AN ORDINANCE relating to the Lake Union Park Armory; authorizing the Superintendent of Parks and Recreation to enter into a development agreement and lease to allow the Museum of History and Industry to redevelop and use the Lake Union Armory Building for a new regional history museum.

WHEREAS, since 1914, the Historical Society of Seattle and King County, a Washington nonprofit corporation doing business as the Museum of History and Industry ("MOHAI"), has been collecting, preserving and presenting the history of the Pacific Northwest, and its exhibits and programs generate broad public appreciation for our region's diverse cultural, social and economic history; and

WHEREAS, MOHAI has grown to become the largest private heritage organization in the State of Washington, attracting to its facility more than 60,000 visitors annually from the Northwest and beyond; and

WHEREAS, MOHAI and the City have had a successful relationship since 1948 when MOHAI constructed and then donated to the City the first phase of its facility at McCurdy Park in the Montlake neighborhood (the "Montlake Location), establishing a pattern that would be followed in each of four successive expansions of its museum, curatorial, educational and administrative facilities at the Montlake Location; and

WHEREAS, MOHAI has since successfully operated its museum and related facilities in the Montlake Location; however, MOHAI began to explore other options for its facilities based on concerns about the long-term viability of the Montlake Location as MOHAI's permanent home, particularly given its location adjacent to SR 520 and the increasing likelihood that eventual expansion of SR 520 would require MOHAI's relocation; and

WHEREAS, in pursuit of a new permanent home, MOHAI in 2003 purchased a commercial condominium unit within the expanded Washington State Convention and Trade Center (the "WSCTC Property") in downtown Seattle for the purpose of constructing and operating a new regional history museum at that location; and

WHEREAS, the City provided funds toward the purchase of MOHAI's WSCTC Property and, under a series of agreements between the City and MOHAI, acquired a restrictive covenant on and an easement for the use of the WSCTC Property for public museum purposes; and

WHEREAS, with the City's acquisition of the former U.S. Naval Reserve Armory (the "Armory Building") at South Lake Union; its subsequent investment in basic restoration of the Armory Building structure; the construction of the City's new Lake Union Park; and the continuing redevelopment of the South Lake Union neighborhood, the City Department of Parks and Recreation invited MOHAI to engage with it in evaluating establishment of the new MOHAI regional history museum in the Armory Building rather than at MOHAI's WSCTC Property; and

WHEREAS, maritime heritage is one of the strengths of MOHAI's collection and MOHAI enjoys a meaningful and collaborative relationship with several maritime heritage organizations, many of which already are resident at South Lake Union; and

WHEREAS, after preliminary due diligence, the MOHAI Board of Trustees resolved that it favored the concept of establishing its primary public venue at the Armory Building in lieu of developing the WSCTC Property; and

WHEREAS, the Washington State Convention and Trade Center (the "WSCTC") independently determined that it would prefer to acquire MOHAI's WSCTC Property for its own expansion purposes and offered to do so; and

WHEREAS, due diligence on the Armory Building option for a new regional history museum was sufficiently encouraging to MOHAI that MOHAI determined to sell the WSCTC Property to the WSCTC; and

WHEREAS, the City concurred that the Armory Building project showed sufficient promise that it agreed, through Ordinance Number 122471, to release its restrictions and security interest in the WSCTC Property to facilitate its sale to the WSCTC, on condition that MOHAI reserve One Million Dollars ($1,000,000) plus accrued interest from its sale proceeds for capital costs associated with the development of a new MOHAI museum to be located elsewhere within the city; and

WHEREAS, through Resolutions 30917, 31011 and 31092, the City Council encouraged the Department of Parks and Recreation to pursue the MOHAI project at the Armory Building, developed a framework for jointly determining the feasibility of developing the Armory Building into MOHAI's new regional history museum, and subsequently established principles to inform the negotiation of project agreements; and

WHEREAS, MOHAI, in consultation with the United States Navy's Real Estate Contracting Officer, has confirmed that MOHAI's proposed use of the Armory Building is consistent with deed restrictions designed to protect the building's historic character and ensure that it remained in public use; and

WHEREAS, MOHAI's redevelopment of the Armory Building and its anticipated collaboration with other maritime heritage organizations to form a Maritime Heritage Partnership at Lake Union Park will create a unique heritage experience at the park for the benefit of a broad cross section of the public and will symbolize and reinforce the ongoing revitalization of the South Lake Union neighborhood; and

WHEREAS, MOHAI is presently investigating the feasibility of obtaining historic rehabilitation tax credit financing for the rehabilitation of the Armory Building, which financing would require that ownership of the Armory Building be conveyed, and the underlying land leased, to a forprofit entity that MOHAI would create and control; and

WHEREAS, ownership of the Armory Building would revert to the City at the termination of the ground lease; and

WHEREAS, the City and MOHAI have determined that various documents, including a project development agreement addressing the funding, design, and construction of the project and a long-term lease of the site to be occupied by MOHAI's museum are necessary and appropriate for memorializing the relationship between the City and MOHAI for undertaking the Armory Building museum project; NOW, THEREFORE,

BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:

Section 1. The Superintendent or his designee is authorized to execute a development agreement, substantially in the form of Attachment 1 hereto, that will allow MOHAI to renovate the Armory Building for museum purposes.

Section 2. If MOHAI has received the approval of the National Parks Service for the proposed renovation of the Armory Building, a firm commitment from a tax credit investor to utilize the Historic Rehabilitation Tax Credits, and has determined that it will utilize Historic Rehabilitation Tax Credits to finance a portion of the project, then the Superintendent is further authorized to execute and record a quitclaim deed for the Armory Building substantially in the form of Exhibit B to Attachment 1, that will convey ownership of the Armory Building to MOHAI or its for-profit affiliate on the condition that it be used solely for museum and museum-related purposes, together with a lease of the underlying real property substantially in the form of Attachment 2 hereto. If MOHAI elects not to utilize Historic Rehabilitation Tax Credits to finance the construction of the project, then the Superintendent is authorized to execute and record a lease of the Armory Building to MOHAI substantially in the form of Attachment 3 hereto.

Section 3. The Superintendent, or his designee, is further authorized and directed, for and on behalf of the City, to make technical, conforming or otherwise nonmaterial changes to the Agreement, and to execute, deliver, record, administer and perform such ancillary agreements or documents or to take such other actions as in their judgment may be necessary, appropriate or desirable in order to carry out the terms and provisions of, and complete the transactions contemplated by, this ordinance.

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 _________, 2009, and signed by me in open session in authentication of its passage this _____ day of __________, 2009.

_________________________________

President __________of the City Council

Approved by me this ____ day of _________, 2009.

_________________________________

Gregory J. Nickels, Mayor

Filed by me this ____ day of _________, 2009.

____________________________________

City Clerk

(Seal)

Version #3a

Attachment 1: PROJECT DEVELOPMENT AGREEMENT BY AND BETWEEN THE CITY OF SEATTLE, A WASHINGTON MUNICIPAL CORPORATION AND HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, A WASHINGTON NONPROFIT CORPORATION.

Exhibits to Attachment 1:

Exhibit A June, 2009 Design Development Documents

Exhibit B Form of Quit Claim Deed

Exhibit C Form of Joinder Agreement

Exhibit D Project Timeline

Exhibit E Capital Budget

Exhibit F City Improvements to Lake Union Park

Exhibit G Agreement Regarding Assignment of Acquisition/Condemnation Proceeds

Exhibit H Fundraising Plan

Exhibit I Montlake Exterior Artifacts

Attachment 2: GROUND LEASE FOR THE ARMORY BUILDING SITE BY AND BETWEEN CITY OF SEATTLE, A WASHINGTON MUNICIPAL CORPORATION,

AS LANDLORD, ________________________, A WASHINGTON _________________,

AS GROUND TENANT AND HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, A WASHINGTON NONPROFIT CORPORATION, AS MOHAI.

Exhibits to Attachment 2:

Exhibit A Legal Description and Depiction of Premises

Exhibit B Legal Description of Portions of Lake Union Park

Exhibit C Depiction of Easements

Exhibit D Depiction of Public Use Area

Exhibit E MOHAI Public Benefits

Attachment 3: ALTERNATE GROUND LEASE FOR THE ARMORY BUILDING SITE BY AND BETWEEN CITY OF SEATTLE, A WASHINGTON MUNICIPAL CORPORATION,

AS LANDLORD, ________________________, A WASHINGTON _________________,

AS GROUND TENANT AND HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, A WASHINGTON NONPROFIT CORPORATION, AS MOHAI.

Exhibits to Attachment 3:

Exhibit A Legal Description and Depiction of Premises

Exhibit B Legal Description of Portions of Lake Union Park

Exhibit C Depiction of Easements

Exhibit D Depiction of Public Use Area

Exhibit E MOHAI Public Benefits

DRAFT

ATTACHMENT 1:

PROJECT DEVELOPMENT AGREEMENT

BY AND BETWEEN

THE CITY OF SEATTLE,

A WASHINGTON MUNICIPAL CORPORATION

AND

HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY,

A WASHINGTON NONPROFIT CORPORATION,

DATED: ____________, 2009

TABLE OF CONTENTS

Page

ARTICLE 1 Recitals 1

ARTICLE 2 Effective Date; Incorporation of Documents and Materials; Definitions 1

Section 2.1 Effective Date 1

Section 2.2 Incorporation of Documents and Materials 1

Section 2.3 Definitions 1

ARTICLE 3 General Provisions 3

Section 3.1 Scope 3

Section 3.2 Basic Relationship of Development Agreement Parties 3

Section 3.3 Schedule 4

Section 3.4 Parking Planning 5

ARTICLE 4 Capital Budget and Funding 5

Section 4.1 Capital Budget 5

Section 4.2 City Direct Funding and Other City-Related Support 5

Section 4.3 MOHAI Funding 6

ARTICLE 5 Project Design and Construction 7

Section 5.1 Construction Management 7

Section 5.2 Requirements for Construction 7

Section 5.3 Required General Public Amenities 8

Section 5.4 Design Review and Approval; Consistent Capital Budget 8

Section 5.5 Project Commencement Actions Timeline; Notice to Proceed 9

Section 5.6 Project Management and Coordination 11

Section 5.7 MOHAI Cost Overruns Responsibility and Risk Management 13

Section 5.8 Changes During Construction 14

Section 5.9 Building Pile System 15

ARTICLE 6 Maritime Heritage Group and Related Matters 16

Section 6.1 Maritime Heritage Group; City Responsibilities 16

Section 6.2 MOHAI Participation 16

Section 6.3 Wawona Preservation Memorandum of Agreement 16

ARTICLE 7 Indemnification and Dispute Resolution 17

Section 7.1 Indemnification 17

Section 7.2 Limitation of Indemnification Obligation 17

Section 7.3 Waiver of Indemnity; Indemnities Negotiated 18

Section 7.4 Dispute Resolution 18

ARTICLE 8 Miscellaneous 19

Section 8.1 Amendments 19

Section 8.2 Authority 19

Section 8.3 Binding Effect; No Assignment 19

Section 8.4 Consents and Approvals 19

Section 8.5 Construction 19

Section 8.6 Counterparts 20

Section 8.7 Cumulative Remedies 20

Section 8.8 Force Majeure 20

Section 8.9 Governing Law; Venue 20

Section 8.10 Integration 20

Section 8.11 Limitation on Third Party Rights 20

Section 8.12 No Partnership 20

Section 8.13 No Waiver 20

Section 8.14 Notices 21

Section 8.15 Severability 22

Section 8.16 Termination of Agreement 22

Section 8.17 Time of Essence 22

Exhibit A June, 2009 Design Development Documents

Exhibit B Form of Quit Claim Deed

Exhibit C Joinder Agreement

Exhibit D Project Timeline

Exhibit E Capital Budget

Exhibit F City Improvements to Lake Union Park

Exhibit G Agreement Regarding Assignment of Acquisition/Condemnation Proceeds

Exhibit H Fundraising Plan

THIS PROJECT DEVELOPMENT AGREEMENT ("Agreement") is dated as of _______________, 2009 and is by and between THE CITY OF SEATTLE (the "City"), a first class city organized under the laws of the State of Washington, and THE HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation doing business as the Museum of History and Industry ("MOHAI").

ARTICLE 1

Recitals

The following facts and circumstances form the background of this Agreement:

1. In satisfaction of the requirements of Council Resolution Number 31011, the City Council, on September 29, 2008, adopted Resolution Number 31092 that approved specific principles to be reflected in binding agreements between the City and MOHAI providing for the development and operation of MOHAI's new regional history museum at the Armory Building in Lake Union Park.

2. The City and MOHAI have determined that several agreements are necessary and appropriate for memorializing the relationship between the City and MOHAI for undertaking the Armory Building museum project, specifically including but not limited to a Project Development Agreement addressing the funding, design and construction of the Project, and a long-term lease of the Armory Building or the Armory Building site, as applicable.

ARTICLE 2

Effective Date; Incorporation of Documents and Materials; Definitions

Section 2.1 Effective Date. This Agreement will be effective upon the date when both of the following conditions are satisfied: (a) the City Council has authorized this Agreement; and (b) this Agreement is executed by authorized representatives of the City and MOHAI.

Section 2.2 Incorporation of Documents and Materials. The following documents and materials are attached as exhibits to this Agreement and by this reference are incorporated into this Agreement:

Exhibit A: June, 2009 Design Development Documents

Exhibit B: Form of Quit Claim Deed

Exhibit C: Form of Joinder Agreement

Exhibit D: Project Timeline

Exhibit E: Capital Budget

Exhibit F: City Improvements to Lake Union Park

Exhibit G: Agreement Regarding Assignment of Acquisition/Condemnation Proceeds

Exhibit H: Fundraising Plan

Section 2.3 Definitions. The following terms shall have the respective meanings set forth below for all purposes of this Agreement.

(a) "Armory Building" means the former Naval Reserve Armory located in Lake Union Park.

(b) "Building Pile System" means the pile system providing support for the Armory Building.

(c) "Development Agreement Parties" means the City and MOHAI.

(d) "Finance Director" means the Finance Director of the City of Seattle or his functional successor.

(e) "Lease" means the Lease for the Armory Building at Lake Union Park by and between the City, as landlord, and MOHAI or, if the Armory Building has been conveyed to the Tax Credit Entity and a Joinder Agreement executed as required under Section 3.2.3, the Ground Lease for the Armory Building site at Lake Union Park by and between the City, as landlord, MOHAI and the Tax Credit Entity.

(f) "Maritime Heritage Group" (also known as the Maritime Heritage Partnership) means that group of maritime heritage organizations including MOHAI as well as other maritime heritage organizations such as the Center for Wooden Boats, Northwest Seaport and the Virginia V Foundation, organized and managed by the City to collaborate on cultural, educational and recreational maritime-related activities at South Lake Union.

(g) "MOHAI" means the Historical Society of Seattle and King County doing business as the Museum of History and Industry. If the Armory Building has been conveyed to the Tax Credit Entity and a Joinder Agreement executed as required under Section 3.2.3, "MOHAI" means MOHAI or the Tax Credit Entity, as applicable.

(h) "Museum" means an integrated, publicly accessible regional history museum with exhibits and programs devoted primarily to the history, culture, industry, commerce and maritime heritage of the Puget Sound region and the Pacific Northwest, including related space for meeting and educational functions, book store/gift shop and cafe.

(i) "Notice to Proceed" means the notice provided by MOHAI to the Project general contractor to commence construction upon satisfaction of the requirements of Section 5.5.

(j) "Parking Plan" means the plan developed by the Superintendent under Section 3.4.

(k) "Parks Department" means the Department of Parks and Recreation of the City of Seattle.

(l) "Project" means the restoration of the Armory Building as represented in the Design Development Documents dated June, 2009 by LMN Architects, attached hereto as Exhibit A.

(m) "Project Commencement Date" means that date when all of the following have occurred (i) the Lease becomes effective; (ii) MOHAI issues its Notice to Proceed; and (iii) if MOHAI has secured a firm commitment from a tax credit investor on terms reasonably acceptable to MOHAI, the date the Armory Building is conveyed to the Tax Credit Entity.

(n) "Superintendent" means the Superintendent of the Department of Parks and Recreation of the City of Seattle or his functional successor.

(o) "Tax Credit Entity" means the Washington limited liability company formed and controlled by MOHAI that would be eligible to claim or convey to others the right to claim federal historic rehabilitation tax credits with respect to the renovation of the Armory Building.

ARTICLE 3

General Provisions

Section 3.1 Scope. MOHAI will substantially restore the Armory Building consistent with applicable historic preservation guidelines and transform it into a new regional history museum at an estimated total cost of approximately Forty Five Million Four Hundred Thousand Dollars ($45,400,000) (in 2010 dollars), consisting of two components. The components include: (a) Armory Building restoration (the "Project"), including shell and core rehabilitation, comprehensive building systems upgrades, access and circulation improvements, and achieving life safety code compliance, expected to cost (in 2010 dollars) approximately Thirty Million Two Hundred Thousand Dollars ($30,200,000), inclusive of design costs, permit fees and other soft costs; and (b) Museum installation, including exhibitry design, fabrication and installation, expected to cost (in 2010 dollars) approximately Fifteen Million Two Hundred Thousand Dollars ($15,200,000). The Project shall be designed to achieve Leadership in Energy and Environmental Design (LEED) certification at the 2009 Silver level or greater, under the U.S. Green Building Council's Rating System. The Project will include exhibit galleries in the large open volume of the building that also will serve the community as a space for large gatherings and events. Traditional museum support spaces such as classrooms and a retail store; amenities including a cafe and restrooms available to both visitors to Lake Union Park and Museum patrons; and work space for MOHAI and Parks staff also will be provided. The Project is represented in Design Development Documents dated June, 2009 by LMN Architects, attached hereto as Exhibit A. The Project will continue to evolve through its design, negotiations with MOHAI's general contractor, permitting and construction. As a result, Project design will be subject to the Development Agreement Parties' continuing review and approval, as provided herein.

Section 3.2 Basic Relationship of Development Agreement Parties. MOHAI will be responsible for the design, development and construction of the Project as more specifically provided in this Agreement. Following completion of the Project and placing the Armory Building in service, MOHAI will relocate to and operate or cause to be operated the publicly accessible Museum at the Armory Building. The Development Agreement Parties each bring substantial resources and commitments to the Project. Together with other maritime heritage organizations already resident at South Lake Union, MOHAI will participate in a Maritime Heritage Group to be organized and managed by the City.

3.2.1 Project Development Agreement. The Development Agreement Parties' rights, responsibilities and obligations during design, development and construction of the Project are delineated in this Agreement.

3.2.2 Lease. The Development Agreement Parties' long term rights, responsibilities and obligations during operation of the Museum at the Armory Building will be reflected in the Lease. Under the Lease, MOHAI will be obligated to provide enumerated public benefits in the operation of the Museum. Subject to Section 3.2.3, the Lease will allocate responsibilities between the City and MOHAI for routine and long term maintenance of the Armory Building and the underlying Building Pile System that supports it. Parking and access will be addressed as will management of the Maritime Heritage Group. The Lease also will provide for continued use of MOHAI's Montlake location by MOHAI until it is demolished by the State for or otherwise becomes unavailable as a result of expansion of SR 520 construction.

3.2.3 Federal Historic Rehabilitation Tax Credits. The City and MOHAI intend to secure the right to claim federal historic rehabilitation tax credits for the Project. In order for the Project to be eligible for such credits, the City must convey ownership of the Armory Building to the Tax Credit Entity (either directly or indirectly through MOHAI). The Parties concur that such conveyance will be accomplished via direct deed from the City to the Tax Credit Entity. If MOHAI has secured a firm commitment from a tax credit investor on terms reasonably acceptable to MOHAI and upon satisfaction of the conditions precedent to the issuance by MOHAI of its Notice to Proceed as provided in Section 5.5, the City, prior to the start of Project construction, will convey ownership of the Armory Building. Such conveyance will be by quit claim deed substantially in the form attached as Exhibit B, which, in addition to conveying ownership of the building, will restrict its use to museum and related purposes and also incorporates the requirements of the historic preservation covenant included in the deed by which the United States conveyed the property to the City in 2000. The City agrees to execute any additional documents reasonably necessary to effect and otherwise cooperate in such conveyance. In such event, the City, MOHAI and the Tax Credit Entity will execute the Ground Lease for the Armory Building site and the City, MOHAI and the Tax Credit Entity will execute a Joinder Agreement substantially in the form provided in Exhibit C under which the Tax Credit Entity joins in and assumes MOHAI's rights and obligations under this Development Agreement. MOHAI agrees to require the Tax Credit Entity to execute the Ground Lease and the Joinder Agreement. In the event MOHAI is unable to secure a commitment from a tax credit investor on reasonably acceptable terms or determines it will not need to pursue tax credits in order to secure approval to issue its Notice to Proceed under Section 5.5, the City and MOHAI will execute a Lease for the Armory Building and land and no Joinder Agreement will be needed.

Section 3.3 Schedule. MOHAI shall use its best efforts to start construction of the Project within one (1) year from the completion of the Lake Union Park Phase II renovations being completed by the City, but in no event later than January 1, 2013, unless compensation from the expansion of SR 520 by MOHAI is substantially delayed and the Development Agreement Parties agree to extend that deadline. The current "Project Timeline" is attached hereto as Exhibit D. The Project Timeline remains subject to change.

Section 3.4 Parking Planning. The Superintendent, in consultation with MOHAI and other organizations resident at Lake Union Park and the Seattle Parks Foundation, shall complete an initial Parking Plan addressing use of the North Parking Lot proximate to the Armory Building and general public parking resources for the use of visitors to Lake Union Park, the Museum and other facilities resident at the Park. The initial Parking Plan shall be completed by the date MOHAI issues its Notice to Proceed. The Parking Plan shall be consistent with MOHAI's parking easement rights under Section 1.5.2 of the Lease and its right to use of other parking resources under Section 1.7 of the Lease. Although MOHAI understands the Parking Plan will be developed through a collaborative process involving the other organizations resident at Lake Union Park and the Seattle Parks Foundation, the Development Agreement Parties agree that the initial Parking Plan and successor Parking Plans must be reasonably acceptable to MOHAI in recognition of its relative size and need for access to parking. The Development Agreement Parties agree that the Parking Plan may be incorporated as a feature of the Operations and Maintenance Plan the Superintendent is required to develop under the City's agreement with the Seattle Parks Foundation regarding Lake Union Park.

In addressing use of the North Parking Lot and the use of other public parking currently available on site, the initial and successor Parking Plans should be developed consistent with principles or considerations that take into account factors such as (a) total staff required for operation of the respective tenant facilities; (b) capital investment in the respective cultural facilities in or immediately adjacent to Lake Union Park; (c) general public attendance, excluding special events, based on uniformly applied standards; and (d) public attendance at special events, based on uniformly applied standards. Recognizing that City owned and managed public parking is at a premium on site at Lake Union Park and in its vicinity, the City will work with MOHAI, the maritime heritage community, and the Seattle Parks Foundation to maximize City owned, controlled and managed parking conveniently located for visitors to Lake Union Park and amenities located there or nearby. The City will consult with MOHAI and other Lake Union Park Tenants on Lake Union Park public parking availability, expansion and management and develop, implement and periodically review and update its Parking Plan.

ARTICLE 4

Capital Budget and Funding

Section 4.1 Capital Budget. The current Capital Budget ("Capital Budget") is attached hereto as Exhibit E. The Capital Budget remains subject to change and the Development Agreement Parties' continuing review and approval, as provided herein.

