AN ORDINANCE relating to Sand Point; authorizing the Director of the Office of Management & Planning to enter into a sublease with the Seattle School District No. 1 for the renovation and use and occupancy of certain buildings at the Naval Station Puget Sound at Sand Point.

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. The Director of the Office of Management and Planning is hereby authorized to execute and deliver, on behalf of The City of Seattle, a sublease with Seattle School District No. 1 substantially in the form of the agreement attached hereto and identified as Exhibit "A", for the renovation of buildings 9, 18 and 47 at the Naval Station Puget Sound, and their subsequent use and occupancy.

Section 2. The Director of the Office of Management & Planning is further authorized to execute on behalf of the City a memorandum of sublease to be filed in the Office of the King County Recorder indicating that said sublease is available for viewing at the Office of the City Clerk of the City of Seattle.

Section 3. Any act consistent with and prior to the effective date of this ordinance is hereby ratified and confirmed.

Section 4. This ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by Municipal Code Section 1.04.020.

Passed by the City Council the day of , 1996, and signed by me in open session in authentication of its passage this

day of , 1996.

President of the City Council

Approved by me this day of , 1996.

Mayor

Filed by me this day of , 1996.

City Clerk

(SEAL)

HH/ks January 10, 1997 111538.DOC (Ver. )

SUBLEASE AND ACCESS AGREEMENT Between The City Of Seattle and Seattle School District No. 1

1. DEFINITIONS. 2. PREMISES. 3. USE/PURPOSE. 4. TERM. 5. EFFECTUATION OF AGREEMENT. 6. POSSESSION AND OCCUPANCY. 7. RENT. 8. TAXES, UTILITIES AND SERVICES. 9. CONDITION OF THE PREMISES. 10. MAINTENANCE AND REPAIR SERVICES. 11. ACCESS. 12. INSTALLATIONS, ALTERATIONS, AND REMOVALS. 13. RENOVATION AND CONSTRUCTION WORK. 14. HISTORIC PRESERVATION. 15. COOPERATION WITH SAND POINT COMMITTEE. 16. RULES AND REGULATIONS; CODE OF CONDUCT. 17. ENVIRONMENTAL PROTECTION. 18. DAMAGE OR DESTRUCTION. 19. MANAGEMENT AND OPERATION. 20. COMPLIANCE WITH LAW. 21. ACQUISITION OF FEE TITLE BY CITY. 22. LIENS. 23. LEGAL LIABILITY. 24. INSURANCE AND BONDS. 25. DEFAULT AND TERMINATION. 26. SUBJECTION TO EXISTING AND FUTURE EASEMENTS AND RIGHTS OF WAY. 27. RIGHTS RESERVED BY CITY. 28. RELINQUISHMENT OF CLAIM. 29. SUBLEASES AND ASSIGNMENTS. 30. SURRENDER. 31. CITY'S CONSENT OR APPROVAL. 32. RELATIONSHIP. 33. AMENDMENTS. 34. NO WAIVER OF DEFAULT. 35. BINDING EFFECT. 36. NEGOTIATED AGREEMENT. 37. NOTICE. 38. CAPTIONS. 39. INVALIDITY OF PROVISIONS. 40. APPLICABLE LAW. 41. AGREEMENT CONTENTS.

SUBLEASE AND ACCESS AGREEMENT Between The City Of Seattle and Seattle School District No. 1

This sublease is made this __ day of ____________, 1996, by and between the City of Seattle, a municipal corporation of the State of Washington ("City"), acting through its Director of the Office of Management and Planning ("Director"), and the Seattle School District No. 1, a municipal corporation of the State of Washington ("District").

RECITALS

WHEREAS, the United States Navy identified the Naval Station Puget Sound at Sand Point for closure in 1991, and requested that the City sponsor a local re-use planning effort to determine how said property should be re-used; and

WHEREAS, the Seattle City Council adopted the Community Preferred Re-use Plan for Sand Point in November of 1993, which contemplates transfer of the property to the City, the National Oceanographic and Atmospheric Administration and the United States Biological Service; and

WHEREAS, the City is in the process of applying to the United States government to secure title to certain of the Naval Station Puget Sound properties; and

WHEREAS, the District is qualified and willing to sublease, rehabilitate and improve a portion of the premises within the Naval Station Puget Sound properties to provide a temporary location for the educational and administrative activities of Ballard High School while said school is being remodeled; and

WHEREAS, the City and District recognize that the utility and other infrastructure elements serving the Naval Station Puget Sound properties require upgrading and the District agrees to contribute to the costs of such upgrades; and

WHEREAS, the City and the District recognize that the District's use of the premises must be coordinated with other uses of the Naval Station Puget Sound properties and must comply with the terms and conditions of the Master Lease between the City and the United States Navy; and

WHEREAS, the City and the District also recognize that if the subleased portions of the Naval Station Puget Sound properties are transferred to the City during the term of this sublease, the District's use of the premises must comply with any deed restrictions or other legal requirements imposed by the United States pursuant to such transfer.

NOW, THEREFORE, in consideration of the terms, covenants, and conditions hereinafter set forth, the City and the District as hereby agree as follows:

DEFINITIONS.

The following capitalized terms used in this sublease shall have the following meanings unless the context otherwise requires:

"Access Property" means the real property to be used by the District for ingress and egress to the Buildings.

"Approved Costs" means the actual costs paid by the District for renovations to Buildings 9, 18 and 47, as described in Exhibit C of this sublease, and approved in advance, in writing, by the City, according to the process identified in Exhibit C.

"Codes" include all land use, building, housing, fire, electrical, mechanical, plumbing and other codes applicable under City ordinances or State law, and all interpretations thereof issued by the agencies responsible for the administration thereof.

"Committee" is defined in section _______.

"Hazardous Substance" means any hazardous, toxic, or dangerous waste, substance or material, including petroleum products, or any containment, pollutant or chemical defined or identified in any environmental regulation as posing a potential risk to human health or the environment.

"Infrastructure Upgrades" means improvements to the water, sewer and electrical systems on the portion of the Naval Station Puget Sound controlled by the City as described in Exhibit D of this sublease.

