
   

  
	
   

  	
  25.1

  	
  Tenant’s
  Compliance with Environmental Laws

  	
   

  
	
   

  	
  25.2

  	
  Indemnification
  By Tenant

  	
   

  
	
   

  	
  25.3

  	
  Notices

  	
   

  
	
   

  	
  25.4

  	
  Environmental
  Notices; Indemnification Notices

  	
   

  
	
   

  	
  25.5

  	
  City’s
  Right of Entry

  	
   

  
	
   

  	
  25.6

  	
  National
  Pollutant Discharge Elimination System

  	
   

  
	
   

  	
  25.7

  	
  Environmental
  Assessment

  	
   

  
	
  Section 26.

  	
  Post
  Termination Restoration of Premises

  	
   

  
	
   

  	
  26.1

  	
  Holdover

  	
   

  
	
   

  	
  26.2

  	
  Tenant’s
  Environmental Access Rights

  	
   

  
	
   

  	
  26.3

  	
  City’s
  Non-Waiver of Environmental Rights

  	
   

  
	
  Section 27.

  	
  City’s
  Right to Enter

  	
   

  
	
  Section 28.

  	
  Right of
  Relocation

  	
   

  
	
  Section 29.

  	
  Security

  	
   

  
	
  Section 30.

  	
  General
  Conditions

  	
   

  
	
   

  	
  30.1

  	
  Rules and
  Regulations

  	
   

  
	
   

  	
  30.2

  	
  Contract
  Interpretation

  	
   

  
	
   

  	
  30.3

  	
  Subordination

  	
   

  
	
   

  	
  30.4

  	
  Discrimination
  Prohibited

  	
   

  
	
   

  	
  30.5

  	
  No
  Exclusive Rights

  	
   

  
	
   

  	
  30.6

  	
  Indemnification
  Agreement

  	
   

  
	
   

  	
  30.7

  	
  Construction
  Inconvenience

  	
   

  
	
   

  	
  30.8

  	
  Ethics

  	
   

  
	
   

  	
  30.9

  	
  Approvals,
  Consents, and Notices

  	
   

  
	
   

  	
  30.10

  	
  Non-liability
  of Agents and Employees

  	
   

  

 

3

 

	
   

  	
  30.11

  	
  No
  Partnership or Agency

  	
   

  
	
   

  	
  30.12

  	
  Forum
  Selection

  	
   

  
	
   

  	
  30.13

  	
  Compliance
  with Law

  	
   

  
	
   

  	
  30.14

  	
  Force
  Majeure

  	
   

  
	
   

  	
  30.15

  	
  Non-Waiver

  	
   

  
	
   

  	
  30.16

  	
  Administration
  of Lease

  	
   

  
	
   

  	
  30.17

  	
  Approval of
  Lease

  	
   

  
	
   

  	
  30.18

  	
  Savings

  	
   

  
	
  Exhibit A

  	
  Airport

  	
   

  
	
  Exhibit B

  	
  Premises

  	
   

  
	
  Exhibit C

  	
  Option Area

  	
   

  
	
  Exhibit D

  	
  Other Airport Fees

  	
   

  
	
  Exhibit E

  	
  Performance Bond and Letter of
  Credit Formats

  	
   

  
	
  Exhibit F

  	
  Insurance Certificate Format

  	
   

  

 

4

 

Double
Eagle II Airport

Ground Lease

 

Utilicraft Aerospace Industries, Inc.

 

This Ground
Lease (“Lease”) is
made and entered into by and between the City
of Albuquerque, a New Mexico municipal corporation (“City”) and Utilicraft Aerospace Industries, Inc., a
corporation organized and existing under the laws of the state of Nevada (“Tenant”).

 

In consideration of the rights, privileges,
and mutual obligations contained in this Lease, City and Tenant agree as
follows:

 

Section 1.             Recitals.

 

1.1          City
owns and operates through its Aviation Department the Double Eagle II Airport (“Airport”)
as shown in Exhibit A located
in the County of Bernalillo, State of New Mexico; and

 

1.2          City
desires to lease to Tenant, and Tenant desires to lease from City, a certain
tract of land at the Airport (“Ground”) as described in Exhibit B attached hereto, in
accordance with the terms of this Lease; and

 

1.3          Tenant
desires to construct, and City desires to allow the construction of, an aircraft
manufacturing facility and related improvements to be located within the Ground
area at the Airport; and

 

1.4          City
and Tenant have the right and power to enter into this Lease.

 

Section 2.             Definitions.
The words and phrases
in this Section shall have the following definitions:

 

2.1          “Additional Improvements” means any fixtures, improvements, or equipment
installed by Tenant as part of the Leasehold Improvements, affixed thereto in such
a manner as determined by City, that they cannot be readily removed without damaging
the remainder of the Leasehold Improvements and without substantially changing
the character of such improvements.

 

2.2          “Airport Construction” means the programs of construction, reconstruction,
expansion, relocation, maintenance, and repair of the various buildings, infrastructure
and facilities on the Airport.

 

5

 

2.3          “Airport Operations Area” (“AOA”) means the public use area of the Airport
including ramps, taxiways, and runways.

 

2.4          “Aviation Department” means the division of City responsible for
operation and maintenance of the Airport.

 

2.5          “Bond Ordinances” means the ordinances adopted by City
authorizing the issuance and sale of Airport Revenue Bonds and any successor
bond ordinance(s) that may be enacted by City with respect to future series of
bonds.

 

2.6          “Construction Commencement Date” means that date on which the construction of
the aircraft manufacturing facility, along with related improvements, must commence;
however, in no case shall that date be later than ninety (90) days after the Effective
Date of this Lease unless agreed to in writing by both parties.

 

2.7          “Construction Documents” means a complete set of final plans and specifications
with an anticipated construction schedule of key events and their dates
with respect to the construction of the aircraft manufacturing facility and other
related improvements.

 

2.8          “Construction Period” means that period of time in which
construction of the aircraft manufacturing facility, along with other related
improvements, must be completed; however, in no case shall that period of time
exceed nine (9) months from the Effective Date of this Lease unless agreed to
in writing by both parties.

 

2.9          “Contaminant” means any Hazardous Material as defined in Section 25
of this Lease.

 

2.10        “Contamination” means any Contaminant released into the air,
soil or groundwater.

 

2.11        “Corrective Action” means any action to assess, monitor,
remediate, or perform corrective action (which may include natural attenuation)
of Contamination.

 

2.12        “Deferred Rent” means that Rent attributable to the Premises
for the Deferred Rent Period as provided for in Section 7 of this Lease.

 

2.13        “Deferred Rent Period” means the first sixty (60) months from the Effective
Date of this Lease.

 

2.14        “Development Guidelines” means the rules and regulations of the
Aviation Department governing the development of the Airport, design standards,
construction specifications, Double Eagle II Airport Minimum Operating
Standards, and other non-technical requirements.

 

6

 

2.15        “Director” means the City of Albuquerque, Director,
Aviation Department, or his/her authorized representatives.

 

2.16        “Effective Date” means the date this Lease is executed by the
City’s Chief Administrative Officer.

 

2.17        “Environmental Agency” means any governmental agency with
jurisdiction regulating any Contamination on or under the Premises.

 

2.18        “Extraordinary Cost” means any non-recurring expenditure or
obligation of City that is allocable to the Premises including 1) any Operation
and Maintenance Expense that is not a part of the normal and regular Operation
and Maintenance Expenses allocable to the Premises, as determined by City, and
2) any remediation costs or penalties incurred by City as a result of the
release of any Contaminant from the Premises, except to the extent caused by an
act or omission of City, its contractors, employees or agents. Any Extraordinary
Cost of City shall be included in Total City Expenses.

 

2.19        ‘Federal
Aviation Administration” (“FAA”) means that agency of the United
States government and any federal agency succeeding to its jurisdiction.

 

2.20        “First Refusal Notice” means a written notice to Tenant from City
advising Tenant of City’s receipt of a qualified offer to lease all or any portion of the Option Area.

 

2.21        “First Refusal Right” means Tenant’s irrevocable right of first
refusal to lease all or any portion of the Option Area.

 

2.22        “Fiscal Year” means the fiscal year, for the purposes of
the Lease, which begins on July 1 and ends on June 30.

 

2.23        “Ground Rent” means the Rent attributable to the lease of
the Ground by Tenant as set forth in Section 7 of this Lease.

 

2.24        “Leasehold Improvements” means those improvements constructed, reconstructed,
or installed on the Premises by Tenant.

 

2.25        “Operation and Maintenance Expenses” (“O&M
Expenses”) means current
expenses, paid or accrued of operating, maintaining, and repairing the Airport.

 

2.26        “Option Area” means that portion of Airport real property
adjacent to the Premises as set forth in Exhibit C
attached hereto, and pursuant to the provisions of Section 6 of
this Lease.

 

7

 

2.27        “Other Airport Fees” means those other fees attributable to the
use of the Premises, if applicable, as set forth in Section 7 of this
Lease and as defined in Exhibit D attached
hereto.

 

2.28        “Premises” if applicable, means the Ground leased to
Tenant by City as legally described in Exhibit B
attached hereto, on which the Leasehold Improvements are constructed
by Tenant.

 

2.29        “Remediation Equipment” means all equipment used or useful in connection
with Corrective Action, including but not limited to groundwater monitoring, extraction,
sparging wells, piping, and equipment.

 

2.30        “Rent” means Ground Rent and Total City Expenses as
set forth in Section 7 of this Lease.

 

2.31        “Tenant Equipment” means the tooling, fabrication equipment,
fuel tanks, fuel pumps, waste oil tanks, and related lines and equipment
installed by or on behalf of Tenant on Premises, subject to the provisions of Section 15
of this Lease.

 

2.32        “Third Party” means that entity making a qualified offer to
City to lease all or any portion of the Option Area.

 

2.33        “Total City Expenses” means those expenses of City that are
allocable to the Premises or Leasehold Improvements and shall consist of: 1) O&M
Expenses, and 2) Extraordinary Costs, if any.

 

2.34        “Transportation Security Administration”
(“TSA”) means that
agency of the United States government and any federal agency succeeding to its
jurisdiction.

 

Section 3.             Term.
The Term of this
Lease (“Term”) shall begin on the Effective Date and terminate at the end of
the twentieth (20th)
year from the Effective Date, unless earlier terminated pursuant to any
provisions of this Lease, with no further option to extend by either party.

 

Holding over by Tenant after the expiration of the Term, whether with
or without the consent of City, shall not operate to extend or renew this Lease.
Any such holding over shall be construed as a month-to-month lease on the same
terms and conditions of this Lease then in effect; provided, however, that the
monthly Ground Rent during such tenancy shall be equal to one hundred fifty
percent (150%) of the monthly Rent paid by Tenant during the preceding month.

 

Section 4.              Premises.
City, for and in
consideration of the Rents reserved in this Lease, and each of the covenants,
conditions, and agreements set forth in this Lease to be kept and performed by
Tenant, hereby leases to Tenant, for its exclusive use, and Tenant hires and
takes from City upon the conditions, covenants, and agreements set forth in
this

 

8

 

Lease, all of which Tenant accepts, the Ground as described in Exhibit B, attached hereto and
incorporated herein.

 

Tenant hereby acknowledges that it has conducted all necessary due diligence
and has independently determined that the Premises is suitable for all uses
permitted under this Lease. Notwithstanding anything to the contrary contained
in this Lease, Tenant acknowledges that it has fully inspected the Premises in
its present condition and it is understood and agreed that the Premises is
being accepted as is, without any representation or warranty by City. Tenant
acknowledges that City has not made any expressed or implied representations or
warranties whatsoever with respect to the condition of the Premises, including
without limitation any representation or warranty regarding compliance with
environmental laws or the suitability for any purpose, use, or operation
anticipated in this Lease. Further, Tenant acknowledges that it is entering
into this Lease without relying upon any statement or representation made by
City or by any agent of City.

 

Section 5.             Use
of Premises.

 

5.1          Limited Use.
Tenant, and its
subtenants and assignees approved by City, are hereby granted the use of the
Premises for only the limited purpose of aircraft and aircraft component
manufacturing and assembly, and for no other purpose. Tenant further agrees
that it may not use the Premises for any other purpose without City’s prior
written consent, which may be withheld in City’s sole discretion.

 

5.2          Termination
of Use. In the event
that aircraft manufacturing operations are not conducted at the Premises for a
period of twelve (12) months or more within any eighteen (18) month period at
any time following the Construction Period (other than as a result of a
remodeling, or a cause or event referred to in Section 23 or Section 24,
or due to Tenant’s impending assignment of its interest in the Lease, as
permitted hereinafter), thereafter City may, as its exclusive remedy, terminate
this Lease and compel Tenant to vacate the Premises, remove all Tenant
Equipment and other property as set forth in Section 15 and Section 19.

 

5.3          Warranties
of Tenant. Tenant
hereby represents and warrants that, upon completion of the Leasehold
Improvements, the Premises and all parts thereof shall be used in full
compliance with all laws and with all regulations of any governmental agencies having
jurisdiction, which affect the intended use of the Premises.

 

Section 6.              First
Refusal Right. During
the Term, City hereby grants to Tenant a First Refusal Right applicable to the
Option Area as shown on Exhibit C, attached
hereto. This First Refusal Right pertains to a qualified offer by a third party
(“Third Party”), whether an aviation related or non-aviation related entity, to
lease or otherwise occupy all or a portion of the Option Area. This First
Refusal Right may be exercisable upon the receipt by City of any qualified
offer from a Third Party to lease the Option Area or any

 

9

 

part thereof.

