totem creek golf course lease agreement · totem creek golf course lease agreement ... 2004, by and...

DRAFT

TOTEM CREEK GOLF COURSE

LEASE AGREEMENT

Approved by the City & Borough of Juneau Assembly ___________, 2004

CBJ Ordinance ____

CBJ/TOTEM CREEK LEASE DRAFT CBJ 04/01/04 DRAFT - November 10, 2004

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TABLE OF CONTENTS

Page Article I Definitions 1 Article II Project Study Area 5 Article III Lease Term 7 Article IV Options to Purchase and Sell 8 Article V Rent 10 Article VII Records and Audit 10 Article VI Impositions 11 Article VIII Use of the Golf Course Lease Area 12 Article IX Repair and Maintenance 13 Article X Ownership of Improvements 14 Article XI Operations and Service 14 Article XII Utilities 16 Article XIII Insurance and Indemnity 16 Article XIV Damage or Destruction of Premises 18 Article XV Default and Remedies 21 Article XVI Mortgaging and Subleasing 25 Article XVII Environmental Provisions 25 Article XVIII Mediation and Arbitration 26 Article XIX Miscellaneous 27 Exhibit "A" (Preliminary Legal Description) 33 Exhibit "B" (Prior Grants and Encumbrances) 35 Exhibit "C" (TCI Development Plan) 36 Exhibit "D" (Form: Limited Assignment of Lease for Security 37

Purposes) Exhibit "E" (Contingency, Development, and Construction 39

Requirements)

CBJ/TOTEM CREEK LEASE DRAFT CBJ 04/01/04 Draft - November 10, 2004

LEASE AGREEMENT

This Lease Agreement ("Lease") is made and executed as of the ___ day of _____________, 2004, by and between the City & Borough of Juneau, 155 S. Seward St., Juneau, AK 99801 ("CBJ") and Totem Creek, Inc., 175 S. Franklin St., Juneau, AK 99801 ("TCI"). Authority This lease is entered into pursuant to CBJ Code Chapter 53.09.260 and CBJ Assembly Resolution No. 1811.

Article I. Definitions Abandonment. "Abandonment" means the cessation or non-use of the golf course for more than one hundred twenty (120) consecutive days during a Golf Season except when the physical condition of the course prohibits play. Approved Use. "Approved Use" or "Approved Uses" means use(s) of the Premises to which CBJ has given prior written consent, and after approval of the TCI Development Plan, means use(s) specifically identified in the TCI Development Plan as an "Approved Use(s)" and as articulated in Section 8.01 of this Lease. CBJ. "CBJ" means the City & Borough of Juneau. For purposes of this Lease, the CBJ City Manager shall be CBJ's authorized representative. CBJ's Fee Interest. "CBJ's Fee Interest" means the underlying title evidencing the right and ownership of CBJ in the Project Study Area and Land that will ultimately be subject to this Lease Agreement. Commencement Date. "Commencement Date" means the date this Lease is executed on behalf of CBJ. Construction Work. "Construction Work" means the construction of all Improvements approved by CBJ in the TCI Development Plan. Contingency Term. "Contingency Term" means the remainder of the calendar year following the Commencement Date plus the five (5) full years thereafter, or until TCI meets its Contingency Term obligations to obtain financing for the construction of the golf course and to submit the TCI Development Plan, whichever occurs first. Exhibit. "Exhibit" means each and every document attached to this Lease, each of which is incorporated into this Lease just as if fully set forth herein.


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Golf Course Lease Area. "Golf Course Lease Area " means any land designated in the TCI Development Plan for the golf course, cart paths, clubhouse, maintenance facilities, and/or access road. Golf Season. For the purposes of establishing the terms of Abandonment, "Golf Season" means, at a minimum, that period of time from May 1 through September 30 of the same Lease Year, except when the physical condition of the course prohibits play. Governmental Authority. "Governmental Authority" means and is limited to any federal, state, or municipal department, agency, court, tribunal, or other instrumentality thereof having jurisdiction over the matter(s) in question. Hazardous Materials. "Hazardous Materials" means and includes petroleum, asbestos, polychlorinated biphenyls, urea formaldehyde, and any flammable explosives, radioactive materials, or hazardous, toxic, or dangerous wastes, substances, or related materials, or any other chemicals, materials, or substances exposure to which is regulated by any Governmental Authority. This includes substances defined as such in the Comprehensive Environmental Response, Compensation, and Liability Act, as amended (42 U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), any so-called "Superfund" or "Superlien" law, or any other federal, state, or local law, ordinance, code, rule, regulation, order, or decree regulating, relating to, or imposing liability or standards of conduct concerning any hazardous, toxic, or dangerous waste, substance, or material. Impositions. "Impositions" means all taxes, assessments, Local Improvement District assessments, excises, levies, and fees imposed by any Governmental Authority which become due or payable during the term of this Lease against the Premises and Improvements. Improvements. "Improvements" means any Work contemplated by this Lease, including the TCI Development Plan, and all other buildings, structures, fixtures, fences, interior roads, garages, parking lots, fountains, utility installations, excavations, surfacing, constructed or modified water banks or channels, landscaping, grading, and plantings from time to time located on the Premises. Improvements do not include personal property, such as golf carts, maintenance equipment, or other items that do not become part of the land or buildings. Lease or Lease Agreement. "Lease" or "Lease Agreement" means this Lease Agreement together with all Exhibits attached to it. Lease Term. "Lease Term" means the term of this Lease as described in Section 3.02.


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Lease Year. "Lease Year" means a calendar year of 365 days (366 days in a leap year) commencing on the first day of January. The first Lease Year will commence on the first day of January following the completion of the Contingency Term. Leasehold Mortgage. "Leasehold Mortgage" means any mortgage, deed of trust, or other security interest encumbering TCI's leasehold estate created by this Lease and which is in favor of a Lender. Leasehold Mortgagee. "Leasehold Mortgagee" means the holder, trustee, or beneficiary of a Leasehold Mortgage who is a Lender. Lender. "Lender" means a private financier, a private credit firm, a governmental entity, a non-profit financier, an Alaska-chartered bank, a federally-chartered bank, a federal savings and loan association, a commercial financial lender, a foreign (chartered in another nation) bank provided it is licensed or otherwise authorized to maintain an office in Alaska or another state, a bank holding company or a subsidiary of a bank holding company which is not a bank, a trust company, savings and loan association, insurance company, investment banker, college or university, pension or retirement fund or system of which any of the foregoing shall be trustee (provided the same be organized under the laws of the United States or of any state thereof), and a Real Estate Investment Trust as defined in Section 856 of the Internal Revenue Code of 1986, as amended, provided such Trust is listed on the New York Stock Exchange, the American Stock Exchange, or NASDAQ. Premises. "Premises" means the Golf Course Lease Area and any Improvements situated on that land. Project Study Area. "Project Study Area" is the 846 acre (approximately) parcel identified in Exhibit A. It is from the Project Study Area that TCI will select the Golf Course Lease Area and Residential Land. Removable Trade Fixtures. "Removable Trade Fixtures" means, but is not limited to, the following: signs, counters, tables, chairs, desks, racks, merchandisers, displays, standards, wall brackets, hang-rods, shelves, mirrors, marking equipment, cash registers and other business machines, all accounting machinery and computer equipment, stoves, and venting equipment. Removable Trade Fixtures does not include ducts, conduits, wiring, plumbing fixtures, pipes, paneling, wall covering, or floor coverings. Additionally, any equipment contributed by CBJ for operation and/or maintenance of the golf course facilities shall revert to CBJ upon termination of this Lease or the earlier cessation of TCI's use of that equipment. Nothing in this Lease shall preclude TCI from obtaining third party financing for and granting security interests in TCI's personal property or Removable Trade Fixtures. Rent. "Rent" means the annual payment that TCI must make to CBJ under Section 5.01 below.


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Residential Development Plan. “Residential Development Plan” means all permit applications, proposed subdivision plats, and other information submitted by TCI to CBJ to facilitate the development of housing on the land surrounding the Golf Course Lease Area and on land within the Golf Course Lease Area Residential Land. "Residential Land" means any land designated in a CBJ Planning Commission-approved Residential Development Plan for residential and/or commercial uses and that is suitable for residential development and/or commercial use consistent with the continued operation of a golf course on the Golf Course Lease Area. Sublease. "Sublease" means a sublease, approved by CBJ, of all or any portion of the Premises or the Improvements in which the interest so transferred is less than TCI's entire interest, the approval of which may not be unreasonably withheld. TCI. "TCI" means Totem Creek, Inc., a non-profit corporation incorporated under the laws of the State of Alaska, and its successors and/or assigns. For purposes of this Lease, the President of TCI shall be TCI's authorized representative. TCI Development Plan. "TCI Development Plan" means the document required to be completed by TCI pursuant to attached Exhibit "E" and approved by CBJ, and any subsequent changes to it agreed to by TCI and CBJ in accordance with applicable law. Unavoidable Circumstances. "Unavoidable Circumstances" means circumstances not caused by TCI or due to causes beyond the reasonable control of TCI, including any circumstances caused by the act or omission of CBJ. Such circumstances include, but are not necessarily limited to, strikes, lockouts, acts of God, unavailability of labor or material, embargoes, war, enemy action, civil commotion, fire, windstorm, flood, explosion, earthquake, unavoidable casualties, and any building or use moratorium imposed by applicable Governmental Authority, including activities necessary to remediate any environmental condition of the Premises. Utilities. "Utilities" means all services and public utilities provided to the Premises, including without limitation such services as janitorial and garbage pick-up and such utilities as natural and propane gas, water, sewer, storm sewer, electricity, cable television, telephone and telefax service, and internet service. Watershed Protection Area. “Watershed Protection Area” means the land located between the Golf Course Lease Area boundary and Peterson Creek and shown on Exhibit A, and that will be maintained in CBJ ownership to protect the creek and adjacent wetlands. Work. "Work" means all construction work and other Improvements to the Premises to be performed by TCI in accordance with, and pursuant to, the TCI Development Plan and this Lease.


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Article II. Project Study Area

Section 2.01 Demise. In consideration of the mutual covenants and agreements set forth in this Lease and other good and valuable consideration, CBJ hereby authorizes TCI to use the tract of real property described as the Project Study Area to conduct such tests, surveys, and other analyses as TCI considers necessary for TCI to develop a golf course on the Golf Course Lease Area and to designate the acreage constituting the Golf Course Lease Area and the Residential Land. The Project Study Area description is attached as Exhibit "A."

A. Golf Course Lease Area. CBJ and TCI acknowledge and agree that the Conditional Use Permit USE 1997-00074 describes the general configuration and location of the parties’ intended Golf Course Lease Area, and that, subject only to the following Section, TCI will select Golf Course Lease Area land as generally described in the Conditional Use Permit and as generally described in the map contained in Exhibit “A.”

B. Minor Boundary Adjustments to Golf Course Lease Area. CBJ and TCI agree that

during the Contingency Term the parties may agree to allow TCI to make minor, necessary alterations to the boundaries of the Golf Course Lease Area. The legal descriptions of any such minor adjustments shall be set forth in Exhibits appended to Exhibit A-1.