"Management Costs" means all costs incurred by the City, or by such other entity as may be designated by the City, to perform overall management functions, including grounds maintenance, for the portion of the Naval Station Puget Sound controlled by the City, and to pay any property insurance and/or security services procured or provided by the City.

"Master Lease" means the lease of a portion of the Naval Station Puget Sound between the United States of America and The City of Seattle, dated July 5, 1996.

"Personal Property" means all personal property on the Premises at inception of this sublease; and all replacements or substitutions therefor.

"Premises" means the buildings, Access Property and parking described in section ___.

"Renovation" means the rehabilitation and modification of the buildings subject to this sublease as described in Exhibit C hereto.

"Site Improvements" means improvements made by the City to the portion of the Naval Station Puget Sound controlled by it, including streets, sidewalks, landscaping, signs and lighting, as described in Exhibit E of this sublease

PREMISES.

Subject to the terms and conditions set forth herein and in the Master Lease, a copy of which is attached hereto as Exhibit B, incorporated herein by reference, and to which this sublease is expressly subject, the City subleases to the District the buildings depicted as numbers 9, 18 and 47 on the attached Exhibit A ("the Buildings"), and located upon that property legally described as follows:

(insert legal description)

Accessory to the sublease of the above-described Buildings and coextensive with its duration, the City grants the District the unrestricted right to use for purposes of ingress and egress to and from the demised Buildings, the Access Property depicted (how depicted?) on Exhibit A.

In addition, for the duration of this sublease, the District shall have the right to use three hundred twenty (320) parking spaces located generally in the areas depicted (how?) on Exhibit A. Said spaces shall be reserved for Ballard High School during the hours of 6 a.m. through 5 p.m., Monday through Friday, and for occasional evening events at the High School. In addition, the District shall have the right to use up to fifty of the spaces depicted on Exhibit A after hours and on weekends for students and staff. The specific location of the three hundred twenty parking spaces reserved for the District shall be determined by the City.

USE/PURPOSE.

In the absence of prior written approval by the City and the United States, the Buildings shall be used exclusively as a temporary location for Ballard High School, including the administrative functions associated therewith. The City shall have the right to terminate this sublease by written notice to the District if the Premises cease to be used for the purposes identified in this section.

TERM.

This sublease shall commence upon satisfaction of the conditions precedent set forth in Article __, and shall terminate October 1, 1999, unless sooner terminated as provided herein, or unless converted into a lease in accordance with Article 21. In addition, this sublease shall terminate immediately upon termination of the Master Lease.[HH1]

EFFECTUATION OF AGREEMENT.

This sublease shall not become effective until all of the following conditions have been satisfied:

(a) the United States Department of the Navy has approved this sublease in writing, as required under paragraph 27 of the Master Lease;

(b) the City or District have completed all necessary and appropriate environmental review in connection with the Ballard High School use of the Naval Station Puget Sound at Sand Point.

(c) the sublease has been signed by an authorized representative of the District and returned to the Director at the address set forth below, accompanied by the required policies of insurance; and

(d) the sublease has been signed by the Director pursuant to ordinance authority.

The City shall notify the District in writing when all conditions precedent have been satisfied. Such notice shall expressly state the Effective Date of this sublease.

POSSESSION AND OCCUPANCY.

Upon the Effective Date of this sublease, the District shall have possession of the Premises subject to the rights reserved by the City herein; provided that no Building shall be occupied until a Certificate of Occupancy has been obtained by the District and the Director has approved such occupancy. The Director's approval shall not be unreasonably withheld or delayed. [HH2]

RENT.

Rental Equivalent: In lieu of rent, the District shall pay the City on the dates set forth below the following amounts for Infrastructure Upgrades and Site Improvements (which Infrastructure Upgrades and Site Improvements shall be installed by the City according to the Schedule set forth on Exhibits D and E to this sublease) :

For Building 9:

1997 $ 75,505

1998: 151,010

1999: 90,609

In lieu of these payments, the District may pay the City a lump sum payment on January 15, 1998 of $________.

For Buildings 18 and 47:

1997: $ 65,000

1998 68,000

1999: 65,000

In lieu of these payments, the District may pay the City a lump sum payment of $________ on January 15, 1998.

Time and Manner of Payment: The rental equivalent shall be due and payable by the District to the City on the Effective Date of this sublease for 1997, and on February 1 of each subsequent year of the sublease. All payments shall be by check or money order, be made payable to the City, and shall be sent in care of the Director at the address shown in Article ___.

Interest on Late Payments: Fees and charges shall be delinquent if not paid within thirty (30) days after the date due; delinquent fees and charges shall bear interest at a rate of eighteen percent (18%) per annum from the date due to the date paid.

No Prepayment Penalty: The District shall have the right to prepay all or any portion of the rental equivalent.

TAXES, UTILITIES AND SERVICES.

Taxes: The District shall pay, before delinquency, all taxes, levies, and assessments that may arise from its activities on or occupancy of the Premises, including, but not limited to taxes arising out of the activity or business conducted on the Premises such as the rental or sale of goods or services; taxes levied on its property, equipment, and improvements on the Premises; and taxes on the District's interest under this sublease and any leasehold interest deemed to have been created thereby under Ch. 82.29A RCW.

Utility Charges: The District, at its sole expense, shall install meters for water, sewer, electricity, and gas (if available) and other utilities, as necessary, and shall pay before delinquency, all costs for utilities and other services provided on or to the Premises, including but not limited to, elevator service, electricity, gas, water, telephone, sewer, garbage, heating, janitorial, security, and litter removal. In the event the District requires additional utility installations and/or modifications of existing installations within or in the immediate area of any of the Buildings, including new connections to water or sewer mains required in connection with the construction, rehabilitation, modification or use thereof as contemplated by this sublease, such installation and/or modification shall be paid for solely by the District.