 

If City receives a qualified offer to lease all or any portion of the
Option Area from a Third Party at fair market value, based on a current
appraisal prepared by an appraiser licensed to do business in the state of New
Mexico, before accepting such offer, City shall deliver written notice (“First
Refusal Notice”) to Tenant of such fact, together with a copy of such offer. Within
ninety (90) days after receipt of the First Refusal Notice, Tenant shall be
entitled to lease the Option Area or portion thereof as applicable, under the
terms and conditions provided in subsection 6.1 below, by giving notice to
City in writing of the exercise of such right to do so.

 

If Tenant delivers written notice to City that Tenant does not desire
to exercise the First Refusal Right to lease the Option Area or portion thereof
as applicable, or if Tenant fails to deliver written notice that it does not
desire to exercise the First Refusal Right to lease the Option Area or portion
thereof as applicable to City within such ninety (90) day period, then Tenant
shall be deemed to have declined to exercise the First Refusal Right to acquire
the Option Area or portion thereof as applicable. If Tenant refuses or declines
to exercise such First Refusal Right, then City may enter into a lease or other
occupancy agreement described in the First Refusal Notice with such Third Party
on the terms set forth in the offer contained in the First Refusal Notice.

 

6.1          Exercise of First Refusal Right. In the event that Tenant elects to exercise
the First Refusal Right as provided for in Section 6 above, Tenant may lease
the Option Area or portion
thereof as applicable, under the then current terms and conditions as set forth
by City for similar ground leases to include the following general terms and conditions:

 

6.1.1       Term for the Ground Lease for the Option
Area or portion thereof as applicable, shall be coterminous with this Lease.

 

6.1.2       The rent for the Ground Lease for the Option
Area or portion thereof as applicable, shall be determined pursuant to a fair
market value appraisal prepared by an appraiser licensed to do business in the
state of New Mexico engaged by City at the time of the exercise of the First
Refusal Right.

 

6.1.3       There shall be no Deferred Ground Rent
provision in the Ground Lease for the Option Area or portion thereof as
applicable.

 

6.1.4       Tenant shall be obligated to commence
construction of an expansion to the Leasehold Improvements that is acceptable
to City, in City’s sole discretion, within six (6) months from its
exercise of the First Refusal Right.

 

6.1.5       There shall be no additional First Refusal
Right or continuation of the First Refusal Right, as defined herein.

 

10

 

6.2          Termination
of First Refusal Right. Upon
the exercise of the First Refusal Right by Tenant, or the failure by Tenant to
exercise the First Refusal Right, as provided for herein, the First Refusal
Right shall, without any further notification from City to Tenant, terminate as
to any portion of the Option Area that did not apply to the exercise of the
First Refusal Right.

 

Section 7.            Rents
and Fees. As
consideration for the rights granted to Tenant pursuant to this Lease, Tenant
shall pay all Rents and Fees to City in the manner described in this Section 7.

 

7.1          Ground Rent.
Tenant agrees to pay
City for the use of the Premises and for the rights granted pursuant to this
Lease, Four Thousand and 00/100 Dollars
($4,000.00) per month, Forty-Eight
Thousand and 00/100 Dollars ($48,000.00) per year, based on Four
Hundred and 00/100 Dollars ($400.00) per acre for ten (10) acres of ground.
During the Deferred Rent Period, payments are to be made per the schedule in
subsection 7.1.1 below.

 

7.1.1       Ground
Rent Payment Schedule

 

	
   

  	
   

  	
  Annual

  Ground Rent

  	
   

  	
  Annual

  Deferred

  Ground Rent

  	
   

  	
  Annual

  Ground Rent

  Payable

  	
   

  	
  Monthly

  Ground Rent

  Due*

  	
   

  	
  Total

  Deffered Annual

  Ground Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1st Year

  	
   

  	
  $

  	
  48,000.00

  	
   

  	
  $

  	
  48,000.00

  	
   

  	
  $

  	
  -0-

  	
   

  	
  $

  	
  -0-

  	
   

  	
  $

  	
  48,000.00

  	
   

  
	
  2nd Year

  	
   

  	
  $

  	
  48,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  
	
  3rd Year

  	
   

  	
  $

  	
  48,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  
	
  4th Year

  	
   

  	
  $

  	
  48,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  
	
  5th Year

  	
   

  	
  $

  	
  48,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  	
  $

  	
  2,000.00

  	
   

  	
  $

  	
  24,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Deferred Ground Rent

  	
   

  	
  $

  	
  144,000.00

  	
   

  
																				

 

*Monthly Ground Rent is due and payable to City on or before the first
(1st) day of each month, in advance and without invoice.

 

All Deferred Ground Rent shall accrue to Tenant, and shall be a Rent
obligation of Tenant under this Lease. Sixty (60) days prior to the last
calendar day of the Deferred Rent Period, City shall provide to Tenant an
invoice stipulating the deferred Ground Rent amount. Such deferred Ground Rent
amount shall be due and payable to City on or before the next business day
following the last calendar day of the Deferred Rent Period.

 

7.2          Ground Rent
Adjustment. During
the Deferred Rent Period, City shall determine the Ground Rent for the second
five (5) year period of the Term pursuant to a fair market value appraisal
of the Ground (not including the Leasehold Improvements or any Additional
Improvements) prepared by an appraiser licensed to do business in the

 

11

 

state of New Mexico engaged by City. Ground Rent will be increased by
City at the end of each subsequent five (5) year period during the Term by
ten percent (10%) of the increase in the fair market value of the Ground. City
shall notify Tenant, in writing, of the increase in the Ground Rent at least
sixty (60) days prior to the subject five (5) year period of the Term. Notwithstanding
the results of any subsequent appraisals, the Ground Rent for any subsequent
five (5) year period shall not be less than the Ground Rent for the
immediately preceding five (5) year period of the Term.

 

In the event there is a conflict with FAA Grant Assurances as they
pertain to the Ground Rent being imposed hereunder, City will so notify Tenant
in writing, and upon sixty (60) days after such written notice, adjust the
Ground Rent as is necessary to meet FAA Grant Assurance requirements.

 

7.3          Total City
Expenses Fee. Tenant
agrees to pay City for the use of the Premises and for the rights granted
pursuant to this Lease, a monthly fee covering those Total City Expenses
allocable to the Premises, which shall be based upon Operating and Maintenance
Expenses of the Airport, as well as any Extraordinary Costs, if applicable. Total
City Expenses shall be calculated annually on a per acre basis, for the
operations area of the Airport. The corresponding Fee charged to Tenant shall
be based only for the acreage of the Premises. City shall provide Tenant thirty
(30) days written notice annually of the amount of the Total City Expenses Fee.
 Tenant shall submit payment of the Total
City Expenses Fee, on or before the first (1st) day of each
month, in advance and without invoice,
provided however, that one hundred percent (100%) of the Total City Expenses Fee
allocable to the Premises shall be deferred during the Deferred Rent Period.

 

All deferred Total City Expenses Fees shall accrue to Tenant, and shall
be a Rent obligation of Tenant under this Lease, Sixty (60) days prior to the
expiration of the Deferred Rent Period, City shall provide to Tenant an invoice
stating the deferred Total City Expenses Fee amount. Such deferred Total City
Expenses Fee amount shall be due and payable to City on or before the next
business day following the last calendar day of the Deferred Rent Period.

 

7.4          Other
Airport Fees. Tenant’s
obligation to pay Other Airport Fees shall commence on the Effective Date of
this Lease and shall be due and payable by Tenant monthly for the preceding
month no later than the fifteenth (15th) day of each month, unless
otherwise specifically provided for in this Lease. Other Airport Fees are
outlined in Exhibit D, attached
hereto and incorporated herein.

 

7.5          Rents and
Fees Prorated. If the
expiration date or earlier termination of this Lease occurs on a date other
than the first or last day of a calendar month, Rents and Fees shall be
prorated according to the number of days in that month during which the Premises
and rights were enjoyed.

 

7.6          Place of
Payment. Tenant shall
deliver payments of Rents and Fees to the office of Director, or at such other
place as may be designated by City from time to time.

 

12

 

Payment shall be made to the order of “City of Albuquerque.”

 

7.7          Late Payment Fees. If Rents and Fees required by this Lease are
not received by City on or before the date specified in this Lease, Tenant
shall pay an interest charge to City of one and one-half percent (11/2%)
per month (18% annually) for each month or partial month that any payment due
is not received. In addition, Tenant shall pay an administrative fee to City of
Fifty and 00/100 Dollars ($50.00) if City sends Tenant a late payment notice.

 

Section 8.              Security Deposit. Prior to the Effective Date, Tenant shall
deposit at the office of Director an Irrevocable Letter of Credit (“LOC”)
issued exclusively to City, or a Performance Bond (“Bond”) in a form
substantially the same as Exhibit E, attached hereto and incorporated herein, in the amount of
Twelve Thousand and 00/100 ($12,000.00), which
amount is based on Ground Rent for three (3) months. The LOC or Bond will
be held by City as security for the full and faithful performance of all the
terms, covenants and conditions to be performed by Tenant under this Lease. The
LOC shall be made to the order of the City of Albuquerque. The Bond shall be
made payable on demand to the City of Albuquerque. The amount of the Security
Deposit may increase in the event that the Ground Rent payable pursuant to this
Lease increases, provided however that there will be no decrease in the
Security Deposit.

 

The LOC or Bond shall expressly permit partial payment and shall be
issued exclusively to City of Albuquerque LOCs or Bonds shall allow presentment
of claims under the LOC or Bond
by City by mail and shall not restrict such presentment to in-person
appearances at a particular place. If a Bond is provided, such Bond shall be
issued with City of Albuquerque as obligee by a surety licensed to conduct
business in the State of New Mexico and which has sufficient bonding capacity
for the amount of the Bond and is named in the current list of “Companies
Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and
as Acceptable Reinsuring Companies” as published in the Federal Register by the
U.S. Treasury Department or its successor agency.

 

Document(s) evidencing the Security Deposit shall provide that it shall
remain in full force and effect for a period of sixty (60) days following
termination or cancellation of this Lease, and shall allow City to make a
partial draw on such Security Deposit. In the event of a partial draw, Tenant
shall immediately reinstate the Security Deposit to the full amount required
herein. Documents establishing the continuation or replacement of the LOC or
Bond shall be received by the Aviation Department no less than thirty (30) days
prior to the expiration of the existing LOC or Bond. If payments required by
Tenant under the terms of this Lease are not made in accordance with the
payment provisions set forth in Section 7 above, City shall have the right
to forfeit, take, and use as much of such Security Deposit as may be necessary
to make such payment in full and to exercise any other legal remedies to which
it may be entitled. In the event Tenant fails to maintain insurance pursuant to
Section 9 below, City shall be entitled to obtain such insurance, and City
shall have the right to forfeit, take and use as much of such Security Deposit
as may be

 

13

 

necessary to make payment for such insurance coverage in full and to
exercise any other legal remedies to which it may be entitled. The LOC or Bond
shall be released by City within sixty (60) days following expiration or
termination of this Lease, provided Tenant has fully performed.

 

City shall have the option of accepting cash security deposits. City
shall not be required to place cash security deposits in interest-bearing
accounts; however, should City elect to do so, City shall be entitled to all
interest earned from such account as compensation for handling such account. City
shall not be required to keep cash security deposits in separate accounts.

 

Section 9.              Insurance.

 

9.1          General
Requirements. Tenant
shall, procure and maintain in full force and effect during the Term, the
insurance required in this Lease. Policies of insurance shall be written by
companies authorized to write such insurance in New Mexico, and shall be on
forms properly filed and approved by the Superintendent of Insurance, State of
New Mexico. When requested by City, Tenant shall provide to City copies of any
or all policies of insurance for the insurance coverage required in this Section 9.
Policies of insurance shall be procured for all insurance required herein and
coverage limits of such policies of insurance shall not be reduced or replaced
in part or in whole by self-insurance, including self-insurance retention
amounts, except as provided hereinafter.

 

If Tenant sublets, or assigns or otherwise transfers any interest in
any part of this Lease, Tenant shall include all transferees in Tenant’s
insurance policies or require such transferees to secure insurance to cover all
hazards arising from Tenant’s use of the Airport.

 

Tenant shall not violate the terms or conditions of insurance policies
required to be furnished by Tenant. Tenant shall promptly notify City of any
claim of loss exceeding the amount of the deductible under such insurance
policies, and certify that proper notice has been given the appropriate
insurance carrier.

 

Tenant shall furnish City with certificates of insurance by sending the
certificates to Director of Aviation, Albuquerque International Sunport, PO Box
9948, Albuquerque, New Mexico 87119. All insurance certificates shall provide
that thirty (30) days written notice be given to Director before a policy is
canceled, materially changed, or not renewed. The form of certificates of
insurance shall be substantially the same as Exhibit F
attached hereto. Documents establishing the continuation or
replacement of insurance shall be delivered to the Aviation Department no less
than thirty (30) days prior to the continuation or replacement of the insurance
coverage.

 

9.2          Approval of
Insurance. Even
though a “notice to proceed” may have been given, neither Tenant nor any
contractors, assignees or other transferees of Tenant shall

 

14

 

begin any operations pursuant to this Lease until the required
insurance has been obtained and proper certificates of insurance delivered to
Director. Neither approval nor failure to disapprove certificates of insurance
by City shall relieve Tenant or any transferees of full responsibility to
maintain the required insurance in full force and effect.