C. Watershed Protection Area to Remain in CBJ Ownership. TCI agrees that it may

not select land located within the Watershed Protection Area for the Golf Course Lease Area, except that minor, necessary boundary alterations that would affect the Watershed Protection Area are allowed under Subsection B above.

D. Identification and Surveying of Boundaries. TCI is responsible for the

identification and surveying of the boundaries of the Golf Course Lease Area, and agrees that such identification and surveying of those boundaries is subject to CBJ's concurrence, as contemplated by the attached Exhibit “E.”

Section 2.02 Easements

A. Reservation of and Agreement to Grant Easements. CBJ reserves and TCI agrees to grant to CBJ any and all easements required for extension of North Douglas Highway and all easements required for access to CBJ land provided that the easements do not significantly alter the golf course design. Such easements shall be granted across, through, and under portions of the Golf Course Lease Area, the Project Study Area, and the Residential Land, and shall be granted for the purpose of constructing, maintaining, and repairing an extension to the North Douglas Highway and the extension’s appurtenances, and for access to CBJ land.


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B. Location. CBJ shall locate such easements wherever necessary for the road extension or for access to CBJ land. TCI acknowledges that CBJ’s chosen easement locations may be subject to adjustment or relocation by federal, state and/or municipal regulatory authorities and that CBJ, as Lessor, may not retain ultimate control over easement locations.

C. Terms. The size and scope of easements granted for North Douglas Highway

extension purposes shall be sufficient for construction, use, and maintenance of a major arterial highway that meets all federal, state, and municipal regulatory requirements. The scope of easements granted for access to CBJ land shall be that necessary for reasonable access to the parcel and for reasonable use of the easement.

D. Duration. CBJ’s right to require that TCI grant easements across, under, and

through the Golf Course Lease Area and Project Study Area continues so long as this Lease is in effect. CBJ’s right to require that TCI grant easements though the Residential Land continues until the time CBJ approves a Residential Development Plan.

E. TCI Easements. CBJ agrees to assist and grant TCI those easements necessary for

the development of the Golf Course Lease Area and the Residential Land.

F. CBJ Use of TCI Easements. TCI agrees to allow CBJ to use easements obtained by TCI from CBJ and/or from the State of Alaska for CBJ’s North Douglas Highway extension project and for any other use of or access to CBJ land.

G. Condemnation Rights Not Affected. Nothing in Section 2.02 diminishes or

otherwise alters CBJ’s or any governmental authority’s rights to exercise eminent domain at any time over the Golf Course Lease Area or the Residential Land. Eminent domain is the sole mechanism for obtaining easements adversely affecting the approved golf course design.

Section 2.03. "As Is" Transfer. TCI has inspected the physical and topographic condition of the Project Study Area and, except as noted below, accepts it "as is" in its existing physical and topographic condition.

A. Hazardous Materials. TCI's "as is" acceptance of the Project Study Area is based on the understanding that CBJ shall retain responsibility for any Hazardous Materials law violations on the Project Study Area which existed as of, or accrued prior to, the Commencement Date. Should TCI discover evidence of any such violation which existed as of, or accrued prior to, the Commencement Date, TCI shall immediately notify CBJ. CBJ shall be responsible for remediation and any consequential damages suffered by TCI. In the event remediation causes TCI to cease all Work, all deadlines in this Lease Agreement shall be tolled until such time as the remediation is approved by the appropriate Governmental Authority. CBJ is not aware of any Hazardous Materials located on the Project Study Area.


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B. Geotechnical. CBJ has or will provide to TCI all geological and other testing data

related to the Project Study Area that CBJ possesses. Section 2.04. Encumbrances. Prior to TCI executing this Lease, CBJ will provide TCI a preliminary title report covering the Project Study Area; the report will be attached to this Lease as Exhibit B. CBJ represents it owns title to the land free and clear of defect and that there are no encumbrances affecting the Project Study Area except as listed in Exhibit B. This Lease is subject to all such encumbrances to the extent they are valid on the Commencement Date of this Lease. Section 2.05. Waiver. TCI hereby releases and waives claims against CBJ, its officers, public officials, employees, agents, or contractors for injury or damage to person(s), property, or business sustained in or about the Project Study Area by TCI, its agents, employees, invitees, customers, subcontractors, or other occupants or users of the Project Study Area, which injury or damage results from any act neglect, occurrence, or condition in or about the Project Study Area that is not attributable in whole or in part to CBJ, its officers, public officials, employees, agents, or contractors. As to injury or damage resulting from any act, neglect, occurrence, or condition in or about the Project Area that is attributable in whole or in part to CBJ, its officers, public officials, employees, agents, or contractors, the normal rules regarding allocation of fault and liability will apply. Section 2.06. Indemnification. TCI will indemnify, defend, and hold CBJ and CBJ’s Fee Interest under this Lease harmless from and against all claims, demands, judgments, damages, liabilities, penalties and costs, including attorney’s fees, for loss or damage, including but not limited to property damage, personal injury, wrongful death, and wage, employment or worker’s compensation claims, arising out of or in connection with the use or occupancy of the Premises by TCI or by any other person holding rights under TCI, or at TCI’s sufferance or invitation; and from any property damage or personal injury, including but not limited to damage or injury caused by errant golf balls, occurring off of the Premises and arising from activities conducted on the Premises; and from accident or fire on the Premises; and from any nuisance made or suffered on the Premises; and from any failure by TCI to keep the Premises in a safe and lawful condition and consistent with applicable laws, regulations, ordinances, and permits; and from any assignment, sublease or conveyance, attempted or successful, by TCI of all or any portion of the Premises contrary to the provisions of this Lease. TCI will hold all goods, materials, equipment, machinery, and other property on the Premises at the sole risk of TCI with its successors, assigns, and invitees, and will save CBJ harmless from any claim of loss or damage by any cause whatsoever, including claims by third parties.

Article III. Lease Term

Section 3.01. Commencement Date. The date this Lease is executed on behalf of CBJ is the "Commencement Date" of this Lease.


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Section 3.02. Term. The term of this lease is thirty-five (35) Lease Years beginning on the first (1st) day of January after the Contingency Term of this Lease and expiring on the last day of December in the thirty-fifth (35th) Lease Year. TCI shall have the option to renew the lease for an additional twenty (20) years by filing a written notice of its election to do so with CBJ prior to the expiration of the Lease. Section 3.03. Lease Year Delay; Cooperation on Defense of Lease. In the event litigation is filed which challenges the execution or validity of this Lease, then the term of this Lease shall be extended until such time as the litigation is resolved through any final appeal. In the event such a legal challenge is filed, CBJ and TCI agree that both CBJ and TCI are necessary parties to any such challenge and that they will cooperate as appropriate in defending against any such challenge. Costs or attorney's fees incurred by CBJ or TCI in responding to any such challenge will be borne by CBJ or TCI as their interests exist in the litigation.

Article IV. Option(s) to Purchase and Sell Section 4.01. Options to Purchase and Sell. TCI shall have option(s) to purchase and sell portions of the Project Study Area as provided in this section.

A. Option to Purchase Residential Land. For a period of 10 years, TCI shall have option(s) to purchase and sell CBJ's Fee Interest in those portions of the land designated in a CBJ Planning Commission-approved Residential Development Plan as Residential Land. The land designated in the Residential Development Plan as Residential Land may include land within the Golf Course Lease Area so long as the land is suitable for residential and/or commercial development consistent with the continued operation of a standard 18-hole golf course.

B. Terms and Conditions. The exercise of an option to purchase must be initiated by

written notice of TCI's intent to exercise the option subject to the following minimal terms and conditions:

1. Commencement of Option Period: The 10-year option period shall begin to

run on the first (1st) day of January after the expiration of the Contingency Period.

2. Conditions for Exercise of Option: TCI may exercise the option to purchase

set out in this Section only if (1) TCI has secured CBJ Planning Commission approval of a Residential Development Plan, and (2) TCI is operating an 18-hole golf course; and (3) TCI is not in default under this Lease.

3. Purchase Price: The purchase price of the Residential Land shall be the fair

market value per acre adjusted by the annual percentage changes in CBJ areawide real property values for land of similar character as determined by the CBJ municipal assessor for the years between the year of the appraisal and


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the year of the exercise of the option(s). To determine fair market value of Residential Land, TCI during the Contingency Period shall retain the services of an appraiser mutually acceptable to TCI and CBJ. The retained appraiser shall determine the fair market value of the Residential Land as it existed on the day prior to the Commencement Date of this Lease and without consideration of any change in value resulting from the execution of this Lease or the activities leading up to the execution of this Lease. The appraised value shall then be adjusted annually by the percentage change in the CBJ areawide real property values for land of similar character as set out above.

4. Closing: Upon CBJ verifying TCI's compliance with the terms of the Lease

and the satisfaction of all conditions which must be met prior to the exercise of the options to purchase, TCI shall have 90 days after final approval in which to close the transaction and complete the purchase.

5. Payment: The purchase price payable to CBJ is to be cash at closing unless

otherwise agreed to by CBJ and TCI in writing.

6. Damage to Residential Land: Each sales agreement executed under this Section shall contain a provision stating that TCI agrees not to log, cut trees, excavate, grade or cause other substantial damage to any Residential Land until TCI has secured the relevant building permits from CBJ.

C. CBJ Right to Repurchase. If, within five (5) years after the date CBJ has

conveyed Residential Land to TCI, TCI has failed to begin developing that land in accordance with the CBJ Planning Commission’s approval of a Residential Development Plan and any permit renewals, CBJ shall have the right to repurchase the land for the price paid by TCI and an adjustment for inflation based on any increase or decrease in the Anchorage Consumer Price Index.

CBJ agrees to make a good faith effort to aid TCI in the exercise of an option to purchase Residential Land and will provide, through the Community Development Department, a checklist of permit applications, studies, and other conditions necessary for TCI to exercise that option to purchase. CBJ’s failure to process a complete application by TCI for a preliminary plat, a conditional use permit, a building permit, or any other applications required to exercise an option to purchase Residential Land within six months shall extend the 10-year option period by the amount of time beyond six (6) months that it takes CBJ to process the application.


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Article V. Rent

Section 5.01. Rent.

A. Percentage of Gross Revenues. Rent for the term of this lease and any extensions thereof shall be calculated according to the following scheduled percentages of the total annual gross revenues generated on the leased premises as defined herein, and paid quarterly to CBJ.