No Charges for Service to Other Property. Nothing contained herein shall require the District to pay any gas, electrical, water, sewer or any other charge for utility service furnished to those portions of the Naval Station Puget Sound controlled by the City and not subject to this sublease.[HH3]

The District's Right To Contest. The District shall have the right to contest or review by legal proceedings or in such other manner as may be legal, any tax, assessment, utility charge or other governmental imposition and to pay such items under protest; provided, that nothing in this section shall be construed to restrain the exercise of any remedy by any City utility for nonpayment, and provided further that notwithstanding any protest or challenge the District shall timely pay such amounts as are necessary to avoid interruption in service, including any interruption that would occur from application of the normal policy or procedure of any City utility.

CONDITION OF THE PREMISES.

The City warrants that, as of the date of the commencement of the term of this sublease, all facilities and property comprising the Premises are in all material respects in the condition identified in that certain Joint Inspection Report as defined in Article 7 of the Master Lease. . [HH4]

The District acknowledges that the Buildings may not be fit for occupancy for the purposes intended, or in some cases for any purpose, without substantial rehabilitation and modifications. The District further acknowledges that the Buildings may not be in compliance with applicable Codes and may not satisfy standards of various potential funding sources for operation thereof. The District agrees that the City has no obligation to cause any of the Buildings to comply with any such Codes or standards, and that if the District fails to bring any of the Buildings into compliance, the District and its sublessees will not be permitted to use or occupy such Building or Buildings for the purposes intended. The District and City acknowledge that this section has been specifically bargained for and that City would not be willing to sublease the Buildings or grant access to the Premises on the terms and conditions set forth herein without the District's agreement to the terms of this section.

MAINTENANCE AND REPAIR SERVICES.

Maintenance: Except as set forth below, the District shall keep the Premises, including all related Personal Property contained therein, at all times and at no expense to the City, in good repair and in a neat, clean, safe and sanitary condition, and shall use and maintain the Premises in accordance with the laws of the State of Washington, the Charter and ordinances of the City of Seattle, and all applicable Codes, rules and regulations of the Health Officer, Fire Marshal, Director of Construction and Land Use and other appropriate officers of The City of Seattle. In addition, the District shall comply at its sole cost and expense with the maintenance obligations of the City imposed under paragraph 11 of the Master Lease, "Protection and Maintenance," except that the District need not provide ground maintenance, pest and weed control or fire protection, as set forth in said paragraph 11. The District shall not cause or permit any waste, damage, or injury to the Premises; use or permit on the Premises anything that will increase the rate of fire insurance thereon; maintain anything on the Premises that may be dangerous to life or limb; overload the floors; permit any objectionable noise or odor to escape or to be emitted from said Premises; or permit anything to be done upon said Premises that in any way will tend to create a nuisance. Notwithstanding the foregoing, the District's maintenance obligations as described in this Article 10 shall not extend to the South wing of Building 9. The City expressly acknowledges that the District has no obligation whatsoever with respect to maintenance or repair of the South wing of Building 9.

City's Maintenance Obligations: During the term of this sublease, the City shall have no obligation to undertake any repairs, maintenance, or work of any kind except as expressly set forth in this sublease. However, the City reserves an unqualified right to make repairs or alterations to the Buildings at any time (a) where conditions deemed by the Director to constitute an emergency exist, (b) in order to correct deficiencies in compliance with any applicable law, regulation or Code, or (c) in order to comply with the Master Lease. In the event the need for any such repair or alteration is reasonably determined by the Director to have been occasioned by the activities of the District or by any person for whose conduct the District is responsible, or is otherwise an obligation of the District under this sublease, the District shall reimburse the City on demand for all costs reasonably incurred in connection with such repairs or alterations.

Books and Records: The District shall keep adequate records and books of account showing costs to it of all items of labor, material, equipment, supplies, services, and other items of cost of any nature constituting an item of actual cost incurred by it directly in the performance of any item of work or service in the nature of repair, restoration, protection and maintenance of the Premises. The District shall provide the City with access to such records and books of account and proper facilities for inspection thereof at all reasonable times.

Contracting for Maintenance and Repairs: The District shall ensure that all contracts and subcontracts for any alterations, maintenance, repairs, and construction activities (including contracts for related professional services) shall be made, entered into, and performed in full compliance with all federal, state and local laws, regulations, ordinances, and the terms of this sublease and the Master Lease (collectively, "requirements"), whether such contracts are let or made by the District or by a sublessee of the District or other person. The District shall ensure, under all such contracts and subcontracts, that work shall be performed by licensed and qualified contractors, and that wages and benefits shall be paid in compliance with all applicable requirements.

Signs: The District shall not display, inscribe, paint or affix to any part of the Premises without the prior written approval of the Director. All proposed signs shall comply with the historic preservation obligations contained in paragraph 10 of the Master Lease.

Keys: Any change in locks shall be at the sole expense of the District. If a lock change is made to the exterior door of any Building, the District shall provide the Director with two (2) keys for each lock changed immediately after such change has been completed.

Personal Property: All personal property located on the Premises at the commencement of this sublease shall be maintained and repaired by the District at no cost to the City.

ACCESS.

The City reserves for itself, its officers, employees, agents and contractors, free access to the Premises, including the Buildings thereon, at all reasonable times for purpose of inspecting, cleaning, or making repairs, additions or alterations to the Premises or any other property owned by or under the control of the City, but this right shall not be construed as an agreement on the part of the City to make inspections, clean or make repairs, additions or alterations.

INSTALLATIONS, ALTERATIONS, AND REMOVALS.

Minor Installations and Improvements: During the term of this sublease, the District shall have the right, at its own expense and without the prior written consent of the Director, to install such of its own machinery and equipment, to make such minor improvements and additions, and to attach such removable fixtures in or upon the Premises as may be necessary to conduct its permitted operations, and to remove same at any time prior to the expiration or termination hereof. "Minor Installations and Improvements" shall be defined as ordinary repairs and any non-structural alteration of any portion of the Premises that, together with all other items of the same nature during the calendar year, cost less than $5,000.00, and emergency repairs immediately necessary for the usual and customary usage of the Premises.