 

9.3          Commercial
General Liability including Automobile. Tenant shall procure and maintain policies of
insurance for commercial general liability and vehicle liability for all
vehicles used in its operation at the Airport, as further described below. All
such policies of insurance shall have liability limits in amounts not less than
One Million and 00/100 Dollars
($1,000,000.00)* single limit liability for bodily injury, including
death, and property damage in any one occurrence. The insurance policies shall
include coverage for one hundred percent (100%) of the replacement value of the
Leasehold Improvements, operations, and Tenant’s contractual liability to City
hereunder. Contractual liability coverage shall specifically insure the
Indemnification provision of this Lease. The insurance policies shall contain “products”
and “completed operations” coverage (if applicable) and shall not be written on
a “claims made” form. The insurance policies shall include coverage for all use
of, activities on, or operations with respect to the Airport, coverage for the
use of all owned, non-owned, hired automobiles, vehicles, and other equipment,
both on and off work. City reserves the right to review and modify the limits
stated above at one-year intervals to give effect to the changing risk
management environment and inflationary trends.

 

* Should Tenant require access to the Air Operations Area (“AOA”) of
the Airport the limit of liability would increase to Five Million and 00/100
Dollars ($5,000,000.00).

 

9.3.1       Increased Limits. If, during the Term of this Lease, the
legislature of the State of New Mexico increases the maximum limits of
liability under the Tort Claims Act (Sections 41-4-1 through 41-4-27, NMSA
1978) to an amount greater than that required for commercial general liability
including auto above, City shall be entitled to require Tenant to increase the
limits of any insurance required herein to an amount equal to such increased
Tort Claim Act maximum limits of liability.

 

9.4          All Risk
Property Coverage. Tenant
shall be solely responsible for obtaining insurance policies that provide all
risk property coverage in an amount not less than one hundred percent (100%) of
the full replacement value of Tenant’s Leasehold Improvements, the Additional
Improvements, the Tenant Equipment and other improvements on the Premises. The
replacement value of the Leasehold Improvements, the Additional Improvements,
the Tenant Equipment and other improvements on the Premises shall be
re-established at intervals of not more than three (3) years, following
the end of the Construction Period, by an independent qualified appraiser
employed by Tenant and approved by City.

 

The insurance policies required in this subsection 9.4 shall also
provide coverage for the

 

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construction of temporary facilities should the
Leasehold Improvements, the Additional Improvements, the Tenant Equipment or
other improvements on the Premises be damaged or destroyed to such an extent
that it shall be untenable.

 

9.5          Environmental
Impairment Liability. Tenant
shall be solely responsible for obtaining insurance policies that provide
environmental impairment liability coverage in an amount not less than Five
Million and 00/100 Dollars ($5,000,000.00) per occurrence with a clean-up cost
rider of not less than Ten Million and 00/100 ($10,000,000.00).

 

9.6          Contractor
Bond and Insurance. Tenant
shall require any contractor or contractors who perform any work on the Airport
on behalf of or for the benefit of Tenant, to procure a Performance Bond in the
full amount of the work to be performed, as well as contractor’s commercial
general liability insurance, ground vehicle liability insurance, property
damage insurance and workers’ compensation insurance in amounts no less than those
required of Tenant pursuant to this Lease. Tenant shall furnish Director of
Aviation with evidence that the contractor has procured such Performance Bond
and insurance coverage.

 

9.7          Builders Risk
Insurance. During any
period of construction or reconstruction for which Tenant contracts, Tenant
shall carry, or shall require its contractor or contractors to carry, a policy
of Builders Risk Insurance in an amount not less than one hundred percent
(100%) of the full insurable value of the construction or reconstruction of Tenant’s
improvements.

 

9.8          Additional
Insured. City of
Albuquerque shall be named as an additional insured on each insurance policy
referred to in subsections 9.3, 9.4, 9.5, 9.6, and 9.7 above.

 

9.9          Workers’
Compensation Insurance. Tenant
shall comply with the provisions of the New Mexico Workers’ Compensation Act,
the Subsequent Injury Act, and the New Mexico Occupational Disease Disablement
Law. Tenant shall procure and maintain during the Term of this Lease complete
Workers’ and Employer’s Liability Insurance in accordance with New Mexico laws
and regulations. Such insurance shall include coverage permitted under Section 52-1-10,
NMSA 1978, for safety devices. In addition, Tenant shall procure and maintain
Employer’s Liability Coverage in an amount not less than One Million and 00/100
Dollars ($1,000,000.00) per occurrence.

 

With respect to Workers’ Compensation Insurance, if Tenant elects to be
self-insured, Tenant shall comply with the applicable requirements of law. If
any portion of the work is to be sublet, Tenant shall require the subtenants
similarly to provide such coverage (or qualify as a self-insured) for all the
latter’s employees to be engaged in such work. Tenant hereby covenants and
agrees that City, its officers, or employees will not be liable or responsible
for any claims or actions occasioned by Tenant’s failure to comply with the
provisions of this subparagraph and that the Indemnification provision of this
Lease shall

 

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apply to this paragraph. It is expressly agreed that the employees of
Tenant are not City employees for any purpose.

 

9.10        Self-Insurance
Retention/Deductibles. In
the event any of the insurance policies required in this Section (except
as allowed by New Mexico law regarding Workers’ Compensation) contain a self-insurance
retention provision (whether or not in the form of a deductible), for each such
amount, Tenant shall post a bond or an irrevocable letter of credit made
exclusively for the benefit of City and held by a bank authorized to do business
in New Mexico which is acceptable to the Aviation Department.

 

9.11        Additional
Requirements. Insofar
as the above-described insurance provides protection against liability for
damages to third parties for personal injury, death, and property damage, City
shall be included as an additional insured; provided such liability insurance
coverage shall also extend to damage, destruction and injury to City-owned or
City-leased property and City personnel, and caused by or resulting from work, acts,
operations or omissions of Tenant, its officers, agents, employees and
independent contractors. City shall have no liability for any premiums charged
for such coverage, and inclusion of City as an additional insured is not
intended to and shall not make City a partner or joint venturer with Tenant in
its operations at the Airport.

 

9.12        Failure to
Maintain Insurance. In
the event Tenant, shall, at any time, fail to have in effect the insurance
required under the provisions of this Lease, such failure shall constitute an
Event of Default pursuant to Section 11 below. City shall have the option,
but no obligation, to secure the insurance required hereunder at the cost and
expense of Tenant, providing Tenant with fifteen (15) calendar days written
notice of its intention to obtain such insurance coverage. Said fifteen (15)
days shall run from the date notice is received by Tenant. Tenant agrees to
reimburse City for costs of such insurance plus fifteen percent (15%) thereof
for administrative overhead.

 

Section 10.            Other Agreements.

 

10.1        Airport Operations Area (“AOA”)
Agreement. Tenant shall be
granted access to the AOA, including all roadways, taxiways, and runways, in
order to perform the activities and operations anticipated under this Lease
pursuant to an AOA Agreement executed by Tenant and City. Tenant and all
approved subtenants, employees, and agents shall use the Premises in strict
accordance with all applicable laws, regulations or guidelines concerning
public or personnel access to the AOA, as same may be promulgated or amended
from time to time, including without limitation such regulations as might
require personnel to submit to random drug testing, background checks, and all
other security precautions mandated as a prerequisite to obtaining access to
the AOA. Tenant understands that if it does not enter into an AOA Agreement
with City for those purposes, it is an event of default of this Lease pursuant
to Section 11 below.

 

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10.2        Concession
Agreement. Tenant
agrees to enter into a Concession Agreement with City, and be bound by the
terms and conditions of that Concession Agreement, pertaining to the sale, or
re-sale, of any item other than fully operational aircraft manufactured or
assembled at the Premises. Tenant agrees that if it does not enter into a
Concession Agreement with City for those purposes, it is an event of default of
this Lease pursuant to Section 11 below.

 

Section 11.            Termination
of Lease.

 

11.1        Termination
by City: 15-Day Cure Period. This Section 11 shall govern Tenant’s failure to comply with the
following provisions (hereafter “Events of Default”):

 

11.1.1     Pay the Rents and Fees pursuant to Section 7,

 

11.1.2     Provide and maintain a Security Deposit pursuant to Section 8,

 

11.1.3     Provide and maintain Insurance pursuant to Section 9,

 

11.1.4     Execute an AOA Agreement pursuant to subsection 10.1, if applicable,

 

11.1.5     Execute
a Concession Agreement pursuant to subsection 10.2, if applicable,

 

11.1.6     Provide and maintain the Performance and Payment Bonds pursuant to Section 14
and Section 15.

 

In the event Tenant fails to comply with any or all of the foregoing
for a period of fifteen (15) days after receipt by Tenant of City’s written
notice of an Event of Default, City shall be entitled to terminate this Lease for
Tenant’s failure to comply, provided that no notice of termination shall be
effective if Tenant has fully cured all Events of Default identified in the
fifteen (15) day notice prior to Tenant’s receipt of the notice of termination.
Termination of this Lease will take effect immediately upon Tenant’s receipt of
notice of termination unless stated otherwise in the notice of termination.

 

11.2        Termination
by City: 30-Day Cure Period. Except for Events of Default that are addressed in subsection 11.1
above, City shall be entitled to terminate this Lease in the event of default
by Tenant in the performance of any covenant or agreement herein required to be
performed by Tenant and the failure of Tenant to remedy such default for a period
of thirty (30) days after receiving City’s written notice to remedy the same. However,
no resulting notice of termination shall be of any force or effect if Tenant
has remedied all Events of Default prior to Tenant’s receipt of City’s notice
of termination. Termination shall take effect immediately upon Tenant’s receipt
of the notice of termination unless stated otherwise in the notice of
termination.

 

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In the event that this Lease is terminated under subsection 11.1
above, or this subsection 11.2, Tenant shall remain liable to City for
damages in an amount equal to the payment obligation for outstanding Rents and
Fees established for the Premises required to be paid under Section 7 of
this Lease.

 

11.3        Termination
by Tenant: 30-Day Cure Period. Tenant shall be entitled to terminate this Lease in the event of a
default by City in the performance of any covenant or agreement herein required
to be performed by City and the failure of City to remedy such default for a
period of thirty (30) days after receiving Tenant’s written notice to remedy
the same. However, no notice of termination shall be of any force or effect if
City has remedied, or has diligently commenced to cure the default prior to
receipt of Tenant’s notice of termination.

 

Section 12.            Financial
Responsibility.

 

12.1        Taxes,
Licenses, Debts. Tenant
shall promptly pay all taxes and other exactions assessed or assessable and pay
all license fees and permit fees applicable to Tenant’s operation, and acquire
and keep current all licenses, municipal, state or federal, required as the
result of Tenant’s operations at the Airport pursuant to this Lease, and shall
not allow any taxes, excises or fees to become delinquent, which may accrue to
the Leasehold Improvements, Additional Improvements, Tenant Equipment, or
personal property situated on the Premises. Tenant shall pay promptly when due
all bills, debts and obligations incurred in connection with its operations or
activities on the Premises and shall not permit them to become delinquent.

 

12.2        Tax Payment
Verification. Tenant
shall provide to City, upon ten (10) days notice, and at no cost to City, any
information deemed necessary by City to verify all taxes have been paid on the
Leasehold Improvements, Additional Improvements, Tenant Equipment, and
additional property situated on the Premises.

 

12.3        Liens. Tenant shall not permit any mortgage,
judgment, execution or mechanic’s or materialman’s or any other lien to become
attached to or be foreclosed upon the Premises or Airport real property by
reasons of work, labor performed or materials or equipment furnished to Tenant
in connection with the Premises.

 

If required by any contractor retained by Tenant, City shall provide
any consent or execute any release relating to services performed or materials
provided to Tenant, but only to the extent any such consent or release is
consistent with the provisions hereof and does not implicate any charging of or
creation of any interest in the Premises.

 

Section 13.            Performance
by City Upon Failure by Tenant. If Tenant fails to perform, for a period of fifteen (15) days after
written notice from City, any obligation required by this Lease, including its
Exhibits, City may, but is not obligated to perform such obligation of Tenant
and charge Tenant for the cost to City of such performance plus

 

19

 

twenty-five percent (25%) of such cost; provided, however, that if
Tenant’s failure to perform any such obligation endangers public safety and
operations at the Airport, including the Premises, and City so states in its
notice to Tenant, City may perform such obligation of Tenant at any time after
giving such notice and charge Tenant for costs of such performance plus
twenty-five percent (25%) percent of such cost. Such costs, including
twenty-five percent (25%) of the costs in this Section 13 shall be
considered Extraordinary Costs of City and included as part of Total City
Expenses.

 

Section 14.            Construction
of Improvements.

 

14.1        Improvements.
Tenant, at its sole
risk and expense, shall completely construct all Leasehold Improvements or
Additional Improvements (“Improvements”), in strict compliance with the
Aviation Department Development Guidelines, and this Section 14, and shall
obtain necessary City permits, licenses, and approvals from City’s building officials
or other governmental agencies as required.

 

14.2        Approval by
Director. Tenant
shall submit to Director, complete plans and specifications for all
Improvements Tenant makes to the Premises and obtain written approval for same
from Director prior to beginning construction and installation. Approval by
Director shall concern architectural and aesthetic matters, and Director shall
be entitled to reject designs submitted and require Tenant to re-submit designs
until approval by Director is given. First class standards of design and
construction are required, and all Improvements shall conform with the Aviation
Department Development Guidelines, and all applicable laws.  City agrees to act promptly upon requests for
approval of plans and specifications, and modifications thereto.