Gross Leasehold Revenues Lease Rate $0 to 1.0 million 0% $1 to $1.5 million 2.5% $1.5 to $2 million 5% Over $2 million 10%

B. Sources of Gross Revenues. For purposes of determining quarterly rent, gross

revenues shall include the aggregate total amount of sales made and services performed by Lessee, or Lessee’s consignees, agents, sublessees, subtenants, employees, independent contractors, licensees, or others on the leased premises whether such activities are for cash or on credit (sales on credit are to be included in gross receipts at the time such are discharged by payment). Sales and services include, but are not limited to, green fees (including tournament entry fees); driving range fees; golf cart rentals; club rentals; sales of golfing apparel or equipment; fees charged for any recreational or other activity on the premises; retail sales of other goods, services or beverages; sales from vending or coin-operated equipment, and rental for any facilities for temporary uses such as conventions, banquets, or storage. Rental revenues received by TCI for rental of space or facilities to TCI’s concessionaires or sublessees shall not be included in gross revenues if such concessionaires or sublessees are conducting an activity on the premises which produces gross revenues. Those gross revenues of such concessionaires or sub lessee not described in the previous sentence shall be included in the total gross revenues for purposes of determining rents due to CBJ. Any sales tax collected on items producing revenues shall not be included in the gross revenues calculation.

C. Payment of Rents. Rent shall be payable quarterly to the Lessor for activity

incurred during the previous quarter. Such payments shall be due and payable within forty-five (45) days after the end of each calendar quarter.

Article VI. Records and Audit

Section 6.01. Records. TCI shall, with respect to both rounds of golf played and all other business activities conducted on the premises, keep true and accurate accounts, records, books and data in a form consistent with good accounting practices. Such accounts, records, books and data shall, among other things, contain a breakdown of


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gross receipts and sales from the various activities taking place on the premises. TCI shall require that any consignees, sublessees, subtenants, or others conducting any revenue producing activity on the premises keep accurate and complete records and accounts in accordance with this paragraph. Section 6.02. Inspection of Records. TCI shall keep intact for at least five (5) years after the end of each lease year, all of TCI’s records, sales slips, and other material that TCI is required to maintain hereunder. TCI hereby agrees that CBJ, its employees, agents and representatives, at all reasonable times, shall have the right to inspect and examine all such records in order to enable CBJ to ascertain the amount of TCI’s gross receipts. In addition, CBJ’s representatives shall have the right to inspect and examine all segregated expenses (i.e., including those expenses which are provided as an adjunct of TCI’s other business operations and which are not separately accounted for or otherwise not charged back to the golf course operation) associated with activities of the Golf Course Lease Area, at CBJ’s offices, but all information reviewed will be treated as proprietary information and will not be released to the public. Section 6.03. Revenue Report. TCI shall submit to CBJ a complete revenue report detailing the gross revenues for that calendar month within thirty (30) working days after the end of each month. Such statements shall contain a breakdown of the gross receipts by the activity which produced such receipts. In addition, TCI shall annually submit to CBJ an audited revenue report of revenues for the twelve (12) month period of October 1 through September 30 by the end of that calendar year. TCI, upon request of CBJ, will provide a list of annual capital improvements and the approximate cost of those improvements. Section 6.04. Audit. CBJ may, once in any lease year during the period of November 1 and March 31, cause an audit of TCI’s gross revenues derived from the lease of the premises (including the operations of any concessionaires or sub lessee) to be made by a Certified Public Accountant (CPA) of CBJ’s selection or a CBJ auditor. If a report of gross revenues shall be found to report less revenue than actually received, TCI shall immediately pay the cost of such audit along with the additional percentage rent due under Section 5.01 A and any other sums shown thereby to be due CBJ. Otherwise, the cost of such audit shall be paid by CBJ, including TCI’s documented expenses incurred in preparing and submitting to such audit. To the extent that CBJ is required or allowed under federal, state, or municipal law to obtain information from records kept by TCI under this lease, CBJ may make a written request for such information and access to the relevant records. If the request is for audited information, CBJ shall pay the expense associated with the audit.

Article VII. Impositions

Section 7.01. Payment of Impositions. TCI agrees to pay and discharge all Impositions for each Lease Year (or portion thereof) of this Lease, with failure to pay all Impositions when due constituting a default of TCI's obligations under this Lease. CBJ agrees not to


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impose any Impositions on TCI that affect only TCI and that any Impositions CBJ may impose on TCI will be of general application.

Section 7.02. Hold Harmless. TCI agrees to and shall protect and hold harmless CBJ from liability for any and all Impositions, together with any interest, thereby imposed, and from any sale or other proceeding to enforce payment thereof. Section 7.03. Time of Payment. TCI agrees to pay all Impositions directly to the applicable authority on or before the due date. In the event that an assessment may be paid in installments by arrangement with a taxing authority or by law, TCI may pay such assessment in such installments. Section 7.04. Right to Contest. Provided TCI complies with applicable law, TCI shall have the right in good faith, at its sole cost and expense and in its own name, to contest the amount of any Impositions. CBJ shall have no obligation to participate in any such contest.

Article VIII. Use of the Golf Course Lease Area

Section 8.01. Approved Uses. Subject to the provisions of Section 8.03 below, TCI shall have the right to use the Golf Course Lease Area for the construction and operation of a public golf course and other recreational activities approved by both CBJ and TCI. Residential Land purchased under Section 4.01A may be used for recreational, commercial, and/or residential development, subject to the CBJ Land Use Code and CBJ Planning Commission decisions. Section 8.02. Approved Winter Recreation Uses. Subject to the mutual agreement of TCI and CBJ as to the appropriate locations for winter recreation on the Premises, CBJ shall have the right to allow the public to enter and use the Premises for these mutually approved Winter Recreation Uses. CBJ shall agree to accept liability for injury to the public and for damage to TCI’s Improvements. Section 8.03. Contingency Term, Development, and Construction Uses. From the Commencement Date through completion of the Work as defined in the TCI Development Plan, TCI shall adhere to the provisions of Exhibit "E", Contingency Term, Development, and Construction Requirements. Section 8.04. No Use in Violation of Law. TCI will comply with all federal, state, municipal and other laws, codes, ordinances, rules, regulations and permits applicable to the Golf Course Lease Area; will install, remove and alter such fixtures, equipment and facilities in, and make such alterations to, the Golf Course Lease Area as may be necessary to comply; and will comply with such ordinances and regulations as CBJ may promulgate regarding sanitation, cleanliness and other health and/or environmental matters, including, without limitation, removal of garbage, trash and other waste. TCI will not make any unlawful use of the Golf Course Lease Area or permit any unlawful use thereof.


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Article IX. Repair and Maintenance

Section 9.01. No Duties on CBJ. Except to the extent caused by its negligent act(s) or omission(s), CBJ shall have no duty to repair or maintain the Golf Course Lease Area or any Improvements placed on or constituting any portion of the Premises. CBJ will not be liable for any economic loss, damage or injury, fatal or nonfatal, resulting from any damage, defect or disrepair of any Improvements placed at or constituting any portion of the Premises. CBJ shall not have any duty to make any replacement of any such Improvements. TCI agrees that TCI shall at all times operate and maintain the golf course in a manner consistent with industry standards and practices, and in accordance with the TCI Development Plan.

Section 9.02. Repair and Maintenance Duties of TCI. TCI will provide at its own cost and expense, all repairs, maintenance, and required service on any Improvements to the Golf Course Lease Area. Such repairs, maintenance, and service will be at least of the same quality and nature as that provided at other public golf courses in Alaska. In the event CBJ considers it necessary for TCI to perform such repairs, maintenance, or service, CBJ may request TCI to do so. TCI will undertake to make such repairs, maintenance, or service or may notify CBJ, within fifteen (15) days, why such repairs, maintenance, or service are not warranted or necessary. In the event CBJ believes that an emergency situation has arisen which warrants immediate action or disagrees with the decision of TCI, CBJ is authorized to perform such work at CBJ’s expense and resolve the matter with TCI through, if necessary, mediation, arbitration, and/or litigation as contemplated herein. Such repairs, maintenance, or service shall be considered warranted or necessary if they are of the same quality and nature as provided at other public golf courses in Alaska and are commercially reasonable in light of the economics at the time of the request, including consideration of the time remaining on the Lease. Section 9.03. Garbage. On the Golf Course Lease Area, TCI will provide bear-proof garbage and trash containers in a suitable number so that customers, club members, members of the public, spectators, trail users, invitees, and other visitors or users of the Golf Course Lease Area are given ample opportunity to dispose of trash. TCI shall be responsible for the disposal of all garbage and trash associated with its operations of the Premises (whether or not such garbage and trash is generated by TCI or its customers and invitees). Garbage and trash disposal will be located in an enclosed bear proof area on the Golf Course Lease Area and screened from public view.

Section 9.04. Right of Inspection. CBJ will have a right to enter the Golf Course Lease Area at any reasonable time (including during TCI's business hours) to inspect the condition thereof; provided, however, such right shall not be exercised in a manner which would unreasonably interfere with TCI's and/or its subcontractors' conduct of business on the Golf Course Lease Area.


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Article X. Ownership of Improvements

Section 10.01. Ownership of Improvements. All alterations, additions, installed equipment or Improvements to the Golf Course Lease Area made by TCI and subcontractors shall become the property of CBJ at the termination of the Lease. Subject to CBJ's rights in the event of a default, TCI may remove Removable Trade Fixtures. In addition to other applicable provisions of this Lease regarding such removal, the following shall apply: (1) such removal must be made prior to the termination of the term of this Lease, (2) the owner of such alterations, additions or Improvements must not be in default of any obligation or covenant under this Lease at the time of such removal; and (3) such removal must be effected without damage to the Golf Course Lease Area and any Improvements made thereon, and TCI must promptly repair all damage caused by such removal. Nothing stated herein shall preclude TCI from obtaining third party financing for, and granting security interests in, TCI’s personal property.

Section 10.02. Alteration and Reconstruction. TCI shall not make any alterations, additions, or Improvements in or to the Golf Course Lease Area where the reasonably anticipated cost thereof is in excess of One Hundred Thousand Dollars ($100,000.00) without submitting design drawings and building plans/specifications to and obtaining written approval from CBJ prior to commencing construction. CBJ shall have thirty (30) days to review and comment on such submittals following receipt of drawings/plans/specifications from TCI. Failure of CBJ to provide written notice of approval within thirty (30) days shall be deemed to constitute approval of the submitted drawings/plans/specifications.

A. Approval of TCI’s submitted drawings/plans/specifications shall not be

unreasonably withheld, and any disapproval shall be in writing and provide justification for such disapproval.

B. Prior to commencement of construction of any alterations, addition or Improvements exceeding a contract amount of One Hundred Thousand Dollars ($100,000), and where TCI intends to use an outside non-affiliated third party contractor, TCI shall obtain and provide CBJ with a copy of a payment and performance bond in compliance with Alaska Statute 36.25.010 that is issued for their joint benefit.

Article XI. Operations and Services

Section 11.01. Management. TCI agrees to operate and manage an eighteen- (18) hole public golf course in a manner consistent with accepted industry standards and practices for public golf courses in Alaska and in accordance with the TCI Development Plan and consistent with the terms of Conditional Use Permit USE1997-00074 and any subsequent modifications Section 11.02. Scheduling. The parties agree that TCI has the right to pre-schedule tournaments and offer advance golf reservations in blocks to hotels, tour companies, and


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individual resident and non-resident groups so long as TCI ensures reasonable and appropriate access to CBJ residents. Section 11.03. Services. In addition to an eighteen (18) hole golf course, TCI may provide the following services:

A. Pro Shop. Within the Pro Shop the following services may be provided for

the public:

1. Starter Services, including the collection of all appropriate fees and the maintenance of a complete daily record of rounds played.