Major Alterations: Except as provided in Article ___ of this sublease, the District shall not make, or cause to be made, any substantial alteration, addition or improvement to the Premises without first obtaining the written consent of both the Director and the United States Navy as required pursuant to paragraph 17 of the Master Lease. After approval by the United States Navy, the Director's approval of alterations, additions or improvements shall not be unreasonably withheld; provided that before undertaking any such alteration, addition or improvement, the District shall demonstrate to the satisfaction of the Director the availability of sufficient financial resources to complete such proposed alterations, additions or improvements. All alterations, additions and improvements made shall be at the sole cost and expense of the District, and unless otherwise agreed in writing by the Director, shall remain in and be surrendered with the Premises as a part thereof at the expiration or termination of this sublease, without disturbance, molestation or injury.

RENOVATION AND CONSTRUCTION WORK.[HH5]

Renovation of Buildings: The District covenants and agrees to rehabilitate Buildings 9, 18 and 47 and to obtain all necessary licenses and permits therefor, at its sole expense and consistent with the construction documents attached hereto as Exhibit C (the "Renovation") so that the Buildings shall be suitable for use for the purposes described in Article __. Prior to the start of the Renovation, the District shall obtain the approval of the United States government as required by paragraph 17 of the Master Lease.

Compliance with Codes and Guidelines: All plans and specifications for the Renovation and all actions of the District in connection therewith shall comply with all federal, state and local laws, Codes, regulations, ordinances and permits, and with the plans and guidelines referred to in Article __, to the extent adopted.

Insurance and Bonds During Renovation: Throughout the period of the Renovation the District shall ensure that the insurance and bonds required by the Master Lease and as set forth in Article __ of this sublease are maintained in full force and effect, at no cost to the City.

Reimbursement of District Renovation Costs for Building 9: On January 1, 1998, or upon the date the City obtains fee title to Building 9, whichever occurs later, the City, in its sole discretion, shall either:

(a) agree to pay to the District an amount equal to fifty-seven (57%) percent of the Approved Costs for the Renovation of Building 9, as described in Exhibit C, to a maximum of $2,700,000.00; or

(b) offer the District a fifty (50) year lease of Building 9 for use exclusively as District administrative offices (educational support); or

(c) support the District in applying to the United States Department of Education for direct ownership of Building 9 for use exclusively as District administrative offices (educational support).

If the City selects option (a), it shall elect, in its sole discretion, to either pay the District the total amount due on July 1, 1999, or to make five (5) annual payments to the District such that the aggregate payment of principal and interest in each year is equal (level debt service). Interest shall be the rate per annum specified for five year obligations on June 1, 1999, by the yield curve scale represented by Index "98" of the Delphis Hanover Corporation Daily Range of Yield Curve Scales (the "Index"); provided, that if the Index ceases to exists, then the interest rate shall be based on a comparable yield curve scale within a comparable index of yield curve scales. In the event the City elects to pay in annual installments, the first installment shall be due and payable on July 1, 1999.

If the City selects options (b) or (c), the District shall pay the City the maximum sum of $3,352,515.00 (if the District's pro rata share of the cost of these upgrades and improvements is less than this amount, the District shall pay its pro rata share) as payment for additional Infrastructure Upgrades and Site Improvements which benefit Building 9 as identified in Exhibits D and E. Such amount shall be paid in nineteen annual installments with the first installment of $90,609.00 due February 1, 1999. For the subsequent 18 years, the District shall pay the City on February 1 of each such year the sum of $181,217.00. The District shall have the right to prepay the principal amount due under this option on or before January 1, 1999, at the discounted sum of $1,881,486.00, less any previously paid rental equivalent.

Reimbursement of District Renovation Costs for Buildings 18 and 47: Contingent upon the District's completion of the Renovations to Buildings 18 and 47 to the satisfaction of the City on or before the Completion Date and transfer of fee title to said Buildings to the City, the City shall reimburse the District for fifty-six (56%) percent of the Approved Costs for the Renovation of said Buildings described in Exhibit C, to a maximum of $750,000.00. On or before February 1, 1999, the City shall elect, in its sole discretion, (a) to pay the District the total amount due on July 1, 1999, or thirty (30) days after the Completion Date, whichever is later; or (b) to make five (5) annual payments to the District, the first installment of which shall be due on July 1, 1999, such that the aggregate payment of principal and interest in each year is equal (level debt service). Interest shall be calculated in accordance with the Index described in section 13.4, above. Delinquent payments shall bear interest at a rate of eighteen percent (18%) per annum from the date due to the date paid.

HISTORIC PRESERVATION.

In undertaking any installation, alteration, modification, repair, renovation or any other work on or to the Premises, the District shall comply with all applicable and lawful laws, regulations and ordinances concerning historic preservation including paragraph 10 of the Master Lease. It shall be the sole responsibility of the District to make timely application for, and to obtain, any and all applicable and lawful permits and approvals related to historic preservation in connection with the Renovation and any proposed aesthetic, structural or landscape alterations to the Premises.

COOPERATION WITH SAND POINT COMMITTEE.

Formation of Sand Point Committee: The District acknowledges and agrees that the City will establish a committee, to include representatives of owners, tenants and users of other portions of the Sand Point Property, as well as representatives of the City and neighborhood interests, to coordinate activities on the Sand Point Property and community involvement therein (the "Committee"). The District shall be entitled to representation on the Committee and shall participate and cooperate in good faith in the processes established by the Committee, including without limitation, the development of a Sand Point Property parking plan. The District shall keep the Committee informed of proposed activities on the Premises, including without limitation any changes in uses, any construction or rehabilitation activities, changes in sublessees, changes in landscaping, and any changes in rules, policies or procedures that might reasonably affect or concern the tenants or users of other portions of the Sand Point Property or residents in the area.

Adoption of Plans: Subject to the express terms of this sublease and to federal, state and local laws and regulations, the District shall comply, and cause its sublessees to comply, with the terms of the following plans for the Sand Point Property from and after the date when such plans have been approved by the City, so long as compliance with such plans does not materially interfere with the District's use of the Premises: Construction Management Plan; Transportation Plan; Parking Plan, Site Design Guidelines; Historic Resources Plan; and any amendments to any of the foregoing that shall be approved by the City.