Section 4.2 City Direct Funding and Other City-Related Support. The following represent the City's contributions to and support for the Project:

(a) The City contributed certain funds toward MOHAI's purchase of the WSCTC Property. As a condition of releasing its restrictions and security interest in the WSCTC Property, the City required that One Million Two Hundred Twenty-Seven Thousand Eight Hundred Fifteen Dollars and Twelve Cents ($1,227,815.12) of the sale proceeds, representing the City's original outstanding contributions plus interest to the date of the sale, be restricted for use by MOHAI for project capital costs associated with the development within the City of a new museum, construction of which may not begin later than June 30, 2017.

(b) The City has undertaken utility upgrades (identified in the attached Exhibit F) and other improvements to the Armory Building and surrounding portions of Lake Union Park that are directly or indirectly beneficial to development of the Museum in the Armory Building.

(c) The City will assign to MOHAI all of its share of compensation for acquisition and/or condemnation by the Washington State Department of Transportation ("WSDOT") of the MOHAI building at, and certain other real property interests in, MOHAI's Montlake Location, as provided in the Agency and Contribution Agreement between the City and MOHAI and attached hereto as Exhibit G (the "Condemnation Agreement").

(d) The funds identified in Sections 4.2.1(a) and (c) shall become available for use and expenditure by MOHAI when MOHAI receives approval to issue its Notice to Proceed with construction of the Project as provided in Section 5.5.

(e) Possible Recovery of Funding by City. As provided in the Release of Covenant and Easement between the City and MOHAI dated September 27, 2007, in the event that MOHAI does not commence construction of a new regional history museum within the City by June 30, 2017, MOHAI will return to the City the City's funds described in Section 4.2.1(a), plus all accrued interest. MOHAI will return to the City some or all of the funds described in Section 4.2.1(c) under the circumstances described in the Condemnation Agreement.

Section 4.3 MOHAI Funding.

4.3.1 MOHAI Funds and Fundraising.

(a) MOHAI shall use its best efforts to secure additional county, state and federal funds for the Project, in recognition of the fact that the Museum is of regional significance.

(b) As reflected in Exhibit E, the Capital Budget currently totals Forty Five Million Four Hundred Thousand Dollars ($45,400,000) to complete both the Armory Building restoration and the Museum installation, to be provided from all available sources, including the City and other City-related funding identified in Section 4.2. MOHAI will be responsible for securing the balance of funding needed to fully fund the Capital Budget, increased or decreased as appropriate resulting from scope, design and schedule changes and any cost overruns, all as provided herein. MOHAI's fundraising commitment shall be increased to reflect the additional cost of any financing necessary to ensure the availability of funding as needed during construction of the Project (above the projected cost of any such financing reflected in the Capital Budget). MOHAI agrees to use its best efforts to secure commitments from private individuals, corporations and foundations, as well as governmental sources (other than the City) for such funds on a schedule consistent with its Fundraising Plan, attached hereto as Exhibit H. MOHAI's success in achieving its fundraising objectives shall be evaluated by the City Finance Director when making his or her determinations under Section 5.5.2(b). Such evaluation shall include review of MOHAI's private sector donor pledges, pledge payment experience and such other relevant information the Finance Director may reasonably require. MOHAI's private sector donor pledges will be reviewed by the Finance Director under procedures to protect the confidentiality of donors and MOHAI donorrelated information to the extent possible. MOHAI will submit to the Finance Director a copy of the pledges in a form acceptable to the Finance Director, with donor names verified by the Finance Director but omitted from the copy submitted. The Finance Director will approve a pledge if it is from a person or entity of substantial net worth in relation to the amount pledged and the Finance Director knows of no reason why the pledge will not be honored.

4.3.2 Historic Rehabilitation Tax Credits; Conveyance of Armory Building. MOHAI agrees to use its best efforts to secure federal historic rehabilitation tax credits for the Project as a feature of the resources MOHAI will bring to it, as more particularly described in Section 3.2.3 and the City agrees to use its best efforts to assist MOHAI, as necessary, in securing federal historic rehabilitation tax credit financing for the Project.

ARTICLE 5

Project Design and Construction

Section 5.1 Construction Management. Subject to the requirements of this Agreement, MOHAI shall undertake and be responsible for the management of all aspects of the design and construction of the Project. MOHAI shall engage and manage, without limitation, project managers, architects and other design professionals and a general contractor with the expertise and experience necessary to successfully complete the project. In conducting any construction work on the premises, MOHAI shall cause all work to be done in a good and workmanlike manner and shall comply with or cause compliance with all laws. MOHAI shall obtain or cause to be obtained and maintain in effect, as necessary, all building permits, licenses and other governmental approvals that may be required in connection with such work. MOHAI shall complete construction of the Project substantially consistent with the Final Project Design, except as specifically provided herein. MOHAI shall use its good faith best efforts to resolve issues that may arise during construction to avoid material or other changes to the Final Project Design that would require the approval of the Superintendent by, among other measures, applying contingency funding available within the Project component of the Final Capital Budget; adjusting the Project Timeline; reducing costs through permissible changes to the Final Project Design and other means; and, as needed, committing additional funds to supplement the Project component of the Final Capital Budget.

Section 5.2 Requirements for Construction. In managing the Project, MOHAI shall ensure that the Project and its general contractor and others as appropriate comply with the following requirements:

(a) MOHAI shall require that its general contractor for the Project: (i) complies with prevailing wages requirements as if the Project were a public work for purposes of RCW 39.12; and (ii) participates in the construction trades apprenticeship program, endeavoring to achieve fifteen percent (15%) utilization of apprentices;

(b) The Project will be subject to the affirmative efforts and nondiscrimination requirements under SMC 20.42 and the equal benefits requirements under SMC 20.45; and

(c) The Project component of the Capital Budget will include at least One Hundred Fifty Thousand Dollars ($150,000) to provide public art as part of the Project. The public art may be incorporated as a component of the Armory Building restoration. The selection of public art shall follow a process agreed to between MOHAI and the City's Office of Arts & Cultural Affairs or that office's successor. It is expected that the Office of Arts & Cultural Affairs will have some representation on the review and selection panel MOHAI will convene and use in the art selection process. If necessary, the public art, its location and display shall be subject to such reviews and approvals as may be required under any applicable agreements regarding Lake Union Park.

(d) Upon completion of construction of the Project, MOHAI shall apply for Leadership in Energy and Environmental Design (LEED) certification at the 2009 silver level or higher, under the U.S. Green Building Council's Rating System.

(e) MOHAI shall ensure that the Project is free of constructionrelated liens or other obligations before it is put in service as a Museum, subject to MOHAI's right to contest any liens.

Section 5.3 Required General Public Amenities. The Project Design shall include the following elements (the "Required General Public Amenities"), the use and operation of which shall be addressed in the Lease:

(a) A meeting room space available for community use by South Lake Union neighborhood groups.

(b) Work space for occasional use by MOHAI staff and City staff.

(c) Museum cafe, including public restrooms serving Museum visitors and Lake Union Park users, accessible to the public without paying admission to the Museum.

Section 5.4 Design Review and Approval; Consistent Capital Budget.

5.4.1 Design Review and Approval. Sequential, major phase design documents shall be subject to review and approval by the Superintendent, which approval shall not be unreasonably denied or delayed. Upon the Superintendent's approval of the Project's fifty percent (50%) construction documents, MOHAI may submit the Project for its building permit. Such documents shall constitute the "Final Project Design" for purposes of this Agreement. Evolution of the Project design is subject to the parallel evolution of a consistent Project component of the Capital Budget at each major design phase. The Capital Budget updated for consistency with the Final Project Design shall constitute the "Final Capital Budget" for purposes of this Agreement. The Project component of the Final Capital Budget shall include appropriate contingencies consistent with industry standards.

5.4.2 Signage. The Museum may be identified by signage affixed on the Armory Building and located elsewhere on its leased premises. Initial signage for the Armory Building and leased premises shall be incorporated in the Project design and shall be subject to the review and approval of the Superintendent in the context of review and approval of the design as provided in Section 5.4.1. The Project design may also include features or fixtures necessary for the display and support of temporary promotional or informational signage such as banners and flags.

5.4.3 Exterior Display of Artifacts. As provided in the Lease, MOHAI is permitted to display artifacts and associated identifying and interpretative information outside the Armory Building in Lake Union Park, subject to the review and approval of the Superintendent. The Development Agreement Parties shall collaboratively prepare a protocol establishing a mutually acceptable process for the review and approval of artifact display and siting. Artifacts to be on display when the Museum initially opens to the public shall be proposed by MOHAI and timely reviewed for approval by the Superintendent such that the artifacts may be installed and interpreted prior to the Museum's opening.

Section 5.5 Project Commencement Actions Timeline; Notice to Proceed.

5.5.1 Project Commencement Actions Timeline. The Lease shall take effect and, if MOHAI has secured a firm commitment from a tax credit investor on terms reasonably acceptable to MOHAI, the Armory Building shall be conveyed to the Tax Credit Entity (the "Project Commencement Actions") upon completion of the following process and timeline:

(a) After the effective date of one or more City ordinances approving and authorizing execution of this Agreement and the Lease, and consenting to a settlement with WSDOT regarding its acquisition of the Montlake Location and authorizing provision to MOHAI of the proceeds from such acquisition as provided in the Condemnation Agreement, MOHAI may notify the City of the date it has determined as the Project Commencement Date. MOHAI shall provide such notification no earlier than July 1, 2010 and no later than six (6) months prior to the determined Project Commencement Date.

(b) MOHAI's notification to the City of the Project Commencement Date shall be accompanied by a comprehensive Project update including information sufficient to enable the Superintendent and Finance Director to begin review of MOHAI's progress toward satisfying the preconditions to MOHAI's issuance of its Notice to Proceed, as provided in Section 5.5.2.

(c) Upon receipt of MOHAI's notification, the City shall promptly notify current Armory Building tenants that such tenants may be required to vacate Armory Building premises occupied by them not later than two (2) weeks prior to the Project Commencement Date.

(d) No later than two (2) months prior to the Project Commencement Date, MOHAI shall confirm its determination of the Project Commencement Date and provide the City with any additional information relevant to the City's review of MOHAI's progress toward satisfying the preconditions to MOHAI's issuance of its Notice to Proceed, as provided in Section 5.5.2, specifically including current information on MOHAI's fundraising efforts. Upon receipt of such confirmation, the City shall provide a final notification to current Armory Building tenants that such tenants are to vacate Armory Building premises occupied by them not later than two (2) weeks prior to the Project Commencement Date. As soon as practical following receipt of such confirmation and completion of their review of MOHAI's additional information, the Superintendent and Finance Director shall provide their respective concurrences or determination required under Section 5.5.2 or, if any such are being withheld, work with MOHAI to address any concerns in order to preserve the Project Commencement Date. The Superintendent and Finance Director shall provide their respective concurrences and determination as soon as possible after resolving any such concerns.

(e) As tenants vacate Armory Building premises, the Parks Department will remove any remaining personal property. Two (2) weeks prior to the Project Commencement Date, representatives of MOHAI and the Parks Department will: (i) inspect the premises to confirm they are free and clear of tenants and tenants' and the Parks Department's personal property; and (ii) confirm arrangements for final cleaning of the Armory Building by the Parks Department and final inspection by MOHAI and the Parks Department prior to the Project Commencement Date. Representatives of MOHAI and the Parks Department also will inspect the construction staging area adjacent to the Armory Building to be subject to a construction easement under the Lease to confirm its pre-construction condition and establish the standard for restoration by MOHAI following completion of construction.

(f) Upon the Project Commencement Date, assuming the Superintendent and Finance Director have provided their respective concurrences and determination required under Section 5.5.2, the Project Commencement Actions shall occur.

(g) If, for any reason, any or all of the Project Commencement Actions identified in this Section 5.5.1 do not occur on the Project Commencement Date, the Development Agreement Parties shall work to resolve any impediments to such actions and establish the earliest possible mutually acceptable future date or dates on which any such remaining actions may take place.

5.5.2 MOHAI may issue its Notice to Proceed to its general contractor after January 1, 2011 upon receipt of the following:

(a) Concurrence by the Superintendent that the Project component of the Final Capital Budget is sufficient to complete the Final Project Design, based on his review of the most recent project cost estimates provided by MOHAI;

(b) The determination of the Finance Director, based on his review of the status of MOHAI's fundraising efforts against its Fundraising Plan, that MOHAI has timely access to sufficient funds from all available sources, including the City and other City-related funding identified in Section 4.2, as well as additional funding from private individuals, corporations and foundations and public sources other than the City, to fully fund the Project (approximately $30,200,000) and, when reasonably needed, consistent with the current Project Timeline, exhibitry (approximately $15,200,000); and

(c) Concurrence by the Superintendent and the Finance Director that (i) MOHAI's general contractor has agreed to a guaranteed maximum price for construction of the Project as represented in the Final Project Design and consistent with the Project component of the Final Capital Budget; and (ii) MOHAI's contract with its general contractor provides for the requirements for construction under Sections 5.2 and 5.7.

Section 5.6 Project Management and Coordination.

(a) Project Manager and Coordinator. At least thirty (30) days prior to issuing its Notice to Proceed, MOHAI shall notify the Superintendent of the identity of the MOHAI construction contractor's project manager ("Project Manager") by name and such person's business and home telephone numbers, and the Parks Department shall provide to MOHAI comparable contact information for the Parks Department project coordinator ("Project Coordinator"). In the event either such person is replaced, the party making such change in personnel shall provide notice to the other no later than the effective date of such replacement, including such replacement's name and business and home telephone numbers.

(b) Project Construction Meetings. MOHAI's Project Manager shall keep the Parks Department Project Coordinator informed of the time and place of each regular and special project construction meeting to enable the Parks Department Project Coordinator to attend, become informed about the status of the Project, participate in discussions and present the Parks Department's position with respect to matters being discussed. The MOHAI Project Manager shall also participate in such separate meetings with the Parks Department Project Coordinator and, at the Superintendent's option, with the Superintendent's designee, as may be scheduled by the Parks Department Project Coordinator with at least three (3) days' prior notice.

(c) Status Reports. Within seven (7) days after the receipt by MOHAI of any project construction meeting minutes, MOHAI shall deliver a copy of each of the same to the Parks Department Project Coordinator.

(d) Minimization of Adverse Impacts. MOHAI shall protect from damage or destruction all private and public property on or in the vicinity of the construction premises that is not scheduled for repair, replacement or removal. All Project-related demolition, construction, alteration, addition, improvement and other activity or work performed by or for MOHAI on the construction premises shall be carried out in a manner that minimizes any adverse impact on City property and the use thereof by the City or third parties, as well as on any private property in the vicinity of the Project. (For purposes of this requirement, the term "property" includes land, trees, shrubbery and landscaping, irrigation facilities, drainage, survey markers and monuments, buildings and structures, conduits and pipes, meters, fences, pavements, curbs, driveways, sidewalks, and other property of any description, excluding the Armory Building and the premises subject to the Lease, except for the Public Use Area.) MOHAI shall prepare for the Superintendent's reasonable review and approval a plan for construction fencing, including routes for temporary pedestrian access around the construction site, before mobilization work begins. MOHAI shall work with the Parks Department Project Coordinator to schedule construction activity to minimize construction impacts such as noise, dust and fumes, to the extent practicable.

(e) Waste Disposal. MOHAI shall secure and provide within the construction premises, appropriately sized containers for the collection of all waste materials, debris and rubbish associated with the Project. MOHAI shall keep the work site and all adjacent property free from the accumulation of waste materials, rubbish and windblown debris associated with the Project and, on a daily basis, shall dispose of all flammable, hazardous and toxic materials generated by or otherwise associated with the Project. Storage and disposal must be in accordance with applicable Federal, State and local laws, fire codes and regulations. All waste materials, debris and rubbish generated by or otherwise associated with the Project shall be disposed of legally at disposal areas away from the Park. Upon the completion of the Project, MOHAI shall ensure that the construction premises and the roadways and walkways immediately surrounding the construction premises are cleaned to the reasonable satisfaction of the Parks Department Project Coordinator; and that all tools, equipment and surplus materials, and waste materials, debris and rubbish associated with the Project have been removed from the construction premises.

(f) Restoration. MOHAI shall be responsible for full restoration of all Parks Department property and improvements, excluding the Armory Building and the premises subject to the Lease, except for the Public Use Area, solely or to the extent attributable to MOHAI's construction activity to a condition equal to or better than prior to MOHAI's use of such Parks Department property, including full repair to or replacement if reasonably determined necessary by the Parks Department. MOHAI agrees to warrant (or to assign contractor warranties for) the repair or replacement of such Parks Department property or improvements for a period of one (1) year from the date of MOHAI's of completion of MOHAI's construction activity at the Park. MOHAI shall repair damage to or replace Parks Department property within thirty (30) calendar days of the occurrence of damage solely or to the extent attributable to MOHAI's construction activity to said improvements, unless an alternate deadline is approved by the Superintendent or repair or replacement should occur at a later date to ensure that additional damage would not occur during the normal course of MOHAI's construction activity. MOHAI and the Parks Department will jointly inspect any such damage; evaluate the extent of the damage attributable to MOHAI's construction activity; and provide such documentation as may be necessary and useful to determining appropriate repairs or replacements to redress it. MOHAI shall provide to the Parks Department a video of pre-existing site conditions prior to mobilization, including areas along the Park's access drive, and all Park property adjacent to the MOHAI project site.

(g) Costs. MOHAI and the Parks Department shall each bear their own costs of performing their respective responsibilities under this Section 5.6.

Section 5.7 MOHAI Cost Overruns Responsibility and Risk Management.

5.7.1 Cost Overruns.

(a) Funds required for any net increases in the Project component of the Final Capital Budget necessary to complete the Project substantially consistent with the Final Project Design (as potentially modified under this Agreement) shall be provided by MOHAI from sources other than the City, except as specifically provided herein. MOHAI's responsibility for cost overruns includes responsibility for those due to unforeseen conditions that need to be addressed in order for the Project to proceed, including any unforeseen preexisting conditions related to the Building Pile System, but only to the extent such conditions can be remedied with resources available within the Project component of the Final Capital Budget. Upon discovery of an unforeseen condition that must be addressed in order for the Project to proceed, MOHAI will notify the Superintendent. MOHAI will evaluate ways to resolve any such conditions to the extent necessary for the Project to proceed and determine the cost of doing so. In addressing such additional cost, MOHAI may, among other measures, apply contingency funds within the Project component of the Final Capital Budget, make modifications to the Final Project Design, and apply such additional funds that MOHAI, in its sole discretion, determines to provide to increase the Project component of the Final Capital Budget. MOHAI will keep the Superintendent apprised of its work and advise him or her of its plans for addressing such conditions, specifically including any proposed changes in the Final Project Design requiring his or her approval under Section 5.8. In the event MOHAI concludes that it lacks the resources to address any such unforeseen conditions and that, as a result, it will not be able to complete the Project, it will so notify the Superintendent. The Development Agreement Parties will cooperate in developing and implementing a plan to suspend or terminate the Project. If the Project is so terminated before completion, MOHAI shall (i) return ownership or control of the Armory Building and its site to the City in no worse overall condition than it was in at the inception of the Project and suitable for uses consistent with its prior use as a general purpose community event center; (ii) return to the City some or all of the funds described in Section 4.2.1(c) under the circumstances described in the Condemnation Agreement, net of Project construction costs expended as of the date of termination, including the costs of restoration as required herein; and (iii) be responsible for all transaction costs arising out of or relating to the termination.

(b) MOHAI's responsibility for cost overruns notwithstanding, the City shall bear financial responsibility for any direct or indirect cost increases associated with changes to the Project that the City requests after the Superintendent approves the Final Project Design (excluding permitting or other regulatory requirements).

5.7.2 Retainage and Bonding. MOHAI shall establish retainage at not less than five percent (5%) of its contractor's guaranteed maximum price and shall require bonding by its contractor to the extent warranted, in its judgment and discretion after consultation with the Superintendent.

5.7.3 Insurance Requirements. In addition to the insurance obligations under the Lease, MOHAI shall obtain or cause to be obtained insurance in the following forms and with the limits of not less than those stated, with the City named as an additional insured, unless MOHAI and the City modify these requirements:

(a) Professional Liability Insurance. Architect's and engineer's professional liability insurance covering the architect with a minimum limit of Two Million Dollars ($2,000,000) for each claim.

(b) Commercial General Liability. Commercial general liability insurance for the architect and the general contractor with minimum combined single limits of Two Million Dollars ($2,000,000) for the architect and Two Million Dollars ($2,000,000) for the general contractor for each occurrence. The policy shall include without limitation coverage for bodily injury, broad form property damage, personal injury (including but not limited to coverage for contractual and employee acts), blanket contractual, owner's and contractor's protective liability, and products and completed operations. Further, the policy for the general contractor shall include without limitation coverage for the hazards commonly referred to as "XCU" and shall contain a severability of interests provision. The products and completed operations coverage for the general contractor shall extend for three (3) years past the commencement of the Lease.

(c) Automobile Liability. Automobile liability insurance for the architect and general contractor with a combined single limit for bodily injury and property damage of not less than One Million Dollars ($1,000,000) each occurrence with respect to vehicles assigned to or used in the construction of the Project.

(d) Contractor's Equipment. Contractor's equipment insurance for the architect and general contractor covering owned, non-owned, leased equipment used in connection with construction of the Project. With the approval of MOHAI, the architect and the general contractor may selfinsure owned, non-owned or leased equipment.

(e) Builder's Risk. Builder's risk insurance with a limit of liability consistent with the requirements of MOHAI's general contractor contract. The coverage shall be written on all risk of direct damage basis and shall include coverage for fire and physical loss or damage from flood and earthquake. Builder's risk insurance shall cover construction at the site, at any off-site storage location, if appropriate, and while in transit, any and all materials, equipment, machinery, tools and supplies, including buildings and all temporary structures to be used in or incidental to the fabrication, erection, testing or completion of the Project.

5.7.4 Liens. MOHAI will pay or cause to be paid all sums payable by them on account of any labor performed or materials furnished in connection with any work performed on the Project. MOHAI will use its good faith best efforts to discharge, by bond or otherwise, any mechanic's or materialman's lien filed against the premises for work claimed to have been done for, or materials claimed to have been furnished to MOHAI, within thirty (30) days after filing.

Section 5.8 Changes During Construction. Any material change to the Final Project Design requires the approval of the Superintendent, which approval shall not be unreasonably withheld or delayed. A material change represents a major departure from the Final Project Design including but not limited to elimination or addition of a significant element or feature; discernible or functional alteration in the quality or projected performance of any significant feature or system; or any significant change in the use or appearance of any major space or component. Any changes in the Required General Public Amenities required under this Agreement and as represented in the Final Project Design shall require the approval of the Superintendent.

Section 5.9 Building Pile System.

(a) MOHAI Responsibilities During Construction. If MOHAI elects to reinforce or add to the Building Pile System so as to provide support for any increased load associated with the Project, such work (as to the initial installation) will be at MOHAI's expense. In addition to MOHAI's responsibility under Section 5.7.1 for unforeseen preexisting conditions related to the Building Pile System that need to be addressed in order for the Project to proceed, MOHAI shall be responsible for the cost to repair measurable damage to the Building Pile System or Armory Building that the City can demonstrate was caused by the MOHAI Project and is determined to exist based on surveys as provided herein. MOHAI will inform the Superintendent of any damage to the Building Pile System incurred during construction and the measures it proposes to take to repair such damage, which measures shall be subject to the Superintendent's reasonable approval. MOHAI will confirm that such repairs have been completed. MOHAI also will survey the position of the Armory before issuing its Notice to Proceed and provide the survey results to the Superintendent.