2. Golf Instruction Services.

3. Tournament Services.

4. Course Marshaling Services.

5. Retail Sales Shop.

B. Driving Range and Practice Putting Area. A driving range adequate for

normal golfing demand and a practice putting green consistent with industry standards.

1. Snack Bar.

2. Restaurant, Bar, and Banquet Facilities.

Section 11.04. Hours of Operation. The golf course and related facilities and services shall be open to the public seven (7) days a week for not less than twelve (12) hours per day during the Golf Season.

Section 11.05. Fees and Charges. TCI is free to charge for green fees as it reasonably believes is necessary, provided, however, that TCI ensures that CBJ residents (as verified by a valid Alaska driver’s license, voter’s registration card, or other source of identification acceptable to TCI) pay average green fees that are at least twenty-five percent (25%) below the posted rates charged to non-residents.


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Article XII. Utilities

Section 12.01. Duty of TCI. Except as provided below, TCI may at its own cost and expense pay any charges for installation, connection, initiation, delivery and use of Utilities used on the Golf Course Lease Area throughout the term of this Lease, and shall save and hold CBJ harmless from any charge or liability for same. All such charges are to be paid by TCI directly to the utility company or municipality furnishing the same if applicable.

Section 12.02. Interruption or Malfunction of Utility Service. No interruption or malfunction of any utility service (including, without limitation, interruption of such utilities as a result of the enactment of any federal, state or municipal law, statute, ordinance, decree, order, guideline or regulation now or hereafter enacted or promulgated by any governmental, quasi-governmental, regulatory or executive authority) shall constitute an eviction or disturbance of TCI's use and possession of the Golf Course Lease Area or a breach by CBJ of any of its obligations hereunder or render CBJ liable for any damages except to the extent any such interruption or malfunction of utility service is caused in whole or in part by the negligence of CBJ or its officers, public officials, employees, agents, or contractors. In the event of any such interruption of any such services, CBJ shall use reasonable diligence to restore such service in any circumstances in which such interruption is caused by CBJ. In the event of an interruption which prohibits TCI from operating the Premises as contemplated herein, TCI shall be entitled to a tolling of the terms set forth herein for so long as is reasonably needed for CBJ and/or TCI to return the Premises to operation.

Article XIII. Insurance and Indemnity

Section 13.01. TCI Indemnification. Except where wholly or in part caused by CBJ’s negligence and subject to Section 2.05 above, TCI agrees to defend, indemnify and hold CBJ and CBJ's officers, agents and employees harmless from all losses, claims, suits, actions, damages and liability arising (or alleged to arise) from any act or omission of TCI or TCI's agents. TCI assumes responsibility for the condition of the Golf Course Lease Area as of the Commencement Date.

Section 13.02. TCI Insurance.

A. TCI shall furnish to the CBJ Office of Risk Management certificates of insurance prior to beginning construction or operations under the Lease, and must give 30 days advance written notice of cancellation, non-renewal, or any material change to such insurance coverage. All of the insurance policies shall be in form and substance reasonably satisfactory to CBJ and shall be issued by a company or companies satisfactory to CBJ. Failure to furnish satisfactory evidence of insurance, or the lapse of the policy once acquired, is a material breach and grounds for termination of the Lease. Required insurance is subject to annual review by the CBJ Office of Risk Management.


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B. The coverage shall extend to property damage, bodily injury, or death arising out of TCI’s activities under the Lease, including, but not limited to, occupancy and use of the Golf Course Lease Area, activities conducted on the Golf Course Lease Area, and the construction, maintenance, and operation of the structures, facilities, or equipment authorized by the Lease.

C. Without limiting the respective rights of indemnification above, TCI shall

purchase at its own expense and maintain in full force at all times during the term of the lease the following policies of insurance:

1. Commercial General Liability insurance with a combined single limit of

not less than $1 million dollars per occurrence (which required amount may be adjusted by CBJ periodically to reflect inflation). Such policy shall name CBJ as an additional insured. This policy shall include but not be limited to premises and operations, independent contractors, and products/completed operations, and reference the indemnification provisions of the Lease. This insurance shall be considered to be the primary of any other insurance carried by CBJ, through self-insurance or otherwise. This insurance shall also contain a “cross-liability” or “severability of interest” clause or endorsement. The insurer shall agree to waive all rights of subrogation against CBJ, its officers, agents, and employees for losses arising from the Golf Course Lease Area.

2. All-Risk Property Insurance, including business interruption and including

debris removal, but not including flood, earthquake, and risk of terrorism, on the golf course and related structures, buildings, and equipment forming part of or otherwise connected to the Golf Course Lease Area, in such amounts and with such deductibles as under good business practices are ordinarily provided for similar golf courses and equipment, but in no event in an amount less than the replacement value of the improvements. The City and Borough of Juneau, Alaska shall also be named as a loss payee on any loss settlement under this section. TCI shall be obligated to pay the deductibles.

3. Statutory Alaska Worker’s Compensation, and Employer’s Liability

Insurance with a limit of not less than $500,000 in compliance with the laws of the state of Alaska

4. Comprehensive Automobile Liability Insurance covering all owned, hired,

and non-owned vehicles with coverage limits not less than $ 2 Million Dollars combined single limit per occurrence bodily injury and property damage.

5. If TCI is engaged in any way in the sale of alcoholic beverages, either for

consumption on or off the Golf Course Lease Area, TCI will obtain and maintain at all times during the lease term Liquor Liability Insurance with


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limits of not less than $1 Million dollars each common cause and $1 Million dollars aggregate. If written on a separate policy from the comprehensive general liability policy, such policy shall name CBJ as an additional insured.

Article XIV. Damage or Destruction of Premises/Condemnation

Section 14.01. Damage or Destruction. Unless resulting from an act or omission by CBJ, its officers, public officials, employees, agents, or contractors, no damage to the Golf Course Lease Area or damage to or destruction of any Improvements erected or placed on the Golf Course Lease Area shall in any way alter, affect or modify TCI's obligations under the Lease, including specifically TCI's obligations to pay rent, Impositions, and other financial obligations hereunder. In the event of any damage to the Golf Course Lease Area or Improvements, TCI shall (1) give timely written notice of the damage or destruction to CBJ, which notice shall include a description of the damage and, as far as known to TCI, the cause of the damage, and (2) take such action as may be required under applicable municipal ordinances and other laws, rules and regulations with respect to any such damage or destruction. TCI also will promptly remove all debris resulting from such damage or destruction and take such action as is necessary to place the Golf Course Lease Area in a neat, safe condition. Any damaged or destroyed Improvement to the Golf Course Lease Area may be reconstructed, replaced with a substitute Improvement, or the damage removed and the Golf Course Lease Area remediated. Any insurance proceeds or other funds for such purposes remaining after such reconstruction, replacement, or remediation may be applied to any outstanding mortgage balance or used to make other Improvements to the Golf Course Lease Area. CBJ's and TCI's rights to terminate the Lease upon damage or destruction to the Golf Course Lease Area or Improvements thereon shall be as provided in the Lease. Section 14.02. Condemnation.

A. In the event that any other authority having the power of eminent domain

requests that CBJ convey to such authority all or any portion of the Golf Course Lease Area, CBJ shall consult with TCI concerning such request. CBJ and TCI may agree to an allocation of any award made in connection with such taking. In the absence of an agreement regarding allocation of the award, the other provisions hereof concerning allocation of the award shall be applied.

B. If a sufficient portion of the Golf Course Lease Area is taken by any authority

having the power of eminent domain during the term of this Lease such that TCI can no longer meet its obligations under this Lease, this Lease shall cease and terminate. The date of such termination shall be the earlier of the date upon which possession is tendered to such authority by TCI or the date upon which possession is taken by such authority.


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C. If a portion of the Golf Course Lease Area is taken by any authority having the power of eminent domain during the term of this Lease but, notwithstanding that taking, TCI can still meet its obligations under this Lease, this Lease at TCI’s option shall remain in full force and effect as to the Golf Course Lease Area not taken by the condemning authority.

D. It is understood that rent shall not be refunded in the event of condemnation of

the Golf Course Lease Area, in whole or in part. E. In the event of a partial taking that does not result in a termination of this

Lease, TCI may restore the remaining portion of the Golf Course Lease Area. Such restoration shall be the enclosure of the remaining portion of building improvements and the renovation of parking and driveway facilities as may be reasonably possible after such taking to provide access and parking for the building Improvements remaining on the Golf Course Lease Area. Any such restoration work shall be performed within a reasonable period of time with reasonable allowances for excusable delays. Any such restoration work by TCI shall be carried forward diligently until completion in accordance with and subject to the provisions of this Lease dealing with construction and renovation. The restoration work, if any, by TCI with respect to the Golf Course Lease Area shall not constitute an eviction or disturbance of TCI's use and possession of the Golf Course Lease Area or a breach by CBJ of any of its obligations hereunder or render CBJ liable for damages or entitle TCI to be relieved from any of its obligations or grant TCI any right of set off or recoupment.

Section 14.03. Award.

A. Full Taking. In the event of a taking resulting in the termination of this Lease

pursuant to the provisions hereof, the parties hereto agree to cooperate in applying for and prosecuting any claim for an award or awards in connection with such taking and further agree that the aggregate net award shall be paid and distributed as follows:

1. All sums awarded or agreed upon between CBJ and the condemning

authority for the taking of CBJ’s remainder interest in the leased fee estate (excluding any and all Improvements thereon), whether as damages or as compensation, will be the property of CBJ, subject to any provision hereof. All sums awarded or agreed upon between TCI and the condemning authority for the taking of TCI's interest in the leasehold in the Golf Course Lease Area will be the property of TCI. TCI may grant to CBJ the authority to negotiate with such condemning authority on behalf of TCI, or TCI may represent its own interests in such negotiations. TCI agrees that the condemning authority shall cause all checks and drafts issued by it for the taking of CBJ’s remainder interest in the leased fee estate and CBJ's portion of the award for Improvements, whether as


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compensation or as damages, to be issued payable to the order of CBJ. CBJ agrees that the condemning authority shall cause all checks and drafts issued by it for the taking of TCI's leasehold interest, and TCI's portion of the award for Improvements, whether as compensation or damages, to be issued payable to TCI. Upon request by CBJ, TCI agrees to immediately execute such instrument or instruments as CBJ may reasonably request as evidence of TCI's cessation in interest in such portion of the Golf Course Lease Area that is condemned by such authority and that this Lease continues to be effective as to the balance of the Golf Course Lease Area not condemned. Notwithstanding the foregoing, CBJ and TCI each acknowledge and agree that it is the intent of CBJ and TCI to work together to obtain adequate remuneration from the condemning authority. In such regard, CBJ and TCI agree that the value of any Improvements placed on the Golf Course Lease Area shall be distributed in accordance with the formula set forth below, and CBJ and TCI agree to work together to determine the value of such Improvements.