RULES AND REGULATIONS; CODE OF CONDUCT.

The District agrees to observe, and to cause its sublessees and other persons allowed on the Premises to observe, such reasonable rules and regulations governing the Premises as the City may promulgate from time to time, so long as compliance with such rules and regulations does not materially interfere with the District's use of the Premises or the administration of Ballard High School.

ENVIRONMENTAL PROTECTION.

The District hereby assumes and agrees to perform all obligations of the City set forth in paragraphs 12 and 13 of the Master Lease with regard to the Premises, as if such obligations were set forth herein in full.

DAMAGE OR DESTRUCTION.

In the event that the Premises (a) are damaged by fire, earthquake, act of war, or other extraordinary casualty to such an extent as to render them untenantable in whole or in substantial part; or (b) are destroyed, the City shall not be obligated to rebuild the Premises nor to compensate the District for any loss occasioned thereby. The District will not be liable for any loss, damage, or destruction of the Premises, except loss, damage, or destruction caused directly by the waste, or willful negligent action of the District, or failure of the District to perform its obligations under this sublease (and, in any event, the District shall not be liable for any loss, damage, or destruction of the South wing of Building 9).

MANAGEMENT AND OPERATION.

Management and Operating Plan: The District shall at all times operate the Premises in compliance with a Management and Operating Plan ("MOP") approved by the Director. The District shall submit a draft MOP to the Director and Committee for review no later than January 1, 1997. The MOP shall contain the elements described in the attached Exhibit __. The District shall make such additions and modifications to the MOP as the Director shall request within 21 days of receipt of such draft, and shall submit its final MOP no later than February 28, 1997. Nothing in the MOP shall modify any of the terms of this sublease, and in the case of conflict, this sublease shall be controlling.

Annual Update to MOP: The District shall prepare an update to its MOP covering the intended operations on the Premises for the 1998-99 school year, for submittal to the Director and the Committee for review and comment no later than March 1, 1998. The District shall make such additions and modifications to the annual update as the Director shall request within 21 days, and shall submit a final MOP update acceptable to the Director no later than April 15 , 1998.

Security: The District shall provide or cause to be provided all security services it deems appropriate for the security and safety of all students, invitees and licensees to the Premises. [HH6]

COMPLIANCE WITH LAW.

General Requirement: This sublease shall be construed under and governed by, and the District, at its sole cost and expense, shall comply with, all applicable laws of the United States of America, the State of Washington and the Charter and ordinances of The City of Seattle, as well as all Codes, rules and regulations of any such governmental entity including environmental, occupational safety and health, and coastal requirements.

Licenses and Similar Authorizations: The District, at no expense to the City, shall secure and maintain in full force and effect during the term of this sublease, any and all necessary licenses, permits, regulatory approvals and similar legal authorizations required for the operation, use and development of the Premises, from all relevant authorities, including without limitation any permits from the City's Department of Construction and Land Use, and shall comply with all reasonable and lawful requirements thereof. Nothing herein shall be construed as assurance that any such approvals will be granted or that the City, as the City, will grant consents, approvals or modifications hereunder for the purpose of compliance with the conditions of any permit, approval, license or funding agreement sought or obtained by the District.

Equal Employment Opportunity and Nondiscrimination: The District shall comply with all applicable equal employment opportunity and nondiscrimination laws of the United States, the State of Washington, and The City of Seattle, including the Seattle Municipal Code ("SMC"), notably SMC Ch. 20.44, and rules, regulations, orders, and directives of the associated administrative agencies and their officers.[HH7]

Women's & Minority Business Enterprise Utilization: The terms and conditions of this sublease shall be administered by the District consistent with the District's policies regarding women's and minority business enterprises.

Lead-Based Paint: The District shall comply with all requirements of applicable laws and regulations with regard to use and disposal of lead-based paint. Without limiting the foregoing, the District shall comply with all provisions contained in 24 CFR Part 35, including regulations promulgated at 61 Federal Register 9063 et seq., with regard to disclosure of information concerning lead-based paint.

ACQUISITION OF FEE TITLE BY CITY.

In the event the City acquires fee title to any portion of the Premises during the Term of this sublease, the sublease shall, without the necessity for further action by the parties, be converted into a lease and shall continue in full force and effect. The District agrees that such lease shall be subject to and that it will comply with, any and all deed or other restrictions which may be imposed by the United States in connection with such conveyance.

LIENS.

If, because of any act or omission of the District or any its sublessees, any mechanic or other lien or order for payment of money shall be filed against the Premises or the improvements, the District shall at its sole expense cause the same to be discharged or bonded within thirty (30) days after the date of such filing.

LEGAL LIABILITY.

Indemnification: The District hereby assumes the indemnification and hold harmless obligations of the City to the United States under paragraph 18 of the Master Lease. In addition, the District shall indemnify and hold the City harmless from any and all losses, claims, actions, damages and expenses arising or that may arise in the future out of or resulting from the District's use or occupancy of the Premises. In the event that any suit based upon such losses, claims, actions, damages, or expenses is brought against the City, the District, upon notice of the commencement thereof, shall defend the same at the District's sole cost and expense (provided that the City shall have the right to appear in and defend any such action by its own counsel); and if final judgment be adverse to the City, or the City and the District jointly, or if the City shall enter into a reasonable settlement of any such claim or action, the District shall promptly satisfy the same.

The liability described in this section shall not be diminished by the fact, if it be a fact, that any such loss, claim, action, damage or expense may have been contributed to, or may be alleged to have been contributed to, in part, by an act or omission of the City, its officers, employees or agents; provided that to the extent that RCW 4.24.115 (or successor provision) applies, (1) this indemnity shall not apply in case of any liability for damages arising out of bodily injury to persons or damage to property caused or resulting from the sole negligence of the City, its agents or employees, and (2) in case of liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the concurrent negligence of (a) City or its agents or employees, and (b) the District or its agents or employees, this indemnity shall apply only to the extent of the District's negligence.