 

Any review or approval by Director of Tenant’s plans or any inspection
by City of the Improvements work or materials, shall not be deemed to
constitute a waiver or release by City of any obligation or responsibility of
Tenant under this Lease, or an assumption of any risk or liability by City with
respect thereto; and Tenant shall make no claim against City on account of such
review, approval, or inspection.  City
reviews, approvals, and inspections shall not constitute assumption by City of
any responsibility for the adequacy of the design or construction.  Such responsibility shall remain totally with
Tenant and Tenant’s architects, engineers, and contractors.  Tenant shall cause all Improvements
authorized under this Lease to be constructed only by a contractor properly
licensed by the State of New Mexico to construct such Improvements.

 

14.3        Construction
Plans and Specifications, No Improvements of any kind shall be erected, placed, assembled,
constructed or permitted on the Premises until preliminary and final plans
showing the type of use, location, size, and design are prepared by an
architect and/or engineer licensed to practice in the State of New Mexico and
the plans have been approved by City.  Prior
to the preparation of preliminary plans, Tenant shall contact Director to schedule a
pre-project meeting to brief City staff on the proposed Improvements.

 

20

 

14.3.1     Preliminary Plans.  Tenant shall, within thirty (30) days following the Effective Date of
this Lease, deliver to Director for approval four (4) sets of preliminary plans
for the Improvements, prepared and stamped by an architect or engineer licensed
to practice in the State of New Mexico.

 

Such preliminary plans shall show the full extent of the Improvements
to be constructed, including but not limited to, grading, drainage,
landscaping, paving, signs, structural details and utility locations, showing
the relationship of the proposed Improvements to all adjacent Airport parcels,
public roadways, or service roadways.  Civil
engineering plans shall include drawings submitted on a scale not smaller than
one (1) inch equals fifty (50) feet. Architectural plans shall include
plan drawings at a suitable scale but in no event shall the scale be smaller
than one sixteenth (1/16) inch equal to one (1) foot. Plans shall include
complete specifications in sufficient detail for Director to determine
compatibility with the Aviation Department Development Guidelines, and the
overall objectives for the aesthetic character and quality of the Improvements.
Architectural submittals shall include an accurate architectural perspective
color rendering, including the proposed exterior color, scheme, style,
materials, and wording and placement of all signs.

 

Within ten (10) days following receipt thereof, Director shall
review such preliminary plans, and transmit to Tenant written approval or
rejection thereof, in whole or in part. In the event of rejection, within
fifteen (15) days after receipt of the rejection notice, Tenant shall amend
such plans to comply with the items set forth in the rejection notice, and
re-submit them to Director for approval. Director shall notify Tenant within ten
(10) days thereafter of his decision regarding the revised plans.

 

Tenant warrants that City may use all plans and specifications
submitted by or on behalf of Tenant, for purposes relevant to and consistent
with this Lease, but for no other purposes whatsoever.

 

14.3.2     Final Plans and Construction Schedule. Within thirty (30) days following Tenant’s
receipt of Director’s approval of the preliminary plans, Tenant shall deliver
to Director for approval four (4) sets of final construction plans and
specifications for construction of the Improvements, together with a schedule for
construction of the Improvements. Such final plans and specifications shall
substantially conform to the preliminary plans previously approved by Director
and shall be submitted to Director prior to submitting the plans to other
applicable agencies. There shall be no substantial changes or alterations made
in said final plans and specifications after the approval by Director without
the advance written approval of Director. Director’s approval of such plans
shall not infer approval by other City or controlling agencies. After approval
of the plans by Director, Tenant has full responsibility for obtaining all
other required approvals and permits for the Improvements.

 

14.3.3     Modification
of Final Plans. Any
modifications to the approved 

 

21

 

final plans and specifications, which may be required following review
by the City of Albuquerque Code Enforcement Division, the New Mexico Environment
Department, the City of Albuquerque Planning Department, Albuquerque Fire
Department, or other governmental agencies, shall be submitted to Director for
approval prior to construction.

 

14.4        Permits,
Licenses, and Approvals. Tenant shall, at its sole expense, obtain all necessary licenses,
permits, and approvals required for construction of the Improvements on the
Premises from City, state, and federal agencies. These shall include, but not
be limited to:

 

14.4.1     Permits, licenses, and approvals for fuel storage
tanks; and

 

14.4.2     Permits, licenses, and approvals of a) the
City of Albuquerque Planning Department, Albuquerque Fire Department, and the
City of Albuquerque Building and Safety Division and b) the National Board of
Fire Underwriters or other similar organizations for the prevention of fire or
for the correction of unhealthy or hazardous conditions; and

 

14.4.3     Permits, licenses, and approvals for
compliance with the necessary storm water management, sediment, and erosion
control requirements pursuant to the regulations of the New Mexico Environment
Department; and

 

14.4.4     Submittal of a Notice of Intent (“NOI”) to
the Environmental Protection Agency (“EPA”) prior to the start of site
development and construction and shall provide, implement, and be responsible
for, a Storm Water Pollution Prevention Plan (“SWPPP”) during all phases of the
work. Tenant shall provide a copy of the NOI to City prior to the start of any
work at the site.

 

Upon completion of the construction, Tenant will be responsible for
submitting a Notice of Termination (“NOT”) to the EPA, and will provide a copy
of the NOT to City.

 

14.4.5     City’s approval of Tenant’s Spill Prevention
Controls and Countermeasures Plan.

 

14.5        Notice to
Proceed, Construction Bonds, and Insurance. Director’s approval of Tenant’s final plans
and specifications and time schedule shall constitute Tenant’s notice to
proceed with construction of Improvements, provided that all the following
requirements have been satisfied:

 

14.5.1     Tenant has delivered to Director for
approval, and Director has approved, certificates of insurance for coverage
evidencing Tenant’s construction contractor’s a) “all risk” type builders’ risk
insurance coverage and workers’ compensation insurance coverage and b)
compliance with the applicable insurance provisions of Section 9 above;
and

 

22

 

14.5.2     Tenant’s construction contractor has duly
executed a Labor and Materials Payment Bond with a surety authorized to do so
in the State of New Mexico, in an amount equal to its contract for construction
of the Improvements to insure City against loss by reason of any lien or liens
that may be filed against the Premises or Airport property. Tenant shall
provide City with a true copy of such executed bond, upon request by Director.

 

Tenant shall be solely responsible for payment and pay promptly, as
due, all persons supplying labor and materials to such contractor for ail
elements of such construction of Improvement on the Premises. Tenant shall keep
the Premises free and clear of all mechanics liens resulting from any
construction thereto by or on behalf of Tenant and shall permit no lien or
claim to be filed or prosecuted against City on account of any such
construction or materials furnished. Tenant may contest the correctness or
validity of any such lien, but Tenant shall indemnify, defend, and hold
harmless City, its elected representatives, officers, agents, and employees,
and the Premises from any and all claims and liability for payment of any such
lien, or attorneys’ fees; and

 

14.5.3     Tenant has delivered to Director a
Performance Bond executed by Tenant’s construction contractor and a surety
acceptable to City, in a form acceptable to City, securing contractor’s
performance of its obligations relating to the construction of the Improvements,
in an amount equal to the value of its construction contract, naming City as
obligee thereunder.  In the alternative,
Tenant may, submit to Director in lieu of a Performance Bond, a deposit in an
amount equal to the total value of Tenant’s construction contract, subject to
the approval of City; and

 

14.5.4     Tenant has obtained at its sole expense all
necessary licenses and permits required for construction of Improvements on the
Premises; and

 

14.5.5     Tenant shall submit to Director a copy of the
building permits issued to Tenant by the City of Albuquerque Building
Inspection Division; and

 

23

 

14.5.6     Tenant shall notify Director of Tenant’s
intention to commence construction of the Improvements at least forty-eight
(48) hours before commencement of such work or delivery of any material to
be used in such work at the Premises.

 

14.6        Contractor Indemnification. Tenant shall include in all construction contracts
entered into in connection with the construction of the Improvements, a provision
requiring the contractor and subcontractors to indemnify, hold harmless, defend
and insure Airport, City, and their directors, officers, councils, employees,
from and against the risk of legal liability for death, injury or damage to
persons or property, direct or consequential, arising or alleged to arise out
of, or in connection with, the performance of any or all of such construction
work, whether the claims and demands made are just or unjust, unless same are
caused by the negligence or willful act of the indemnified parties.

 

14.7        Coordination
of Construction. Tenant
shall cooperate with the Aviation Department in the construction of the
Improvements. Tenant agrees that all construction and installation of said
Improvements at the Airport shall be accomplished without interfering with
other users of the Airport.

 

Tenant shall be responsible for obtaining and paying for any temporary
utilities needed during construction of the Improvements.

 

Tenant and its construction contractor and subcontractors shall at all
times keep the construction sites and surrounding areas clean, orderly, safe,
free of accumulated construction debris and waste materials, and shall be
solely responsible for removal of all construction debris and waste materials
to a suitable licensed landfill off the Airport.

 

14.8        Delay in
Completion. The
construction of the Improvements to the Premises must be completed within the
Construction Period as defined in subsection 2.11 of this Lease and as
further outlined in Tenant’s schedule for construction. Completion of the
Improvements after those dates shall be subject to assessment of liquidated
damages in the amount of One Thousand and 00/100 Dollars ($1,000.00) per day
payable to City by Tenant. A delay in the completion of the construction of the
Improvements beyond the time allowed must be approved, in advance, in writing,
by Director.

 

14.9        Certificate
of Occupancy. Within
ten (10) days after the completion of the construction of the
Improvements, Tenant shall submit a copy of the Certificate of Occupancy to
Director. Within ten (10) days after receipt of the Certificate of
Occupancy, Director may schedule an inspection of the Improvements to be
accompanied by Tenant for purposes of confirming compliance with the final plans
and any subsequent modifications to the final plans.

 

24

 

14.10      As-Built/Certified
Drawings. Within sixty (60) days after receipt of a Certificate
of Occupancy, the Tenant shall furnish to City, one (1) set of original reproducible
record drawings on reproducible mylar sheets (twenty-four (24) inches by thirty-six
(36) inches) showing the “as-built” improvements, and one (1) set of first
generation plain bond photo copy. Certified drawings shall be dated and stamped
by the engineer or architect of record. A complete set of digital format Auto
CAD 2000 or earlier version drawings, reflecting the same information as the
certified drawings, shall be delivered at the same time. Delivery of the Auto
CAD drawings shall be on CD (compact disc), along with necessary
printing/plotting information to allow City to reproduce drawings as originally
designed. If Tenant fails to provide said “as-built” drawings, City may hire a
registered architect or registered engineer to provide the same and shall recover
the cost of the said drawings, plus a fifty percent (50%) overhead
administrative fee, from Tenant. Upon request of City, Tenant shall inspect the
Improvements jointly with City to verify compliance with the “as-built”
drawings.

 

14.11      Improvements
by Tenant to Remain Throughout Term. All of Tenant’s
Improvements, pursuant to this Section 14 shall remain on the Premises
throughout the Term, unless otherwise approved in writing by Director.

 

14.12    Ownership of
Improvements. All
Improvements existing or constructed on the Premises by Tenant, shall be owned
by Tenant until expiration of the Term or the earlier termination of this Lease.
 Tenant shall not, however, remove any of
the Improvements from the Premises, nor waste, destroy, demolish or alter any
of the Improvements on the Premises except as permitted by this Lease. All
improvements on the Premises at the expiration of the Term, or the earlier
termination of this Lease, shall, without compensation to Tenant, become the
property of City, provided Tenant shall have the right to remove any and all
trade fixtures, fixtures, or similar improvements on the Premises provided for
in Section 20, but Tenant shall repair all damage to the Premises or
Improvements caused by such removal. Except as otherwise expressly provided in
this Lease, upon expiration of the Term or the earlier termination of this
Lease, the Improvements shall become the property of City free and clear of any
and all rights to possession and all claims to or against them created by
Tenant.

 

14.13      Removal of
Unapproved Improvements. Improvements made on the Premises without Director’s written approval
as required under this Section 14 or portions of the Improvements that are
not constructed as indicated and specified on approved plans will be considered
to be unapproved Improvements constructed in violation of the provisions of
this Lease. Unapproved Improvements shall be removed by Tenant, at Tenant’s sole
expense, within ninety (90) calendar days after Tenant’s receipt of written notice
to do so from Director.

 

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14.14      Future
Improvements. Tenant
shall make no alterations to the Premises, following completion of the
construction of the Improvements, nor construct additional improvements upon
the Premises without the prior written approval of Director, in accordance with
the procedures as set forth in this Section 14.

 

Section 15.            Tenant Equipment.

 

15.1        Provision of
Tenant Equipment. Tenant,
at its sole risk and expense, shall procure and completely construct or install
the Tenant Equipment, on and in the Leasehold Improvements and the Premises, in
strict compliance with the Aviation Department Development Guidelines, and this
Section 15, and shall obtain necessary City permits, licenses, and
approvals from City’s building officials or other governmental agencies as
required.

 

15.2        Installation/Construction
of Tenant Equipment. Installation
or construction of Tenant Equipment on the Premises shall comply with the
Aviation Department Development Guidelines. Notwithstanding anything in this
Lease to the contrary, any approval or inspection by City of the Tenant
Equipment, shall not be deemed to constitute a waiver or release by City of any
obligation or responsibility of Tenant under this Lease, or an assumption of
any risk or liability by City with respect thereto; and Tenant shall make no claim against City on account
of such review, approval, or inspection.  City reviews, approvals, and inspections shall not constitute assumption by
City of any responsibility for the adequacy of the design, construction, or
installation of Tenant Equipment. Such responsibility shall remain totally with
Tenant and Tenant’s architects, engineers, and contractors.