In order to determine whether movement of the Armory Building has occurred as a result of the Project, MOHAI will again survey the position of the Armory Building both upon Project completion and contemporaneously with the issuance of a certificate of occupancy for the Museum. MOHAI will provide results of both subsequent surveys to the Superintendent. If movement has occurred during construction that exceeds the normal tolerance of survey instruments and procedures (three eighths of one inch 3/8"), the Development Agreement Parties will evaluate its significance and resolve how to address any resulting material problems related to the ability of the Building Pile System to support the Armory Building for its intended use for Museum and related purposes. To the extent that the Project was responsible for such unanticipated movement and the Parties conclude that such movement materially affects the ability of the Building Pile System to support the Armory Building for its intended use for Museum and related purposes, MOHAI will pay for the remedial measures the Parties determine are necessary and appropriate to address it.

(b) City Responsibilities Following Construction. Following completion by MOHAI of the survey of the position of the Armory Building contemporaneously with the issuance of the certificate of occupancy for the Museum and the completion of any remedial measures that the Development Agreement Parties may have determined necessary under Section 5.9(a), and subject to the provisions of the Lease regarding damage and destruction (i) the City will be exclusively responsible for the condition of the Building Pile System and for maintaining it in a safe and sound condition, capable of supporting the Armory Building for its use for Museum and related purposes for the duration of its use as such; and (ii) the City will address, at no cost to MOHAI, any conditions that impair the ability of the Building Pile System to support the Armory Building for its intended use for Museum and related purposes for the duration of its use as such. Notwithstanding the foregoing, with respect to any (a) alterations to the Armory Building or Premises that affect the Building Pile System; or (b) specific changes or additions to exhibitry reasonably likely to affect the Building Pile System, either of which are undertaken after issuance of the certificate of occupancy for the Museum, MOHAI and the Superintendent shall reasonably determine the measures, if any, to be undertaken in conjunction with such alteration or exhibitry change or addition described in clauses (a) or (b) above that are needed to enable the Building Pile System to continue to support the Armory Building for its intended use for Museum and related purposes. MOHAI shall at its expense, complete such measures as a component of its alteration or exhibitry change or addition. MOHAI also will inform the Superintendent of any damage to or adverse affects on the Building Pile System incurred during the construction of any alteration or exhibitry change or addition described in clauses (a) or (b) above, together with the measures it proposes to take to repair any such damage, which measures shall be subject to the Superintendent's reasonable approval. MOHAI will confirm that such repairs have been completed. All such measures or repairs shall be the property of the City upon their completion and shall thereafter be considered part of the Building Pile System (and be maintained, repaired or replaced by the City as required herein).

ARTICLE 6

Maritime Heritage Group and Related Matters

Section 6.1 Maritime Heritage Group; City Responsibilities. Within six (6) months of the effective date of this Agreement, the Superintendent will organize, at the City's expense, an affiliation among the City, MOHAI and other maritime heritage organizations, including those also resident at South Lake Union such as the Center for Wooden Boats, Northwest Seaport and the Virginia V Foundation. The Maritime Heritage Group will be documented through agreements between the various organizations and the City establishing the basis for an ongoing collaboration on cultural, educational and recreational maritime-related activities. The Development Agreement Parties envision an integrated museum and historic ship visitor experience that enhances Lake Union Park, the historic ships wharf and encourages knowledge and support for the preservation of the region's diverse history, particularly including its maritime history. The Superintendent will be responsible for management, at the City's expense, of the Maritime Heritage Group, consistent with its responsibility for managing or providing for the management of the historic ships wharf, except for those portions of such wharf subject to the MOHAI's use under the Lease.

Section 6.2 MOHAI Participation. MOHAI will cooperate with and participate in the Maritime Heritage Group. MOHAI will enter into collaborative agreements as desirable and appropriate with other participants in such Maritime Heritage Group relating to, among other things, marketing, programming, and reasonable shared use of appropriate regional history museum facilities for public accommodations (such as ticketing, merchandizing, and way-finding facilities).

Section 6.3 Wawona Preservation Memorandum of Agreement. MOHAI will cooperate in the implementation of the Wawona Preservation Memorandum of Agreement, including good faith consideration of options for preservation of components of the vessel for display in the regional history museum.

ARTICLE 7

Indemnification and Dispute Resolution

Section 7.1 Indemnification.

(a) MOHAI Indemnification. To the fullest extent permitted by law, MOHAI shall indemnify, defend (using counsel acceptable to the City) and hold the City, its officers, agents, employees and elected officials (collectively, the "City Indemnified Parties") harmless from and against all claims, suits, losses, damages, fines, penalties, liabilities and expenses (including City's actual and reasonable personnel and overhead costs and attorneys' fees and other costs incurred in connection with claims, regardless of whether such claims involve litigation) of any kind whatsoever arising out of the Project, including, but not limited to, claims resulting from, arising out of, or connected with the following: (i) the acts or omissions of MOHAI, its employees, agents, officers, affiliates, contractors, guests or invitees throughout the course of the Project; (ii) MOHAI's breach of this Agreement; or (iii) construction of the Project. MOHAI's defense and indemnity obligations extend to claims brought by its own employees and MOHAI's foregoing obligations are specifically and expressly intended to act as a waiver of MOHAI's immunity under Washington's Industrial Insurance Act, RCW Title 51, but only as to the City Indemnified Parties and to the extent necessary to provide the City Indemnified Parties with a full and complete defense and indemnity.

(b) City Indemnification. To the fullest extent permitted by law, the City shall indemnify, defend (using counsel acceptable to MOHAI) and hold MOHAI, its board members, employees, agents, officers, contractors, guests or invitees throughout the course of the Project (collectively, "MOHAI Indemnified Parties") harmless from and against all claims, suits, losses, damages, fines, penalties, liabilities and expenses (including MOHAI's actual and reasonable personnel and overhead costs and attorneys' fees and other costs incurred in connection with claims, regardless of whether such claims involve litigation) of any kind whatsoever resulting from, arising out of, or connected with the City's breach of this Agreement. The City's defense and indemnity obligations extend to claims brought by its own employees and the City's foregoing obligations are specifically and expressly intended to act as a waiver of the City's immunity under Washington's Industrial Insurance Act, RCW Title 51, but only as to MOHAI Indemnified Parties and to the extent necessary to provide MOHAI Indemnified Parties with a full and complete defense and indemnity.

Section 7.2 Limitation of Indemnification Obligation.

(a) Limitation of MOHAI's Obligation. To the extent necessary to comply with RCW 4.24.115 as in effect on the date of this Agreement, MOHAI's obligation to indemnify the City for damages arising out of bodily injury to persons or damage to property relative to the construction, alteration, repair, addition to, subtraction from, improvement to, or maintenance of, any building, road, or other structure, project, development, or improvement attached to real estate, including the Project (i) shall not apply to damages caused by or resulting from the sole negligence of the City Indemnified Parties; and (ii) to the extent caused by or resulting from the concurrent negligence of (A) the City Indemnified Parties and (B) MOHAI, its board members, agents, contractors, officers, affiliates, employees, guests or invitees shall apply only to the extent of the negligence of MOHAI, its board members, agents, contractors, officers, employees, guests or invitees; PROVIDED, HOWEVER, the limitations on indemnity set forth in this Section shall automatically and without further act by either the City or MOHAI be deemed amended so as to remove any of the restrictions contained in this Section 7.2(a) no longer required by then applicable law.

(b) Limitation of City's Obligation. The City's obligation to indemnify MOHAI shall not apply to (i) damages caused by or resulting from the sole negligence of MOHAI Indemnified Parties; and (ii) to the extent caused by or resulting from the concurrent negligence of (A) MOHAI Indemnified Parties and (B) the City, its agents, contractors, officers and employees shall apply only to the extent of the negligence of the City, its agents, contractors, officers, or employees; PROVIDED, HOWEVER, the limitations on indemnity set forth in this Section shall automatically and without further act by either the City or MOHAI be deemed amended so as to remove any of the restrictions contained in this Section 7.2(b) no longer required by then applicable law.

Section 7.3 Waiver of Indemnity; Indemnities Negotiated. The City and MOHAI agree that the foregoing indemnities specifically include, without limitation, claims brought by any of the Development Agreement Parties' employees against any other such party. THE FOREGOING INDEMNITIES ARE EXPRESSLY INTENDED TO CONSTITUTE A WAIVER OF EACH DEVELOPMENT AGREEMENT PARTY'S IMMUNITY UNDER WASHINGTON'S INDUSTRIAL INSURANCE ACT, RCW TITLE 51, TO THE EXTENT NECESSARY TO PROVIDE ANY OTHER SUCH PARTY WITH A FULL AND COMPLETE INDEMNITY FROM CLAIMS MADE BY EACH SUCH PARTY AND ITS EMPLOYEES, TO THE EXTENT OF THEIR NEGLIGENCE. THE CITY AND MOHAI ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF THIS ARTICLE WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

Section 7.4 Dispute Resolution. In the event of a dispute regarding this Agreement, the Development Agreement Parties agree to follow the procedures in this Section prior to filing or initiating a lawsuit. The Development Agreement Parties shall make their best efforts to resolve disputes as expeditiously as possible through negotiations at the lowest possible decision-making level, and in the event such negotiations are unsuccessful, the matter shall be referred to the Superintendent and the Executive Director of MOHAI. If those officials are unable to resolve the dispute within a period of fifteen (15) days after the matter has been formally referred to them for resolution, they shall meet during the immediately succeeding seven (7) days to select a mediator to assist in the resolution of such dispute. MOHAI and the City agree to participate in mediation with the agreed upon mediator for a reasonable amount of time and in good faith. The cost of the mediation shall be shared equally between the City (one-half) and MOHAI (collectively, one-half).

ARTICLE 8

Miscellaneous

Section 8.1 Amendments. This Agreement may not be effectively amended, changed, modified or altered, except by an instrument in writing duly executed by the City and MOHAI (or their successors in title) upon passage of an ordinance by the City Council.

Section 8.2 Authority. Each Development Agreement Party hereto warrants that it has the authority to enter into this Agreement and to perform its obligations hereunder and that all necessary approvals, acts or resolutions to authorize this transaction have been taken, and the signatories, by executing this Agreement, warrant that they have the authority to bind the respective parties.

Section 8.3 Binding Effect; No Assignment. This Agreement shall inure to the benefit of and shall be binding upon the Development Agreement Parties and their successors. This Agreement may not be assigned without the written consent of the Development Agreement Parties, except for possible joinder of the Tax Credit Entity under Section 3.2.3.

Section 8.4 Consents and Approvals. In any instance when any Development Agreement Party's consent or approval is required under this Agreement, such consent or approval shall not be unreasonably withheld, conditioned or delayed. Whenever the consent of City, the Finance Director or the Superintendent to any act to be performed under this Agreement, MOHAI must obtain the consent or approval expressly for purposes of this Agreement, regardless of whether a consent or approval shall have been granted by the City in its regulatory, public utility, or other capacity. No permission, consent, or approval of the City, the Finance Director or the Superintendent contained herein or given pursuant to this Agreement 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.

Section 8.5 Construction. The following rules shall apply to the construction of this Agreement unless the context otherwise requires:

(a) Words describing the singular number shall include the plural number and vice versa, except where otherwise indicated.

(b) All references herein to particular articles, sections or exhibits are references to articles, sections or exhibits of this Agreement, unless otherwise expressly stated.

(c) The headings and table of contents herein are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.

(d) This Agreement shall not be construed as if it had been prepared by one of the Development Agreement Parties, but rather as if all Development Agreement Parties had prepared it.

Section 8.6 Counterparts. This Agreement may be executed in counterparts for the convenience of the Development Agreement Parties, and such counterparts shall together constitute one Agreement.

Section 8.7 Cumulative Remedies. The rights and remedies that any Development Agreement Party may have under this Agreement or at law or in equity, upon any breach, are distinct, separate and cumulative and shall not be deemed inconsistent with each other, and no one of them shall be deemed to be exclusive of any other.

Section 8.8 Force Majeure. Except as otherwise expressly provided in this Agreement, time periods for any Development Agreement Party's performance under any provisions of this Agreement shall be extended for periods of time during which such performance is prevented due to circumstances beyond such party's reasonable control, including without limitations, strikes, embargoes, shortages of labor or materials, governmental regulations, acts of God, unforeseen site conditions, casualty, war or other strife.

Section 8.9 Governing Law; Venue. This Agreement is governed by and shall be construed in accordance with the substantive laws of the State of Washington and shall be liberally construed so as to carry out the purposes hereof. Except as otherwise required by applicable law, any action under this Agreement shall be brought in the Superior Court of the State of Washington in and for King County.

Section 8.10 Integration. Together with the Lease and the Condemnation Agreement, this Agreement contains the entire integrated agreement between the parties as to the matters covered herein and supersedes any oral statements or representations or prior written matter not contained in this instrument as to the matters set forth herein.

Section 8.11 Limitation on Third Party Rights. Nothing in this Agreement expressed or implied is intended or shall be construed to give to any person other than the Development Agreement Parties any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenant, condition or provision herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the Development Agreement Parties.

Section 8.12 No Partnership. Nothing contained in this Agreement shall create any partnership, joint venture or other relationship between MOHAI and the City.

Section 8.13 No Waiver. Failure of any Development Agreement Party to complain of any act or omission on the part of the other, no matter how long the failure may continue, shall not constitute a waiver of any rights under this Agreement. No waiver by any Development Agreement Party of any breach of any provisions of this Agreement shall be deemed a waiver of a breach of any other provision of this Agreement or consent to any subsequent breach of any other provision. If any action of any Development Agreement Party requires the consent or approval of another, consent or approval given on one occasion shall not be deemed a consent to or approval of that action on any other occasion. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

Section 8.14 Notices. All notices, demands or requests that may or are required to be given by any Development Agreement Party to another under this Agreement shall be given in writing and delivered personally, or sent by U.S. certified mail, postage prepaid, return receipt requested, or nationally recognized overnight air carrier, and addressed to City's address or MOHAI's address, as follows:

If to the City: The City of Seattle

Department of Finance

600 Fourth Avenue, Sixth Floor

PO Box 94747

Seattle, WA 98124-4747

Attn: Director

Telephone: (206) 684-0503

Fax: (206) 233-0022

Email: dwight.dively@seattle.gov

And: The City of Seattle

Department of Parks and Recreation

100 Dexter Avenue North

Seattle, WA 98109

Attn: Superintendent

Telephone: (206) 684-8022

Fax: (206) 233-7023

Email: timothy.gallagher@seattle.gov

Copy to: Helaine Honig

The City of Seattle

Law Department

600 Fourth Avenue, 4th Floor

Seattle, WA 98104

Telephone: (206) 684-8222

Fax: (206) 984-8284

Email: helaine.honig@seattle.gov

If to MOHAI: Museum of History and Industry

McCurdy Park

2700 24th Avenue East

Seattle, WA 98112-2099

Attn: Executive Director

Telephone: (206) 324-1685, ext. 32

Fax: (206) 324-1346

Email: leonard.garfield@seattlehistory.org

Copy to: Gerry Johnson

K&L Gates LLP

925 Fourth Avenue, Suite 2900

Seattle, WA 98104-1158

Telephone: (206) 623-7580

Fax: (206) 623-7022

Email: gerry.johnson@klgates.com

Notices shall be deemed to have been given upon receipt or attempted delivery where delivery is not accepted. Any Development Agreement Party may change its address and/or those receiving copies of notices upon written notice given to the other.

Section 8.15 Severability. If any provision of this Agreement is determined to be invalid or unenforceable, then that provision and the remainder of this Agreement shall continue in effect and be enforceable to the fullest extent permitted by law. It is the intention of the Development Agreement Parties that if any provision of this Agreement is capable of two constructions, one of which would render the provision void, and the other of which would render the provision valid, then the provision shall have the meaning that renders it valid.

Section 8.16 Termination of Agreement. Unless otherwise stated herein, this Agreement and all obligations hereunder shall terminate when the Project receives its final certificate of occupancy, except that the provisions of Sections 3.4, 4.2(e), 5.7.1(a), 7.1, 7.2 and 7.3 survive the expiration or termination of this Agreement.

Section 8.17 Time of Essence. Time and all terms and conditions shall be of the essence of this Agreement.

[signatures on next page]

City:

CITY OF SEATTLE, a Washington municipal corporation

By:

Name:

Title:

Approved as to form:

_______________________________

City of Seattle Assistant City Attorney

MOHAI:

HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation

By:

Name:

Title:

EXHIBIT A JUNE, 2009 DESIGN DEVELOPMENT DOCUMENTS (177 KB PDF document)

EXHIBIT B

FORM OF QUIT CLAIM DEED

After Recording Return to:

K&L Gates LLP

925 Fourth Avenue

Suite 2900

Seattle, WA 98104

Attn: Shannon Skinner

QUIT CLAIM DEED

(Improvements Only)

GRANTOR: CITY OF SEATTLE

GRANTEE: _________________________, a _________________________

Legal Description:

Abbreviated Form: ________________________________________

________________________________________

________________________________________

Additional Legal is on Exhibit 1 attached to document

Assessor's Tax Parcel ID No. _______________________________________

The GRANTOR, CITY OF SEATTLE, a Washington municipal corporation for and in consideration of Ten and 00/100 Dollars ($10), conveys and quit claims to _______________________, the building and improvements only located on the following described real estate, situated in the County of King, State of Washington, together with all after acquired title of the grantor(s) therein:

See Exhibit 1 attached hereto and incorporated herein by this reference.

Subject to the covenants set forth on Exhibit 2 attached hereto.

This Deed does not convey title to the land described on Exhibit 1 or the Building Pile System and is a conveyance of buildings and improvements only.

Dated _____________________, 2009.

GRANTOR:

CITY OF SEATTLE, a Washington municipal corporation

By: ________________________

Name: ________________________

Title: ________________________

GRANTEE:

[Tax Credit Entity]

By: _____________________________

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 City of Seattle to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.

Dated: ________________________

Notary Public

Print Name

My commission expires

(Use this space for notarial stamp/seal)

Exhibit 1

LEGAL DESCRIPTION

Lots 9 through 12, inclusive, Block 74, all in Lake Union Shore Lands,

Situate in the City of Seattle, County of King, State of Washington.

Together with the eastern one-half of Terry Avenue adjoining the foregoing described property, upon the vacation thereof by the City of Seattle.

Exhibit 2

COVENANTS

1. Museum Use. This deed is given pursuant to that certain Project Development Agreement between Grantor and Grantee dated _______________, 2009. Pursuant to the Project Development Agreement, following this conveyance of the building and improvements (collectively the "Armory Building") to Grantee, Grantee will cause the Armory Building to be renovated and placed into service as a regional history museum. In accepting this conveyance, Grantee covenants to Grantor that, after the renovations to the Armory Building are complete and it is placed into service, the Armory Building will be used only for the purpose of operating as a regional history museum (the "Museum") with a focus on maritime heritage, whose exhibits and programs are devoted primarily to the history, culture, industry or commerce of the Puget Sound region and the Pacific Northwest, including ancillary purposes, unless Grantor consents to a change in such uses. Ancillary purposes shall include without limitation cafe and gift shop, administrative, storage, meetings, back of house operations and functions and events hosted, sponsored or permitted by Grantee or the operator of the Museum or uses permitted pursuant to the Ground Lease of even date herewith between Grantor and Grantee, a memorandum of which is recorded contemporaneously herewith.

2. Federal Deed Covenants. Grantee acknowledges that the Armory Building is subject to the covenants running with the land imposed by Quit Claim Deed from the United States of America, acting by and through the Department of the Navy, to Grantor, recorded on September 1, 2000 under AFN 20000901000377, records of King County Washington, and agrees to comply with all obligations imposed on the owner of the Armory Building thereunder.

3. Binding Nature of Covenants. The foregoing covenants are binding servitudes on Grantee, its heirs, successors and assigns, in perpetuity.

EXHIBIT C

JOINDER AGREEMENT

EXHIBIT C

JOINDER AGREEMENT

Joinder Agreement made and entered into this _____ day of ____________, 2009, by and between THE CITY OF SEATTLE (the "City"), a first class city organized under the laws of the State of Washington, THE HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation doing business as the Museum of History and Industry ("MOHAI") and ____________________, LLC ("Tax Credit Entity"), a Washington limited liability company.

RECITALS

The following facts and circumstances form the background of this Agreement:

1. The City and MOHAI executed the Project Development Agreement dated _______________, 2009 (the "Project Development Agreement") addressing the funding, design and construction of a regional history museum in the former Naval Reserve Armory Building in Lake Union Park.

2. Under the Project Development Agreement, the City and MOHAI commit to use their respective best efforts to secure federal historic rehabilitation tax credits for the museum project.

3. The Project Development Agreement also provides that if MOHAI has secured a firm commitment from a tax credit investor on terms reasonably acceptable to MOHAI, that a number of actions will be taken to access such credits, specifically including conveyance of the Armory Building to the Tax Credit Entity and the execution of a Joinder Agreement by the Tax Credit Entity under which the Tax Credit Entity joins in and assumes MOHAI's rights and obligations under the Project Development Agreement.

4. MOHAI has secured a firm commitment from the tax credit investor acceptable to it and, consequently, the City, MOHAI and the Tax Credit Entity wish to execute this Joinder Agreement as required under the Project Development Agreement.

AGREEMENTS

1. Joinder. The Tax Credit Entity hereby joins with the City and MOHAI, as a Party under the Project Development Agreement dated _______________, to the same extent and with the same effect as if the Tax Credit Entity had executed the Project Development Agreement as an original party thereto, and hereby assumes, jointly and severally with MOHAI, all of the rights and obligations of MOHAI under the Project Development Agreement, as well as any rights and obligations specifically reserved for the Tax Credit Entity per se under such Project Development Agreement.

2. No Release. Nothing in this Agreement shall be construed as a release of MOHAI from any of its obligations under the Project Development Agreement, and MOHAI hereby confirms and reaffirms its obligations under the Agreement.

EXHIBIT D

PROJECT TIMELINE

Major Milestones. The major milestones for development of the project are summarized below.

EXHIBIT E

CAPITAL BUDGET

EXHIBIT F

CITY IMPROVEMENTS TO LAKE UNION PARK

As part of the development of Lake Union Park Phase II, the City will make certain utility upgrades to the Amory Building utility infrastructure to facilitate the renovation of the Armory Building as a regional history museum. Except as noted herein, the City shall install all utilities as shown on the Lake Union Park Phase 2 "Construction Drawings" dated April 5, 2008.

* General Utility Upgrades: All new utilities will be installed underground.

* Water Supply Line: In lieu of the 3" service line shown on the drawing U-3.1 extending from the 6" meter adjacent to the existing pump house, the City shall install a new 6" water line (from the SPU meter to the Armory Building). The City has elected not to replace the existing 8" water main from Valley Street to the SPU meter. Responsibility for the maintenance of that line shall remain exclusively with the City.

* Water Meter: The SPU meter jointly serves the irrigation for the Park and the Armory Building. The Museum shall install its own sub-meter inside the Armory Building to allow the parties to monitor water usage by the Museum and shall cooperate on developing a mutually agreeable system for payment of water charges.

* Fire Hydrants: The two hydrants adjacent to the Armory Building will not be relocated as part of the Phase II work. The Museum plans to relocate both of these as part of the Armory Building renovation.

* Fire Department Connection: An existing Fire Department Connection (FDC) near the north end of Terry Avenue serves the north wharf area. This FDC will be re-located by the Museum. Final location will be approved by both the Parks Department and Seattle Fire Department.

* Sewer: Installation of a new sewer lift station and force main serving the Armory Building. In addition, the City shall install a side sewer stub that extends from the lift station under the Terry Avenue walk, capped, marked, and ready for the future tie-in by the Museum. Peak rate of sewer effluent from the Museum and pump capacity by the Park system will be coordinated between the Parks Department and Museum design teams.