Solely with respect to claims for indemnification under this sublease, the District waives its immunity under Title 51 RCW. This section has been negotiated by the parties as indicated by their initials below, and the District acknowledges that the City would not enter into this sublease absent this section. the District shall insure that the provisions of this Section are incorporated in any sublease and are binding on the sublessee for the benefit of the City.

the City:______ the District:______

Contractor's Indemnification: The District shall ensure that every contract executed by it pertaining to the Renovation or any other work on or improvement to the Premises shall contain the following indemnification provision:

The contractor agrees to protect, defend, indemnify, and hold harmless the City and the City's officials, employees, and agents from and against all claims, demands, and causes of action (including all costs and fees for defense thereof), judgments and/or awards of damage arising from or in connection with the performance of this agreement by the contractor or from the activities of any subcontractor or other person or entity employed by or having a contract with the contractor:

a) Arising out of bodily injury or death to persons or damage to property, except this obligation shall not apply when such injury or damage is solely and entirely the fault of the City, or when such injury or damage results from the concurrent negligence of the City and the contractor, in which case the contractor shall protect, defend, indemnify and hold the City harmless to the extent of the contractor's negligence.

b) Arising out of other than bodily injury or death to persons or damage to property, except this obligation shall not apply when such injury or damage is solely and entirely the fault of the City.

c) Arising from the use of any design, process, or equipment which constitutes, or is alleged to constitute, an infringement of any United States patent presently issued, or violates any other proprietary interest, including copyright, trademark, or trade secret.

Contractor shall also hold the City harmless from any expense incurred to enforce the City's rights under this section.

In the event that any action is brought against the City by any employee of contractor, its subcontractors, sub-subcontractors, agents, or anyone directly or indirectly employed by any of them the indemnification obligation of the contractor set forth in this section shall not be limited by a limit on the amount or type of damages, compensation, or benefits payable by or for contractor or any subcontractor under RCW Title 51, the Industrial Insurance Act, or any other employee benefit acts. In addition, as to actions arising out of the performance of this agreement, contractor waives its immunity under RCW Title 51.

This indemnification agreement has been negotiated by the parties and shall survive the termination of this agreement.

Any liability of the District hereunder for acts or omissions occurring during the term of this sublease, or arising under any indemnity provision of this sublease, shall survive termination and surrender (whether or not any claim giving rise to such liability shall have accrued).[HH8]

Flammable/Hazardous Substances:[HH9] The District understands and agrees that flammable or Hazardous Substances, including explosives, petroleum products, paint, solvents, and resins, are not allowed on the Premises without the express written permission of the City. In the event written permission to store the preceding materials is granted by the City, disposal of such materials shall be in a legal manner by the District.

Prior to initiating any process requiring the use or storage of, or generating, on or adjacent to the leased premises, Hazardous Substances, the District covenants and agrees to obtain the City's prior approval. The City may consider approving the specific use, but only after the District demonstrates to the satisfaction of the City that District has all necessary permits for operation and a Hazardous Substances emergency response plan.

The District agrees to cooperate in any environmental audits conducted by the City's staff or independent third parties. The District agrees to provide the City with notice of every governmental inspection of the leased premises, notice of violation, and order to clean up contamination, within five (5) days after receipt thereof by the District. The District agrees to permit the City to participate in all settlement or abatement discussions. In the event the District fails to take remedial measures as stated in any final administrative or judicial order to decrees signed by a state, federal, or local regulatory agency within 90 days of such order or decree, the City may elect to perform such work, and the District covenants and agrees to reimburse the City for all direct and indirect costs associated by the City's work.

City will indemnify, defendant and hold District harmless from any claims, demands, penalties, fees, liens, damages, losses, expenses or liability (including the cost of cleanup and reasonable professional fees, including fees of Tenant's counsel) incurred y Tenant as a result of any hazardous substance contamination that exists on the property at the commencement date of this sublease. Landlord will not be responsible for any cost Commencement Date. The indemnity and other duties provided for in this section will survive the expiration or sooner termination of this Lease.

Tenant will hold harmless, protect, indemnify and defend Landlord from and against any claims, demands, penalties, fees, liens, damages, losses, expenses or liabilities (including the cost of cleanup and reasonable professional fees, including fees of Landlord's counsel) incurred by Landlord as a result of hazardous substances first introduced on the Property after the commencement date of this sublease, to the extent not caused by any negligent act or omission of Landlord. The indemnity and other duties provided for in this section will survive the expiration or sooner termination of this Lease, and will apply notwithstanding any approval, knowledge, acquiescence, or notice of Landlord of any activity of the Tenant on the Property.

The District's duties under this paragraph shall not apply to the extent the suit, claim, damages or costs result solely from hazardous substances released prior to the beginning of the sublease term. To the extent the suit, claim, damages or costs arise from hazardous substances released in part prior to the sublease term and in part after the beginning of the sublease term, then (1) the District's duty to defend shall apply, and (2) the District shall indemnify the City for the District's proportionate share. The District's "proportionate share," for purposes of the preceding sentence, shall be the percentage of damages or costs that are attributable to releases of hazardous substances after the commencement of the sublease.

The District further agrees to retain any and all liabilities arising from the off-site disposal, handling, treatment, storage, or transportation of any Hazardous Substances, including petroleum products, removed from the Premises. The District's obligations and liabilities under this section shall survive the expiration of this sublease.

Assumption of Risk: The placement and storage of personal property on the Premises shall be the responsibility, and at the sole risk, of the District.

INSURANCE AND BONDS.

The District shall comply and shall ensure that each of its contractors complies with the insurance requirements set forth in paragraph 5 of the Master Lease.

The City and the District waive all subrogation rights against each other, any sublessees, contractor, subcontractors, architects, and architects' sub-consultants, if any, for damages caused by fire or other perils to the extent covered by property insurance obtained pursuant to this section or other property insurance applicable to the Renovation or any new construction upon the Premises, except such rights as they have to proceeds of such insurance held by any person as fiduciary. This waiver of subrogation shall be effective to a person or entity even though that person or entity would otherwise have a duty of indemnification, contractual or otherwise, whether or not the person or entity paid the insurance premium directly or indirectly, and whether or not the person or entity had an insurable interest in the property damaged.