 

15.3        Installation/Construction
Bonds. Tenant shall
be allowed to proceed with the installation/construction of Tenant Equipment,
provided that all the following requirements have been satisfied:

 

15.3.1     Tenant has delivered to Director for
approval, and Director has approved, certificates of insurance for coverage
evidencing Tenant’s installation/construction contractor’s a) “all risk” type
builders’ risk insurance coverage and workers’ compensation insurance coverage
and b) compliance with the applicable insurance provisions of Section 9
above; and

 

15.3.2     Tenant’s installation/construction contractor
has duly executed a Labor and Materials Payment Bond with a surety authorized
to do so in the State of New Mexico, in an amount equal to its contract for the
installation/construction of the Tenant Equipment to insure City against loss
by reason of any lien or liens that may be filed against the Premises or
Airport property. Tenant shall provide City with a true copy of such executed
bond, upon request by Director.

 

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Tenant shall be solely responsible for payment and pay promptly, as
due, all persons supplying labor and materials to such contractor for all
elements of such installation/construction of Tenant Equipment on the Premises.
Tenant shall keep the Premises free and clear of all mechanics liens resulting
from any installation/construction thereto by or on behalf of Tenant and shall
permit no lien or claim to be filed or prosecuted against City on account of
any such installation/construction or materials furnished. Tenant may contest
the correctness or validity of any such lien, but Tenant shall indemnify,
defend, and hold harmless City, its elected representatives, officers, agents,
and employees, and the Premises from any and all claims and liability for
payment of any such lien, or attorneys’ fees.

 

On or before the installation of the Tenant Equipment, Tenant shall
deliver to Director, a Performance Bond executed by Tenant’s
installation/construction contractor and a surety acceptable to City, in a form
acceptable to City, securing installation/construction contractor’s performance
of its obligations relating to the installation/construction of Tenant
Equipment, in an amount equal to the value of its installation/construction
contract, naming City as obligee thereunder. In the alternative, Tenant may,
submit to Director in lieu of a Performance Bond, a deposit in an amount equal
to the total value of Tenant’s installation/construction contract, subject to
the approval of City.

 

15.4        Installation/Construction
Indemnification. Tenant
shall include in all installation/construction contracts entered into in
connection with any or all of the installation/construction of Tenant Equipment,a
provision requiring the contractor and subcontractors to indemnify, hold
harmless, defend and insure Airport, City, and their directors, officers,
councils, employees, from and against the risk of legal liability for death,
injury or damage to persons or property, direct or consequential, arising or
alleged to arise out of, or in connection with, the performance of any or all
of such installation/construction of Tenant Equipment, whether the claims and
demands made are just or unjust, unless same are caused by the negligence or
willful act of the indemnified parties.

 

15.5        Ownership of
Tenant Equipment. Tenant
Equipment shall at all times remain the property of Tenant and unless expressly
agreed to in writing by City, ownership of such equipment shall not pass to
City at any time during the Term, or at the expiration or earlier termination,
of this Lease by virtue of such equipment being installed at the Premises.

 

Section 16.            Operational
Requirements. Tenant
hereby acknowledges and understands it shall use the Premises and operate its
business in compliance with all requirements of this Lease. In particular
Tenant shall:

 

16.1        Conduct a continuing program of improvement
of the Premises adequate to maintain the Premises in a first-class condition
during the Term.

 

16.2        Provide and maintain the Tenant Equipment and
such personal property,

 

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equipment and trade fixtures as it needs to operate its business as a
first-class facility. Tenant shall remove such equipment at the expiration or
earlier termination of this Lease.

 

16.3        Procure from all governmental authorities,
including City, having jurisdiction over the operations of Tenant at the
Airport, all licenses, certificates, permits or other authorizations which may
be necessary to conduct its operations or any activity authorized by this
Lease.

 

16.4        Promptly cancel and discharge as of record
any and all liens in any way arising out of its occupancy or use of the
Premises or the exercise of its rights hereunder.

 

Section 17.           Maintenance
by City. City shall
have no duty or obligation whatsoever to maintain any portion of the Premises,
the Leasehold Improvements, the Additional Improvements, the Tenant Equipment,
or any personal property thereon.

 

Section 18.           Maintenance
and Utilities by Tenant.

 

18.1        Operational
Maintenance. During
the Term, it shall be the obligation of Tenant, without cost to City, to
maintain the Premises in accordance with the Operational Requirements set forth
in Section 16 above.

 

18.2        Improvement Maintenance. During
the Term, Tenant shall perform, at its
sole expense, ordinary preventative maintenance and ordinary unkeep and repair,
to maintain in good repair and condition all portions of the Premises, the
Leasehold Improvements, the Additional Improvements, the Tenant Equipment, or
any personal property thereon.

 

18.3        Janitorial
Maintenance. Tenant
shall at all times keep its Premises, Leasehold Improvements, Additional
Improvements, Tenant Equipment, or any personal property neat, orderly,
sanitary, and presentable. Tenant shall furnish its own janitorial services at
the Premises and shall cause to be removed at the expense of Tenant from the Premises
all waste, garbage, and rubbish, and agrees not to deposit the same on any part
of the Airport. City shall be entitled to remove the refuse of Tenant from the
Premises and charge Tenant a reasonable fee if Tenant fails to remove such
refuse within one (1) day after receiving written or verbal notice from
City of improper disposal.

 

18.4        Utilities. All utility services to the Premises shall be
separately metered and Tenant shall receive bills directly from utility
providers and promptly pay for all such services when due. During the Term,
City shall not be liable to Tenant for any interruption in or curtailment of
any utility service. City shall not be liable for damages to persons or property
for any such interruption, nor shall such interruption in any way be construed
as cause for Rents and Fees to abate or operate to release Tenant from any of
its obligations hereunder, except that, if the interruption is caused solely by
the act or omission of City

 

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and the interruption continues for more than seventy-two (72) hours,
Rents and Fees will be abated for the duration of the interruption.

 

Section 19.            Tenant
Improvements and Personal Property.

 

19.1        Tenant
Improvements. Tenant
shall not make any modifications or changes to the completed Leasehold
Improvements or construct any further improvements to the Premises without the
prior written approval of Director, and then only in accordance with such
designs and plans as approved by Director. Tenant shall provide and install all
Tenant Equipment, personal property, and trade fixtures necessary for the
operation of the business activities defined and allowed under this Lease only
with the prior written approval of Director, All alterations, additions, or
improvements made by Tenant which are made a part of the Premises including
Tenant Equipment, signs, trade fixtures, display furnishings, and satellite
communication equipment used on the Premises and furnished by Tenant will be
removed by Tenant and any damage to the Premises associated with such removal
shall be repaired by Tenant.

 

19.2        Personal
Property. All
personal property installed, erected, or placed by Tenant in, on, or about the
Premises shall be, and shall remain the property of Tenant, except as otherwise
provided herein. Tenant shall have the right at any time during the Term to remove
any or all of such personal property, subject to Tenant’s obligation to repair
damage, if any, resulting from such removal.

 

Section 20.            Surrender
of Premises. Tenant
covenants and agrees that on expiration of the Term, or earlier termination as
provided in this Lease, Tenant will peaceably surrender possession of the
Premises in good condition, reasonable wear and tear, acts of God, fire, and
other casualties excepted, and City shall have the right to take possession of
the Premises. City shall not be required to give notice to quit possession at
the expiration date of the Term.

 

20.1        Removal of
Personal Property. Tenant
shall have the right, on expiration of the Term or earlier termination as
provided in this Lease, and within thirty (30) days thereafter, to remove or
dispose of all trade fixtures and equipment and other personal property placed
by it at its expense, in, on, or about the Premises, subject to any valid lien that
City may have thereon for unpaid rents or fees. Tenant shall not be entitled to
remove non-trade fixtures without the advance written consent of Director.

 

20.2        Removal
Damages. In the event
Tenant removes their trade fixtures and equipment and other personal property
described in subsection 20.1 above, and/or remove their non-trade
fixtures, Tenant shall repair any damage to the Premises caused by such removal.
Removal shall be at Tenant’s expense.

 

20.3        Ownership
of Fixtures Not Removed. In the event Tenant fails to remove its property by the expiration of
this Lease, City shall have the options of a)

 

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removing Tenant’s property at Tenant’s expense but only in the event
Tenant takes possession of such property immediately upon such removal; or b)
taking title to Tenant’s property in lieu of removal on behalf of Tenant. In
the event City takes title to such property, City shall be entitled to all
proceeds of sale of such property as liquidated damages for the breach of
Tenant’s covenant to remove.

 

Section 21.            Signs.

 

21.1        Criteria. Tenant agrees to adhere to the signage
criteria set out in the Aviation Department Development Guidelines.

 

21.2        Installation.
Tenant agrees not to
erect, maintain or display, without the prior written consent of Director, and
when so required by law, approvals of any governmental agency or City agency,
any placards, signs or any form of advertising on the Premises or elsewhere at
the Airport. Any placard, sign or other form of advertising erected, maintained
or displayed without such written consent may be removed by City at Tenant’s
expense.

 

21.3        Removal. During the Term, Tenant shall not be required
to remove its signs unless required to do so by any applicable law enacted
subsequent to the date hereof. Tenant may at any time remodel or replace the sign
facia to conform to Tenant’s then standard signage so long as such signage does
not violate any applicable law or the signage criteria set forth in the
Aviation Department Development Guidelines and provided further that Director
has provided written consent to such signage. Tenant shall remove all signs
erected by Tenant at the expiration of the Term or earlier termination of this
Lease, and shall repair any damage caused by such removal.

 

21.4        Signage
Indemnification. Tenant
hereby agrees to indemnify, defend and hold harmless City from and against any
claims, suits, costs and expenses (including reasonable attorneys’ fees)
resulting from or in any way connected with a claim by any third party that
Tenant’s signage violates or infringes any trademark, trade name, or copyright
held by such third party.

 

Section 22.            Depreciation and Investment
Credit for Federal Income Tax Purposes. In order to preserve the tax exempt status of City Airport Revenue
Bonds, it is a condition of this Lease that Tenant, its successors and assigns
in interest under this Lease hereby agrees that for federal income tax
purposes, a) it shall not claim depreciation or any investment credit, and b)
it shall make and file an irrevocable election not to claim depreciation or an
investment credit, with respect to the Premises furnished by City. Tenant
agrees to send a copy of its election to the office of Director.

 

City agrees that it will provide such consents, releases or other
similar assurances to any third-party providing financing, whether for
purchase, lease or other similar transaction, for the construction of any
facility on the Premises as may be necessary to permit such third-

 

30

 

party any available tax advantages, so long as such can be provided in
a manner consistent with the conditions set out in this section.

 

Section 23.            Damage
or Destruction of Leasehold Improvements.

 

23.1        Tenant’s
Notification. If at
any time during the Term, the Leasehold Improvements, the Additional Improvements,
the Tenant Equipment or other improvements on the Premises, or any part
thereof, shall be damaged or destroyed by fire or other occurrence, of any kind
or nature, ordinary or extraordinary, foreseen or unforeseen, Tenant shall
promptly notify City in writing.

 

23.2        Tenant’s
Obligation. If the
Leasehold Improvements, the Additional Improvements, the Tenant Equipment or
other improvements on the Premises are damaged by a fire or other casualty,
Tenant shall bear the cost to repair, restore, replace, or rebuild the same as
nearly as possible to its value, condition, and character immediately prior to
such damage or destruction. In addition, Tenant shall bear the cost for the construction
of temporary facilities similar in nature to the Leasehold Improvements, the Additional
Improvements, the Tenant Equipment or other improvements should the Leasehold
Improvements, the Additional Improvements, the Tenant Equipment or other improvements
on the Premises, be damaged or destroyed to such an extent that it shall be untenable
by Tenant. Tenant shall apply all insurance proceeds paid on account of such damage
or destruction under the policies of Insurance required in Section 9, including
the insurance proceeds necessary for the construction of a temporary facility
similar in nature to the Leasehold Improvements, the Additional Improvements,
the Tenant Equipment or other improvements.

 

23.3        Insurance
Proceeds. If the
insurance proceeds are not sufficient to pay the entire cost of such repairs or
rebuilding, or for the construction of a temporary facility similar in nature
to the Leasehold Improvements, the Additional Improvements, the Tenant Equipment
or other improvements on the Premises, Tenant shall pay the amount of any such
deficiency and shall apply the same to the payment of the cost of the repairs
or rebuilding, or the costs for the construction of a temporary facility
similar in nature to the Leasehold Improvements, the Additional Improvements,
the Tenant Equipment or other improvements and City shall not be obligated to
make any payment, reimbursement, or contribution towards such costs. In the
event the cause of the damage or destruction is by risk, which is or was
uninsurable, then Tenant shall have the same responsibility to provide the
funds necessary to pay the cost of the repairs or rebuilding or the costs for construction
of a temporary facility similar in nature to the Leasehold Improvements, the Additional
Improvements, the Tenant Equipment or other improvements.

 

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23.4        Non-Abatement of Rents and
Fees. During any such period
of repair, rebuilding, or construction as described in subsection 23.2
above, Rents and Fees pursuant to this Lease, shall continue and Tenant shall
not be entitled to an abatement of said Rents and Fees.

 

Section 24.            Condemnation.

 

24.1        Partial Taking. In the event less than all of the Premises is
taken or condemned by any competent authority, such that Tenant may reasonably
continue its operations thereafter, this Lease shall remain in full force and
effect with a reduction of Rents and Fees, if appropriate, commensurate with
the reduced useable area of the Premises, upon the date of such partial taking.

 

24.2        Total Taking. In the event the entire Premises is taken or
condemned by any competent authority, such that the Premises are unusable for
the continuation of Tenant’s operations thereafter, then this Lease shall
terminate as of the date of the total taking.