* Electrical: Removal of all overhead lines and installation of a new underground vault servicing the Armory Building. The City shall install a new 1600A service serving the Armory Building. The panels serving the Armory Building shall be separately metered.

* Communications: The City shall install all communications infrastructure as shown on the Phase II plans including four (4) 4" conduits from Valley Street to the telecommunication manholes at the south side of the North Parking Lot. The use of two of these shall be reserved for the exclusive use of the Museum. The City shall also install four (4) 4" conduits and three (3) 2" conduits from the manholes on the south side of the North Parking Lot to a point within the Armory Building. The use of two of the 4" conduits and one of the 2" conduits shall be reserved for the exclusive use of the Museum.

EXHIBIT G

Agreement Regarding Assignment of Acquisition/Condemnation Proceeds (2.65 MB PDF document)

EXHIBIT H

FUNDRAISING PLAN (480 KB PDF document)

ATTACHMENT 2:

GROUND LEASE

FOR THE ARMORY BUILDING SITE

BY AND BETWEEN

CITY OF SEATTLE,

A WASHINGTON MUNICIPAL CORPORATION,

AS LANDLORD

________________________, A WASHINGTON _________________,

AS GROUND TENANT

AND

HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY,

A WASHINGTON NONPROFIT CORPORATION,

AS MOHAI

DATED: ____________, 20___

TABLE OF CONTENTS

Page

ARTICLE 1 DESCRIPTION OF THE PREMISES

1.1 Recitals 2

1.2 Lease of Premises 2

1.3 Tax Credit Structure 2

1.4 Expansion of Premises 3

1.5 Easements 3

1.5.1 Construction Easement 3

1.5.2 Parking Easement 3

1.5.3 Access Easement 4

1.5.4 Utility Easement 4

1.5.5 Drop Off Easement 5

1.6 Building Pile System and Wharfs 5

1.6.1 Maintenance and Reinforcement of Building Pile System 5

1.6.2 Loading Docks 6

1.6.3 Control, Maintenance and Management of Public Areas 6

1.7 Public Parking 7

1.8 As-Is Condition 7

1.9 Signage 7

1.10 Covenant and Warranty of Quiet Possession 7

ARTICLE 2 TERM

2.1 Term 8

ARTICLE 3 CONSIDERATION, PUBLIC BENEFITS AND EXPENSE ALLOCATION

3.1 Consideration 8

3.2 Redevelopment and Maintenance 8

3.3 Public Benefits 8

3.4 Maritime Heritage Group 9

3.5 Museum Operations 9

3.5.1 Hours of Operation and Public Access 9

3.5.2 Continuing Use of Montlake Facility 9

3.6 Property Operating Expenses 9

3.7 Real Estate Taxes 10

ARTICLE 4 USE OF PREMISES

4.1 Use of Premises 11

4.2 Prohibited Activities 12

4.3 Compliance with Laws 12

ARTICLE 5 ALTERATIONS

5.1 Alterations 12

5.2 Ownership of Armory Building and Alterations 12

5.3 Alteration Construction 13

5.4 Mechanic's Liens 13

ARTICLE 6 OPERATION, MAINTENANCE AND SUPPORT

6.1 Operation 13

6.2 Maintenance and Repair By Tenant Parties 14

6.3 Maintenance of Historic Features 14

6.4 Maintenance and Repair By City 14

6.5 Operating Support 15

6.6 Placement of Artifacts in the Park 15

6.7 Maritime Heritage Group 15

ARTICLE 7 ENVIRONMENTAL

7.1 Hazardous Substances 16

7.2 City Environmental Obligations 17

ARTICLE 8 MUSEUM PROPERTY

8.1 Museum Property 18

ARTICLE 9 DAMAGE AND DESTRUCTION

9.1 Repair and Rebuilding 18

9.2 City Rebuilding of Building Pile Systems and Wharfs 19

9.3 No City Liability 19

ARTICLE 10 CONDEMNATION

10.1 Taking 20

10.2 Termination for Material Interference 20

10.3 Taking Award 20

ARTICLE 11 ACCESS TO PREMISES

11.1 Access 21

ARTICLE 12 INSURANCE, WAIVER OF CLAIMS AND LIMITATION OF LIABILITY

12.1 Tenant's Liability Insurance 21

12.2 Premises Property Insurance 22

12.3 General Insurance Requirements 22

12.4 City Obligation to Insure Piles 22

12.5 Waiver of Recovery and Subrogation 22

12.6 Limitation of Tenant's Liability 23

12.7 Reallocation of Insurance Responsibilities 23

ARTICLE 13 INDEMNIFICATION

13.1 Tenant Parties Indemnification 23

13.2 City Indemnification 24

13.3 Joint, Comparative or Concurrent Negligence of Willful Misconduct 24

13.4 Waiver of Indemnity 24

ARTICLE 14 ASSIGNMENT AND SUBLETTING

14.1 Assignment and Subletting 25

ARTICLE 15 DEFAULT AND REMEDIES

15.1 Tenant Parties' Default 25

15.2 City's Remedies for Tenant Parties' Default 26

15.3 City Exigent Circumstances 27

15.4 City's Default 27

15.5 Tenant Parties' Remedies for City Default 27

15.6 Tenant Parties' Exigent Circumstances 28

ARTICLE 16 NOTICES

16.1 Notices 28

ARTICLE 17 MEMORANDUM OF AGREEMENT

17.1 Memorandum 29

ARTICLE 18 DISPUTE RESOLUTION

18.1 In General; Mediation 29

ARTICLE 19 MISCELLANEOUS

19.1 No Partnership 29

19.2 Successors 29

19.3 Severability 30

19.4 Integration and Amendments 30

19.5 Governing Law; Venue 30

19.6 No Waiver 30

19.7 Construction 30

19.8 Time 30

19.9 Cumulative Remedies 31

19.10 Authority 31

19.11 Consents and Approvals 31

19.12 Counterparts 31

19.13 Force Majeure 31

19.14 Exhibits 31

19.15 Limitation on Third Party Rights 31

19.16 Rights Reserved by City 31

19.16.1 Appearance, Size and Location of Lake Union Park 31

19.16.2 Traffic Regulation 32

19.16.3 Admission Charges 32

19.16.4 Rules and Regulation Promulgation 32

19.16.5 Days and Hours for Operations 32

19.16.6 Park Concessions 32

EXHIBIT A Legal Description of Premises

EXHIBIT B Description of Portions of Lake Union Park Burdened by the Easements

EXHIBIT C Depiction of Easements (except Utility Easement)

EXHIBIT D Depiction of Public Use Area

EXHIBIT E MOHAI Public Benefits

INDEX OF DEFINED TERMS

Page Page

Access Easement 4

Alterations 12

Armory Building 1

Building Pile System 1

City 1

City Default 27

City Parties 24

Claims 17

Construction Easement 3

Default 25

Development Agreement 1

Dispute 27

Drop Off Easement 5

Easements 3

Effective Date 2

Environmental Law 16

Federal Deed 1

Ground Tenant 1

Hazardous Substance 16

Historic Features 14

Historic Requirements 14

Historic Wharf 9

Lake Union Park 3

Laws 11

Lease 1

Maritime Heritage Group 15

Master Tenant 2

MOHAI 1

Museum 1

Museum Property 18

Opening Date 8

Operating Hours 4

Parking Easement 3

Parking Plan 3

Permitted Users 3

Premises 1

Project 1

Property Operating Expenses 10

Property Operation Activities 9

Public Benefits 8

Public Benefits Report 9

Public Use Area 6

Real Estate Taxes 10

Rebuilding 18

Rent 8

Superintendent 3

Support Payments 15

Taking 20

Tax Credit Compliance Period 2

Tenant Parties 1

Term 8

Terrace 3

Utility Easement 4

Wharfs 4

WSDOT 9

GROUND LEASE

This GROUND LEASE ("Lease"), dated as of ______________, 20___, is by and between [TAX CREDIT ENTITY], a Washington ___________________ ("Ground Tenant"), the HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation ("MOHAI"), and the CITY OF SEATTLE, a Washington municipal corporation ("City").

RECITALS

A. City is the owner of that certain improved parcel of real property located in the City of Seattle, King County, Washington legally described on, and also depicted on, Exhibit A hereto, together with all appurtenances, rights and privileges now belonging or appertaining thereto (the "Premises"). The historic Armory Building (the "Armory Building") is located on the Premises. City received the Premises and the Armory Building pursuant to that certain Quit Claim Deed from the United States of America, acting by and through the Department of the Navy, as grantor, to City, as grantee, recorded on September 1, 2000 under AFN 20000901000377, records of King County Washington (the "Federal Deed"). The Armory Building is built on a piling support system (the "Building Pile System").

B. MOHAI is a Washington nonprofit corporation that has operated the Museum of History and Industry in the Montlake area of Seattle for over fifty (50) years. MOHAI is being displaced from its current Montlake location due to the SR 520 expansion project and MOHAI and City have agreed that the Armory Building is a suitable and desirable site for MOHAI's relocation. Tenant Parties (as defined below) intend to operate a regional history museum as more particularly described in Exhibit E, Section 1 (the "Museum").

C. To facilitate obtaining certain historic rehabilitation tax credit financing for the rehabilitation of the historic Armory Building, which is the "Project" as defined in the Development Agreement (the "Project"), MOHAI has formed Ground Tenant, which is a subsidiary of MOHAI. MOHAI is currently the sole beneficial owner of Ground Tenant and controls its operations and activities. MOHAI is executing this Lease, not as the tenant but rather to evidence its agreement to provide, directly or indirectly, certain public benefits, generally as described in the Project's development principles, adopted pursuant to Resolution Number 31092, and more specifically described on Exhibit E hereto, and to agree to cause Ground Tenant to perform such public benefit obligations in addition to its other obligations hereunder. MOHAI and Ground Tenant are collectively called "Tenant Parties."

D. City and MOHAI are parties to that certain Project Development Agreement dated _____________, 2009 (as now or hereafter amended, the "Development Agreement"). Pursuant to the Development Agreement, City has agreed to convey the Armory Building to MOHAI, who will convey it to Ground Tenant (such conveyance, however, to be accomplished via direct deed from City to Ground Tenant) with a covenant that it be used only as a regional history museum.

E. Following completion of the Project and placement of the Armory Building into service, Ground Tenant will lease the Armory Building to "Master Tenant," an entity formed by a tax credit investor, who will in turn sublease the Armory Building to MOHAI. MOHAI will thereafter operate or cause to be operated the Museum in the Armory Building.

F. City believes it serves an important public function to have a vibrant and successful Museum at the Armory Building and to see that the Armory Building is maintained over time.

G. The parties have agreed that this Lease is in the best interests of all parties to facilitate the establishment and operation of the Museum in the new location at the Armory Building. Thus, the parties are entering into this Lease for the Premises on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, City, Ground Tenant and MOHAI agree as follows:

ARTICLE 1

DESCRIPTION OF THE PREMISES

1.1 Recitals. The above Recitals are hereby incorporated by this reference.

1.2 Lease of Premises. Consistent with the Development Agreement, this Lease becomes effective (the "Effective Date") on the date when the Armory Building is conveyed to the Ground Tenant. As of the Effective Date, City as landlord hereby leases to Ground Tenant as tenant, and Ground Tenant hereby leases from City, the Premises, subject to the obligations, terms, and conditions contained herein. The Premises consist of the land and the Building Pile System that supports the Armory Building, as legally described on Exhibit A hereto, and the associated appurtenant rights and easements only (including the easements described below) and do not include the Armory Building. Tenant Parties' right to use and occupy the Premises is subject to City's reserved rights in the Public Use Area as described in Section 1.6.3. The Armory Building has been separately conveyed to Ground Tenant contemporaneously herewith. The purpose of this Lease is to permit the Armory Building to remain on the Premises and to provide for the on-going rights and obligations of the parties with respect to the Armory Building and the Premises for the Term.

1.3 Tax Credit Structure. In addition to leasing the Armory Building to the Master Tenant, Ground Tenant will sublease the Premises to Master Tenant, both for terms exceeding thirty (30) years. Master Tenant will in turn sublease the Armory Building to MOHAI. Such structure is designed to comply with requirements for historic rehabilitation tax credits and must remain in effect during the period required under the Internal Revenue Code for such credits to be available for tax credit investors (the "Tax Credit Compliance Period").

1.4 Expansion of Premises. City is in the process of vacating Terry Avenue adjoining the Premises. When such vacation is complete, the portion of Terry Avenue to the centerline thereof adjoining the Premises shall automatically and without further action by the parties become part of the Premises. Following such vacation, Ground Tenant shall be permitted to construct, at its expense and consistent with City-approved plans and any applicable National Park Service requirements, a terrace on the west side of the Armory Building (the "Terrace" in such addition to the Premises.

1.5 Easements. To operate the Armory Building for Museum purposes, certain easements are required, as hereinafter described. Thus, City hereby grants and conveys to Tenant Parties, their successors and assigns, for the Term, the Construction Easement, the Parking Easement, the Access Easement, the Utility Easement and the Drop-Off Easement (collectively, the "Easements"), on the terms and conditions of this Lease. The memorandum of this Lease that is recorded on the Effective Date shall provide notice of these Easements. The Easements are located on and burden Lake Union Park, or portions thereof surrounding the Premises, owned by City, described on Exhibit B attached hereto, together with Terry Avenue adjoining the Premises and Lake Union Park.

1.5.1 Construction Easement. "Construction Easement" means an exclusive easement for construction staging activities in the North Parking Lot, which area is depicted on Exhibit C attached hereto. The Construction Easement area shall be reserved for the exclusive use by Tenant Parties, their agents, employees and contractors. Activities permitted in the Construction Easement area shall include parking of construction and contractor vehicles and storage of construction materials to be used in the Project. The Construction Easement shall commence on the date that MOHAI or Ground Tenant authorizes its contractor to proceed with construction of the Project, and terminate when the Project is complete and the Armory Building is placed in service.

1.5.2 Parking Easement. "Parking Easement" means a non-exclusive easement for vehicular parking (including disabled parking) and a secondary loading dock in the North Parking Lot, which area is depicted on Exhibit C attached hereto. The Parking Easement shall commence when the Construction Easement terminates. Permitted users of the Parking Easement shall include Tenant Parties, their invitees, licensees, employees, contractors, service providers and permitted subtenants and assignees ("Permitted Users"). Emergency vehicles shall be permitted access through the Parking Easement area. Tenant Parties' use of the Parking Easement area shall be consistent with the Lake Union Park parking plan that City's Superintendent of Parks and Recreation ("Superintendent") will develop in consultation with Tenant Parties and other interested parties (the "Parking Plan"). The initial Parking Plan shall be completed as provided in the Development Agreement and must be reasonably acceptable to Tenant Parties. The Parking Plan is subject to review and revision by the Superintendent, in consultation with Tenant Parties and other interested parties; any such revisions and any successor Parking Plans must be reasonably acceptable to Tenant Parties and must be consistent with the Parking Easement rights granted herein and Tenant Parties' rights to use of other parking resources under Section 1.7. The Parking Plan may allocate parking stalls for the exclusive use of Tenant Parties and other Lake Union Park tenants. There shall be no charge to Tenant Parties and the Permitted Users for parking and loading dock use in the Parking Easement and, if the Access Easement described below is gated or otherwise secured so as to restrict access to the Parking Easement area, Permitted Users of the Parking Easement shall be provided with a means of access through such gate or security system. MOHAI shall provide staff to regulate and coordinate vehicular access in and out of the North Parking Lot when either the Museum or the Museum cafe are open to the general public ("Operating Hours") to facilitate loading, special deliveries and disabled parking with respect to the use of the Museum only. Staffing shall not include providing personnel for any security or parking booth at a gated access point.

1.5.3 Access Easement. "Access Easement" means a non-exclusive easement for access in the area depicted on Exhibit C attached hereto. This right to access shall include all forms of access to the Premises, including access for Permitted Users and access for cars, vans, trucks, construction vehicles, bicycles and pedestrians. If the Access Easement is gated or otherwise secured so as to restrict access, Permitted Users of the Access Easement shall be provided with a means of access through such gate or security system.

1.5.4 Utility Easement. "Utility Easement" means a non-exclusive easement for all utilities (including electric, water, sewer, communications, cable and gas) serving or to serve the Premises and the Armory Building to provide utility service thereto. Ground Tenant shall be permitted to have a telecommunications provider(s) install its cables in the conduit in the Utility Easement. The Utility Easement shall be for the utilities in the locations where installed or relocated from time to time, which are in Terry Avenue adjoining the Premises and Lake Union Park and in the portions of Lake Union Park described on Exhibit B attached hereto.

City has previously installed water lines, electric services, sewer lines, conduits for communications, meters, fire department connections and hydrants and other utility facilities to serve the Premises, as described in the Development Agreement. City shall keep these utilities and related facilities installed in the Utility Easement area in good condition and repair at all times at City's sole cost and provide such utility service to the Premises. Notwithstanding the foregoing, Ground Tenant shall be responsible for the portion of the sewer line connecting from the side sewer stub into the Armory Building, and City is not responsible for the communications lines installed by a third party provider at the request of Ground Tenant.

Ground Tenant may install additional utilities and upgrade or repair utilities in the Utility Easement at its sole cost and with the prior written approval of the Superintendent, which approval shall not be unreasonably withheld or delayed. In doing such work, Ground Tenant shall not disturb the vegetation and topography and improvements on the property outside of the Utility Easement area. Upon completion of such reconstruction, maintenance, repair or other permitted activity, Ground Tenant shall immediately restore all disturbed topography and vegetation to their condition immediately prior to the initiation of such maintenance or repair and, as to the installation of any new utilities by Ground Tenant, Ground Tenant shall thereafter be responsible for their maintenance and repair.

Electrical service to the Armory Building shall be separately metered; water shall be submetered. Tenant Parties shall be responsible for utility charges for their usage. The parties recognize that electric service lines and service that serve the Wharfs and surrounding Lake Union Park are located within the Armory Building; such lines will remain on the Premises. City (by and through City Light) shall have the right to access as needed to maintain, repair and replace such electric lines and service (a) at all times to the Armory Building's electrical service room, which shall be accessible from outside the Building; and (b) to the Armory Building, provided that such persons are accompanied by appropriate MOHAI staff, during Operating Hours or any time, with or without MOHAI staff, if necessitated by an emergency or dangerous condition. Such access shall be conducted in such a way as to minimize interference with the operation of the Museum and activities in the Armory Building and City shall repair any damage caused by such access.

1.5.5 Drop Off Easement. "Drop Off Easement" means a nonexclusive easement for buses and other vehicles to pick up and drop off visitors to the Premises in the area depicted on Exhibit C attached hereto. Currently, the East Wharf and North Parking Lot are not configured to permit visitor drop off/pick up by school or tour bus. Therefore, Tenant Parties and other Permitted Users may utilize the Valley Parking Lot for such purpose on a non-exclusive basis. Tenant Parties acknowledge that the Valley Parking Lot is a temporary parking lot that may be removed as part of on-going Lake Union Park improvements. Before City were to remove the Valley Parking Lot or make it unavailable for Museum visitor drop off, City and Tenant Parties must agree on and implement a mutually acceptable plan to either: (a) extend the corner of the East Wharf so as to permit bus and other vehicles access to and turnaround from the North Parking Lot; or (b) otherwise provide for MOHAI's need for a bus drop-off. The parties agree to cooperate to develop, identify funding for and implement such a mutually acceptable plan if the need arises, recognizing that providing the Public Benefits described herein depends on having drop off arrangements reasonably acceptable to MOHAI.

1.6 Building Pile System and Wharfs.

1.6.1 Maintenance and Reinforcement of Building Pile System. Subject to the provisions of the Development Agreement regarding assessments of the Building Pile System at completion of shell and core construction and contemporaneously with the issuance of a certificate of occupancy for the Museum, and subject to the provisions of Section 9.3 and the qualifications below, from and after the time the Project is complete and a certificate of occupancy is issued for the Museum: (i) City will be responsible for the condition of the Building Pile System and for maintaining it in a safe and sound condition, capable of supporting the Armory Building for its use for Museum and related purposes for the duration of its use as such; and (ii) City will address, at no cost to Tenant Parties, any conditions that impair the ability of the Building Pile System to support the Armory for its intended use for Museum and related purposes for the duration of its use as such.

Notwithstanding the foregoing, with respect to any (a) alteration to the Armory Building or Premises that affect the Building Pile System; or (b) specific change or addition to exhibitry reasonably likely to affect the Building Pile System, either of which are undertaken after issuance of the certificate of occupancy for the Museum, Ground Tenant and the Superintendent shall reasonably determine the measures, if any, to be undertaken in conjunction with such alteration or exhibitry change or addition that are needed to enable the Building Pile System to continue to support the Armory Building for its intended use for Museum and related purposes. Ground Tenant shall at its expense, complete such measures as a component of its alteration or exhibitry change or addition described in clauses (a) or (b) above. Ground Tenant also will inform the Superintendent of any damage to the Building Pile System incurred during the construction of any alteration or exhibitry change or addition described in clauses (a) or (b) above, together with the measures it proposes to take to repair any such damage, which measures shall be subject to the Superintendent's reasonable approval. Ground Tenant will confirm that such repairs have been completed. All such measures or repairs shall be the property of City upon their completion and shall thereafter be considered part of the Building Pile System (and be maintained, repaired or replaced by City as required herein).

1.6.2 Loading Docks. Ground Tenant shall be entitled to locate and use its loading dock (including dumpsters) in the area located on the East Wharf as depicted on Exhibit B attached hereto. Ground Tenant shall also be entitled to locate and use its secondary loading dock in the North Parking Lot as also depicted on Exhibits B and C.

1.6.3 Control, Maintenance and Management of Public Areas. City shall be responsible for the maintenance, repair, replacement, management, regulation and programming of the Wharfs and other public portions of the Premises outside the Armory Building footprint (which footprint shall be deemed to include the concrete steps along and attached to the north side of the Armory Building and the loading dock on the east side of the Armory Building) and Terrace (collectively, the "Public Use Area"). The Public Use Area is depicted on Exhibit D hereto. City shall manage and operate the Public Use Area in a clean, safe and unobstructed manner consistent with the operation of the Museum. Loitering shall not be permitted in the Public Use Areas. Tenant Parties shall not obstruct members of the public from entering upon and using and enjoying the Public Use Area for park purposes except for occasional closures of the Wharfs for Museum events approved by City in advance, and except for temporary construction activities and fencing near the Armory Building in connection with the Project (in locations approved by the Parks Department Project Coordinator identified under the Development Agreement). City will not block or obstruct, or permit the blocking or obstruction of the Public Use Areas (including without limitation the loading docks described in the preceding section, the steps on the north side of the Armory Building and other points of ingress and egress from the Armory Building) or modify the Public Use Areas except for occasional, temporary obstructions for park events. Such obstructions shall not materially interfere with public access to the Museum or Tenant Parties' ability to use the Premises and the Armory Building for their intended purposes. City will consult with Ground Tenant to minimize any impacts from any temporary blockage or obstruction.

Neither Ground Tenant nor MOHAI shall have any responsibility or liability for the activities on the Wharfs or the condition thereof, unless and to the extent caused by Ground Tenant, MOHAI, or their employees or agents (as further provided in Section 13, Indemnity). In collaboration with MOHAI, the Superintendent shall develop and implement an expeditious procedure for providing MOHAI with the permits necessary for Tenant Parties to use or host the use of the Wharfs adjoining the Armory for MOHAI events on mutually acceptable terms and conditions.

1.7 Public Parking. In addition to the Parking Easement, visitors to the Museum and the Armory Building shall be permitted to use the Valley Parking Lot (depicted on Exhibit C) and other City owned, controlled and managed parking conveniently located for visitors to Lake Union Park and amenities located therein for parking pursuant to the Parking Plan on a basis no less favorable than City makes it available to other visitors to Lake Union Park.