Self-Insurance: Should the District or any of its contractors be self-insured for general or automobile liability, the District shall submit a letter from the District's or contractor's corporate risk manager or appropriate financial officer stating if actuarially funded and if so, the fund limits.

DEFAULT AND TERMINATION.[HH10]

Default; Cure Periods, Termination: In the event the City is notified by the United States of its intent to terminate the Master Lease in accordance with subparagraph 6.a. of thereof, the City shall give a copy of such notice to the District at the address shown below within 48 hours of the City's receipt thereof, and the District shall be bound by and shall comply with all obligations of the City contained in the notice and in the Master Lease, and this sublease shall terminate on the date set forth in such notice. In addition, the District's failure to comply with any term or provision of this sublease shall be a default, and if such default shall continue, after notice from the City specifically identifying the nature of the default, for a period of thirty (30) days, or such longer period as

(i) may be specified by another applicable Section of this sublease, or

(ii) may be reasonably required to cure the default, if the District commences cure within said thirty day period and covenants to diligently complete same within a total period of 120 days,

then the City shall have the right, at the City's option, to terminate this sublease or any extension of it, as well as all right, title and interest of the District thereunder by giving the District at least ninety (90) days notice in writing of said termination. Upon the expiration of the date and time fixed in the notice of termination, all right, title and interest of the District under this sublease, and unless otherwise directed by the City all rights of the Districts, shall wholly cease and expire. The District shall then immediately surrender to the City the Premises and all improvements and Personal Property, as more fully set forth in Article __.

Partial Termination: The City may, in its sole discretion, exercise its rights of termination under this Article as to one or more Buildings rather than as to the entire Premises. In such case the sublease shall remain in full force and effect with respect to all portions of the Premises except those Parcels expressly designated by the City in the notice of termination.

Remedies Cumulative: The remedies under this Article __ are in addition to, and not in limitation of, any other remedies provided in this sublease.

SUBJECTION TO EXISTING AND FUTURE EASEMENTS AND RIGHTS OF WAY.

This sublease is subject to all outstanding easements and rights of way identified on Exhibit A of the Master Lease for location of any type of facility over, across, in and upon the Premises, or any portion thereof, and to the right of the Untied States and of the City to grant such additional easements and rights of way over, across, in and upon the Premises as they shall determine to be in the public interest; provided, that any such additional easement or right of way shall be conditioned on the assumption by the grantee thereof of liability to the District for such damages as the District shall suffer for property destroyed or property rendered unusable on account of the grantee's exercise of its rights thereunder. There is hereby reserved to the holders of such easements and rights of way as are presently outstanding or which may hereafter be granted, to any workers officially engaged in the construction, installation, maintenance, operation, repair, or replacement of facilities located thereon pursuant to the terms of such easements, and to any Federal State or local official engaged in the official inspection thereof, such reasonable rights of ingress and egress over the Premises as shall be necessary for the performance of their duties with regard to such facilities.

RIGHTS RESERVED BY CITY.[HH11]

The City reserves the right to enter into the Buildings and, with reasonable advance notice to the District, and to use any portion of the Premises for any purpose not inconsistent with the use and operation of the Premises by the District, including without limitation the rights:

(a) To construct, install, maintain, use, and/or modify -across, under and over the Premises -streets, roads, sidewalks, bicycle paths, utility lines and poles, and facilities of all kinds related to any of the foregoing.

(b) To install, maintain, remove, or modify any and all landscaping, trees, shrubs, signs, fences, and accessory structures of any kind.

THE RIGHTS RESERVED HEREUNDER MAY BE TRANSFERRED BY THE CITY WHOLLY OR IN PART TO ANY PRIVATE OR PUBLIC PARTIES, WHETHER OR NOT IN CONNECTION WITH THE TRANSFER OF A FEE INTEREST IN THE PREMISES OR ANY PART THEREOF, AND SHALL BE EXERCISED IN SUCH MANNER AS DOES NOT UNREASONABLY INTERFERE WITH THE DISTRICT'S ACCESS TO AND USE OF THE BUILDINGS ON THE PREMISES.

SUBLEASES AND ASSIGNMENTS.

The District shall not enter into any sublease of the Premises or any portion thereof or any assignment of any interest in this sublease, whether longor short-term in nature, without the written consent of the Director and of the United States, consistent with paragraph 26 of the Master Lease.

SURRENDER.

Upon the expiration of this sublease or its prior termination, the District shall surrender the Premises, including all improvements, alterations, changes and additions thereto, in good repair, good order and in a clean and safe condition. If so requested by the City, the District shall convey to the City by special warranty deed all improvements, subject only to such encumbrances and subleases as shall have been specifically approved in writing by the City and the United States. On or before such date the District shall deliver to the City (a) all keys to any structures, fixtures or Personal Property on the Premises; (b) all plans, blueprints, surveys, diagrams, subleases, contracts and documents relating to the Premises or the improvements; and (c) all security deposits, prepaid rent and any other deposits from sublessees still in possession (but nothing herein shall be construed as the City's consent to any such continued possession), and the balances in reserve accounts maintained for the Premises or improvements pursuant to any grant agreement, loan documents, or other financing or subsidy arrangements for the Premises or any improvements. The District, on or before said termination date, shall remove from the Premises all of the District's personal property other than Personal Property as defined in Article 1 hereof. All property not removed by the District shall be deemed to have been abandoned by the District and may be appropriated, sold, stored, destroyed or otherwise disposed of by the City without notice to the District and without obligation to account therefor. If the sublease shall be terminated as to a portion of the Premises then this section shall apply to such portion and all improvements thereon, together with all related Personal Property.

CITY'S CONSENT OR APPROVAL.

Whenever the City's consent or approval in writing to any act to be performed by the District is required under the sublease, (a) the District must obtain a consent or approval in writing expressly for purposes of this sublease, regardless of whether a consent or approval shall have been granted by the City in its regulatory, public utility, or other capacity; and (b) unless otherwise expressly stated herein, such consent or approval may be withheld in the City's sole and absolute discretion.