 

24.3        Termination of Lease. Termination of this Lease because of
condemnation shall be without prejudice to the rights of either City or Tenant
to recover from the condemning authority compensation and damages for the
injury and loss sustained by either party as a result of such total
taking.  Tenant shall have the right to
make a separate claim against the condemning authority for the fair market
value of the leasehold estate. In the event that the law at the time of the
condemnation does not provide allow for separate condemnation awards for
landlords and tenants, then Tenant shall be entitled to receive the portion of
the condemnation award allocable to the leasehold estate and the remainder of
the award shall be paid to City.

 

Section 25.            Hazardous Materials.

 

25.1        Tenant’s Compliance with
Environmental Laws. Tenant
shall at all times in all respects comply with all environmental laws, and any
amendments thereto affecting Tenant’s operation on the Airport, including all
federal, state and local laws, ordinances and regulations relating to Hazardous
Materials as defined in subsection 25.2 below.

 

25.2        Indemnification by Tenant. Tenant shall not cause or permit any Hazardous
Material, as defined below in this Lease, to be brought upon, kept or used in
or about the Premises by Tenant, its agents, employees, contractors,
subcontractors, licensees, or invitees without the prior written consent of
City.

 

As used herein the term “Hazardous Material” means any hazardous or
toxic substance, material or waste which is or becomes regulated by any local
governmental authority, the State of New Mexico or the United States
government. The term “Hazardous Material”

 

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includes, without limitation, any material or substance which is 1)
defined as a “Hazardous Waste,” under Section 74-4-3 of the New Mexico
Statutes (NMSA 1978), 2) designated as a “Hazardous Substance” pursuant to Section 311
of the Federal Water Pollution Control Act (33 USC Section 1317), 3)
defined as a “Hazardous Waste” pursuant to Section 1004 of the Federal
Resource Conservation and Recovery Act, 42 USC Section 6901 et seq. (42
USC Section 6903) or 4) defined as a ‘‘Hazardous Substance” pursuant to Section 101
of the Comprehensive Environmental Response, Compensation and Liability Act, 42
USC Section 9601 et seq. (42 USC Section 9601).

 

City shall not unreasonably withhold or delay consent if Tenant can
demonstrate to City’s reasonable satisfaction that such Hazardous Material is
necessary or useful to Tenant’s business and will be used, kept and stored in a
manner that complies with all laws regulating any such Hazardous Material so
brought upon, used or kept in or about the Premises.

 

If Tenant breaches the obligations stated in the preceding paragraph,
or if the presence of Hazardous Material on the Premises caused or permitted by
Tenant results in Contamination of the Premises or Airport, or if Contamination
of the Premises or Airport by Hazardous Material otherwise occurs for which
Tenant is legally liable to City for damage resulting from such Contamination,
then Tenant shall indemnify, defend and hold City harmless from any claims,
judgments, damages penalties, fines, costs, liabilities or losses (including but not limited to, diminution in
value of the Premises and sums paid in settlement of claims, reasonable attorney’s fees, consultant fees and
expert fees) which arise during or after the Term as a result of such
Contamination. This indemnification of City by Tenant includes, but is not
limited to, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by
any federal, state or local governmental agency or political subdivision
because of Hazardous Material present in the air, soil, ground water on or
under the Premises. Without limiting the foregoing, if the presence of any
Hazardous Material on the Premises caused or permitted by Tenant results in any
Contamination of the Premises, Tenant shall promptly take all Corrective
Actions at its sole expense as are necessary to clean up the Premises to the extent
required by an Environmental Agency and/or any other government agency having
jurisdiction. Tenant shall, in consultation with City, determine the schedule,
technique, method, and design of the Corrective Action, subject to
Environmental Agency and/or other governmental agency requirements and
approval; and Tenant may contest and appeal any Environmental Agency and/or
other governmental agency decision or directive.

 

Tenant shall not have any liability to City for any environmental,
investigatory, monitoring, or cleanup costs except as ordered by a federal,
state, or local agency of competent jurisdiction. In the event such an order is
issued, City shall immediately notify Tenant and provide them the opportunity
to negotiate with the acting government authority and enter the Premises to
conduct investigatory, monitoring, or cleanup work. In the event Tenant is

 

33

 

responsible for any investigatory remediation or cleanup work on the
Premises after termination of the Term, Tenant shall have the right to enter
the Premises for performance of such obligation.

 

The indemnification required by this subsection 25.2 shall not
apply to any Hazardous Material existing on, under or about the Lease Property
prior to the Effective Date. However, the parties recognize that there has been
no environmental assessment establishing the presence or absence of any
Hazardous Material on, under or about the Premises as of the Effective Date of
this Lease. Even so, the parties agree that, as of the Effective Date of this
Lease, they are not aware of the existence of any Hazardous Material on, under
or about the Premises.

 

25.3        Notices. Tenant shall immediately notify City in
writing of any enforcement, cleanup, removal or other governmental or
regulatory action instituted, completed or threatened pursuant to any Hazardous
Materials laws related to its operations on the Premises. Except as otherwise
provided in Section 25, Tenant shall also supply to City as promptly as
possible, and in any event within ten (10) business days after Tenant
first receives or sends the same, with copies of all claims, reports,
complaints, notices or warnings or asserted violations relating in any way to
the Premises or Tenant’s use thereof.

 

25.4        Environmental Notices;
Indemnification Notices. Tenant
shall provide City with a copy of any written release reports that Tenant is
required to submit to any Environmental
Agency with respect to releases of any and all Hazardous Materials and/or
Contaminants at the Premises during the Term. Tenant shall, within twenty-four
(24) hours, provide City written notification of liquid petroleum product
releases that enter the storm drains, soil, or groundwater on or under the
Premises at a level that constitutes a reportable quantity, as this quantity is
determined by the State of New Mexico. City and Tenant each shall promptly
provide the other with a copy of a) any claim or demand for Corrective Action
that any Environmental Agency issues and b) any other claim giving rise to
either party’s indemnification obligations under subsection 25.2 above, or
subsection 25.6 below.

 

25.5        City’s Right of Entry. During the Term, Director, or those
authorized by Director, shall have the right of entry to test and determine the
extent of any Contamination of the Premises. Entry for this purpose shall be
provided in writing to Tenant with advance notice, at reasonable times, except
in case of emergency, and shall not unreasonably interfere with Tenant’s use of
the Premises.

 

25.6        National Pollutant Discharge
Elimination System. Tenant
shall comply with all federal and state regulations governing the National
Pollutant Discharge Elimination System (NPDES) and applicable sections of
Airport’s Storm Water Pollution Prevention Plan, including all future
amendments of said regulations and procedures as may be adopted by federal,
state or local agencies.

 

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25.7        Environmental Assessment. Tenant shall cause an environmental
assessment to be conducted on the Premises, with a copy provided to Director,
at Tenant’s sole cost, within thirty (30) days after the expiration or earlier
termination of the Term. Tenant shall be responsible for and shall be required
to, at Tenant’s sole cost and expense, remediate any Contamination identified
by such environmental assessment at the expiration or earlier termination of
the Term unless Tenant can provide Director sufficient evidence, to Director’s
sole satisfaction, that either Contamination existed prior to Tenant’s
occupancy and operation at the Premises, or was not caused, in any part, by
Tenant.

 

Section 26.            Post Termination Restoration
of Premises.

 

26.1        Holdover. If Tenant requires possession of the Premises
after the Term in order to a) remove its improvements, b) install Remediation
Equipment, or c) perform other Corrective Action that would materially impair
ingress, egress, parking, business operations, or City’s use of the Premises or
if any law or governmental or court order requires Tenant to be in possession
of the Premises, this Lease will not be considered to be renewed. Instead,
Tenant will be considered to be in possession of the Premises under a month-to-month
holdover tenancy (“Holdover Tenancy”) until Tenant can surrender the Premises
to City in a condition that will not materially impair City’s use of the
Premises, as determined by City. The Holdover Tenancy will be on the terms
contained in this Lease, except that the amount of Rent paid by Tenant during
such holdover period shall a) not exceed one hundred and fifty percent (150%)
of the Rent paid by Tenant during the preceding month, and b) shall be in place
for one (1) year after the end of the Term. After such one (1) year
period, Rent shall be determined solely by City.

 

Alternatively, at City’s request, Tenant may remove Remediation
Equipment from the occupied portions of the Premises at Tenant’s sole cost and
expense, provided the removal of such Remediation Equipment will not hinder any
Corrective Action or violate any law.

 

26.2        Tenant’s Environmental
Access Rights. If, upon
surrender of the Premises to City, any of Tenant’s Remediation Equipment
remains on the Premises, Tenant and its representatives and contractors will
have access to the Premises during normal business hours and business days, to
a) install additional Remediation Equipment, b) maintain, modify, monitor,
operate, repair, and abandon Tenant’s Remediation Equipment, and c) verify to
the Environmental Agency that Tenant’s Corrective Action has been completed. Tenant
or its representative or Contractor shall give City at least two (2) business
days prior written notice of its exercise of the access right and attempt to minimize,
to the extent reasonably possible, any interference with the operation of any business
conducted at the Premises, except in the case of an emergency, as determined by
Tenant. In conducting its operations at the Premises after the Term, City shall
attempt to minimize, to the extent reasonably possible, any interference with
Tenant’s Corrective Action. Tenant’s access rights include the right to have
service trucks on the Premises. The access rights will terminate when a) the
Environmental Agency issues a letter to Tenant stating that, based on certain
assumptions and conditions, no further Corrective

 

35

 

Action will be necessary and b) Tenant removes or closes its existing
Remediation Equipment. But if, after the Environmental Agency issues the
letter, the Environmental Agency requires Tenant to perform further Corrective
Action, then the access rights hereunder will resume.

 

26.3        City’s Non-Waiver of
Environmental Rights. Any
waiver of any provision of Section 26, or a delay by City in the
enforcement of any right hereunder, shall neither be construed as a continuing
waiver, nor create an expectation of non-enforcement of that or any other
provision or right. In order to be effective, any waiver of any right, benefit,
or power hereunder must be in writing and signed by an authorized
representative of City, it being intended that no waiver shall be implied by
the City’s conduct or failure to act. Any specific written waiver shall be
applicable only to the particular facts and circumstances thereby addressed and
shall not be of any effect with respect to future events, even if any of said
future events involve substantially similar circumstances. Any remedies
provided for in this Article shall be cumulative and in addition to, and
not in lieu of, any other remedies available to the City at law, in equity, or
otherwise.

 

Section 27.            City’s Right to Enter. City, by its authorized officers, employees,
agents, contractors, subcontractors, and other representatives, shall have the
right, but not the obligation, at such times as may be reasonable under the
circumstances and with as little interruption of Tenant’s operations as is
reasonably practicable, to enter upon the Premises, accompanied by an
authorized representative of Tenant, if practicable, for the following
purposes:

 

a)             to inspect the Premises, the Leasehold Improvements,
and/or systems to determine whether Tenant is in compliance with the terms and
conditions of this Lease, including inspection for safety, fire protection or
security purposes;

 

b)            to perform, upon fifteen (15) days written or
verbal notice, such maintenance, cleaning, or repair as City reasonably deems
necessary;

 

c)             City shall have the right to enter upon the
Premises to show and tour the Premises with prospective tenants for the
Premises and government officials, including but not limited to airport
officials and elected officials.

 

Section 28.            Right of Relocation. City shall have the right to relocate the
Premises if necessary to accommodate the overall growth of the Airport. The
need for such relocation shall be determined solely by Director. In the event
relocation becomes necessary, Tenant shall be assigned a replacement area,
which is generally equivalent in size and amenities to the Premises. Should
Tenant disagree with the replacement location, Tenant shall have the right,
within thirty (30) calendar days of receipt of Director’s written notice of
impending relocation, to provide written notice to Director that Tenant
disagrees with the replacement location. Upon such notice by Tenant, the
parties shall, for a period not to exceed thirty (30) days from the date of
such notice, negotiate in good faith in an attempt to resolve the

 

36

 

matter to the satisfaction of both parties; however, if for any reason
the disagreement is not resolved within the thirty (30) days, Director shall
have the right to unilaterally decide the matter. In such case, Tenant may
terminate this Lease, which shall be deemed an early termination of hereof, or
may agree to abide by Director’s decision. Should Director serve notice to
Tenant that Tenant is to be relocated or must surrender space because of
reallocation, Tenant agrees that it shall take or cause to be taken any and all
actions as may be required to vacate the Premises and surrender same to City
not later than one (1) year after receipt of Director’s notice of his
final decision. Tenant shall be responsible for moving its trade fixtures,
personal property, and personnel. City will reimburse Tenant for its
documented, actual, and reasonable direct costs incurred to move to the
relocated area, but in no event shall City be liable for any consequential or
incidental costs or damages arising out of such relocation, including, but not
limited to, lost profits, lost revenues, or increased cost of doing business.

 

Section 29.            Security. In conjunction with Tenant’s right and
privilege to use the Premises, access may be made available for Tenant’s
personnel and vehicles via card reader-controlled doors and/or ramp gates to
the Airport Operations Area (“AOA”), defined herein as the public use ramps,
taxiways, and runways at the Airport. In order to maintain the security of
restricted areas on the Airport, Tenant shall be responsible for the control of
persons and vehicles entering the AOA via the ramp gates. Tenant agrees to
implement and maintain, at a minimum, the following security measures with
regard to access control to and from the AOA.