1.8 As-Is Condition. Except as specifically required in the Development Agreement or in this Lease, City has no obligation to contribute to the cost of the Project, nor shall City be obligated to perform any construction or make any improvements in connection with the Project, except as provided in this Lease with respect to the Building Pile System. The acceptance of possession of the Premises by Ground Tenant on the Effective Date shall be conclusive evidence that Ground Tenant accepts the Premises in their then "as-is" condition, subject to City's obligation in the Development Agreement to provide a clean and empty building, free and clear of tenants and their personal property. Ground Tenant hereby acknowledges that City has made and makes no representations or warranties, express or implied, regarding the condition of the Premises or their suitability for the intended use. Ground Tenant confirms that it has had ample opportunity to inspect the Premises and is familiar with their condition.

1.9 Signage. Tenant Parties shall have the right to place informational and directional signage in Lake Union Park (but outside of the Premises) to inform the public about the location of and access to the Museum, with the Superintendent's prior written consent. Tenant Parties shall develop for the Superintendent's approval a signage plan for the installation of appropriate signage for the Museum within Lake Union Park (but outside of the Premises). In determining whether to approve such signage plan the Superintendent may consider, among other factors, Tenant Parties' needs for public awareness of the location of and access to the Museum; the signage needs of other Lake Union Park tenants and uses; the design, scale, placement and materials proposed for such signage; and compatibility of the proposed signage with other Lake Union installations. Tenant Parties may request modifications of the signage plan from time to time, such changes are also subject to the approval of the Superintendent.

The parties recognize that the Project will entail installation of a signage system for the Armory Building and Terrace, which system will be approved by the Superintendent pursuant to the Development Agreement. The signage system will support a continuing display of banners and signs advertising events and exhibits at the Premises and the presence of the Museum. Such banners and signs shall not be subject to approval by the Superintendent and need not conform to sign regulations for Lake Union Park, so long as they relate to the Museum and events and exhibits at the Museum. In addition, Tenant Parties may install temporary signage at the entrance to Lake Union Park on Valley Street, to advertise special events on the Premises, subject to the approval of the Superintendent as to size, location and content.

1.10 Covenant and Warranty of Quiet Possession. City covenants and warrants that Ground Tenant's peaceable and quiet occupation, use and enjoyment of the Premises shall not be disturbed by City or anyone claiming by or through City. City shall defend at its expense any third party claims asserted that would interfere with Ground Tenant's (and its permitted successors and assigns) right to such occupancy, use, and enjoyment of the Premises or City's title to the Premises.

ARTICLE 2

TERM

2.1 Term. All obligations of City, Ground Tenant and MOHAI hereunder shall commence and be binding on the parties as of the Effective Date. Ground Tenant shall be entitled to and shall take possession of the Premises upon the Effective Date. Thus, City shall have removed or caused to be removed all tenants, occupants and personal property in the Premises before the Effective Date. This Lease shall be and continue in full force and effect for a term (the "Term") that commences on the Effective Date and continues for approximately fifty-five (55) years, ending on __________, 20__, unless sooner terminated pursuant to the provisions hereof.

ARTICLE 3

CONSIDERATION, PUBLIC BENEFITS AND EXPENSE ALLOCATION

3.1 Consideration. During the Term, as consideration for this Lease, Tenant Parties shall at their expense (i) undertake the Project, including rehabilitation of the Armory Building for Museum purposes and the construction and installation of museum exhibits; (ii) maintain and operate the Armory Building as a Museum open to the public and in a condition suitable for Museum purposes; and (iii) maintain the Historic Features, all as further provided below. In addition, to support Ground Tenant's lease of the Premises, MOHAI shall provide or cause to be provided the Public Benefits and perform or cause to be performed the Museum Operation Activities, all as further provided below. "Rent" as used herein means the duties and obligations to be undertaken by Tenant Parties set forth in this Section 3.1 and as further detailed in Sections 3.2 through 3.7 below. The parties agree that there is no monetary consideration or monetary rent that is owed by Tenant Parties to City hereunder. Rather, the consideration for this Lease consists of the Public Benefits to be provided and the rehabilitation, maintenance and operation of the Armory Building at the expense of Tenant Parties as provided herein.

3.2 Redevelopment and Maintenance. Tenant Parties shall rehabilitate and redevelop the Armory Building to be suitable for Museum uses as provided in the Development Agreement. From and after the date the Armory Building is placed in service, the relocation of the Museum displays to the Armory Building and the opening of the Museum in the Armory Building to the public ("Opening Date"), Tenant Parties shall ensure that the Armory Building is maintained in good operating condition and state of repair and in a condition suitable for the Public Benefits to be provided, subject to the terms and conditions of this Lease as further described in Section 6.2 below. Tenant Parties shall also maintain the Historic Features as provided in Section 6.3 below.

3.3 Public Benefits. A central element of this Lease is the identification of and MOHAI's commitment to the ongoing provision of certain public benefits as described herein. In fulfillment of Tenant Parties' commitment, from and after the Opening Date, Tenant Parties shall operate or cause to be operated the Museum located in the Armory Building and shall perform or ensure the provision of certain "Public Benefits" identified in Exhibit E during the Term of this Lease, all at no cost to City. At the Superintendent's request from time to time throughout the Term, but no more frequently than annually, MOHAI will produce a report documenting the Public Benefits that MOHAI has provided during the designated time period (the "Public Benefits Report"). The Public Benefits Report shall include such information as the Superintendent may reasonably request but at a minimum shall contain a description of the benefits provided; the number of persons served, by date and age group, if known; and the value of any fee discounts or scholarships provided. In addition, on or before the Opening Date, MOHAI shall provide the Superintendent with a report documenting the public benefits provided during the last full year of its operations at its Montlake facility to use as a benchmark against future reporting.

3.4 Maritime Heritage Group. In addition to the Public Benefits identified in Exhibit E, from and after the Opening Date, MOHAI shall collaborate with City in its management of the Maritime Heritage Group, which will focus on cultural, educational and recreational maritimerelated activities at the "Historic Wharf" adjacent to the Premises and include from time to time Museum programming that links exhibits to visits to historic ships moored at the Historic Wharf.

3.5 Museum Operations.

3.5.1 Hours of Operation and Public Access. Notwithstanding the Public Benefits, the Armory Building will be open to the public only during regular hours of operation as determined by MOHAI but consistent with the requirements of Exhibit E. MOHAI may restrict access to the Armory Building as necessary for security purposes. MOHAI may close portions of the Armory Building to the public for offices, ancillary services, installation or repairs, as MOHAI deems necessary or desirable from time to time. MOHAI may use any portion of the Armory Building for its purposes when the Armory Building is not open to the general public. Nothing herein shall limit Tenant Parties' ability to regulate use of the cafe, restrooms or other facilities consistent with Museum security needs or to address unruly or inappropriate behavior.

3.5.2 Continuing Use of Montlake Facility. MOHAI may for some period of time maintain storage, office, public assembly and other space at the Montlake location as the transition to the Armory Building occurs. This use may continue until the Montlake facility is removed from service by the Washington State Department of Transportation ("WSDOT") or MOHAI has secured facilities fully replacing all of the facilities and functions provided at the Montlake facility on the Effective Date. Following the Opening Date, MOHAI shall pay all operations and maintenance costs for the Montlake facility during the time it continues to be occupied exclusively by MOHAI or on a pro rata basis with City if the use is shared between MOHAI and City. If the facility is not removed from service by WSDOT immediately upon MOHAI's vacation, the auditorium and other primary public assembly spaces within the Montlake facility shall be available for City Parks and Recreation Department-related uses as well as MOHAI uses (subject to WSDOT consent) and MOHAI and City shall develop a protocol for programming such spaces.

3.6 Property Operating Expenses. Ground Tenant and/or MOHAI shall bear all costs and expenses during the Term that are associated with the improvement, restoration, repair, remodeling, replacement, maintenance, operation, lease and management of the Armory Building and the Museum (the "Property Operation Activities") on an absolute net basis. Property Operation Activities shall exclude the improvement, restoration, repair, replacement, maintenance, operation and management of the Building Pile System and Wharfs. City is to bear no expenses of any kind with respect to the Premises, except as provided herein. "Property Operating Expenses" shall include, without any limitation, all costs and expenses associated with the following:

3.6.1 Insurance premiums and deductibles as required under this Lease or as Ground Tenant and/or MOHAI may elect;

3.6.2 All charges for public and private utility services, including but not limited to electricity, gas, heating, air conditioning, telephone and telecommunications service, garbage, janitorial services, sewer and water services;

3.6.3 Permits, licenses and certificates necessary for the Property Operation Activities;

3.6.4 Expenses incurred to comply with any Laws with respect to the operation of the Museum in the Armory Building (excluding expenses that are the responsibility of City under this Lease); and

3.6.5 Management, operation, repair, maintenance and restoration of the Armory Building to the extent required herein, including, without limitation, any of the building systems and their equipment and components.

As of the Effective Date, Tenant Parties shall be responsible for direct payment of all Property Operating Expenses accruing from and after the Effective Date as and when any such expenses are due. The parties shall cooperate to arrange for direct billing of all Property Operating Expenses from the service provider to Ground Tenant (to the extent practical; for example water service will be submetered from City's meter).

3.7 Real Estate Taxes. Ground Tenant shall bear all cost and expense of any taxes and assessments related to the Premises accruing during the Term, including without any limitation the following (collectively, "Real Estate Taxes"):

3.7.1 General real estate taxes levied against the Armory Building or taxes in lieu thereof;

3.7.2 Special assessments or taxes in the nature of improvement or betterment assessments;

3.7.3 Any taxes relating to operation of the Premises by MOHAI; and

3.7.4 All taxes on personal property and intangibles of Tenant Parties on or used in connection with the Premises.

As of the Effective Date, Tenant Parties shall be responsible for direct payment of all Real Estate Taxes accruing during the Term before any such taxes are delinquent, subject to the protest rights described below. The parties may agree to implement direct billing of all Real Estate Taxes to Ground Tenant or MOHAI, with appropriate notice to City. All Real Estate Taxes that are payable by Tenant Parties pursuant hereto for the tax year in which the Term commences, as well as during the year in which the Term expires, shall be prorated between City and Tenant Parties on an actual per diem basis. If any of the Real Estate Taxes that either of Tenant Parties is obligated to pay in whole or in part is permitted by law to be paid in installments, Tenant Parties may pay the taxes in installments. Any exemption for property tax, in lieu tax or leasehold excise tax will accrue to the benefit of Tenant Parties (i.e., it will have no obligation to pay such taxes under this Section 3.7 to the extent of such exemption).

Tenant Parties may contest the validity or amount, including the assessed valuation upon the Premises, of any Real Estate Taxes that they in good faith believe is excessive, improper or invalid. In such event, the payment thereof may be deferred during the pendency of such contest, if diligently prosecuted. City agrees to join at Tenant Parties' request in any such contest to the extent such joinder is a prerequisite to such prosecution under statute, regulation or administrative practice. In connection with a judicial or administrative challenge to any assessment, Tenant Parties may take advantage of any stay in collection available under statute, regulation, or court or administrative order or rules. Nothing herein contained, however, shall be so construed as to allow such items to remain unpaid for such length of time as shall permit the Premises, or any part thereof, to be sold by any governmental authority for the nonpayment of the taxes. Within thirty (30) days after the amount of such contested item is finally determined to be due, Tenant Parties shall pay the amounts so determined, together with any penalties, interest and expenses associated with such contest.

ARTICLE 4

USE OF PREMISES

4.1 Use of Premises. As provided in the Development Agreement, the deed conveying the Armory Building to Ground Tenant shall restrict the use of the Armory Building by Tenant Parties to Museum purposes (including the display of historic materials and artifacts, and cultural and special events), ancillary purposes (including cafe and gift shop), functions and events hosted or sponsored by Tenant Parties (including short term event rentals of three (3) consecutive days or less), and related office, educational, research, administrative, storage and back-of-house uses only. The use of the Premises shall be for purposes consistent with the use restrictions in such deed and shall comply with this Lease, any easements, covenants, restrictions (including those imposed by the Federal Deed), as well as all laws, statutes, ordinances, regulations, rules and other governmental requirements of any kind applicable to the Premises (hereinafter "Laws"). Although the Premises are located in a City park area managed by City's Department of Parks and Recreation, prohibitions on the serving and consumption of alcoholic beverages on the Premises shall not apply and Tenant Parties may permit alcoholic beverages to be served on the Premises (e.g., in the cafe and terrace and at events, but not on the Wharfs, unless pursuant to a Parks Department permit as described in Section 1.6.3 above), provided that Tenant Parties are responsible for seeing that all required liquor permits/licenses are obtained..

4.2 Prohibited Activities. Nothing shall be done by Tenant Parties or their officers, directors or employees upon or about the Premises that violates any Law. Tenant Parties will not do or keep anything in or upon the Premises that may prevent the obtaining of any insurance required under this Lease or carried with respect to the Premises or that may void any such insurance. Tenant Parties agree to adopt and implement a policy prohibiting any person, except for law enforcement officers and on-duty security personnel, from possessing firearms on the Premises or in the Armory Building.

4.3 Compliance with Laws. Tenant Parties shall be solely responsible, at their sole cost (as between Tenant Parties and City), for compliance with Laws affecting the design, construction and operation of the Armory Building and those affecting their use of the Premises throughout the Term. City agrees that Tenant Parties shall have the right to reasonably contest, at Tenant Parties' sole cost, any asserted or alleged violation of any Laws in the name of either of Tenant Parties, as Tenant Parties deem appropriate.

ARTICLE 5

ALTERATIONS

5.1 Alterations. "Alterations" are any alterations, additions or improvements made by Tenant Parties to the Armory Building. Tenant Parties may, from time to time, at their own cost and expense and without the consent of City make alterations to the Armory Building, except as provided below. Such alterations include, without limitation, the Project and the construction of the Terrace in the vacated portion of Terry Avenue that becomes part of the Premises. Notwithstanding the foregoing, Tenant Parties shall not make any alterations to the Armory Building or the Premises that affect the Building Pile System, the Wharfs or the Armory Building public entry and amenities (i.e., cafe and cafe restrooms) without City's prior written consent, which will not be unreasonably withheld. Changes to any exhibitry, whether fixed or temporary exhibits, are not subject to City review or approval provided they are not reasonably likely to affect the Building Pile System. Alterations to the Historic Features must be in compliance with Section 6.3. Tenant Parties may make any other alterations to the Armory Building, at their sole cost and expense, without City's consent.

5.2 Ownership of Armory Building and Alterations. Title to the Armory Building and any Alterations thereto constructed by Ground Tenant shall be vested in Ground Tenant until the expiration or earlier termination of this Lease, at which time the Armory Building, including all alterations thereto shall become the property of City, free and clear of all liens and encumbrances, without any obligation on the part of City to pay therefor. At City's request, Ground Tenant shall deliver a deed to the Armory Building to City confirming this transfer at the expiration or termination of this Lease, together with a complete set of all as-built or other building plans and all keys to the Armory Building and any other improvements on the Premises.

Subject to the terms of Section 9.1 relating to damage and destruction, upon expiration or earlier termination of the Term of this Lease, whether by lapse of time or otherwise (including any holdover period), Tenant Parties at their expense shall: (a) remove all of Tenant Parties' moveable, unaffixed personal property, goods and effects and those of all persons claiming under MOHAI from the Armory Building and the Premises; (b) to the extent required by City, remove all of its exhibitry and exhibitry-related casework, and (c) promptly and peacefully surrender the Armory Building and the Premises (including surrender of all Tenant Parties' improvements, alterations and additions installed in the Armory Building or on the Premises) in at least as good a condition as at the conclusion of the Project, reasonable wear and tear and casualty excepted. Any property left on the Premises more than thirty (30) days after the expiration or termination of the Term shall be deemed to have been abandoned and to have become the property of City to dispose of as City deems expedient and Tenant Parties shall be liable for all costs associated with the disposal of such property. Tenant Parties hereby waive all claims for damages that may be caused by City re-entering and taking possession of the Premises or removing and storing Tenant Parties' property as herein provided. No such reentry shall be considered or construed to be a forcible entry.

Notwithstanding the foregoing, nothing herein shall give City any right whatsoever to the Museum Property, as further provided in Section 8 below.

5.3 Alteration Construction. In conducting any construction work on the Premises, Tenant Parties shall cause all work to be done in a good and workmanlike manner and shall comply with or cause compliance with all Laws. Tenant Parties shall obtain or cause to be obtained and maintain in effect, as necessary, all building permits, licenses and other governmental approvals that may be required in connection with such work and such insurance as the Tenant Parties, in consultation with City, determine reasonable for the scope and scale of the work to be undertaken.

5.4 Mechanic's Liens. Tenant Parties shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature upon, or in any manner to bind, the interest of City in the Premises for any claim in favor of any person dealing with Tenant Parties, including those who may furnish materials or perform labor for any construction or repairs to the Premises. Each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to Ground Tenant by this Lease. Tenant Parties will pay or cause to be paid all sums payable by them on account of any labor performed or materials furnished in connection with any work performed on the Premises. Tenant Parties will discharge, by bond or otherwise, any mechanic's or materialman's lien filed against the Premises for work claimed to have been done for, or materials claimed to have been furnished to Tenant Parties, within sixty (60) days after filing. Tenant Parties shall indemnify, defend and hold City harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of City in the Premises or under the terms of this Lease.

ARTICLE 6

OPERATION, MAINTENANCE AND SUPPORT

6.1 Operation. Tenant Parties shall procure and maintain at their expense all permits and approvals that may be required for any use made of the Premises. Tenant Parties shall comply with the requirements of any Laws (i) regarding the condition of the Premises; or (ii) relating to the lawful use of the Premises. Tenant Parties shall conduct or cause to be conducted the Museum operations on the Premises in compliance with all terms and conditions of this Lease.

6.2 Maintenance and Repair By Tenant Parties. Ground Tenant, at its sole cost and expense (as between Ground Tenant and City), without cost or charge to or contribution by City, shall be responsible for and shall perform all improvements, repairs, replacements, restoration and maintenance to the Armory Building throughout the Term. Following completion of the Project, Ground Tenant shall at all times maintain the Armory Building in good operational order, condition and repair. If Ground Tenant fails to perform its obligations under this section following sixty (60) days' prior written notice (or such shorter period as may be necessitated by an emergency or dangerous condition, or such longer time as may be needed provided that Ground Tenant is diligently pursuing the necessary work) from City to Tenant Parties, City may perform such work and Tenant Parties shall be responsible for reimbursing City for the cost thereof.

Upon completion of the Project, Tenant Parties will provide City with a long-term maintenance plan for the Armory Building. Every five (5) years thereafter, Tenant Parties will provide City with a report on its performance against the plan during the preceding five (5) years, as well as an updated long-term maintenance plan. With the submission of each plan, Tenant Parties will demonstrate to City's reasonable satisfaction that they have or will have sufficient resources to meet their responsibilities identified in the long-term maintenance plan.

6.3 Maintenance of Historic Features. The Armory Building exterior contains certain historic elements and features (the "Historic Features"). The Historic Features are described in (i) the Federal Deed; and (ii) the Armory Building's landmark listings with the City of Seattle Landmarks Preservation Board and the National Register of Historic Places. Tenant Parties, at their sole cost and expense (as between Tenant Parties and City), without cost or charge to or contribution by City, shall be responsible for and shall perform all improvements, repairs, restoration and maintenance of the Historic Features throughout the Term required by and in compliance with the Historic Requirements. The "Historic Requirements" are those imposed by the Deed, the National Register of Historic Places and the City of Seattle Landmarks Preservation Board, all with regard to the Historic Features.

6.4 Maintenance and Repair By City. Subject to the provisions of Sections 1.6.1 and 9.2 and except as provided below, City, at its sole cost and expense (as between Ground Tenant and City), without cost or charge to or contribution by Ground Tenant, shall be responsible for and shall perform all improvements, repairs, replacements, restoration and maintenance to the Building Pile System and Wharfs throughout the Term in a manner that provides adequate support for the Amory Building and its use as contemplated by this Lease and in good, clean and safe condition compatible with Museum use.

Notwithstanding the foregoing, with respect to any measures or repairs with respect to the Building Pile System undertaken by Ground Tenant after issuance of a certificate of occupancy for the Museum pursuant to Section 1.6.1 in connection with (a) alterations to the Armory Building or Premises that affect the Building Pile System; or (b) specific changes or additions to exhibitry reasonably likely to affect the Building Pile System, such measures or repairs shall be considered part of the Building Pile System upon their completion (and be maintained, repaired or replaced by City as required herein).

6.5 Operating Support.

6.5.1 City will contribute on an annual basis by April 1 of each year during the Term the amount of Three Hundred Thousand Dollars ($300,000) to MOHAI (or, at MOHAI's direction, to Ground Tenant) to be used to help defray the costs of operating, maintaining and repairing the Armory Building (the "Support Payments"). MOHAI shall separately account for the Support Payments and shall use them solely to pay operating and maintenance expenses for the Armory Building. MOHAI shall keep complete and accurate records and books of account with respect to all expenditures from the Support Payments account and shall provide City with copies of relevant records reasonably promptly upon City request.

6.5.2 If City reasonably determines that Tenant Parties have failed to maintain the Armory Building in good condition and repair as measured by their performance under the maintenance plan described in Section 6.2 above, then City may withhold the Support Payments until such time as Tenant Parties complete the necessary maintenance and repairs. City will reimburse Tenant Parties for the cost of such maintenance and repairs, up to the total amount of the withheld Support Payments, upon Tenant Parties' presentation of an invoice therefor.

6.6 Placement of Artifacts in the Park. From time to time, MOHAI may request that certain of its artifacts be placed in the Lake Union Park surrounding the Armory Building or on the Wharfs. Such a request shall be in writing and accompanied by details of the nature and proposed location of the artifact and the plans for installation. If approved by City in its sole discretion, MOHAI shall be responsible for the cost of installation and maintenance of the artifact. The placement of such artifact in Lake Union Park or on the Wharfs shall be at the risk of MOHAI and City shall not be responsible for any damage to or loss of such artifact. Following installation, MOHAI may remove the artifact at its discretion.

6.7 Maritime Heritage Group. Pursuant to the Development Agreement, City has organized the Maritime Heritage Group among City, MOHAI and certain other maritime heritage organizations resident at South Lake Union. The Maritime Heritage Group is documented through agreements between the various organizations and City establishing the basis for an ongoing collaboration on cultural, educational and recreational maritimerelated activities. Through the Maritime Heritage Group, the parties envision an integrated Museum and historic ship visitor experience that enhances Lake Union Park and the Historic Wharf and encourages knowledge and support for the preservation of the region's diverse history, particularly including its maritime history. City, by and through its Superintendent, will be responsible for management, at City's expense, of the Maritime Heritage Group.

MOHAI will cooperate with the other maritime heritage participants in the Maritime Heritage Group and will participate in the Maritime Heritage Group. MOHAI will enter into collaborative agreements from time to time as desirable and appropriate with the Center for Wooden Boats, Northwest Seaport and the Virginia V Foundation (and with similar organizations in the event the foregoing named entities' presence at South Lake Union ends) relating to, among other things, marketing, programming and reasonable shared use of appropriate Museum facilities for public accommodations (such as ticketing, merchandizing and way-finding facilities).