2. All sums awarded or agreed upon between CBJ, TCI, and the condemning

authority in connection with the condemnation of Improvements constructed on leased Golf Course Lease Area shall be divided by CBJ and TCI in accordance with the following formula: TCI's portion of all sums awarded shall be determined by multiplying the award by a fraction, the numerator of which is the unexpired number of calendar months of the Lease term and the denominator of which is the total number of months in the Lease Term and any extensions, and the remainder of such amount (remaining after deducting TCI's aforesaid portion thereof) shall be CBJ's. Such respective amounts shall be paid directly to the party entitled thereto.

3. Any amounts specifically awarded or agreed upon by the TCI and the

condemning authority for the taking of TCI's Removable Trade Fixtures shall be the property of TCI.

B. Partial Taking. In the event of a partial taking which does not result in the

termination of this Lease, the award with respect to such taking (or conveyance thereof) shall be made as follows:

1. There shall be allocated and paid to TCI the amount thereof reasonably

required to make repairs to buildings and Improvements on the Golf Course Lease Area which TCI is required to make. In addition, there shall be paid to TCI any portion of the award specifically made for moving expenses, loss of business or other expenses of the operator of the Golf Course Lease Area.

2. The balance of the award shall be divided by CBJ and TCI in accordance

with the following formula: TCI's portion of all sums awarded shall be determined by multiplying the award by a fraction, the numerator of which


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is the unexpired number of calendar months of the Lease Term and the denominator of which is the total number of months in the Lease Term, and the remainder of such amount (remaining after deducting TCI's aforesaid portion thereof) shall be CBJ's. Such respective amounts shall be paid directly to the party entitled thereto.

Article XV. Default and Remedies

Section 15.01. Default by TCI. Each of the following acts, omissions, or occurrences shall constitute a default of its Lease obligations by TCI:

A. Failure or refusal by TCI to timely pay Percentage Rent or any sum required

when due hereunder and the continuance of such failure for ten (10) consecutive days after the receipt of CBJ's written notice to TCI specifying such failure.

B. Failure or refusal by TCI to comply with the obligations of TCI set forth in

this Lease; provided, however, that if the alleged default is the use of the Golf Course Lease Area for a use not contemplated under this Lease and TCI takes reasonable steps to cure the default and prevent a reoccurrence of such default within thirty (30) days after receipt of CBJ's notice, then no default will be deemed to have occurred and CBJ shall not have any right to terminate this Lease by reason thereof.

C. Abandonment of the Golf Course Lease Area. D. If TCI’s interest or any part of its interest in this Lease is assigned or

transferred by operation of law, except with CBJ’s consent.

E. Filing of a voluntary or involuntary petition in bankruptcy and/or reorganization, or for an arrangement by or against CBJ; Adjudication of TCI as a bankrupt or insolvency in the bankruptcy or equity sense; Filing of a petition or other proceedings by or against TCI for, or the appointment of a trustee, receiver, guardian, or liquidator of TCI with respect to all or substantially all of its property, except a receiver appointed at the request of CBJ; A petition of other proceeding by or against TCI for its dissolution or liquidation, or the taking of possession of TCI’s property by any governmental authority in connection with dissolution or liquidation; or the taking by any person of the leasehold created hereby or any part thereof upon execution, attachment or other process of law or equity.

F. Failure or refusal by TCI to timely perform or observe any other covenant,

duty or obligation of TCI under this Lease; provided, however, notwithstanding the occurrence of such default, CBJ shall not be entitled to exercise any of the remedies provided for in this Lease or by law unless such default continues beyond the expiration of thirty (30) days following notice to


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TCI of such default; provided further, in the event such covenant, duty or obligation of TCI reasonably requires more than thirty (30) days for the curing thereof, such failure shall not constitute default if TCI shall have commenced the curing of such failure within such thirty- (30-) day period and having commenced such curing, carries same forward to completion with due diligence. Following the running of that notice period, any expenses incurred by CBJ to collect rents or declare default of the lease and commence termination of the lease shall be due and payable by TCI in order to cure any such default and/or to bring the lease current. Notwithstanding the foregoing, however, TCI’s failure to meet the construction benchmarks set forth in Exhibit E shall constitute a default unless that failure is due to Unavoidable Circumstances.

Section 15.02. Remedies. On the occurrence of a default as described above, CBJ has the following rights or remedies available to it, which rights or remedies shall be cumulative and non-exclusive:

A. After appropriate notice as provided in Section 14.01, CBJ may, at its option, terminate this Lease, in which event, TCI shall immediately surrender possession of the Golf Course Lease Area to CBJ.

B. Notwithstanding any default, nothing herein shall be construed so as to relieve

TCI of any obligation, including the payment of rent, as provided in this Lease. CBJ shall have the right, in the event of any uncured financial default, to proceed with a lawsuit to collect on the outstanding rent owed, however, nothing in this Lease relieves CBJ of its obligation to mitigate its damages.

C. After appropriate notice as provided in Section 14.01, CBJ, at its option, may

file suit for specific performance by TCI of the terms and conditions of this Lease.

D. The remedies of CBJ hereunder shall be deemed cumulative and no remedy of

CBJ, whether exercised by CBJ or not, shall be deemed to be in exclusion of any other. Except where otherwise provided, in all circumstances under this lease where prior consent or permission is required of a party, the matter of whether to grant such consent or permission shall be within the reasonable judgment and discretion of that party

E. Notwithstanding any default or the assumption of possession by CBJ, this

Lease may be reinstated if TCI offers to cure the default within ninety (90) days of the default after notice of the default or assumption of possession by CBJ, whichever is later.

Section 15.03. CBJ Default. In the event of any default by or other dispute with CBJ, TCI shall have the right, in addition to other remedies available to it at law or in equity, to a hearing before the City Manager. Notwithstanding the foregoing, prior to commencing


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any action of a suit for specific performance or other remedies, TCI will give CBJ written notice specifying such default with particularity, and CBJ shall thereupon have thirty (30) days in which to commence to cure any such default. If CBJ fails to commence curing any default within thirty (30) days after such notice or, having so commenced, fails thereafter to exercise reasonable diligence to complete such curing, TCI shall be deemed to have exhausted its administrative remedies and may pursue any other legal options available to it.

Section 15.04. Venue. All monetary obligations of CBJ and TCI (including without limitation, any monetary obligation of CBJ or TCI for damages for any breach of the respective covenants, duties or obligations of CBJ or TCI hereunder) are performable exclusively in the City & Borough of Juneau, Alaska.

Section 15.05. TCI’s Bankruptcy.

A. Conditions of Assumption and Assignment. CBJ and TCI agree that if TCI ever becomes the subject of a voluntary or involuntary bankruptcy, reorganization, composition, or other similar type proceeding under the Federal Bankruptcy Laws, as now enacted or hereafter amended, then “adequate protection” of CBJ’s interest in the Golf Course Lease Area pursuant to the provisions of Sections 361 and 363 (or their successor sections) of the Bankruptcy Code, 11 U.S.C. Paragraph 101, et seq. (such Bankruptcy Codes as amended from time to time being herein referred to as the “Bankruptcy Code”) prior to assumption and/or assignment of the Lease by TCI shall include, but not be limited to all (or any part) of the following:

1. The continued payment by TCI of all Percentage Rent and all other sums

due and owing under this Lease;

2. The hiring of security guards to protect the Golf Course Lease Area if TCI abandons and/or ceases operations; such obligation of TCI to be effective so long as TCI remains in possession and control of the Golf Course Golf Course Lease Area to the exclusion of CBJ;

3. The furnishing of a security deposit by TCI sufficient to pay the

Percentage Rent provided for in this lease by TCI, in the amount of the Percentage Rent payable during the immediately preceding Lease Year, or demonstration that subleases of the Golf Course Lease Area are in place and paying rent in sufficient amount to pay the Percentage Rent provided for in this Lease and the reasonably expected expenses of the project built on the Golf Course Lease Area.

B. Adequate Assurance. CBJ and TCI agree that if TCI ever becomes the subject

of a voluntary or involuntary bankruptcy, reorganization, composition, or other similar type proceeding under the Federal Bankruptcy Code, as now enacted or as amended, then “adequate assurance of future performance” by


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CBJ and/or any assignee of TCI pursuant to Bankruptcy Code 365 (or its successor section) will include (but not be limited to) payment of a security deposit in the amount of Percentage Rent paid during the immediately preceding Lease Year; or demonstration that subleases of the Golf Course Lease Area are in place and paying rent sufficient amount to pay the Percentage Rent provided for in this Lease and the reasonably expected operating expenses of the project built on the Golf Course Lease Area.

C. Assignment as Assumption. Any person or entity to which this Lease is

assigned Pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all the obligations of TCI arising under this Lease on and after the effective date of such assignment. Any such assignee shall, upon demand by CBJ, execute and deliver to CBJ an instrument confirming such assumption of liability.

D. Notwithstanding anything in this Lease to the contrary, all amounts payable

by CBJ to or on behalf of TCI under this Lease, whether or not expressly denominated as Percentage Rent, shall constitute “rent” for the purposes of Section 502(b)(7) of the Bankruptcy Code.

E. Treatment of Rent. If this lease is assigned to any person or entity pursuant to

the provisions of the Bankruptcy Code, any and all moneys or other considerations payable or otherwise to be delivered to TCI or the estate of TCI within the meaning of the Bankruptcy Code. Any and all monies delivered to CBJ shall be held in trust by TCI for the benefit of CBJ and shall be promptly paid to or turned over to CBJ.

F. Notice of Offer of Assignment. If TCI assumes this Lease and proposes to

assign the same pursuant to the provisions of the Bankruptcy Code to any person or entity who shall have made a bona fide offer to accept an assignment of this Lease on terms acceptable to TCI, then notice of such proposed offer/assignment, setting forth (1) the name and address of such person or entity, (2) all of the terms and conditions of such offer and (3) the adequate assurance to be provided CBJ to assure such person’s or entity’s future performance under the Lease, including, without limitation, the assurance referred to in Section 365(b)(3) of the Bankruptcy Code, shall be given to CBJ by TCI no later than twenty (20) days prior to the date that TCI shall make application to a court of competent jurisdiction for authority and approval to enter into such assumption and assignment, and CBJ shall thereupon have the prior right and option, to be exercised by notice to TCI given at any time prior to the effective date of such proposed assignment, to accept an assignment of this lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such persons or entity, less any brokerage commissions which may be payable out of the consideration to be paid by such person for the assignment of this Lease.


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Article XVI. Mortgaging and Subleasing

Section 16.01. Leasehold Mortgage. If TCI is not then in default under this Lease, TCI may, with the prior written consent of CBJ and subject to the terms and conditions as may be reasonably imposed, dispose of all or any portion of TCI’s interest under this Lease and the leasehold estate hereby created to any trustee by way of a deed of trust in favor of any Leasehold Mortgagee, for the purpose of creating an encumbrance on such interest.