 

29.1        During all hours, access points to the AOA
shall be secured and locked.

 

29.2        Tenant’s personnel shall challenge any
persons not recognized as being authorized to have access to the AOA.

 

29.3        Tenant shall restrict the activities of its
employees who are authorized to be in the AOA to that portion of the AOA in
which such Tenant is authorized to operate.

 

29.4        Tenant is responsible for training its
personnel in the security procedures, which are described in this Lease and in
all other security procedures developed by City of which it is informed.

 

29.5        Tenant shall not allow any unescorted person
into the AOA unless that person has a valid Airport Identification Badge. Identification
Badges shall not be considered valid unless the color code of the badge
corresponds with the location in which such person may enter, all as designated
by City’s Aviation Department. Individuals who do not have valid Identification
Badges to be present on the AOA shall be escorted at all times they are present
on the AOA by a person with a valid Identification Badge. Issuance of AOA
Identification Badges shall be made only by the Aviation Department and shall
be at the sole discretion of the Aviation Department. AOA and other
Identification Badges shall be denied to individuals not meeting security
requirements.

 

37

 

29.6        Tenant
shall participate in the Airport’s Security Program and comply with applicable
security procedures including, but not limited to, the wearing of Airport Identification
Badges by Tenant’s personnel, including Tenant, and clearly identifying each of
Tenant’s vehicles by placing Tenant’s company name on both sides of each
vehicle. Changes to the Airport Security Program shall not constitute an
amendment to this Lease and City shall have no obligation to seek an amendment
to this Lease in revising the provisions.

 

29.7        Tenant
shall immediately notify the Aviation Police of any suspicious activity observed
in or about the AOA.

 

29.8        Any
unresolved questions concerning Airport security shall be directed to the Aviation
Department’s Airport Security Coordinator (“ASC”).

 

29.9        Tenant
further agree that any and all costs, penalties or fines levied against City by
the FAA, TSA, or successor agency due to Tenant’s failure to abide by the
security measures described herein, and/or due to security measures imposed by
the FAA and/or the TSA during the Term shall be considered Total City Expenses
for purposes of calculating the Rents and Fees in Section 7 of this Lease.

 

Director or his designated representative will periodically evaluate
the procedures set forth in this Section 29, and make revisions as required to
comply with City, state, or federal regulations. Failure of Tenant to fully
comply with the procedures set forth in this Section 29 or as later
revised shall be sufficient grounds for City to immediately take any necessary
corrective measures until security, acceptable to City, is restored.

 

Section 30.            General Conditions.

 

30.1        Rules and Regulations. During the Term, Tenant shall observe and
obey all rules and regulations, including Airport Security Procedures,
which may be imposed from time to time by the FAA, TSA, or City, governing
conduct on, and operations at the Airport. Tenant shall not violate, nor
knowingly permit its agents, contractors, or employees acting on Tenant’s
behalf to violate any such rules and regulations. In addition, City has or
may hereafter promulgate a set of rules and regulations to be administered
against all tenants at the Airport, and Tenant agrees to adhere to such rules and
regulations, as may be amended by City or any government agency from time to
time.

 

38

 

30.2        Contract Interpretation.

 

30.2.1     Severability. In the event any covenant, condition or provision herein is held to be
invalid, illegal, or unenforceable by any court of competent jurisdiction, such
covenant, condition or provision shall be deemed amended to conform to applicable
laws so as to be valid or enforceable or, if it cannot be so amended without materially
altering the intention of the parties, it shall be stricken. If stricken, all
other covenants, conditions and provisions of this Lease shall remain in full
force and effect provided that the striking of such covenants, conditions or
provisions does not materially prejudice either City or Tenant in its
respective rights and obligations contained in the valid covenants, conditions
or provisions of this Lease.

 

30.2.2     Waiver. No provision of this Lease shall be deemed to
have been waived by either party unless such waiver is in writing, signed by
the party making the waiver and addressed to the other party, nor shall any
custom or practice which may evolve between the parties in the administration
of the terms of this Lease be construed to waive or lessen the right of either
party to insist upon the performance of the other party in strict accordance
with the terms of this Lease. Further, the waiver by any party of a breach by
the other party or any term, covenant, or condition hereof shall not operate as
a waiver of any subsequent breach of the same or any other term, covenant, or
condition thereof.

 

30.2.3     Gender, Singular/Plural. Words of any gender used in this Lease shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires.

 

30.2.4     Captions and Section Headings. The captions, section headings, and table of
contents contained in this Lease are for convenience of reference only, and in
no way limit, define, or enlarge the terms, scope, and conditions of this
Lease.

 

30.2.5     Entire Agreement. This Lease represents the entire contract between the parties and,
except as otherwise provided herein, may not be amended, changed, modified, or
altered without the written consent of the parties hereto. This Lease incorporates
all of the conditions, agreements, and understandings between the parties concerning
the subject matter of this Lease, and all such conditions, understandings and agreements
have been merged into this Lease. No prior condition, agreement, or understanding,
verbal or otherwise, of the parties or their agents shall be valid or enforceable
unless embodied in this Lease.

 

30.2.6     Relationship of Contract Documents. All documents attached to this Lease or
incorporated into this Lease are complementary, and any requirement of one
contract document shall be as binding as if required by all.

 

39

 

30.2.7     Exhibits Certificates,
Documents Incorporated, and Attachments. All
certificates, documents, exhibits, attachments, riders, and addenda referred to
in this Lease, including but not limited to the attached exhibits, are hereby
incorporated into this Lease by reference and made a part hereof as though set
forth in full in this Lease to the extent they are consistent with its
conditions and terms.

 

30.2.8     Applicable Law. This Lease shall be governed by and construed
and enforced in accordance with the laws of the State of New Mexico, and the laws,
rules and regulations of City of Albuquerque.

 

30.2.9     Successors. All covenants, representations, stipulations
and agreements in this Lease shall extend to and bind the legal
representatives, successors, and assigns of the respective parties hereto.

 

30.2.10  Governmental Rights and
Powers. Nothing in this
Lease shall be construed or interpreted as limiting, relinquishing or waiving
any rights of ownership enjoyed by City in the Airport; except as specifically
provided in this Lease; or impairing, exercising or defining governmental
rights and the police powers of City.

 

30.2.11  Cross References. References in the text of this Lease to articles,
sections or exhibits pertain to articles, sections or exhibits of this Lease
unless otherwise specified.

 

30.2.12  Relation to Other Tenants. This Lease is separate and distinct from, and
shall be construed separately from any other agreement between City and any
other tenants at the Airport. The fact that such other agreement contains provisions,
which differ from those contained in this Lease, shall have no bearing on the construction
of this Lease.

 

30.2.13  Time is of the Essence. Time is of the essence in the performance of this Lease.

 

30.3        Subordination.

 

30.3.1 Subordination to Agreements with the U.S.
Government. This
Lease is subject and subordinate to the provisions of any agreements heretofore
or hereafter made between City and the United States, relative to the operation
or maintenance of the Airport, the execution of which has been required as a
condition precedent to the transfer of federal rights or property to City for
Airport purposes, or to the expenditure of federal funds for the improvement or
development of the Airport, including the expenditure of federal funds for the
development of the Airport in accordance with the provisions of the Federal
Aviation Act of 1958, as amended, or in accordance with

 

40

 

successive airport development acts. City covenants that it has no
existing agreements with the United States in conflict with the express
provisions hereof.

 

30.3.2     Other Subordination. The Premises and Airport are, and this Lease is, subject to and
subordinate to the terms of all deeds from the United States of America to
City, including but not limited to that certain deed from the United States of America
to City dated December 15,1962, and filed for record on December 19,1962,
in Volume 672 of Records, Folio 469, with the records of the County Clerk of
the County of Bernalillo, New Mexico, wherein City agreed to hold title to
certain property upon certain terms and which also provides that the United
States may regain title should City not cure any default within sixty (60) days
of notice thereof.

 

30.3.3     Airport Revenue Bond
Ordinances. This Lease is
subject to and subordinate to any and all City Ordinances codified in the
Revised Ordinances of City of Albuquerque, New Mexico, 1994 pertaining to
Airport Revenue Bonds payable from the net revenues from the operation of the
Airport.

 

30.4        Discrimination Prohibited.

 

30.4.1     General. In the use and occupation of the Premises by
Tenant, Tenant shall not discriminate against any person or class of persons by
reason of race, color, religion, sex, national origin or ancestry, age, or
physical or mental handicap in violation of any federal, state or local law.

 

30.4.2     Civil/Human Rights Laws. In the operation and use of the Premises,
Tenant shall not on the grounds of race, color, religion, sex, national origin
or ancestry, age, or physical or mental handicap, discriminate or permit
discrimination against any person or group of persons in any manner prohibited
by Title 49 CFR Parts 21, 23 and 26, the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1963, the Rehabilitation Act of 1973, the New Mexico Human
Rights Act, and the Albuquerque Human Rights Ordinance. Tenant agrees to take
affirmative action to ensure that applicants are employed, and that employees
are treated during employment without regard to their race, color, religion,
sex, national origin or ancestry, age, or physical or mental handicap. Such
action shall include, but not be limited to: employment, upgrading, demotion,
or transfer; recruitment or recruitment advertising; layoff or termination;
rates of pay or other forms of compensation; selection for training; and
disciplinary actions and grievances. Tenant agrees to post in conspicuous
places available to employees, and applicants for employment, notice to be
provided setting forth the provisions of this non-discrimination clause.

 

41

 

30.4.3     Covenants of Tenant. Tenant, for itself, its successors in interest,
and assigns, as a part of the consideration of this Lease, does hereby covenant
and agree that: a) no person on the grounds of race, color, religion, sex,
national origin or ancestry, age, or physical or mental handicap shall be
excluded from participation in, denied the benefits of, or otherwise be
subjected to discrimination in the use of said Lease Property, b) that in the
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, national origin or ancestry, age, or physical or mental handicap
shall be excluded from participation in, denied the benefits of, or otherwise
be subjected to discrimination, c) that Tenant shall use the Premises in compliance
with all other requirements imposed by, or pursuant to, the New Mexico Human
Rights Act, the Albuquerque Human Rights Ordinance, and 49 CFR Parts 21, 23 and
26, and as said regulations may be amended; and Tenant assures that it will
undertake an affirmative action program as required by 14 CFR Part 152
Subpart E, Nondiscrimination Airport in Aid Program, to ensure that no person
shall on the grounds of race, color, religion, national origin or ancestry,
sex, age, or physical or mental handicap be excluded from participating in any
employment activities covered in 14 CFR Part 152 Subpart E, or such
employment activities covered in the New Mexico Human Rights Act, or the
Albuquerque Human Rights Ordinance. Tenant 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. Tenant assures
that it will require that any covered sub-organization similarly will undertake
affirmative action programs and that the sub-organization will require
assurance from the sub-organization, as required by 14 CFR Part 152
Subpart E, to the same effect.

 

30.5        No Exclusive Rights. Nothing herein contained shall be deemed to
grant to Tenant any exclusive right or privilege within the meaning of FAA
Advisory Circular 150/5190-5 for the conduct of any activity on the Airport.

 

30.6        Indemnification Agreement. Tenant covenants that it and all of its agents,
servants, and employees will use due care and diligence in all of its or their
activities and operations at the Airport. Tenant recognizes and agrees to the
broad nature of this indemnification provision (hereafter the “Indemnification
Agreement”) and voluntarily makes this covenant and expressly acknowledges the
receipt of adequate compensation by City in support of this Indemnification
Agreement.

 

30.6.1 General Indemnification. Tenant agrees to defend, indemnify and hold
harmless City and its officers and employees from and against all suits,
actions, claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses (including but not limited to consultants’ fees, reasonable
fees of attorneys, court costs and litigation expenses) of whatever kind or
nature, known or unknown, contingent or otherwise, brought against City because
of any injury, including death at any time resulting from bodily injury,
damages for care and loss of services, or damage received or sustained by any
person, persons or property arising out of or resulting from any negligent act,
error, or omission of Tenant, its agents or its employees arising out of the
operations

 

42

 

of Tenant’s performance, purported performance, or non-performance of
this Lease or Tenant’s activities at the Premises, including without limitation
any claim relating to the design or construction of the Leasehold Improvements,
or any obstacle free areas, taxi lanes, taxiways or any other aircraft movement
areas. Tenant specifically acknowledges that the safe movement of any aircraft
at any time and at any place is the sole responsibility of the person or party
moving said aircraft, regardless of the facilities or space available for said
movement.

 

30.6.2     Costs. As used in this Indemnification Agreement,
Costs shall include but not be limited to:

 

a)             all claims of third parties, including
government agencies for damages, response costs or other relief; and

 

b)            the cost, expense or loss to City of any
injunctive relief, including preliminary or temporary injunctive relief
applicable to City; and

 

c)             all expenses of evaluation, testing analysis
related to Hazardous Substances including fees of attorneys, engineers,
consultants, paralegals and experts; and

 

d)            all expenses of reporting the existence of
Hazardous Substances to any agency of the State of New Mexico or the United
States, as required by applicable Environmental Laws; and

 

e)             any and all expenses or obligations including
attorneys’ and paralegal fees incurred at, before or after any trial or appeal
there from, or any administrative proceeding or appeal there from, whether or
not taxable as costs, including without limitation, attorneys’ and paralegal
fees, witness fees (expert or otherwise), deposition costs, copying and
telephone charges and other expenses; and

 

f)             any damages, costs, liabilities and expenses
which are claimed to be owed by any federal or state agency.

 

30.6.3     Limitations. Tenant shall not, however, in any event be required
to indemnify or hold harmless City pursuant to this Section 30 with respect
to any bodily injury, death or injury to or destruction of property which
results from the negligence or willful misconduct of City, its agents, servants
or employees.