ARTICLE 7

ENVIRONMENTAL

7.1 Hazardous Substances.

7.1.1 For the purposes of this Lease, (a) the term "Environmental Law" means any federal, state or local law, statute, ordinance, regulation or order pertaining to hazardous substances or materials, including without limitation those defined in this Section 7.1 as "Hazardous Substances;" and (b) the term "Hazardous Substance" means any hazardous or toxic substance, material or waste, pollutants or contaminants, as defined, listed or regulated now or in the future by any federal, state or local law, ordinance, code, regulation, rule, order or decree regulating, relating to or imposing liability or standards of conduct concerning, any Hazardous Substances, including without limitation, (i) chlorinated solvents, (ii) petroleum products or by-products, (iii) asbestos, (iv) polychlorinated biphenyls, (v) lead-based paint, and (vi) mold, fungus and other microbial matter.

7.1.2 Tenant Parties agree that:

(a) Neither Tenant Parties nor their employees, agents, contractors, assignees, subtenants, licensees or invitees will use, generate, manufacture, produce, store, release, discharge or dispose of on, under or about the Premises, or transport to or from the Premises, any Hazardous Substances except in such quantities as are typically used in connection with the construction, rehabilitation, operation and use of property of the similar sort for the uses permitted under this Lease and the Development Agreement, and then only in compliance with all Environmental Laws.

(b) Tenant Parties shall give prompt written notice to City of:

(i) Any proceeding or inquiry by any governmental authority known to Tenant Parties with respect to the presence or release of any Hazardous Substance on, in, about or from the Premises, Armory Building, Building Pile System or Wharfs, or relating to any loss or injury resulting from any Hazardous Substance, all caused or alleged to be caused by Tenant Parties or their employees, agents, contractors, assignees, subtenants or invitees;

(ii) All claims made or threatened by any third party in writing against Tenant Parties with respect to the Premises, Armory Building, Building Pile System or Wharfs relating to any loss or injury resulting from any Hazardous Substance caused or alleged to be caused by Tenant Parties;

(iii) Discovery after the Effective Date by Ground Tenant or MOHAI of any occurrence or condition on the Premises, Armory Building, Building Pile System or Wharfs that could cause them to be subject to any restrictions on occupancy or use under any Environmental Law; and

(iv) Any release of a Hazardous Substance on or from the Premises or the Armory Building by Tenant Parties.

(c) Excluded from all obligations of Tenant Parties under this Section 7.1 are any obligations, claims or liabilities arising out of the use or condition of or events occurring with respect to (i) the Building Pile System, Wharfs, Lake Union or surrounding City property or property in the vicinity, or out of the use thereof or the use of the Premises pursuant to the Maritime Heritage Group agreements (except for Tenant Parties' sole use) or members of the public, or (ii) Hazardous Substances existing on, under, in or about the Premises, the Building Pile System, the Wharfs, Lake Union or surrounding City property or property in the vicinity prior to the Effective Date unless arising in whole or in part from the Tenant Parties' conduct.

(d) Except as provided in Sections 7.2 and 13.1.2, Tenant Parties shall protect, indemnify, pay the defense costs of and hold harmless City Parties (as defined in Section 13.1.2) from any loss, damage, cost, expense, claim, suit, action, penalty or liability (collectively, "Claims"), including, without limitation, reasonable attorneys' fees and costs and the costs of any required or necessary repairs or cleanup of the Premises or the Armory Building and the implementation of any remediation or other plans required by any Environmental Law directly or indirectly arising out of or attributable to the presence, use, generation, manufacture, production, storage, release, discharge or disposal of a Hazardous Substance on, under or emanating from the Premises or the Armory Building (i) on or after the Effective Date and (ii) caused by Ground Tenant, MOHAI, their employees, agents, assignees, subtenants or licensees.

7.1.3 The indemnity provisions of this Section 7.1 shall survive expiration or termination of this Lease.

7.2 City Environmental Obligations.

7.2.1 City shall give prompt written notice to Ground Tenant of:

(a) Any proceeding or inquiry by any governmental authority known to City with respect to the presence or release of any Hazardous Substance on, in, about or from the Premises, Armory Building, Building Pile System or Wharfs;

(b) All claims made or threatened by any third party in writing against City with respect to the Premises, Armory Building, Building Pile System or Wharfs relating to any loss or injury resulting from any Hazardous Substance; and

(c) City's discovery of any occurrence or condition on the Premises, Armory Building, Building Pile System or Wharfs that could cause them to be subject to any restrictions on use under any Environmental Law.

Excluded from City's obligations under this Section 7.2 are any obligations, claims or liabilities arising out of the use or condition of the Armory on or after the Effective Date caused by Tenant Parties or their employees, agents, assignees, subtenants or licensees that are the responsibility of Tenant Parties under Section 7.1.2.

7.2.2 Except as provided in Sections 7.1 and 13.2, City shall protect, indemnify, pay the defense costs of and hold harmless Tenant Parties and their board members, officers, employees and agents from any Claims, including, without limitation, reasonable attorneys' fees, expenses and costs and the costs of any required or necessary repairs or cleanup of the Premises, Building Pile System and Wharfs and the implementation of any remediation or other plans required by any Environmental Law directly or indirectly arising out of or attributable to the presence, use, generation, manufacture, production, storage, release, discharge or disposal of a Hazardous Substance on, under or emanating from the Building Pile System, Wharfs or the Premises, or, to the extent caused by City, its employees, agents, assignees or licensees.

7.2.3 The indemnity provisions of this Section 7.2 shall survive expiration or termination of this Lease.

ARTICLE 8

MUSEUM PROPERTY

8.1 Museum Property. Notwithstanding anything in this Lease to the contrary, City shall have no interest in, lien on or right of any kind to any fixtures, display cases, exhibits, art, artifacts, personal property or the Museum collection located in or used in connection with the Armory Building, or on the Wharfs or in Lake Union Park ("Museum Property"), however installed or located in the Armory Building, the Wharfs, on the Premises or in Lake Union Park. All Museum Property shall be and remain at all times the property of MOHAI, Ground Tenant or the other owners thereof as the case may be. Notwithstanding the foregoing, if Tenant Parties fail to properly maintain (in accordance with the approval of the Superintendent granted under Section 6.6 above) any Museum Property installed or located on the Wharfs, in Lake Union Park, or in the Public Use Area following thirty (30) days' prior written notice (or such shorter period as may be necessitated by an emergency or dangerous condition) from City to Tenant Parties, such Museum Property shall be deemed abandoned and City may perform remove and dispose of the same, without recourse to Tenant Parties and Tenant Parties shall be responsible for reimbursing City for the cost thereof.

ARTICLE 9

DAMAGE AND DESTRUCTION

9.1 Repair and Rebuilding. If all or part of the Armory Building is damaged or destroyed, then Ground Tenant shall at their sole cost (as between City and Ground Tenant) complete the repair and rebuilding thereof (the "Rebuilding"), provided that: (a) Ground Tenant determines that such Rebuilding is economically, legally and operationally feasible; (b) sufficient insurance proceeds are available and/or Tenant Parties raise the costs of such repairs from private donations or other sources; and (c) the Rebuilding will be complete at least five (5) years before the end of the Term. Notwithstanding the foregoing, Ground Tenant shall in any event be required to repair or restore any damage and destruction to the extent necessary to bring the Armory Building and Premises into a safe and sanitary condition and to remove debris (although not to the condition required for occupancy). All Rebuilding shall be done in consultation with City and the plans therefor shall be subject to City's reasonable approval. Nothing herein shall require Tenant Parties to repair and restore damage to Museum Property.

If Ground Tenant will be restoring the Armory Building, then Ground Tenant shall apply for any permits or approvals required in connection with such Rebuilding diligently after the applicable insurance claims have been adjusted and proceeds thereof made available to Ground Tenant and other funding, if necessary, has been arranged, and after City has approved of the plans for Rebuilding. Ground Tenant shall commence Rebuilding promptly after issuance of such permits and approvals and thereafter diligently pursue completion of such Rebuilding.

If the Armory Building is not repaired or restored as provided herein, then this Lease shall terminate on a date mutually agreed by the parties, Tenant Parties and City shall cooperate in settling the loss with the insurance company and Tenant Parties agree to contribute to City all rights Tenant Parties have to all insurance proceeds (net of recovery costs (agreed by the parties to be reasonable third party costs for such recovery) and deductibles) for the loss of the Armory Building (excluding that received for Museum Property) as a result of such damage and destruction.

9.2 City Rebuilding of Building Pile Systems and Wharfs. Ground Tenant's obligation to restore as provided in Section 9.1 is subject to City's agreement to repair, restore or reconstruct as necessary the Building Pile System and Wharfs at its expense. Therefore, in planning for any Rebuilding, the parties shall work cooperatively together to expeditiously determine the feasibility and desirability of such Rebuilding and make plans for the same.

Further, if Ground Tenant decides to undertake to restore the Armory Building, then City shall restore and rebuilding the Building Pile System and Wharfs to the extent necessary to permit the restoration of the Armory Building for Museum purposes.

The obligation of City to restore the Building Pile System and Wharfs is in every instance limited to the amount of available insurance proceeds received by City (or made available by Tenant Parties if the parties agree under Section 12.7 to have Tenant Parties insure the Building Pile System and Wharfs) (together with the amount of any deductible attributable to the Building Pile Systems and Wharfs in excess of a commercially reasonable or available deductible) for the loss of the Building Pile System and Wharfs (and, if and to the extent that the same are self insured, then such self insurance shall be deemed to be in the amount of the full replacement cost of the Building Pile Systems and Wharfs).

9.3 No City Liability. In no event shall City be liable to Tenant Parties for destruction or damage by casualty to any of Museum Property, except for Claims for which City indemnifies Tenant Parties pursuant to Section 13.2 hereof.

ARTICLE 10

CONDEMNATION

10.1 Taking. "Taking" means a taking by condemnation or by the exercise of the power of eminent domain by a public or quasi-public authority or entity, whether or not there is a taking of title, or a conveyance in lieu thereof. If there is a taking of the entire Premises and the Armory Building, then this Lease shall terminate as of the earlier of the date title to the Premises is transferred or the date Ground Tenant is dispossessed by the Taking authority. City agrees not to exercise its eminent domain rights with respect to the Premises or the Armory Building during the Tax Credit Compliance Period.

City further agrees that in any Taking by City pursuant to its power of eminent domain that results in the termination of this Lease, the measure of the damages to Ground Tenant for the value of the Armory Building shall be the cost to replace such facility, meaning funds sufficient to pay for a substitute facility of at least equal size, function, and capacity.

10.2 Termination for Material Interference. If there is a Taking of part of the Premises or Armory Building that in Tenant Parties' reasonable judgment materially interferes with Tenant Parties' ability to use the Premises for the purposes set forth herein, which interference cannot be feasibly, economically, operationally or legally remediated, then Ground Tenant shall have the right to terminate this Lease by giving City notice of its election within sixty (60) days after the Taking. If this Lease is so terminated, then it shall terminate on the earlier of the date when title is transferred, the date Ground Tenant is dispossessed by the Taking authority or thirty (30) days following Ground Tenant's notice; provided that such termination shall in no event extinguish or diminish Ground Tenant's right under Section 10.3 to receive a portion of the award payable on account of the Taking.

If the Taking does not materially interfere with Tenant Parties' ability to operate the Premises for the purposes set forth in this Lease, then this Lease shall continue in full force and effect as to the part not taken, except that Ground Tenant need not operate a Museum or provide the Public Benefits in the space so taken.

10.3 Taking Award. The parties are entitled to the following portions of any award or settlement in lieu thereof payable on account of a Taking:

(a) City shall be entitled to all amounts attributable to the value of the land comprising the Premises; and

(b) Ground Tenant shall be entitled to receive:

(i) All amounts attributable to the value of the Armory Building provided that such funds are used for a replacement facility for a regional history museum in Seattle. Such replacement facility shall be of comparable scale and quality to the Armory Building Museum. MOHAI shall provide public benefits at the replacement facility consistent with those enumerated in Exhibit E for not less than the remaining term of this Lease or 40 years, whichever is longer. In selecting the location for a replacement facility, Tenant Parties shall give priority consideration to a leasehold interest in any suitable City-owned site or facility that City may propose for such purpose. The term of the MOHAI lease in any such City-owned site or facility shall be long enough to justify the investment that will be necessary to replace the Museum and in no event less than the remaining term of this Lease when the Armory Building is taken;

(ii) All amounts attributable Museum Property; and

(iii) Tenant Parties' relocation expenses.

If MOHAI has not started construction on a replacement facility for a regional history museum in Seattle within seven (7) years after the Taking and payment of the Taking proceeds to MOHAI (with such extensions as City may grant in its reasonable discretion), then the Taking proceeds described in Section 10.3(b)(i) above shall be contributed to City and MOHAI shall have no further claim to them. The provisions of this Section 10 shall survive expiration or termination of this Lease.

ARTICLE 11

ACCESS TO PREMISES

11.1 Access. City and City's agents, employees, and representatives shall have the right to access, enter and inspect the Premises and the Armory Building at any reasonable time during the Operating Hours or when Museum staff is on Premises to escort the inspector for the purpose of ascertaining the condition of the Premises or the Armory Building, monitoring compliance with this Lease or for any other purpose permitted under the terms of this Lease. City understands that Museum operating requirements prohibit unaccompanied, unsupervised access (including inspection), except as specifically provided herein. City, in its capacity as the landlord under this Lease, shall have the right to enter the Armory Building only upon reasonable prior notice to Tenant Parties. In exercising such rights, the parties shall cooperate and shall take all reasonable steps to avoid disruption or unnecessary interference with Tenant Parties' use and operations of the Premises.

ARTICLE 12

INSURANCE, WAIVER OF CLAIMS AND LIMITATION OF LIABILITY

12.1 Tenant's Liability Insurance. Tenant Parties, at their expense, shall purchase and keep in force during the Term Commercial General Liability insurance with limits of not less than Five Million and 00/100 Dollars ($5,000,000.00) combined single limit each occurrence, covering bodily injury to persons, including death, and damage to property. Such insurance shall provide coverage for Tenant Parties' premises and operations and contractual liability assumed in Article 13. Tenant Parties shall cause their Commercial General Liability insurer to name City as an additional insured under such insurance and such policy shall contain a severability of interests provision, a provision that the insurance provided to City as additional insured shall be primary to and not contributory with insurance maintained by City, and a provision that an act or omission of one of the insureds or additional insureds that would void or otherwise reduce coverage shall not reduce or void the coverage as to the other named and additional insureds.

12.2 Premises Property Insurance. Throughout the Term of this Lease, Tenant Parties shall maintain a standard form property insurance policy insuring City's and Tenant Parties' interests in the Armory Building (excluding Museum Property) against all risks of physical loss or damage (including earthquake and flood). The insurance required under this Section 12.2 shall provide coverage in an amount not less than one hundred percent (100%) of the replacement cost of the Armory Building with a commercially reasonable deductible or self-insured retention.

12.3 General Insurance Requirements. All of the insurance policies required to be maintained under Sections 12.1-.2 shall: (a) be issued by insurance companies authorized to do business in the State of Washington and having an A.M. Best's rating of not less than AVII, unless placed as a surplus line by an authorized Washington State surplus lines broker; (b) contain an endorsement requiring thirty (30) days' written notice from the insurance company to both parties before cancellation, non-renewal or change in the coverage, scope or amount of any policy; and (c) be written as primary policies, not contributing with and not supplemental to the coverage that other party may carry. Certificates of insurance evidencing that the insurance required under this section is in effect shall be delivered to City before any entry on the Premises by Tenant Parties, and shall be kept current throughout the Term. Such certificate shall reflect the status of City as additional insured (as to the insurance under Section 12.1), and shall provide for at least thirty (30) days advance notice to City in the event of cancellation. City and Tenant Parties shall assist and cooperate with any insurance company in the adjustment or litigation of all insurance claims arising under the insurance required by this Article. A certificate of demonstrating procurement of the required insurance, including an actual copy of the additional insured policy provision, shall be issued to The City of Seattle, P.O. Box 94669, Seattle, WA 98024-4669. However, the original certification shall not be mailed but sent either by facsimile transmission to (206) 470-1270 or emailed as an attachment in PDF format to riskmanagement@seattle.gov.

12.4 City Obligation to Insure Piles. City shall maintain or pay the allocated cost of standard form of property insurance, including earth movement, insuring against loss to the Building Pile System and the Wharfs. The insurance required under this Section 12.4 shall provide coverage in an amount not less than one hundred percent (100%) of the replacement cost of the Building Pile System and the Wharfs with a commercially reasonable deductible or self-insured retention.

Certificates of insurance evidencing that the insurance required under this Section 12.4 is in effect shall be delivered to Tenant Parties before any entry on the Premises by Tenant Parties, and shall be kept current throughout the Term. Such certificate shall provide for at least thirty (30) days advance notice to Ground Tenant in the event of cancellation. City and Tenant Parties shall assist and cooperate with any insurance company in the adjustment or litigation of all insurance claims arising under the insurance required by this Section 12.4.

12.5 Waiver of Recovery and Subrogation. City and Tenant Parties release and relieve the other from any liability they might otherwise have and waive their entire right of recovery for loss or damage to property located within or constituting a part or all of the Premises or the Armory Building to the extent that the loss or damage either (a) is actually covered by the injured party's property insurance, or (b) would have been covered by the property insurance the injured party is required to carry under this Article 12, whichever is greater. This waiver applies regardless of the cause or origin of the claim including without limitation loss due to the negligent acts or omissions of City or Tenant Parties, or their respective officers, directors, council members, employees, agents, contractors, invitees, Tenant Parties' assignees or subtenants. The parties shall have their property insurers endorse the applicable insurance policies to reflect the foregoing waiver of claims, provided however, that the endorsement shall not be required if the applicable policy of insurance permits the named insured to waive rights of subrogation on a blanket basis, in which case the blanket waiver shall be acceptable.

12.6 Limitation of Tenant's Liability. In no event shall City, its successors or assigns, have any recourse whatsoever for any damages payable, obligations assumed or indemnifications proffered by Tenant Parties under this Lease to (a) the Museum Property, endowment, archives or other property of MOHAI; (b) funds and pledges of funds raised by MOHAI for the Project or operation of the Museum; (c) proceeds, rents or other income derived, arising from or attributable to the Armory Building or Museum, excluding insurance or condemnation proceeds; or (d) any claims for relief related to the Armory Building or the Project, including claims arising under the insurance policies required to be carried under this Lease or actually carried by Tenant Parties, except as provided in Section 9.1 above. Under no circumstances shall City have any recourse whatsoever to Tenant Parties' officers, trustees, directors, agents, employees, contractor or licensees for any debt or obligation created by this Lease.

12.7 Reallocation of Insurance Responsibilities. Notwithstanding the allocations of responsibility to insure contained in Sections 12.112.4 above, the parties may by mutual agreement decide to reallocate such responsibilities, including having one or another party insure both the Building Pile System and Wharfs along with the Armory Building and allocating the cost thereof in an appropriate way among the parties. The parties will engage in good faith discussions, including consulting with their insurance professionals, to agree on the preferred arrangements for purchasing the insurance and sharing the cost thereof, which may change from time to time by mutual agreement. In addition, the parties may by mutual agreement amend the insurance requirements of this Lease from time to time as appropriate to address changes in insurance practices and the insurance needs of the parties consistent with their rights and obligations hereunder.

ARTICLE 13

INDEMNIFICATION

13.1 Tenant Parties Indemnification.

13.1.1 Subject to the waiver of recovery and subrogation in Section 12.5, Tenant Parties shall indemnify, pay the defense costs of and hold harmless City and its council members and employees from Claims for damages, costs, personal injury, death or for loss or damage to property that arise out of or relate to: (a) the acts or omissions of any of Tenant Parties, their employees, agents, contractors, affiliates or licensees in the development, improvement, operation, maintenance or use of the Premises or conduct of the Project; or (b) any breach or default by either of Tenant Parties in the performance of any obligation on Tenant Parties' part to be performed under this Lease.

13.1.2 This indemnity does not apply: (x) to Claims to the extent they are caused by the acts, omissions or misconduct of City Parties; or (y) to damages, claims, suits, actions or liabilities waived under Section 12.5. The term "City Parties" means City, its council members, agents, employees, contractors and licensees.

13.1.3 Subject to Section 13.3, the foregoing indemnity shall also include reasonable costs, expenses and attorneys' fees incurred in connection with any indemnified Claim or incurred by City in successfully establishing the right to indemnity. Tenant Parties shall have the right to assume the defense of any Claim subject to this indemnity. City agrees to cooperate fully with Tenant Parties and their counsel in any matter in which either Tenant Party elects to defend, provided that Tenant Parties promptly reimburse City for reasonable costs and expenses incurred in connection with its duty to cooperate.

13.2 City Indemnification.

13.2.1 Subject to the waiver of recovery and subrogation in Section 12.5, City shall indemnify, pay the defense costs of and hold harmless Tenant Parties and their officers, directors, trustees, agents, employees, contractors and licensees from Claims for damages, costs, personal injury, death or for loss or damage to property that arise out of or relate to the negligence or willful misconduct of City Parties in connection with the Premises, the Project or this Lease.

13.2.2 This indemnity does not apply: (y) to Claims to the extent they are caused by the acts or omissions or misconduct of the Tenant Parties, including their officers, directors, trustees, agents, employees, contractors, affiliates and licensees; or (z) to damages, claims, suits, actions or liabilities waived under Section 12.5.

13.2.3 Subject to Section 13.3, the foregoing indemnity shall also include reasonable costs, expenses and attorneys' fees incurred in connection with any indemnified Claim or incurred by Tenant Parties in successfully establishing the right to indemnity. City shall have the right to assume the defense of any Claim subject to this indemnity. Tenant Parties agree to cooperate fully with City and City's counsel in any matter in which City elects to defend, provided that City promptly reimburses Tenant Parties for reasonable costs and expenses incurred in connection with its duty to cooperate.

13.3 Joint, Comparative or Concurrent Negligence of Willful Misconduct. If the parties are determined to be jointly and severally liable in any action, then each party's duty to indemnify and defend shall be proportionate to such party's allocable share of joint, comparative or concurrent negligence or willful misconduct.

13.4 Waiver of Indemnity. City and Tenant Parties agree that the foregoing indemnities specifically include, without limitation, Claims brought by either party's employees against the any other party. THE FOREGOING INDEMNITIES ARE EXPRESSLY INTENDED TO CONSTITUTE A WAIVER OF EACH PARTY'S IMMUNITY UNDER WASHINGTON'S INDUSTRIAL INSURANCE ACT, RCW TITLE 51, TO THE EXTENT NECESSARY TO PROVIDE THE OTHER PARTY OR PARTIES WITH A FULL AND COMPLETE INDEMNITY FROM CLAIMS MADE BY EACH PARTY AND ITS EMPLOYEES, TO THE EXTENT OF THEIR NEGLIGENCE. CITY AND TENANT PARTIES ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF THIS ARTICLE WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 Assignment and Subletting. No party may directly or indirectly make or permit an assignment, transfer, sublease or other alienation of such party's rights or obligations under this Lease at any time without the prior written consent of the other parties. Although the Armory Building is not part of the Premises, Ground Tenant has informed City that, in the ordinary course of business for purposes consistent with normal Museum operations, Ground Tenant or MOHAI may sublet portions of the Armory Building or enter into licenses, concessions for a cafe and gift store, and permit short term event rentals (not to exceed three (3) consecutive days per event), which subleases shall be permitted hereunder. Nothing in this Section 14.1 shall change the requirements of Section 3.3 above under which Tenant Parties provide or cause to be provided certain Public Benefits as the operator of the Armory Building.