Section 16.02. Sublease or Assignment. TCI shall not assign or sublease any part or portion of the Premises without the prior written consent of CBJ. CBJ’s approval of any sublease or assignment shall not be unreasonably withheld If TCI desires to assign the lease to a for-profit corporation, the prospective assignee and CBJ shall first agree on a lease rate that represents the fair market value of the CBJ-owned land, and such lease rate shall be substituted for the schedule listed in Section 5.01 of this lease.

A. TCI shall be obligated to enforce the terms and conditions of any permitted subleases. Failure to do so, following written notice as required by Section 14.01 hereof, shall constitute an event of default.

B. All such subleases shall be subject and subordinate to CBJ’s rights under this

Lease, and shall be for Approved Uses. All subleases shall be for a term or terms that shall expire on or before the expiration of the Lease Term.

Section 16.03. Assignment for Security Purposes. CBJ recognizes that TCI may have a need, in lieu of encumbering the leasehold interest provided for herein, to assign to a lender, for security purposes, TCI’s interest contained herein. To the extent that such an assignment for security purposes is required, the parties agree that such an assignment is authorized, with CBJ’s consent, provided the assignment generally adheres to the terms and conditions set forth in the form attached hereto as Exhibit D. [Limited Assignment for Security Purposes]

Article XVII. Environmental Provisions

Section 17.01. TCI Compliance. TCI, at all times during the Lease Term, at its own expense, and with all due diligence, shall observe and comply with all laws, ordinances, rules, and regulations which are now in effect or may later be adopted by any Governmental Authority and which may be applicable to the Golf Course Lease Area or any Improvement on it or any use of it. This includes all of the conditions in TCI's Conditional Use Permit (USE1997-0074), specifically the conditions pertaining to maintenance of streamside buffers, and includes all amendments made to the Conditional Use Permit. Section 17.02. Duty to Clean and Restore. In the event any discharge, leakage, spillage, emission, or pollution of any type occurs upon or from the Golf Course Lease Area during the Lease Term or any holdover thereafter, TCI shall immediately notify CBJ and


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shall, at TCI’s own expense, clean and restore the Golf Course Lease Area to the satisfaction of CBJ and any governmental body or court having jurisdiction of the matter. Section 17.03. Indemnification. TCI agrees to indemnify, hold harmless and defend CBJ against all liability, cost and expense (including, without limitation, any fines, penalties, diminution in value of the Premises, assessment and clean-up costs, and judgments) incurred by or levied against CBJ as a result of TCI’s breach of Section 16.01 above; provided, however, that TCI shall not be required to indemnify CBJ under this paragraph if the parties agree or a court of competent jurisdiction determines that such liability, cost or expense is caused in whole or in part by the negligence of CBJ. The foregoing indemnity shall survive the expiration or earlier termination of this Lease.

Article XVIII. Mediation and Arbitration

Section 18.01. Mediation. CBJ and TCI agree that with the exception of any claim for payment of rent, when due, all litigation must be preceded by a mandatory mediation session, with a mediator mutually agreeable to CBJ and TCI. CBJ and TCI agree that the mediation shall occur in Juneau, Alaska, and that they will, in good faith, use the mediation process in the event they are unable to agree with respect to any event of default or other claim involving non-performance by either party under the Lease. If litigation is filed before mediation occurs, either party may seek and obtain an order from a court of appropriate jurisdiction staying all such legal proceedings until the conclusion of the mediation process. Section 18.02. Arbitration. To the extent Mediation under Section 17.01 above does not resolve the dispute, CBJ and TCI agree to binding Arbitration to resolve the dispute under the procedures set out below.

A. Appointment of Arbitrators and Conduct of Arbitration. If the parties are unable to resolve any dispute arising under the Lease, upon the election of either of them, the dispute shall be submitted to and determined by a single arbitrator, mutually appointed by them, whose decision and award shall be final, conclusive, and binding upon both of them. If the CBJ and TCI fail to mutually appoint a single arbitrator, the matter shall be submitted to and determined by three (3) arbitrators, in which event either the CBJ or TCI may give to the other written notice of election to have the matter of disagreement so arbitrated and shall appoint therein one of the arbitrators. The other party shall, within twenty (20) days after the receipt of such written notice, appoint a second arbitrator. If he fails to do so, the party who has already appointed an arbitrator may have the second arbitrator appointed by any judge of the Superior Court of Alaska resident in the district where the Leased Premises are situated. The two (2) arbitrators so appointed in either manner shall appoint the third arbitrator, and if the first two (2) arbitrators fail to appoint a third arbitrator within twenty (20) days after the appointment of the second arbitrator, either the CBJ or TCI may have the third arbitrator appointed by any judge of the Superior Court of Alaska resident in the district where the


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subject area is situated. Each of the arbitrators appointed under this paragraph shall possess the professional qualifications as further described below.

The three (3) arbitrators so appointed shall thereupon proceed to arbitrate the matter of disagreement, upon such rules of procedure as they may adopt, and shall render a written decision containing their findings and conclusions. The CBJ and TCI shall share equally the costs associated with the arbitration.

B. Special Qualifications of Arbitrators. CBJ and TCI agree that each arbitrator

appointed shall be a person who has not less than five (5) years commercial and/or real property leasing experience in the State of Alaska prior to his or her appointment.

C. Judicial Review of Arbitration Decision. The decision of the arbitrator or

arbitrators shall be final and unreviewable by any court, except to the extent authorized by Alaska Statutes 09.43.110, .120, and .130. If the court determines that the arbitration decision should be set aside on one of the grounds enumerated in such statutes, it may proceed to decide the merits of the matter at the insistence of either party, and neither party shall be required to submit to rearbitration of the matter.

Article XIX. Miscellaneous

Section 19.01. Notices/Addresses. Any notice which may or shall be given under the terms of this Lease shall be in writing and shall be either delivered by hand or sent by United States Registered or Certified Mail, adequate postage prepaid, if for CBJ, to City Manager, City & Borough of Juneau, 155 South Seward Street, Juneau, Alaska 99801, and, if for TCI, to 175 South Franklin Street, Juneau, Alaska 99801. Either party's address may be changed from time to time by such party by giving notice as provided above, except that the Premises may not be used by TCI as the sole notice address. No change of address of either party shall be binding on the other party until notice of such change of address is given as herein provided. A post office receipt for registration of such notice or signed return receipt shall be conclusive proof that such notice was delivered in due course of mail if mailed as provided above. For purposes of the calculation of various time periods referred to herein, notice delivered by hand shall be deemed received when delivered to the place for giving notice to a party referred to above and notice mailed in the manner provided above shall be deemed completed upon actual receipt as indicated on the signed return receipt.

Section 19.02. Acceptance of Rent. Neither acceptance of rent (or any portion thereof) or any other sums payable by TCI hereunder (or any portion thereof) by CBJ nor failure by CBJ to complain of any action, non-action or default of TCI shall constitute a waiver as to a breach of any covenant or condition of TCI contained herein nor a waiver of any of CBJ's rights hereunder. Waiver by CBJ of any right for any default of TCI shall not constitute a waiver of any right for either a prior or subsequent default of the same obligation or for any prior or subsequent default of any other obligation. No right or


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remedy of CBJ hereunder or covenant, duty or obligation of TCI hereunder shall be deemed waived by CBJ unless such waiver be in writing, signed by CBJ.

Section 19.03. Holdover.

A. Month-to-Month Rent. If TCI holds over and continues in possession of the

Premises after expiration of the term of this Lease, TCI will be deemed to be occupying the Premises on the basis of a month-to-month tenancy subject to all of the terms and conditions of this Lease.

B. Termination. The above-described tenancy from month-to-month may be

terminated at will by either party upon thirty (30) days written notice to the other.

C. Rent After Notice of Termination. Any rent or other payment due after notice of termination has been given is to be calculated according to Section 5.01 above on a pro rata basis. If upon notice of termination by CBJ, TCI tenders rent in excess of the amount due and payable and CBJ accepts such payment, the acceptance of such payment will not operate as a waiver by CBJ of the notice of termination unless such waiver is in writing and signed by CBJ. Any such excess amounts tendered and accepted shall be promptly refunded by CBJ after deducting them from any amounts owed CBJ.

Section 19.04. Use of Earth Materials and Forest Products. To the extent reasonably necessary to complete development of the Golf Course Lease Area in accordance with the approved TCI Development Plan, TCI may use earth materials (including but not limited to sand, gravel, rock, soil and peat moss) and forest products (including but not limited to trees) from the Golf Course Lease Area in construction of Improvements on the Golf Course Lease Area. TCI also may sell surplus earth materials and forest products for use off the Golf Course Lease Area in accordance with the following provisions.

A. Earth Materials. For earth materials sold for use off the Golf Course Lease Area, TCI shall pay CBJ a royalty of $2.85 per cubic yard or $1.90 per ton for gravel, and $3.75 per cubic yard or $1.50 per ton for rock. The above amounts are subject to annual adjustments pursuant to the Anchorage Consumer Price Index.

B. Forest Products. Subject to recovery of the costs of logging (including but not

limited to the costs of constructing necessary roads which may later be used for cart paths on the golf course and/or roads on land designated for residential and/or commercial development), TCI shall pay CBJ a stumpage fee for timber harvested from the Golf Course Lease Area and sold for use off the Golf Course Lease Area, such fee to be based on the fair market value of the timber as determined by a qualified timber appraiser to be mutually agreed upon by TCI and CBJ. TCI agrees to pay for the appraisal.

Section 19.06. Unavoidable Circumstances. In the event the parties are prevented by Unavoidable Circumstances from performing any obligation of this Lease, non-


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performance resulting from such Unavoidable Circumstances shall not be deemed to be a breach of this contract which will render the parties liable for damages or give rights to the termination of the Lease for default. However, if and when such Unavoidable Circumstances cease to prevent performance, the parties shall exercise all reasonable diligence to resume and complete performance of the obligation with the least possible delay.

Section 19.07. Jurisdiction; Choice of Law. Any civil action arising from this Lease shall be brought in the Superior Court for the First Judicial District of the State of Alaska at Juneau. The laws of the State of Alaska shall govern the rights and obligations of the parties.

Section 19.08. Severability. If any clause of this Lease is found to be in violation of the law, the remainder of the agreement shall remain in full force and effect, unless the unlawful portion would prevent TCI from using the Golf Course Lease Area for its intended purposes.

Section 19.09. Integration/Entire Agreement. This document with Exhibits A through E contains the entire agreement of the parties hereto. All negotiations, statements, representations, warranties, and assurances, whether oral or written, which are in any way related to the subject matter of this Lease and the performance of either party hereto, are merged and integrated into the terms of this document.

Section 19.10. Amendment. This Lease shall not be amended, changed, or modified except by written instrument signed by both parties hereto. Subject to mutual agreement, the parties reserve the right to amend this Lease as necessary to address issues not reasonably foreseeable at the time the Lease was entered into, including without limitation, delayed performance of either party occasioned by third party acts or omissions, market conditions, requirements of Governmental Authorities with jurisdiction over the Premises, and financing requirements of TCI’s Lender(s).

Section 19.11. Interpretation and Enforcement.