No permission, consent, or approval of the City contained herein or given pursuant to this sublease is, or shall be construed as, a representation or assurance that the matter consented to or approved complies with applicable laws, regulations, ordinances or Codes, nor shall any such consent or approval be construed to authorize any failure to comply with any of the foregoing.

RELATIONSHIP.

In no event shall the City be construed or held to have become in any way or for any purpose a partner, associate, or joint venturer of the District or any party associated with the District in the conduct of the District's business or otherwise. This sublease does not make the District the agent or legal representative of the City for any purpose whatsoever.

AMENDMENTS.

The parties hereto expressly reserve the right to renegotiate and change the provisions of this sublease from time to time as may be necessary. No alteration or modification of the terms or conditions of this sublease shall be valid and binding unless made in writing and signed by the authorized representatives of the parties hereto.

NO WAIVER OF DEFAULT.

The City does not waive full compliance with the terms and conditions of this sublease by acceptance of rent. No waiver of default by either party of any of the terms, covenants, and conditions hereof to be performed, kept and observed by the other party shall be construed as, or operate as, a waiver of any subsequent default of any of the terms, covenants and conditions of this sublease to be performed, kept and observed by the other party.

BINDING EFFECT.

This sublease shall be binding upon the successors and assigns of the parties hereto.

NEGOTIATED AGREEMENT.

The parties to this sublease acknowledge that it is a negotiated agreement, that they have had the opportunity to have this sublease reviewed by their respective legal counsel, and that the terms and conditions of this sublease are not to be construed against any party on the basis of such party's draftsmanship thereof.

NOTICE.

Any notice to be given by either party to the other shall be in writing and shall be hand-delivered to the respective parties at the addresses below, or deposited in the United States mail, postage prepaid, addressed as follows:

If to the City:

If to the District:

Notices shall be deemed to have been received by the parties three (3) days after mailing or upon actual delivery, whichever first occurs. The parties, by notice given, may designate any further or different addresses to which subsequent notices or other communications shall be sent.

CAPTIONS.

The headings of the various Articles and Sections of this sublease are for convenience only and shall not in any manner be construed as modifying, amending or affecting in any way the express terms and provisions herein.

INVALIDITY OF PROVISIONS.

Should any term, provision, condition or other portion of this sublease be held to be inoperative, invalid, or void, the same shall not affect any other term, provision, condition or other portion of this sublease, and the remainder of this sublease shall be effective as if such term, provision, condition, or portion were not a part hereof.

APPLICABLE LAW.

This sublease shall be governed by and construed in accordance with the laws of the State of Washington. Venue for any legal action under the sublease shall be King County Superior Court.

AGREEMENT CONTENTS.

This sublease, including all exhibits hereto, embodies the entire agreement and understanding between the parties with respect to the sublease of the Premises and supersedes all other understandings or agreements, written or oral, between the parties relating to the subject matter of this sublease.

Signed:

THE CITY OF SEATTLE THE SEATTLE SCHOOL DISTRICT

By: By:

Signature Signature

Norman B. Rice Print Name:____________________

Superintendent of the Seattle Schools , Mayor of The City of Seattle

Date: Date:

CITY ACKNOWLEDGMENT

STATE OF WASHINGTON )

)ss.

COUNTY OF KING )

On this _____ day of _________________, 19___, before me, the undersigned, a Notary Public in and for the State of Washington, duly commissioned and sworn, personally appeared NORMAN B. RICE, to me known to be the Mayor of the City of Seattle, the municipal corporation that executed the within and foregoing instrument, and acknowledged the said instrument to be the free and voluntary act and deed of said municipal corporation, for the uses and purposes therein mentioned, and on oath stated that she was authorized to execute the said instrument.

WITNESS my hand and official seal hereto affixed the day and year in this certificate above written.

________________________________________

NOTARY PUBLIC in and for the State

of Washington, residing at __________________

My commission expires: ____________________

Print Name: ______________________________

CORPORATE ACKNOWLEDGMENT

STATE OF WASHINGTON )

)ss.

COUNTY OF KING )

I certify that I know or have satisfactory evidence that ________________________ is the person who appeared before me, and said person acknowledged that he/she signed this instrument, on oath stated that he/she was authorized to execute the instrument and acknowledged it as the _______________________________ of the Seattle School District, to be the free and voluntary act and deed of such party for the uses and purposes mentioned in the instrument.

Date: ________________ _______________________________________

NOTARY PUBLIC in and for the State

of Washington, residing at _________________

My commission expires: ___________________

Print Name: _____________________________

Approved as required by paragraph 26 of the Master Lease.

THE UNITED STATES OF AMERICA

Department of the Navy

Commanding Officer (Code 09P)

Engineering Field Activity, Northwest

Naval Facilities Engineering Command

19917 7th Avenue NE

Poulsbo, WA 98370-7570

By:_______________________________

signature

JAMES F. BRYANT

Head, Planning and

Real Estate Department

Real Estate Contracting Officer

Date:______________________________

List of Exhibits:

A. Diagram of Sand Point Property

B. Master Lease

C. Construction Documents for Renovation of buildings 9, 18 and 47

D. Schedule for Renovation

E. Elements of Management and Operating Plan

F. Lead-based Paint Disclosure Document

EXHIBIT E

ELEMENTS OF MANAGEMENT AND OPERATING PLAN

The Management and Operating Plan must address the following:

Identification of key management/staff positions, including descriptions of job responsibilities.

Identification of a single contact person for City and Navy contacts.

Identification of a single contact person for community contacts.

Description of a Building Maintenance Plan.

Description of a Litter Removal Plan.

Description of a Security Plan.

Description of an Emergency Plan.

Hours of Operation and After-Hours Site Access Policy.

Parking Plan.

Description of ongoing community education and involvement strategy, including action to be taken to address complaints or issues raised by neighbors regarding the District's use or management of the site.

Code of Conduct.