Further notwithstanding the foregoing, the following, in the event such actions are taken, shall be permitted assignments and subleases hereunder: (i) the lease of the Armory Building and sublease of the Premises to a Master Tenant and the Master Tenant's sublease of the Armory Building and Premises to MOHAI or such other entity as may be operating the Museum; (ii) the acquisition by Ground Tenant of Master Tenant or of the interest of Master Tenant in the various leases and subleases of the Premises and the Armory Building; (iii) the acquisition by MOHAI of Master Tenant or of the interest of Master Tenant in the various leases and subleases of the Premises and the Armory Building and the termination of the sublease to MOHAI; (iv) the acquisition by purchase or reorganization by MOHAI of Ground Tenant or of the interest of Ground Tenant in this Lease or the fee interest of the Ground Tenant in the Armory Building and the termination of this Lease and the various subleases of the Armory Building and the Premises; and (v) assignments or subleases to an entity affiliated with and under the control of either of Tenant Parties. ("Subleases" as used herein shall include all leases below this Lease, including subsubleases.)

ARTICLE 15

DEFAULT AND REMEDIES

15.1 Tenant Parties' Default. Each of the following constitutes a default by Tenant Parties under this Lease ("Default"):

15.1.1 Either of Tenant Parties transfers its rights and obligations under this Lease in contravention of Article 14;

15.1.2 Tenant Parties fail to perform or observe any covenant, provision or obligation of Tenant Parties under this Lease not specifically addressed in another section of this Section 15.1, including failure to perform the Public Benefits or Museum operations obligations under Sections 3.4 and 3.5, within ninety (90) days of the date of written notice of default from City (or if the breach requires longer than ninety (90) days to cure, either or both of Tenant Parties fail to start curing the default within ninety (90) days after receipt of written notice and to thereafter diligently prosecute the cure thereof to completion);

15.1.3 Tenant Parties vacate, abandon or cease to use the Premises or cause the Premises to be used for Museum operations for sixty (60) consecutive calendar days or longer, subject to excuse for force majeure reasons or periods of reconstruction following casualty or condemnation;

15.1.4 Either or both of Tenant Parties consolidates, dissolves or liquidates or takes an equivalent action or an involuntary case is commenced (other than by City) under any federal or state bankruptcy, reorganization, insolvency, moratorium or similar statute against either Tenant Party, or a custodian, receiver, trustee, assignee for the benefit of creditors or other similar official is appointed to take possession, custody, or control of the property of either Tenant Party unless such case, petition or appointment is dismissed, set aside or withdrawn or ceases to be in effect within ninety (90) days after the date such case is commenced or the date of said filing or appointment; or either Tenant Party becomes insolvent or admits in writing its inability to pay its debts as they mature, or commences any voluntary case or files any petition or action for relief relating to any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; or either Tenant Party makes an assignment for the benefit of creditors or enters into an agreement of composition with its creditors; or either Tenant Party fails generally to pay its debts as they become due; or either Tenant Party fails to have discharged promptly any judgment, execution, garnishment or attachment of such consequence as could impair the ability of either Tenant Party to carry on its operations or to fulfill its obligations under this Lease. Reorganization or dissolution of a Tenant Party not in the insolvency context but rather in the context of a restructuring of the entities as part of the tax credit process (either obtaining tax credits or winding down after the Tax Credit Compliance Period) shall not be an Event of Default hereunder.

15.1.5 A court enters an order, judgment or decree approving a petition filed against either or both of Tenant Parties seeking an arrangement, composition, liquidation, dissolution or similar relief under the present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors (other than at the instigation of City), and the order, judgment or decree remains unvacated or unstayed for one hundred twenty (120) days.

15.2 City's Remedies for Tenant Parties' Default. If a Default occurs , then the parties shall use the dispute resolution procedures set forth in Section 18 hereof. Subject to Section 18 hereof if applicable, upon the occurrence of a Default, City may do any one or more of the following:

15.2.1 After the end of the Tax Credit Compliance Period, which the parties anticipate to be five (5) years from and after the date the Project is completed and the Museum is placed in service, terminate this Lease upon one hundred eighty (180) days' prior written notice. Then and in any such event, the Armory Building and all improvements (excluding Museum Property) constructed or installed upon the Premises shall become the property of City without the necessity of any deed or conveyance from Ground Tenant to City;

15.2.2 Hold Ground Tenant liable for all other damages and reasonable expenses except attorneys' fees incurred by City in enforcing its remedies for any Default; and

15.2.3 Exercise any other legal or equitable right or remedy that it may have. Notwithstanding the foregoing, City may not elect to relet the Premises for its own or Ground Tenant's account or any other remedy that seeks to maintain Tenant Parties' obligation to pay or perform the Rent obligations hereunder after the date of termination of this Lease (which shall not in any event be before the end of the Tax Credit Compliance Period).

15.3 City Exigent Circumstances. Notwithstanding anything in Sections 15.2 to the contrary, if a Default by Tenant Parties has occurred that involves an imminent danger to public health or safety, then City shall not be required to exhaust all the dispute resolution procedures set forth in Section 18 before exercising its remedies under Sections 15.2 hereunder, but the parties shall nonetheless work together in good faith to try to resolve such dispute in accordance with such dispute resolution procedures.

15.4 City's Default. Each of the following constitutes a default by City under this Lease ("City Default"):

15.4.1 City fails to perform or observe any obligation of City under this Lease within ninety (90) days of the date of written notice from Ground Tenant (or if the breach requires longer than ninety (90) days to cure, City fails to start curing within ninety (90) days after receipt of written notice and thereafter to diligent prosecute such cure to completion).

15.5 Tenant Parties' Remedies for City Default. If a City Default occurs, then the parties shall use the dispute resolution procedures set forth in Section 18 hereof. If the mediation required pursuant to Section 18 hereof does not resolve the Dispute, then Tenant Parties may exercise any remedies available to it at law, including without limitation any one or more of the following:

15.5.1 Terminate this Lease upon one hundred eighty (180) days prior written notice. Then and in any such event, and the Armory Building and all improvements (excluding Museum Property) constructed or installed upon the Premises shall become the property of City without the necessity of any deed or conveyance from Ground Tenant to City;

15.5.2 Hold City liable for all other damages and reasonable expenses except attorneys' fees incurred by Tenant Parties in enforcing its remedies for any City Default;

15.5.3 Tenant Parties may cease or suspend the provision of some or all of the Public Benefits to the extent that the City Default makes it impossible or impractical to provide the same; and

15.5.4 Tenant Parties may exercise any other legal or equitable right or remedy that they may have.

15.6 Tenant Parties' Exigent Circumstances. Notwithstanding anything in Sections 15.5 to the contrary, if a City Default has occurred that involves an imminent danger to public health or safety, then Tenant Parties shall not be required to exhaust all the dispute resolution procedures set forth in Section 18 before exercising its remedies under Sections 15.5 or 15.6 hereunder, but the parties shall nonetheless work together in good faith to try to resolve such dispute in accordance with such dispute resolution procedures.

ARTICLE 16

NOTICES

16.1 Notices. All notices, demands or requests that may or are required to be given by one party to the other under this Lease shall be given in writing and delivered personally, or sent by U.S. certified mail, postage prepaid, return receipt requested, or nationally recognized overnight air carrier, and addressed to City's address or Tenant Parties' address, as follows:

City's address for notices: The City of Seattle

Dept. of Parks and Recreation

100 Dexter Avenue North

Seattle, WA 98109

Attn: Superintendent

With a copy to: The City of Seattle

Law Department

600 Fourth Avenue, 4th Floor

Seattle, WA 98104

Attn: Helaine Honig

Tenant Parties' address for notices: Museum of History and Industry

McCurdy Park

2700 24th Avenue East

Seattle, WA 98112-2099

Attn: Executive Director

With a copy to: K&L Gates LLP

925 Fourth Avenue

Suite 2900

Seattle, WA 98104

Attn: Gerry Johnson

Notices shall be deemed to have been given upon receipt or attempted delivery where delivery is not accepted. Either party may change its address and/or those receiving copies of notices upon written notice given to the other.

ARTICLE 17

MEMORANDUM OF AGREEMENT

17.1 Memorandum. This Lease shall not be recorded except as permitted in this Article 17. The parties shall promptly execute and record, at Ground Tenant's cost, a short form memorandum describing the Premises and stating the Term, the Effective Date and any other information the parties reasonably agree to include and/or necessary for any financing with respect to the Project.

ARTICLE 18

DISPUTE RESOLUTION

18.1 In General; Mediation. In the event of any dispute or difference that shall arise between the parties relating to the construction, meaning or effect of this Lease, or of the rights or liabilities of the parties hereunder, the parties shall first follow the procedures in this section before filing or initiating a lawsuit. The parties shall make their best efforts to resolve disputes as expeditiously as possible through negotiations at the lowest possible decision-making level, and in the event such negotiations are unsuccessful, the matter shall be referred to the Superintendent of City's Park and Recreation Department and the Executive Director of MOHAI or the manager of Ground Tenant. If those officials are unable to resolve the dispute within a period of fifteen (15) days after the matter has been formally referred to them for resolution, they shall meet during the immediately succeeding seven (7) days to select a mediator to assist in the resolution of such dispute. Tenant Parties and City agree to participate in mediation with the agreed upon mediator for a reasonable amount of time and in good faith. The cost of the mediation shall be shared equally between Tenant Parties and City.

ARTICLE 19

MISCELLANEOUS

19.1 No Partnership. Nothing contained in this Lease shall create any partnership, joint venture or other relationship between Tenant Parties and City. It is the intent of the parties that this Lease creates a leasehold estate in the Premises and that the relationship of the parties hereunder is that of landlord and tenant only.

19.2 Successors. This Lease shall bind and inure to the benefit of City, its successors and assigns, Tenant Parties and their successors and assigns.

19.3 Severability. If any provision of this Lease is determined to be invalid or unenforceable, then that provision and the remainder of this Lease shall continue in effect and be enforceable to the fullest extent permitted by law. It is the intention of the parties that if any provision of this Lease is capable of two constructions, one of which would render the provision void, and the other of which would render the provision valid, then the provision shall have the meaning that renders it valid.

19.4 Integration and Amendments. Together with the Development Agreement, this Lease contains the entire integrated agreement between the parties as to the matters covered herein and supersedes any oral statements or representations or prior written matter not contained in this instrument as to the matters set forth herein. This Lease shall not be modified except by a written document signed by City and Tenant Parties (or their successors in title) upon passage of an ordinance by the City Council.

19.5 Governing Law; Venue. This Lease shall be governed by and construed and enforced in accordance with the laws of the State of Washington.

19.6 No Waiver. Failure of either party to complain of any act or omission on the part of the other, no matter how long the failure may continue, shall not constitute a waiver of any rights under this Lease. No waiver by any party of any breach of any provisions of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of any other provision. If any action of any party requires the consent or approval of another, consent or approval given on one occasion shall not be deemed a consent to or approval of that action on any other occasion. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

19.7 Construction. The following rules shall apply to the construction of this Lease unless the context otherwise requires:

(a) Words describing the singular number shall include the plural number and vice versa, except where otherwise indicated.

(b) All references herein to particular articles, sections or exhibits are references to articles, sections or exhibits of this Lease, unless otherwise expressly stated.

(c) The headings and table of contents herein are solely for convenience of reference and shall not constitute a part of this Lease nor shall they affect its meaning, construction or effect.

(d) This Lease shall not be construed as if it had been prepared by one of the parties, but rather as if all parties had prepared it.

19.8 Time. Time is of the essence of every provision of this Lease.

19.9 Cumulative Remedies. The rights and remedies that either party may have under this Lease or at law or in equity, upon any breach, are distinct, separate and cumulative and shall not be deemed inconsistent with each other, and no one of them shall be deemed to be exclusive of any other.

19.10 Authority. Each party hereto warrants that it has the authority to enter into this Lease and to perform its obligations hereunder and that all necessary approvals, acts or resolutions to authorize this transaction have been taken, and the signatories, by executing this Lease, warrant that they have the authority to bind the respective parties.

19.11 Consents and Approvals. In any instance when either party's consent or approval is required under this Lease, such consent or approval shall not be unreasonably withheld, conditioned or delayed. No permission, consent, or approval of City contained herein or given pursuant to this Lease is, or shall be construed as, a representation or assurance that the matter consented to or approved complies with applicable Laws, nor shall any such consent or approval be construed to authorize any failure to comply with such Laws. No action of the Superintendent in implementation of this Lease shall constitute or excuse any official action by any other City department or official that may be required by law, ordinance, rule or regulation.

19.12 Counterparts. This Lease may be executed in counterparts for the convenience of the parties, and such counterparts shall together constitute one Lease.

19.13 Force Majeure. Except as otherwise expressly provided in this Lease, time periods for any party's performance under any provisions of this Lease shall be suspended for periods of time during which such performance is prevented due to circumstances beyond such party's reasonable control, including without limitations, strikes, embargoes, shortages of labor or materials, governmental regulations, acts of God, unforeseen site conditions, casualty, war or other strife.

19.14 Exhibits. Exhibits A through E attached hereto are hereby incorporated herein and made a part of this Lease, and the term "Lease" shall include all exhibits hereto.

19.15 Limitation on Third Party Rights. Nothing in this Lease expressed or implied is intended or shall be construed to give to any person other than City or Tenant Parties any legal or equitable right, remedy or claim under or in respect of this Lease or any covenant, condition or provision herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of City and Tenant Parties.

19.16 Rights Reserved by City. City reserves the right to do the following, without liability of any kind, so long as such actions do not substantially interfere with Tenant Parties' rights under this Lease or their ability to operate the Museum and provide the Public Benefits:

19.16.1 Appearance, Size and Location of Lake Union Park. Increase, reduce, and change in any manner whatsoever the number, appearance, dimension, and locations of Lake Union Park walks, buildings, landscaping, parking, and service areas, and make improvements, alterations, and additions to the portions of the Premises that are located outside of the Armory Building footprint.

19.16.2 Traffic Regulation. Regulate all traffic within and adjacent to the Lake Union Park.

19.16.3 Admission Charges. Impose a reasonable charge for use of facilities (other than the Museum) within Lake Union Park, including parking facilities.

19.16.4 Rules and Regulation Promulgation. Promulgate, from time to time, reasonable rules and regulations regarding the use and occupancy of any area of Lake Union Park; provided that no such rule or regulation that would directly or indirectly affect any right granted to MOHAI by this Lease shall be promulgated without City having given prior written notice of such action to MOHAI and at least thirty (30) days to comment on such proposed action unless such promulgation is because of a declared emergency.

19.16.5 Days and Hours for Operations. Determine the hours Lake Union Park will be open to the public. Nevertheless, regardless of park hours, City cannot restrict or block access to the Premises and Armory Building (recognizing that the Museum may be operating on different hours than when the park is open).

19.16.6 Park Concessions. Determine the size, number, type and identity of concessions and operations being conducted or undertaken at Lake Union Park other than in the Armory Building.

[signatures on next page]

IN WITNESS WHEREOF, this Lease is executed on the day and year first above written.

City:

CITY OF SEATTLE, a Washington municipal corporation

By:

Name:

Title:

Approved as to form:

_____________________________

City of Seattle Assistant City Attorney

Ground Tenant:

[TAX CREDIT ENTITY], a Washington ______________

By:

Name:

Title:

MOHAI:

HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation

By:

Name:

Title:

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 s/he signed this instrument, on oath stated that s/he was authorized to execute the instrument and acknowledged it as the ______________________ of the City of Seattle, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.

Dated: ________________________

(Seal or stamp)

(Signature)

(Printed Name)

Notary Public

My appointment expires

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 s/he signed this instrument, on oath stated that s/he was authorized to execute the instrument and acknowledged it as the ______________________ of [Ground Tenant], a Washington _____________, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.

Dated: ________________________

(Seal or stamp)

(Signature)

(Printed Name)

Notary Public

My appointment expires

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 s/he signed this instrument, on oath stated that s/he was authorized to execute the instrument and acknowledged it as the ______________________ of the Historical Society of Seattle and King County, a Washington nonprofit corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.

Dated: ________________________

(Seal or stamp)

(Signature)

(Printed Name)

Notary Public

My appointment expires

EXHIBIT A

Legal Description of Premises

Lots 9 through 12, inclusive, Block 74, all in Lake Union Shore Lands,

Situate in the City of Seattle, County of King, State of Washington.

Together with the eastern one-half of Terry Avenue adjoining the foregoing described property, upon the vacation thereof by the City of Seattle.

Depiction of Premises on continuation of Exhibit A attached. (109 KB PDF document)

EXHIBIT B

Description of Portions of Lake Union Park Burdened by the Easements (130 KB PDF document)

EXHIBIT C

Depiction of Easements (except Utility Easement) (144 KB PDF document)

EXHIBIT D

Depiction of Public Use Area (129 KB PDF document)

EXHIBIT E

MOHAI Public Benefits

The Museum of History and Industry is committed to preserving and sharing the rich and diverse history of Seattle and its region with residents of and visitors to the city as well as to presenting exhibits and programs from institutions around the country that illuminate our shared national heritage. In partial consideration for the public support for the development of its new regional history museum at the Armory Building in Seattle's Lake Union Park and in fulfillment of its mission and ongoing commitment to the community, Ground Tenant and MOHAI (which for purposes of this Exhibit shall include any successor operator of the Museum) agrees that from and after the Opening Date of the Museum through the Term of the Lease, it will:

1. Regional History Museum. Cause the Armory Building to be operated as an integrated, publicly accessible regional history museum with exhibits and programs devoted primarily to the history, culture, industry, commerce and maritime heritage of the Puget Sound region and the Pacific Northwest, including related space for meeting and educational functions, book store/gift shop and cafe.

2. Opening Hours and General Admissions. Operate the Museum in the Armory Building at least fifty (50) hours per week, fifty (50) weeks per year, subject to the following admissions policy:

(a) General public admission will be subject to reasonable standard admission charges;

(b) Every day the Museum is open, any member of the public unable to pay the standard admission fee will be admitted (excluding special events) upon payment of whatever amount he or she determines he or she can pay. MOHAI will include this policy in its written admissions policies, including indication of this policy on its website;

(c) At least one (1) day per calendar month will be regularly scheduled when admission to the Museum (excluding special events) is free of charge to all visitors; and

(d) Children of elementary and middle school age (fourteen (14) years or younger) will be admitted free of charge every day the Museum is open. This excludes school and group admissions and special events.

3. School Programs. Develop and offer on-going educational programs for elementary, middle and high school classrooms and provide reduced fee and other scholarship assistance to students from schools that participate in federal free or reduced price school lunch programs. In the event regional or other programs provide scholarship or transportation benefits to students from schools, MOHAI will participate in such programs.

4. Cultural Diversity in Programming. Develop and implement programs and enrichment opportunities of interest to particular segments of the public by ensuring a robust slate of culturally diverse programming throughout the year, consistent with its traditional role in sharing and presenting the history of African Americans, Asian and Pacific Islander Americans, Hispanic Americans, Native Americans and others. To this end, MOHAI's programs and exhibits will incorporate the perspectives and stories of the entire Seattle community.

5. City Use. Make the Museum available for up to four public events each year, identified by City and scheduled to the mutual convenience of the parties. Such events cannot unreasonably interfere with the operation of the Museum. The group sponsoring such events must be either City or an organized nonprofit corporation and such event sponsor must execute a use agreement required by Tenant Parties including appropriate indemnities and agreement to pay for costs as hereafter described. There shall be no facility rental fee for such events, but MOHAI shall be compensated for (and may required advance payment of) audio/visual, after hours or special security or staffing, catering and other event special needs and costs, if MOHAI elects to provide the same. MOHAI will also allow City to make occasional use of the Terrace for events in Lake Union Park, subject to the terms and conditions for the four events described in this paragraph.

6. Meeting Space. Provide meeting room space for noncommercial use by South Lake Union community organizations for up to thirty (30) hours per month on a first-come, first-served basis, during hours when the Museum is open to the public, and subject to demand for such meeting space, MOHAI's rules regarding use of such space and MOHAI's scheduling convenience and execution of use agreements required by Tenant Parties (including appropriate indemnities and agreement to pay for costs as hereafter described). The parties recognize that separate, dedicated meeting space will not be included in the Project design and such meetings would need to occur in Museum areas that also serve other functions. There shall be no facility rental fee for such meetings, but MOHAI shall be compensated for (and may require advance payment of) audio/visual, special security or staffing, special set up and other event special needs and costs, if MOHAI elects to provide the same. MOHAI shall publicize the availability of such meeting space by, at a minimum, posting notice thereof in a prominent position on its website.

7. Public Restrooms. Make available for public use restrooms in the cafe to be located in the Armory Building during Operating Hours without requiring payment of Museum admission charges.

8. City Staff Work Space. Make available work space for regular use by City staff during Operating Hours or when Museum staff is on Premises in connection with the operation and maintenance of the Lake Union Park and the Maritime Heritage Group.

9. Publicly Accessible Cafe. Design and cause the cafe to be operated so as to serve not only the Museum but Lake Union Park users generally. The cafe's open hours (if less than normal Museum open hours, exclusive of special events) and access policies (if any) shall be subject to the review and approval of the Superintendent, which consent shall not be unreasonably withheld.

10. Emergency Use. Tenant Parties acknowledge that Lake Union Park and the Armory Building have been designated as "Tier 2 Sheltering Sites" in City's Emergency Response Plan and that use of the Armory Building for Museum purposes may be impacted in the event of a declared emergency. City and Tenant Parties shall develop a protocol concerning any such use, providing for management of the Premises during a declared emergency and City responsibility for any cost, damage or liability associated with such use.