A. This agreement has been jointly drafted by the parties following negotiations

between them. It shall be construed according to the fair intent of the language as a whole, not for or against any party. The interpretation and enforcement of this Lease shall be governed by the laws of the State of Alaska. The titles of sections in this Lease are not to be construed as limitations or definitions but are for identification purposes only.

B. Whenever either party to this Lease has a right which matures prior to the other

party taking action, it is agreed that the exercise of such consent right shall be governed by the rules of good faith, fair dealing and reasonableness.

Section 19.12. Terminology and Miscellaneous.


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A. With respect to terminology in this Lease, each number (singular or plural) shall include all numbers, and each gender (male, female or neuter) shall include all genders.

B. The titles of the Articles in this Lease shall have no effect and shall neither limit

nor amplify the provisions of the Lease itself. This Lease shall be binding upon and shall accrue to the benefit of CBJ, its successors and assigns, TCI, its successors and assigns (or heirs, executors, administrators and assigns, as the case may be); however, this clause does not constitute a consent by CBJ to any assignment by TCI but instead refers only to those instances in which an assignment by TCI is hereafter made in strict compliance with Article XIV above, The words “hereof,” “herein,” “hereunder,” “hereinafter,” “aforementioned” and the like refer to this entire instrument, not just to the specific article, section or paragraph in which such words appear.

C. In any circumstances where CBJ is permitted to enter upon the Premises during

the Lease Term, whether for the purpose of curing any default of TCI, or is otherwise permitted hereunder or by law to go upon the Premises, provided CBJ does not unreasonably interfere with TCI's business or operations no such entry shall constitute an eviction or disturbance of TCI's use and possession of the Premises or a breach by CBJ of any of its obligations hereunder or render CBJ liable for damages for loss of business or otherwise or entitle TCI to be relieved from any of its obligations hereunder or grant TCI any right of off-set or recoupment or other remedy; and in connection with any such entry incident to performance of repairs, replacements, maintenance or construction, all of the aforesaid provisions shall be applicable notwithstanding that CBJ may elect to take building materials in, to or upon the Premises that may be required or utilized in connection with such entry by CBJ.

D. The relation created by this Lease is that of lessor and lessee. Neither the

provisions for rent nor any other provision of this Lease shall be construed in such a way as to constitute CBJ and TCI joint venturers or co-partners or to make TCI the agent of CBJ or make CBJ liable for the debts of TCI.

E. In all instances where TCI or CBJ is required hereunder to pay any sum or do any

act at a particular indicated time or within an indicated period, it is understood that time is of the essence.

F. Upon payment by TCI of the rent herein provided, and the performance of the covenants of TCI, TCI shall peacefully and quietly hold and enjoy the Premises for the term hereof without hindrance or interruption by CBJ or any other persons claiming by, through or under CBJ. CITY AND BOROUGH OF JUNEAU


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By:_________________________________ Rod Swope, City Manager TOTEM CREEK, INC. By:_________________________________ Peter Metcalfe, President

ATTEST: ___________________________________ Municipal Clerk (SEAL)

STATE OF ALASKA ) )ss. First Judicial District ) THIS IS TO CERTIFY that on the _____ day of __________, 200_, before me, the undersigned, a Notary Public in and for the State of Alaska, personally appeared Rod Swope, to me known to be the City Manager of the City and Borough of Juneau, a municipal corporation which executed the foregoing instrument, who on oath stated that he was duly authorized to execute said instrument on behalf of said corporation; who acknowledged to me that he signed the same freely and voluntarily on behalf of said corporation for the uses and purposes therein mentioned.

___________________________________

Notary Public for State of Alaska My commission expires:_______________

STATE OF ALASKA ) )ss. First Judicial District )

THIS IS TO CERTIFY that on the _____ day of _____________, 2004, before me, the undersigned, a Notary Public in and for the State of Alaska, personally


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appeared Peter Metcalfe, President of TOTEM CREEK, INC., known to me and to me known to be the individual named in and who executed the foregoing document, and he acknowledged to me that he was authorized by authority granted him in the Bylaws or by resolution of the Board of Directors of said corporation for the uses and purposes therein set forth.

WITNESS my hand and notarial seal the day and year first hereinabove

written.

___________________________________

Notary Public for State of Alaska My commission expires:_______________


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Exhibit “A” to Lease Agreement

(Legal Description)

See the attached map of the Project Study Area, and attached map of golf course as laid out in Conditional Use Permit 1997-0074.

Upon successful completion of the Contingency Term, this map shall be supplemented by an Exhibit A-1, signed by both parties, as further provided in Section 2.01A of the Lease.


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Exhibit “A 1” to Lease Agreement This Exhibit has been reserved.


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Exhibit “B” to Lease Agreement (Prior Grants and Encumbrances)

See the attached title report, “Preliminary Commitment for Title Insurance,” dated

_________________, 2004, prepared by ________________________________.


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Exhibit “C” to Lease Agreement

(TCI Development Plan) This Exhibit has been reserved. It will consist of the plan described in Section 2

of Exhibit E and will be inserted when the TCI Development Plan is approved by the City & Borough of Juneau Planning Commission.


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Exhibit “D” to Lease Agreement

(Limited Assignment for Security Purposes)

The CITY & BOROUGH OF JUNEAU (“CBJ”), whose mailing address is 155

South Seward Street, Juneau, Alaska 99801, under that certain Lease (“Lease”) dated _________________________, with TOTEM CREEK, INC. (“ASSIGNOR”), whose mailing address is _____________________, of the following real property:

hereby consents to the assignment of the Lease by ASSIGNOR to _________________________ (“ASSIGNEE”)

The purpose of this consent is to allow ASSIGNOR to secure a loan, the total

proceeds of which are to be used for leasehold development and/or operations on the property described above.

1. Possession by Assignee. ASSIGNEE may take possession of the leased

premises and vest in the interest of ASSIGNOR in the Lease upon the performance of the following conditions:

a) The payment to CBJ of any and all sums due to CBJ under the lease,

including but not limited to accrued unpaid rent.

b) The sending of a written notice to CBJ and ASSIGNOR of ASSIGNEE’s intent to take possession of the premises and assume the Lease.

c) The curing of all defaults not remediable by the payment of money within

an additional thirty (60) days of the date upon which such default was required to be cured by the TCI under the terms of the Lease.

2. No Liability of Assignee Without Possession. ASSIGNEE shall have no

liability or obligation under the Lease pursuant to this Assignment unless and until it sends to CBJ the written notice described in paragraph 1(b) above. Nothing in this Assignment nor in the taking of possession of the leased premises and assumption of the Lease by ASSIGNEE or a subsequent assignee shall relieve ASSIGNOR of any duty or liability to CBJ under the Lease.


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3. Notice of Default and Opportunity to Cure. Upon any default of any of the terms of the Lease by ASSIGNOR, CBJ, in addition to notifying ASSIGNOR (TCI) pursuant to the terms of the Lease, shall also notify ASSIGNEE of such default. Upon receipt of a written notice of default, ASSIGNEE and/or ASSIGNOR shall have 60 days, or the length of time as set forth in the Lease, whichever is longer, to cure the default. If the event of default cannot be cured by the payment of money to CBJ or a third party, the Lease will not be terminated if, ASSIGNEE and/or ASSIGNOR have promptly and diligently commenced to cure and complete the cure within 60 days of notice.

4. Notice. For purposes of the notice set forth in paragraph 3, the address for

ASSIGNEE is: ________________________________________, unless CBJ is subsequently advised in writing of a more current address.

5. No Other Change. Except as otherwise expressly stated herein, nothing in this

consent to assignment is intended to amend or alter any of the terms and conditions of the Lease or any amendments thereto previously executed by CBJ and ASSIGNOR, or any predecessor in interest to either of them, all of which terms and conditions remain in full force and effect. In the event of any conflict among any provisions of this Assignment, the Lease as amended, and any provisions of any security agreements including assignments of lease and deeds of trust, the provisions of this Assignment and the Lease as amended shall govern the rights of CBJ.

6. ASSIGNEE’s Right to Find New Operator. In the event ASSIGNEE is

required to take over and assume ASSIGNOR’s obligations under the lease, ASSIGNEE is entitled, upon receipt of written consent from CBJ, to locate a new operator for purposes of fulfilling ASSIGNOR’s obligations under the Lease until the end of the then existing lease term. Any such subsequent operator will be required to demonstrate to CBJ its experience and capability to operate the Premises as identified in the Lease, in accordance with the terms and conditions set forth therein. Proof of financial capability to fulfill the operations contemplated by the Lease will also be considered in determining whether to consent to any such subsequent operator.

CITY& BOROUGH OF JUNEAU By:________________________ City Manager Rod Swope Date: 2004 ASSIGNOR

By:_________________________________ Peter Metcalfe, President

Date: 2004


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Exhibit “E” to Lease Agreement (Contingency, Development and Construction Requirements)

Pursuant to Section 7.02 of the Lease, the following terms shall be in effect from the Commencement Date until TCI shall have completed the Work specified in the TCI Development Plan.

1. Contingency Term

"Contingency Term" means the remainder of the calendar year following the Commencement Date plus the five (5) full years thereafter (or when TCI meets its obligation to obtain financing for the golf course and to submit a Development Plan, whichever occurs first) which comprises the time period during which TCI must obtain financing for construction of the golf course. The Contingency Term is to be devoted toward: (i) the “Testing and Planning Period,” (ii) the obtaining of financing, and (iii) TCI's preparation and submission to CBJ of the completed TCI Development Plan as described below. A. Prior to entry on the Premises for purposes of conducting activities during the

Testing and Planning Period, TCI shall submit a plan of operation, including time line and schedule, for the Testing and Planning Period for approval by CBJ.

B. During the Testing and Planning Period, TCI, its agents, employees and

independent contractors shall have the right to enter upon the Premises to inspect the Premises, to conduct tests, assessments, or studies; to conduct and obtain surveys and/or to conduct construction studies with regard to the design of Improvements for the permitted uses under the terms of this Lease and to determine whether the Premises are satisfactory to TCI for the development of Improvements as contemplated by the proposed TCI Development Plan. It is anticipated that TCI’s tests, assessments, or studies whether based on new or historic evidence will cover the following characteristics and environmental aspects of the Premises:

• Climatic conditions (solar aspect, prevailing winds, rainfall and

other pertinent data). • Water availability (potential surface and subsurface water sources

for irrigation and other project uses). • Vegetative cover (type/location of plant material and sensitive or

high qualify areas). • Scenic views. • Existing roads/access points and easements. • Location of utilities (nearest location of power, water and sewer).

TCI shall furnish to CBJ copies, at no cost to CBJ, of the results of any and all of its soil and water tests, assessments, or studies and/or analyses at or before


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the expiration of the Testing and Planning Period. If, during the Testing and Planning Period, TCI determines that the Premises are not appropriate for TCI's use due to the results of the soil and water tests or studies and/or assessments, TCI may terminate this Lease by causing written notice of such termination to be delivered to CBJ on or before the expiration of the Contingency Term. Along with such notice of termination, TCI shall deliver to CBJ a copy of the results of any and all soil and water tests and studies and/or assessment(s).