 

30.6.4     Scope of Indemnification. With respect to any claims, actions, suits,
damages or judgments caused by or resulting from acts, omissions or operations
of Tenant, its agents, servants, or employees, Tenant shall

 

a)             investigate or cause the investigation of
accidents involving such injuries; and

 

43

 

b)            negotiate or cause to be negotiated
settlement of all claims made as may be deemed expedient by Tenant, and defend,
or cause to be defended, suits for damages, even if groundless, false or
fraudulent, brought on account of such injuries or damages against City; and

 

c)             pay and satisfy judgments finally
establishing the liability of City in all actions defended by Tenant pursuant
to this Section 30; and

 

d)            pay, or cause to be paid: 1) all costs taxed
against City in any legal proceeding defended or caused to be defended by
Tenant as aforesaid; 2) any interest accruing up to the date of payment by
Tenant; 3) all premiums charged upon appeal bonds required in such proceedings;
and 4) all expenses incurred by City for investigation, negotiation, and
defense, including but not limited to expert witnesses and attorneys fees incurred,
should Tenant fail to provide the defense and indemnification required herein.

 

30.6.5     Notice. City shall, promptly upon receipt of a notice
of claim, give Tenant every demand, notice, summons, or other process received
in any claim or legal proceeding contemplated therein. In the event City shall
fail to give Tenant notice of any such demand, notice, summons, or other
process received by City and such failure to give notice shall result in
prejudice to Tenant in the defense of any action or legal proceeding
contemplated herein, such failure or delay shall release Tenant of its
liability as set forth in this paragraph insofar as only the particular claim
or legal proceeding is concerned, and only to the extent of such prejudice.
Nothing in this subsection 30.6.5 shall be deemed a change or modification
in any manner whatsoever of the method or condition of preserving, asserting,
or enforcing any claim or legal liability against City. This subsection 30.6.5
shall not be construed as a waiver of City’s immunity. The provisions of this
subsection 30.6.5 shall not be construed to prohibit Tenant from seeking
contribution or indemnity from any third party that may have caused or
contributed to the event for which Tenant indemnified City.

 

30.6.6     Length of Indemnification. Tenant’s obligations and liabilities under
this subsection 30.6 shall survive the early termination or expiration of
the Term.

 

30.6.7     Assignment and Subletting. Lessees shall not assign, sublet, mortgage,
or otherwise transfer, in whole or in part, any of the rights granted in this
Lease without the prior written approval of City. Such approval shall not be unreasonably
withheld.

 

44

 

30.7        Construction Inconvenience. Tenant agrees that from time to time during the
Term, City shall have the right to initiate Airport Construction, including but
not limited to terminal facilities, roadways, parking areas for aircraft and
ground vehicles, runways, and taxiway areas. Tenant agrees that it shall not
hold City (including its officers, agents, employees and representatives)
liable for damages of any nature whatsoever to it due to the Airport
Construction. Tenant shall hold City harmless for all damages arising out of or
caused by inconveniences and/or interruptions of its business activities at the
Airport, loss of business, and personal injury (including death) and property
damage due to the Construction. Tenant’s waiver of its rights to make claims
for damages include claims based on City’s negligence or intentional conduct
and is made voluntarily. Tenant acknowledges receipt of adequate compensation
by City in support of this waiver. In the event Airport Construction results in
a total denial of access to the Premises by Tenant, Tenant shall be entitled to
an abatement of the Ground Rent, Annual Deferred Ground Rent and Other Airport
Fees provided for in Section 7 of this Lease. Abatement shall be only for
each calendar day such access is denied.

 

30.8        Ethics.

 

30.8.1     Conflict of Interest. Upon execution of this Lease, or within five (5) days
after the acquisition of any interest described in this Section 30 during
the Term, Tenant shall disclose in writing to City whether any City Councilor,
Albuquerque Airport Advisory Board member, officer or employee of City has or
hereafter acquires any direct, indirect, legal, or beneficial interest in
Tenant or in any contract, lease, or agreement between City and Tenant, or in
any franchise, concession, right, or privilege of any nature granted by City to
Tenant in this Lease or otherwise.

 

30.8.2     Fair Dealing. Tenant covenants and warrants that the only entity
interested in this Lease is named in this Lease and that no other person or
firm has any interest in this Lease, and this Lease is entered into by such
Tenant without collusion on the part of such Tenant with any person or firm,
without fraud and in good faith. Tenant also covenants and warrants that no
gratuities, in the form of entertainment, gifts or otherwise, were, or during
the Term, will be, offered or given by such Tenant, or any agent or
representative of such Tenant, to any officer or employee of City with a view towards
securing this Lease or for securing more favorable treatment with respect to making
any determinations with respect to performing this Lease.

 

30.8.3     Board of Ethics and Campaign
Practices. Tenant agrees to provide
the Board with any records or information pertaining in any manner to this
Lease, or both, whenever such records or information are within Tenant’s
custody, are germane to an investigation authorized by the Board, and are
requested by the Board. Tenant further agrees to appear as a witness before the
Board as required by the Board in hearings concerning ethics or campaign
practices charges heard by the Board. Tenant agrees to require that all
subcontractors employed by Tenant for services performed for this Lease shall
agree to comply with the provisions of this subsection 30.8.3. Tenant and
its

 

45

 

subcontractors shall not be compensated under this Lease for its time
or any costs incurred in complying with this subsection 30.8.3.

 

30.8.4     Harassment. Tenant shall not harass or annoy City Councilors
of the City of Albuquerque or
officers or employees of City with requests for modifications resulting in more
favorable treatment under this Lease than the treatment accorded other tenant.

 

30.9        Approvals, Consents, and
Notices. All notices,
consents, and approvals required by this Lease shall be in writing and shall be
given by registered or certified mail by depositing the same in the U.S. mail
in the continental United States, postage prepaid, return receipt requested, or
by personal delivery, or by facsimile transmission to the “FAX” number given
below, provided that the completed transmission is electronically verified.

 

Either party shall have the right, by giving written notice to the
other, to change the address at which its notices are to be received. Until any
such change is made, notices shall be delivered as follows:

 

	
  City:

  	
  Director,
  Aviation Department

  
	
   

  	
  Albuquerque
  International Sunport

  
	
  Certified
  Mail:

  	
  PO
  Box 9948

  
	
   

  	
  Albuquerque,
  New Mexico 87119-1048

  
	
  Personal
  Delivery:

  	
  2200
  Sunport Blvd. SE, 3rd Floor

  
	
   

  	
  Albuquerque,
  NM 87106

  
	
  Telephone:

  	
  (505)
  244-7700

  
	
  FAX
  Transmission:

  	
  (505)
  842-4278

  
	
   

  	
   

  
	
  Tenant:

  	
  Utilicraft Aerospace Industries, Inc.

  
	
  Tenant
  Official:

  	
  John J. Dupont

  
	
  Title:

  	
  Chairman, President-CEO

  
	
  Certified
  Mail and

  	
  554 Briscoe Boulevard

  
	
  Personal
  Delivery:

  	
  Lawrenceville, GA 30045

  
	
  Telephone:

  	
  (678) 376-0898 x2201

  
	
  FAX:

  	
  (678) 376-9093

  
	
  Email
  Address:

  	
  idupont@utilicraft.com

  

 

30.9.1     If notice, consent, or approval is given in
any other manner or at any other place, it will also be given at the place and
in the manner specified above.

 

46

 

30.9.2     The effective date of such notice, consent or
approval shall be the date of the receipt as shown by the U.S. Postal Service
Return Receipt, or the date personal delivery is certified, or the date of
electronic verification of the facsimile transmission, unless provided
otherwise in this Lease.

 

30.10      Non-liability of Agents and
Employees. City shall not in
any event be liable for any acts or omissions of Lessees, or its agents,
servants, employees, or independent contractors, or for any condition resulting
from the operations or activities of Lessees, Lessees’ agents, servants,
employees, or independent contractors either to Lessees or to any other person.

 

30.11      No Partnership or Agency. Nothing contained in this Lease is intended, or
shall be construed in any respect, to create or establish any relationship
other than that of City and Tenant, and nothing herein shall be construed to
establish any partnership, joint venture, or association between or among City
and Tenant, or any agency by or in favor of the other, or to make Tenant the
general representative or agent of City for any purpose whatsoever.

 

30.12      Forum Selection. Any cause of action, claim, suit, demand, or
other case or controversy arising from or related to this Lease shall only be
brought in the New Mexico Second Judicial District Court located in Bernalillo
County, New Mexico or in the United States District Court located in
Albuquerque, New Mexico.  The parties
irrevocably admit themselves to, and consent to, the jurisdiction of either or
both of said courts. The provisions of this subsection 30.12 shall survive
the termination or expiration of this Lease.

 

30.13      Compliance with Law. Tenant shall comply with all applicable laws,
ordinances, rules, regulations and procedures of Federal, State, and local
governments related to Tenant’s use of the Premises and the Airport, including,
but not limited to Aviation Department rules. Tenant shall comply with all
applicable provisions of the Americans with Disabilities Act of 1990 (42 U.S.C.
Section 12101) and federal regulations promulgated there under (28 C.F.R.
Paris 35, 36, and 37).

 

30.14      Force Majeure. Except as expressly provided in this Lease,
neither City nor Tenant shall be deemed to be in default hereunder if either
party is prevented from performing any of the obligations, other than payment
of rents and fees hereunder, by reason of strikes, boycotts, labor disputes,
embargoes, shortages of energy or materials, acts of a public enemy, acts of
terrorism or threatened acts of terrorism, weather conditions or the results of
acts of nature, riots, rebellion, sabotage or other causes similar to those
enumerated for which it is not responsible or which are not within its control.

 

30.15      Non-Waiver. The failure of City to insist upon prompt and
strict performance of any of the terms, conditions or undertakings of this
Lease, or to exercise

 

47

 

any right herein conferred, in any one or more instances, shall not be
construed as a waiver of the same or any other term, condition, undertaking,
right or option.

 

30.16      Administration of Lease. The Chief Administrative Officer of the City
of Albuquerque or his authorized representative shall administer this Lease for
the City of Albuquerque.

 

30.17      Approval of Lease. This Lease shall not become effective or
binding until signed by the Chief Administrative Officer of the City of
Albuquerque.

 

30.18      Savings. City and Tenant acknowledge that they have
thoroughly read this Lease, including all Exhibits hereto, and have sought and
received whatever competent advice and counsel that was necessary for them to
form a full and complete understanding of all rights and obligations herein.
City and Tenant further acknowledge that this Lease is the result of extensive
negotiations between them and that this Lease shall not be construed against
either party by reason of that party’s preparation of all or part of this Lease.

 

(INTENTIONALLY LEFT BLANK)

 

48

 

IN WITNESS
WHEREOF, City has
caused this to be executed
by its Chief Administrative Officer, and
Tenant has caused the same to be executed by its appropriate and
authorized officers.

 

City of Albuquerque:

 

 

	
  By:

  	
  /s/
  James B. Lewis

  	
   

  	
  Date:
  

  	
  3/31/05

  	
   

  
	
   

  	
  James
  B. Lewis

  	
   

  
	
   

  	
  Chief
  Administrative Officer

  	
   

  
	
   

  	
   

  
	
  Recommended:

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  John D. “Mike” Rice

  	
   

  	
  Date:
  

  	
  2/19/05

  	
   

  
	
   

  	
  John
  D. “Mike” Rice, Director

  	
   

  
	
   

  	
  Aviation
  Department

  	
   

  
	
   

  	
   

  
	
  Tenant:          Utilicraft Aerospace
  Industries, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  John J. Dupont

  	
   

  	
  Date:
  

  	
  Feb
  3, 2005

  	
   

  
	
   

  	
  John
  J. Dupont

  	
   

  
	
   

  	
  Chairman,
  President-CEO

  	
   

  
	
   

  	
   

  
	
  City
  of Albuquerque Business Registration No.:

  	
  pending

  	
   

  
	
   

  	
   

  
	
  NM
  State Taxation and Revenue Taxpayer I.D. No.:

  	
  pending

  	
   

  
	
   

  	
   

  
	
  Federal
  Taxpayer ID Number:

  	
  pending

  	
   

  

 

49

 

Acknowledgments

 

	
  State of New Mexico 

  	
  )

  
	
   

  	
  )   ss.

  
	
  County of Bernalillo

  	
  )

  

 

This instrument was acknowledged before me this 31st day of
March, 2005, by James B. Lewis, Chief Administrative Officer for the City of Albuquerque, a New Mexico municipal
corporation, on behalf of said
corporation.

 

	
   

  	
  /s/ Felicia [ILLEGIBLE]

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
  My Commission Expires:

  	
   

  
	
  1-27-06

  	
   

  	
   

  
				

 

	
  State of New Mexico 

  	
  )

  
	
   

  	
  )   ss.

  
	
  County of Bernalillo

  	
  )

  

 

This instrument was
acknowledged before me this 3rd day of February, 2005, by John J. Dupont, Chairman, President-CEO of Utilicraft Aerospace Industries, Inc., a Nevada
corporation, on behalf of said corporation.

 

	
   

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
  Notary Public

  
	
   

  	
   

  
	
  My Commission Expires:

  	
   

  
	
  4/28/2005

  	
   

  	
   

  
				

 

50

 

Exhibit A

Airport

 

51

 

Exhibit B

Premises

 

52

 

Exhibit C

Option Area

 

53

 

Exhibit D

Other
Airport Fees

 

54

 

Exhibit E

Performance
Bond and Letter of Credit Formats

 

55

 

Exhibit F

Insurance
Certificate Format

 

56

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