CBJ shall keep all materials relating to soils and water analysis, geological studies, and the physical condition of the Project Study Area confidential to the extent it is able to do so under applicable law and shall not reveal any such materials to third parties, except as required to do so by applicable law during and after the Lease Term.

CBJ agrees that it will share all information it has, including survey data, covering the Project Study Area. This material will be made available during the Contingency Term to assist TCI in the preparation of its TCI Development Plan.

C. TCI shall timely furnish to CBJ, at no cost to CBJ, copies of all site plans,

concept development plans, applications for plat approval, applications for zoning approval, applications for site development permits, soil and water reports, geological studies, environmental studies and/or assessment(s) and other documentation developed by or for TCI having to do with the physical condition of the Premises and/or Governmental Authority approvals and consents required for the development of the Golf Course Lease Area.

D. Notwithstanding any expense which has been incurred by either CBJ or TCI

and notwithstanding any actions which either party may have entered into in reliance upon the existence of this Lease or the obligations of the other party hereunder, in the event that either TCI or CBJ should elect to terminate this Lease in the manner provided above, then this Lease shall be of no further force and effect except for those rights or obligations which accrued prior to the effective date of termination.

Any modification of the property description of the Project Study Area, the Golf Course Lease Area and/or the Residential Land shall be described in one or more new surveys and the approved TCI Development Plan provided by TCI to CBJ, at TCI’s sole cost and expense. Legal descriptions consistent with any such new surveys shall be designated sequentially as Exhibits “A-__” to this Lease. The TCI Development Plan shall be designated Exhibit “C” to this Lease. All such legal descriptions and the TCI Development Plan will be signed by both parties.


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2. TCI Development Plan

Submission of Plan. Within the Contingency Term, TCI shall submit, for the approval by CBJ, a TCI Development Plan. TCI's initial submission of the TCI Development Plan may be limited to the Golf Course Lease Area. To the extent commercially reasonable and consistent with sound golf course design and construction standards for golf courses in Alaska, the TCI Development Plan for the Golf Course Lease Area shall as much as possible incorporate USGA Design and Construction Standards, and provide a detailed schematic and narrative representation of the planned use and development of the Golf Course Lease Area in accord with the Lease, including a site plan which will show the specific location, through graphic representation, of contemplated construction work and other Improvements, including buildings, access and service roads, parking, utility line locations, water sources and storage, equipment and maintenance storage, wetland alteration areas, floodplain development, pedestrian trails, bridges, golf course routing plans, landscaping, lighting and any other areas within the Golf Course Lease Area where Improvements would be constructed and/or the natural vegetation would be disturbed. All uses proposed in the TCI Development Plan shall be Approved Uses. If a contemplated use or activity is not presently allowed, the TCI Development Plan shall specify the process and timeframe to be used by the TCI to obtain such approvals. At a minimum, the following Improvements shall be addressed in the TCI Development Plan for the Golf Course Golf Course Lease Area:

a) 18-hole public resort golf course b) multi-use clubhouse (including public restrooms) c) golf driving range d) golf practice putting green e) parking area f) golf-related equipment/storage facilities g) snack bar h) golf cart paths i) pro shop, including sales and rental of golf equipment and apparel j) maintenance building

The TCI Development Plan for the Golf Course Lease Area shall also include the following specific components:

A. GOLF COURSE: The plan shall graphically depict the entire 18-hole golf

course and driving range/practice putting green, including transects of elevation at least two- (2-) foot elevation intervals; slope; proposed wetland and floodplain alterations; revetments, dikes and other stream bank protection measures; bridges; and the amount and location of all natural vegetation disturbance. The routing plan shall also specify the total par for the course


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and for each hole. In addition, the location of each tee, fairway, green, water and sand hazard area, cart path and other proposed Improvement must be identified.

B. CLUBHOUSE FACILITY DESIGN: The plan shall include, at a minimum,

the locations and approximate footprints of the clubhouse and other facilities, including the maintenance and storage facilities, landscaped areas, restrooms, waste and sanitary facilities, and parking areas. Should TCI decide to build a temporary clubhouse initially, it may include the location and approximate footprint of the temporary clubhouse in the plan or in a supplement thereto, along with the anticipated date for construction of a permanent clubhouse. If required by CBJ’s ordinances and regulations governing construction of improvements in the borough, the plans for any such improvement will be submitted to CBJ for approval and CBJ’s approval of those plans is a pre-condition to commencing construction of that improvement.

C. GOLF COURSE CONSTRUCTION METHODS AND PRACTICES: The

plan shall include a description of the construction methods to be use for golf course construction, including erosion control measures, the number and type of contractors proposed for the golf course construction and the estimated cost of construction.

D. WILDLIFE AND HABITAT MANAGEMENT: Wildlife and habitat on the

Golf Course Lease Area shall be managed as provided in TCI's approved Wildlife and Habitat Management Plan.

E. ACCESS ANALYSIS: The plan shall identify all access routes, including

roadway alignment, width, grade and associated engineering specifications. F. LANDSCAPING PLAN: The plan shall identify the type and location of all

landscaping proposed and required on the Golf Course Land and may include buffering and density mitigation for the Residential Land.

G. FERTILIZER, HERBICIDE AND PESTICIDE MANAGEMENT: Fertilizers,

herbicides, and pesticides shall be managed as provided in TCI's approved Integrated Pest Management Plan.

H. SCHEDULE OF PERFORMANCE: A development schedule for the

progressive development of the Golf Course Land and Improvements shall be prepared. The schedule shall detail the specific time frame anticipated for each of the major tasks required for development of that land.

I. RESIDENTIAL DEVELOPMENT PLAN: TCI shall prepare the TCI

Residential Development Plan for all or part of the Residential Land in conjunction with obtaining the CBJ conditional use permit for developing that


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land TCI shall be required to obtain CBJ Planning Commission approval of the Residential Development Plan.

3. Proof of Financial Capability. Upon receipt of all approvals as required herein

above, and no less than thirty (30) days before construction commences, TCI shall provide to CBJ an enforceable letter of commitment from an Lender evidencing the Lender’s willingness to provide the financing necessary for completion of the golf course and Improvements contemplated by this Lease and/or other proof of TCI’s ability to provide the necessary financing to complete the terms and conditions of this Lease. At a minimum, this letter or other proof shall include evidence of the immediate availability of a payment and performance bond to build the golf course in an amount equal to TCI’s estimated construction cost (at least $6.0 million dollars) or other proof of TCI’s financial capability to complete construction of all improvements on the Golf Course Lease Area, the acceptability of such financial capability to be determined by CBJ based on reasonable commercial evaluation methods. Failure to provide evidence of financial ability to complete all construction contemplated hereunder shall be deemed default under Section 14.01 of the Lease.

4. Failure to Perform. Subject to the notice and cure provisions of the Lease, TCI’s failure to meet the following performance benchmarks from the commencement of the Contingency Period through the first five (5) Lease Years, shall be deemed a failure to perform and default allowing CBJ to terminate the Lease in accordance with the provisions of Article XIV:

A. Failure to pay rent.

B. Failure to comply with all provisions set forth in the Contingency Term, as

described above.

5. Extension Bank. TCI shall be entitled to unilaterally extend any milestone set forth in the TCI Development Plan for up to one (1) full year (twelve (12) months), thereby extending performance compliance and a prospective default declaration. Once invoked, all milestone deadlines will slip by the amount of time used by TCI. To extend any milestone under this provision, TCI must notify CBJ, in writing, of (1) the intended exercise of the extension prior to its effective date; and (2) the reasons TCI needs the extension.

6. Golf Course. Until completion of the golf course, TCI will maintain valid contracts or agreements (1) with a Project Manager or Managers for the construction of the golf course, and (2) with a golf course architect when necessary to complete golf course design and construction. TCI shall furnish a copy of said contract or agreement to the CBJ and notify CBJ, in writing not less than thirty (30) days prior to any contract or agreement being assigned, amended, modified, terminated, or canceled for any reason by either party. A lapse in such


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a contract shall not be considered a default under the Lease if it is the result of a need to change either the Project Manager or the golf course architect.

7. Original Construction Work

Conditions to Original Construction. All construction, alteration or renovation of Improvements shall conform to the TCI Development Plan. TCI shall submit to CBJ for review all plans and specifications for substantial construction, alteration or renovation (excluding construction of repairs and renovations of Improvements already in place which do not materially alter the exterior appearance of the Improvements and are intended to continue the Improvements in a useful state of operation or to conform the Improvements with uses required by any subcontractors approved by CBJ). Construction, alteration or renovation may not begin until CBJ has approved, or CBJ has been deemed to have approved, the plans and specifications. CBJ’s review of plans and specifications is for the purpose of determining compliance with any applicable zoning ordinance, applicable land use plans, and this Lease, and for no other purpose. By reviewing such plans and specifications, CBJ does not assume any liability for any defect in Improvements constructed by TCI or a permitted subcontractor. CBJ's consent to a request for construction approval shall not be unreasonably withheld or delayed. CBJ shall be deemed to have approved TCI's plans and specifications if CBJ has not responded to TCI's written request for construction approval within thirty (30) days after submission of plans and specifications by TCI. All Work shall be performed in a good and workmanlike manner and shall comply in all material respects with the plans and specifications approved by CBJ. TCI shall obtain and maintain at all times during construction of the structural portions of Improvements, payment and performance bonds acceptable to CBJ as providing reasonable commercial security for performance of the obligations undertaken.

8. Surrender of Premises. Upon termination of the Lease, TCI will surrender and deliver up the Golf Course Lease Area to CBJ with any Improvements constructed thereon by TCI, being in the same condition in which they existed upon completion of construction thereof, excepting only ordinary wear and tear and except for removal of Removable Trade Fixtures and excepting also damage by fire or other casualty or condemnation damage to the extent TCI is not hereunder required to repair such fire or other casualty damage.

9. Easements. CBJ and TCI acknowledge and agree that each may require certain ingress and egress and utility easements in connection with TCI's development of the Land and CBJ’s possible development of other adjacent property In such regard, TCI acknowledges that some or all of such easements may only be granted by CBJ or the State of Alaska. CBJ agrees to assist TCI in obtaining such easements as are necessary for development of the Land; provided, however, CBJ may reserve the right to use and access any easement property in connection with the development of CBJ's adjacent property and for North Douglas Highway Extension as stated in Section 2.02 of the Lease. In addition, TCI agrees to assist


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and grant to CBJ easements, to the extent CBJ has a need for easements which involve the Land, provided that any such easement does not affect TCI’s quiet enjoyment of the Land nor otherwise affect or impact the operations thereon. Subject to the foregoing, CBJ and TCI acknowledge and agree that CBJ may designate or grant rights-of-way and utility easements across leased Land without compensation, providing that TCI shall be compensated for the taking or destruction of any Improvements To the extent that any easements are required by CBJ or TCI, after the approval of the TCI Development Plan, then either party seeking such easement right shall be required to comply with all laws governing the obtaining of the easement.

10. Development of Residential Land. All development of Residential Land for commercial and/or residential uses must comply with all applicable state or municipal building codes at the time of the development.

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