-ii P:\SJS\SJS2V1

ATTACHMENT 3:

LEASE

FOR THE ARMORY BUILDING AND SITE

BY AND BETWEEN

CITY OF SEATTLE,

A WASHINGTON MUNICIPAL CORPORATION,

AS LANDLORD

MOHAI

HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY,

A WASHINGTON NONPROFIT CORPORATION,

AS TENANT

DATED: ____________, 20___

TABLE OF CONTENTS

Page

ARTICLE 1 DESCRIPTION OF THE PREMISES

1.1 Recitals 2

1.2 Lease of Premises 2

1.3 Intentionally Deleted 2

1.4 Expansion of Premises 2

1.5 Easements 2

1.5.1 Construction Easement 3

1.5.2 Parking Easement 3

1.5.3 Access Easement 3

1.5.4 Utility Easement 3

1.5.5 Drop Off Easement 4

1.6 Building Pile System and Wharfs 5

1.6.1 Maintenance and Reinforcement of Building Pile System 5

1.6.2 Loading Docks 5

1.6.3 Control, Maintenance and Management of Public Areas 5

1.7 Public Parking 6

1.8 As-Is Condition 6

1.9 Signage 6

1.10 Covenant and Warranty of Quiet Possession 7

ARTICLE 2 TERM

2.1 Term 7

2.2 Extension Option 7

ARTICLE 3 CONSIDERATION, PUBLIC BENEFITS AND EXPENSE ALLOCATION

3.1 Consideration 8

3.2 Redevelopment and Maintenance 8

3.3 Public Benefits 8

3.4 Maritime Heritage Group 8

3.5 Museum Operations 9

3.5.1 Hours of Operation and Public Access 9

3.5.2 Continuing Use of Montlake Facility 9

3.6 Property Operating Expenses 9

3.7 Real Estate Taxes 10

ARTICLE 4 USE OF PREMISES

4.1 Use of Premises 11

4.2 Prohibited Activities 11

4.3 Compliance with Laws 11

ARTICLE 5 ALTERATIONS

5.1 Alterations 12

5.2 Ownership of Alterations 12

5.3 Alteration Construction 12

5.4 Mechanic's Liens 13

ARTICLE 6 OPERATION, MAINTENANCE AND SUPPORT

6.1 Operation 13

6.2 Maintenance and Repair By MOHAI 13

6.3 Maintenance of Historic Features 14

6.4 Maintenance and Repair By City 14

6.5 Operating Support 14

6.6 Placement of Artifacts in the Park 15

6.7 Maritime Heritage Group 15

ARTICLE 7 ENVIRONMENTAL

7.1 Hazardous Substances 15

7.2 City Environmental Obligations 17

ARTICLE 8 MUSEUM PROPERTY

8.1 Museum Property 18

ARTICLE 9 DAMAGE AND DESTRUCTION

9.1 Repair and Rebuilding 18

9.2 City Rebuilding of Building Pile Systems and Wharfs 19

9.3 No City Liability 19

ARTICLE 10 CONDEMNATION

10.1 Taking 19

10.2 Termination for Material Interference 19

10.3 Taking Award 20

ARTICLE 11 ACCESS TO PREMISES

11.1 Access 20

ARTICLE 12 INSURANCE, WAIVER OF CLAIMS AND LIMITATION OF LIABILITY

12.1 MOHAI's Liability Insurance 21

12.2 Premises Property Insurance 21

12.3 General Insurance Requirements 21

12.4 City Obligation to Insure Piles 22

12.5 Waiver of Recovery and Subrogation 22

12.6 Limitation of Tenant's Liability 22

12.7 Reallocation of Insurance Responsibilities 22

ARTICLE 13 INDEMNIFICATION

13.1 MOHAI's Indemnification 23

13.2 City Indemnification 23

13.3 Joint, Comparative or Concurrent Negligence of Willful Misconduct 24

13.4 Waiver of Indemnity 24

ARTICLE 14 ASSIGNMENT AND SUBLETTING

14.1 Assignment and Subletting 24

ARTICLE 15 DEFAULT AND REMEDIES

15.1 MOHAI's Default 25

15.2 City's Remedies for MOHAI's Default 26

15.3 City Exigent Circumstances 26

15.4 City's Default 26

15.5 MOHAI's Remedies for City Default 26

15.6 MOHAI's Exigent Circumstances 27

ARTICLE 16 NOTICES

16.1 Notices 27

ARTICLE 17 MEMORANDUM OF AGREEMENT

17.1 Memorandum 28

ARTICLE 18 DISPUTE RESOLUTION

18.1 In General; Mediation 28

ARTICLE 19 MISCELLANEOUS

19.1 No Partnership 28

19.2 Successors 28

19.3 Severability 29

19.4 Integration and Amendments 29

19.5 Governing Law; Venue 29

19.6 No Waiver 29

19.7 Construction 29

19.8 Time 29

19.9 Cumulative Remedies 30

19.10 Authority 30

19.11 Consents and Approvals 30

19.12 Counterparts 30

19.13 Force Majeure 30

19.14 Exhibits 30

19.15 Limitation on Third Party Rights 30

19.16 Rights Reserved by City 30

19.16.1 Appearance, Size and Location of Lake Union Park 30

19.16.2 Traffic Regulation 31

19.16.3 Admission Charges 31

19.16.4 Rules and Regulation Promulgation 31

19.16.5 Days and Hours for Operations 31

19.6.6 Park Concessions 31

EXHIBIT A Legal Description of Premises

EXHIBIT B Description of Portions of Lake Union Park Burdened by the Easements

EXHIBIT C Depiction of Easements (except Utility Easement)

EXHIBIT D Depiction of Public Use Area

EXHIBIT E MOHAI Public Benefits

INDEX OF DEFINED TERMS

Page Page

Access Easement 3

Alterations 12

Armory Building 1

Building Pile System 1

City 1

City Default 26

City Parties 23

Claims 16

Construction Easement 3

Default 25

Development Agreement 1

Dispute 26

Drop Off Easement 4

Easements 2

Effective Date 2

Environmental Law 15

Extension Term 7

Federal Deed 1

Hazardous Substance 15

Historic Features 14

Historic Requirements 14

Historic Wharf 9

Lake Union Park 2

Laws 11

Lease 1

Maritime Heritage Group 15

MOHAI 1

Museum 1

Museum Property 18

Opening Date 8

Operating Hours 3

Parking Easement 3

Parking Plan 3

Permitted Users 3

Premises 1

Project 1

Property Operating Expenses 9

Property Operation Activities 9

Public Benefits 8

Public Benefits Report 8

Public Use Area 6

Real Estate Taxes 10

Rebuilding 18

Rent 8

Superintendent 3

Support Payments 14

Taking 19

Term 7

Terrace 2

Utility Easement 3

Wharfs 4

WSDOT 9

LEASE

This LEASE ("Lease"), dated as of ______________, 20___, is by and between the HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation ("MOHAI"), and the CITY OF SEATTLE, a Washington municipal corporation ("City").

RECITALS

A. City is the owner of that certain improved parcel of real property located in the City of Seattle, King County, Washington legally described on, and also depicted on, Exhibit A hereto, together with all appurtenances, rights and privileges now belonging or appertaining thereto (the "Premises"). The historic Armory Building (the "Armory Building") is part of the Premises. City received the Premises pursuant to that certain Quit Claim Deed from the United States of America, acting by and through the Department of the Navy, as grantor, to City, as grantee, recorded on September 1, 2000 under AFN 20000901000377, records of King County Washington (the "Federal Deed"). The Armory Building is built on a piling support system (the "Building Pile System").

B. MOHAI is a Washington nonprofit corporation that has operated the Museum of History and Industry in the Montlake area of Seattle for over fifty (50) years. MOHAI is being displaced from its current Montlake location due to the SR 520 expansion project and MOHAI and City have agreed that the Armory Building is a suitable and desirable site for MOHAI's relocation. MOHAI (as defined below) intends to operate a regional history museum as more particularly described in Exhibit E, Section 1 (the "Museum").

C. To facilitate the rehabilitation of the historic Armory Building, which is the "Project" as defined in the Development Agreement (the "Project"), MOHAI is executing this Lease as the tenant and to evidence its agreement to provide, directly or indirectly, certain public benefits, generally as described in the Project's development principles, adopted pursuant to Resolution Number 31092, and more specifically described on Exhibit E hereto, and to agree to perform such public benefit obligations in addition to its other obligations hereunder.

D. City and MOHAI are parties to that certain Project Development Agreement dated _____________, 2009 (as now or hereafter amended, the "Development Agreement"). Pursuant to the Development Agreement, City has agreed to lease the Premises, including the Armory Building, to MOHAI.

E. Following completion of the Project and placement of the Armory Building into service, MOHAI will thereafter operate the Museum in the Armory Building.

F. City believes it serves an important public function to have a vibrant and successful Museum at the Armory Building and to see that the Armory Building is maintained over time.

G. The parties have agreed that this Lease is in the best interests of all parties to facilitate the establishment and operation of the Museum in the new location at the Armory Building. Thus, the parties are entering into this Lease for the Premises on the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, City and MOHAI agree as follows:

ARTICLE 1

DESCRIPTION OF THE PREMISES

1.1 Recitals. The above Recitals are hereby incorporated by this reference.

1.2 Lease of Premises. Consistent with the Development Agreement, this Lease becomes effective (the "Effective Date") on the date first written above. As of the Effective Date, City as landlord hereby leases to MOHAI as tenant, and MOHAI hereby leases from City, the Premises, subject to the obligations, terms, and conditions contained herein. The Premises consist of the land, the Armory Building located thereon and the Building Pile System that supports the Armory Building, as legally described on Exhibit A hereto, and the associated appurtenant rights and easements only (including the easements described below). MOHAI's right to use and occupy the Premises is subject to City's reserved rights in the Public Use Area as described in Section 1.6.3. The purpose of this Lease is to provide for the on-going rights and obligations of the parties with respect to the Premises for the Term.

1.3 Intentionally Deleted.

1.4 Expansion of Premises. City is in the process of vacating Terry Avenue adjoining the Premises. When such vacation is complete, the portion of Terry Avenue to the centerline thereof adjoining the Premises shall automatically and without further action by the parties become part of the Premises. Following such vacation, MOHAI shall be permitted to construct, at its expense and consistent with City-approved plans and any applicable National Park Service requirements, a terrace on the west side of the Armory Building (the "Terrace" in such addition to the Premises.

1.5 Easements. To operate the Armory Building for Museum purposes, certain easements are required, as hereinafter described. Thus, City hereby grants and conveys to MOHAI, its successors and assigns, for the Term, the Construction Easement, the Parking Easement, the Access Easement, the Utility Easement and the Drop-Off Easement (collectively, the "Easements"), on the terms and conditions of this Lease. The memorandum of this Lease that is recorded on the Effective Date shall provide notice of these Easements. The Easements are located on and burden Lake Union Park, or portions thereof surrounding the Premises, owned by City, described on Exhibit B attached hereto, together with Terry Avenue adjoining the Premises and Lake Union Park.

1.5.1 Construction Easement. "Construction Easement" means an exclusive easement for construction staging activities in the North Parking Lot, which area is depicted on Exhibit C attached hereto. The Construction Easement area shall be reserved for the exclusive use by MOHAI, its agents, employees and contractors. Activities permitted in the Construction Easement area shall include parking of construction and contractor vehicles and storage of construction materials to be used in the Project. The Construction Easement shall commence on the date that MOHAI authorizes its contractor to proceed with construction of the Project, and terminate when the Project is complete and the Armory Building is placed in service.

1.5.2 Parking Easement. "Parking Easement" means a non-exclusive easement for vehicular parking (including disabled parking) and a secondary loading dock in the North Parking Lot, which area is depicted on Exhibit C attached hereto. The Parking Easement shall commence when the Construction Easement terminates. Permitted users of the Parking Easement shall include MOHAI, its invitees, licensees, employees, contractors, service providers and permitted subtenants and assignees ("Permitted Users"). Emergency vehicles shall be permitted access through the Parking Easement area. MOHAI's use of the Parking Easement area shall be consistent with the Lake Union Park parking plan that City's Superintendent of Parks and Recreation ("Superintendent") will develop in consultation with MOHAI and other interested parties (the "Parking Plan"). The initial Parking Plan shall be completed as provided in the Development Agreement and must be reasonably acceptable to MOHAI. The Parking Plan is subject to review and revision by the Superintendent, in consultation with MOHAI and other interested parties; any such revisions and any successor Parking Plans must be reasonably acceptable to MOHAI and must be consistent with the Parking Easement rights granted herein and MOHAI's rights to use of other parking resources under Section 1.7. The Parking Plan may allocate parking stalls for the exclusive use of MOHAI and other Lake Union Park tenants. There shall be no charge to MOHAI and the Permitted Users for parking and loading dock use in the Parking Easement and, if the Access Easement described below is gated or otherwise secured so as to restrict access to the Parking Easement area, Permitted Users of the Parking Easement shall be provided with a means of access through such gate or security system. MOHAI shall provide staff to regulate and coordinate vehicular access in and out of the North Parking Lot when either the Museum or the Museum cafe are open to the general public ("Operating Hours") to facilitate loading, special deliveries and disabled parking with respect to the use of the Museum only. Staffing shall not include providing personnel for any security or parking booth at a gated access point.

1.5.3 Access Easement. "Access Easement" means a non-exclusive easement for access in the area depicted on Exhibit C attached hereto. This right to access shall include all forms of access to the Premises, including access for Permitted Users and access for cars, vans, trucks, construction vehicles, bicycles and pedestrians. If the Access Easement is gated or otherwise secured so as to restrict access, Permitted Users of the Access Easement shall be provided with a means of access through such gate or security system.

1.5.4 Utility Easement. "Utility Easement" means a non-exclusive easement for all utilities (including electric, water, sewer, communications, cable and gas) serving or to serve the Premises and the Armory Building to provide utility service thereto. MOHAI shall be permitted to have a telecommunications provider(s) install its cables in the conduit in the Utility Easement. The Utility Easement shall be for the utilities in the locations where installed or relocated from time to time, which are in Terry Avenue adjoining the Premises and Lake Union Park and in the portions of Lake Union Park described on Exhibit B attached hereto.

City has previously installed water lines, electric services, sewer lines and pipes, conduits for communications, meters, fire department connections and hydrants and other utility facilities to serve the Premises, as described in the Development Agreement. City shall keep these utilities and related facilities installed in the Utility Easement area in good condition and repair at all times at City's sole cost and provide such utility service to the Premises. Notwithstanding the foregoing, MOHAI shall be responsible for the portion of the sewer line connecting from the side sewer stub into the Armory Building, and City is not responsible for the communications lines installed by a third party provider at the request of MOHAI.

MOHAI may install additional utilities and upgrade or repair utilities in the Utility Easement at its sole cost and with the prior written approval of the Superintendent, which approval shall not be unreasonably withheld or delayed. In doing such work, MOHAI shall not disturb the vegetation and topography and improvements on the property outside of the Utility Easement area. Upon completion of such reconstruction, maintenance, repair or other permitted activity, MOHAI shall immediately restore all disturbed topography and vegetation to their condition immediately prior to the initiation of such maintenance or repair and, as to the installation of any new utilities by MOHAI, MOHAI shall thereafter be responsible for their maintenance and repair.

Electrical service to the Armory Building shall be separately metered; water shall be submetered. MOHAI shall be responsible for utility charges for their usage. The parties recognize that electric service lines and service that serve the Wharfs and surrounding Lake Union Park are located within the Armory Building; such lines will remain on the Premises. City (by and through City Light) shall have the right to access as needed to maintain, repair and replace such electric lines and service (a) at all times to the Armory Building's electrical service room, which shall be accessible from outside the Building; and (b) to the Armory Building, provided that such persons are accompanied by appropriate MOHAI staff, during Operating Hours or any time, with or without MOHAI staff, if necessitated by an emergency or dangerous condition. Such access shall be conducted in such a way as to minimize interference with the operation of the Museum and activities in the Armory Building and City shall repair any damage caused by such access.

1.5.5 Drop Off Easement. "Drop Off Easement" means a nonexclusive easement for buses and other vehicles to pick up and drop off visitors to the Premises in the area depicted on Exhibit C attached hereto. Currently, the East Wharf and North Parking Lot are not configured to permit visitor drop off/pick up by school or tour bus. Therefore, MOHAI and other Permitted Users may utilize the Valley Parking Lot for such purpose on a non-exclusive basis. MOHAI acknowledges that the Valley Parking Lot is a temporary parking lot that may be removed as part of on-going Lake Union Park improvements. Before City were to remove the Valley Parking Lot or make it unavailable for Museum visitor drop off, City and MOHAI must agree on and implement a mutually acceptable plan to either: (a) extend the corner of the East Wharf so as to permit bus and other vehicles access to and turnaround from the North Parking Lot; or (b) otherwise provide for MOHAI's need for a bus drop-off. The parties agree to cooperate to develop, identify funding for and implement such a mutually acceptable plan if the need arises, recognizing that providing the Public Benefits described herein depends on having drop off arrangements reasonably acceptable to MOHAI.

1.6 Building Pile System and Wharfs.

1.6.1 Maintenance and Reinforcement of Building Pile System. Subject to the provisions of the Development Agreement regarding assessments of the Building Pile System at completion of shell and core construction and contemporaneously with the issuance of a certificate of occupancy for the Museum, and subject to the provisions of Section 9.3 and the qualifications below, from and after the time the Project is complete and a certificate of occupancy is issued for the Museum: (i) City will be responsible for the condition of the Building Pile System and for maintaining it in a safe and sound condition, capable of supporting the Armory Building for its use for Museum and related purposes for the duration of its use as such; and (ii) City will address, at no cost to MOHAI, any conditions that impair the ability of the Building Pile System to support the Armory for its intended use for Museum and related purposes for the duration of its use as such.

Notwithstanding the foregoing, with respect to any (a) alteration to the Armory Building or Premises that affect the Building Pile System; or (b) specific change or addition to exhibitry reasonably likely to affect the Building Pile System, either of which are undertaken after issuance of the certificate of occupancy for the Museum, MOHAI and the Superintendent shall reasonably determine the measures, if any, to be undertaken in conjunction with such alteration or exhibitry change or addition that are needed to enable the Building Pile System to continue to support the Armory Building for its intended use for Museum and related purposes. MOHAI shall at its expense, complete such measures as a component of its alteration or exhibitry change or addition described in clauses (a) or (b) above. MOHAI also will inform the Superintendent of any damage to the Building Pile System incurred during the construction of any alteration or exhibitry change or addition described in clauses (a) or (b) above, together with the measures it proposes to take to repair any such damage, which measures shall be subject to the Superintendent's reasonable approval. MOHAI will confirm that such repairs have been completed. All such measures or repairs shall be the property of City upon their completion and shall thereafter be considered part of the Building Pile System (and be maintained, repaired or replaced by City as required herein).

1.6.2 Loading Docks. MOHAI shall be entitled to locate and use its loading dock (including dumpsters) in the area located on the East Wharf as depicted on Exhibit B attached hereto. MOHAI shall also be entitled to locate and use its secondary loading dock in the North Parking Lot as also depicted on Exhibits B and C.

1.6.3 Control, Maintenance and Management of Public Areas. City shall be responsible for the maintenance, repair, replacement, management, regulation and programming of the Wharfs and other public portions of the Premises outside the Armory Building footprint (which footprint shall be deemed to include the concrete steps along and attached to the north side of the Armory Building and the loading dock on the east side of the Armory Building) and Terrace (collectively, the "Public Use Area"). The Public Use Area is depicted on Exhibit D hereto. City shall manage and operate the Public Use Area in a clean, safe and unobstructed manner consistent with the operation of the Museum. Loitering shall not be permitted in the Public Use Areas. MOHAI shall not obstruct members of the public from entering upon and using and enjoying the Public Use Area for park purposes except for occasional closures of the Wharfs for Museum events approved by City in advance, and except for temporary construction activities and fencing near the Armory Building in connection with the Project (in locations approved by the Parks Department Project Coordinator identified under the Development Agreement). City will not block or obstruct, or permit the blocking or obstruction of the Public Use Areas (including without limitation the loading docks described in the preceding section, the steps on the north side of the Armory Building and other points of ingress and egress from the Armory Building) or modify the Public Use Areas except for occasional, temporary obstructions for park events. Such obstructions shall not materially interfere with public access to the Museum or MOHAI's ability to use the Premises and the Armory Building for their intended purposes. City will consult with MOHAI to minimize any impacts from any temporary blockage or obstruction.

MOHAI shall not have any responsibility or liability for the activities on the Wharfs or the condition thereof, unless and to the extent caused by MOHAI, or its employees or agents (as further provided in Section 13, Indemnity). In collaboration with MOHAI, the Superintendent shall develop and implement an expeditious procedure for providing MOHAI with the permits necessary for MOHAI to use or host the use of the Wharfs adjoining the Armory for MOHAI events on mutually acceptable terms and conditions.

1.7 Public Parking. In addition to the Parking Easement, visitors to the Museum and the Armory Building shall be permitted to use the Valley Parking Lot (depicted on Exhibit C) and other City owned, controlled and managed parking conveniently located for visitors to Lake Union Park and amenities located therein for parking pursuant to the Parking Plan on a basis no less favorable than City makes it available to other visitors to Lake Union Park.

1.8 As-Is Condition. Except as specifically required in the Development Agreement or in this Lease, City has no obligation to contribute to the cost of the Project, nor shall City be obligated to perform any construction or make any improvements in connection with the Project, except as provided in this Lease with respect to the Building Pile System. The acceptance of possession of the Premises by MOHAI on the Effective Date shall be conclusive evidence that MOHAI accepts the Premises in their then "as-is" condition, subject to City's obligation in the Development Agreement to provide a clean and empty building, free and clear of tenants and their personal property. MOHAI hereby acknowledges that City has made and makes no representations or warranties, express or implied, regarding the condition of the Premises or their suitability for the intended use. MOHAI confirms that it has had ample opportunity to inspect the Premises and is familiar with their condition.

1.9 Signage. MOHAI shall have the right to place informational and directional signage in Lake Union Park (but outside of the Premises) to inform the public about the location of and access to the Museum, with the Superintendent's prior written consent. MOHAI shall develop for the Superintendent's approval a signage plan for the installation of appropriate signage for the Museum within Lake Union Park (but outside of the Premises). In determining whether to approve such signage plan the Superintendent may consider, among other factors, MOHAI's needs for public awareness of the location of and access to the Museum; the signage needs of other Lake Union Park tenants and uses; the design, scale, placement and materials proposed for such signage; and compatibility of the proposed signage with other Lake Union installations. MOHAI may request modifications of the signage plan from time to time, such changes are also subject to the approval of the Superintendent as to size, location and content.

The parties recognize that the Project will entail installation of a signage system for the Armory Building and Terrace, which system will be approved by the Superintendent pursuant to the Development Agreement. The signage system will support a continuing display of banners and signs advertising events and exhibits at the Premises and the presence of the Museum. Such banners and signs shall not be subject to approval by the Superintendent and need not conform to sign regulations for Lake Union Park, so long as they relate to the Museum and events and exhibits at the Museum. In addition, MOHAI may install temporary signage at the entrance to Lake Union Park on Valley Street, to advertise special events on the Premises, subject to the approval of the Superintendent.

1.10 Covenant and Warranty of Quiet Possession. City covenants and warrants that MOHAI's peaceable and quiet occupation, use and enjoyment of the Premises shall not be disturbed by City or anyone claiming by or through City. City shall defend at its expense any third party claims asserted that would interfere with MOHAI's (and its permitted successors and assigns) right to such occupancy, use, and enjoyment of the Premises or City's title to the Premises.

ARTICLE 2

TERM

2.1 Term. All obligations of City and MOHAI hereunder shall commence and be binding on the parties as of the Effective Date. MOHAI shall be entitled to and shall take possession of the Premises upon the Effective Date. Thus, City shall have removed or caused to be removed all tenants, occupants and personal property in the Premises before the Effective Date. This Lease shall be and continue in full force and effect for a term (the "Term") that commences on the Effective Date and continues for approximately thirty (30) years, ending on __________, 20__, unless sooner terminated pursuant to the provisions hereof.

2.2 Extension Option. At MOHAI's option, the Term may be extended for one additional ten (10) year period (the "Extension Term. To exercise this option, MOHAI must give City written notice of its intention to extend not sooner than 24 months and not later than 9 months before the expiration of the Term set forth in Section 2.1. MOHAI may not exercise its option to extend if City has declared a Default (as defined in Section 15.1) under this Lease, which default has not been cured by MOHAI, either at the time of the giving of the notice to extend or the commencement of the Extension Term. If properly exercised, the Extension Term shall be part of the Term for all purposes hereof. All of the terms and conditions of this Lease shall continue to apply during the Extension Term.

ARTICLE 3

CONSIDERATION, PUBLIC BENEFITS AND EXPENSE ALLOCATION

3.1 Consideration. During the Term, as consideration for this Lease, MOHAI shall at its expense (i) undertake the Project, including rehabilitation of the Armory Building for Museum purposes and the construction and installation of museum exhibits; (ii) maintain and operate the Armory Building as a Museum open to the public and in a condition suitable for Museum purposes; and (iii) maintain the Historic Features, all as further provided below. In addition, to support MOHAI's lease of the Premises, MOHAI shall provide the Public Benefits and perform the Museum Operation Activities, all as further provided below. "Rent" as used herein means the duties and obligations to be undertaken by MOHAI set forth in this Section 3.1 and as further detailed in Sections 3.2 through 3.7 below. The parties agree that there is no monetary consideration or monetary rent that is owed by MOHAI to City hereunder. Rather, the consideration for this Lease consists of the Public Benefits to be provided and the rehabilitation, maintenance and operation of the Armory Building at the expense of MOHAI as provided herein.

3.2 Redevelopment and Maintenance. MOHAI shall rehabilitate and redevelop the Armory Building to be suitable for Museum uses as provided in the Development Agreement. From and after the date the Armory Building is placed in service, the relocation of the Museum displays to the Armory Building and the opening of the Museum in the Armory Building to the public ("Opening Date"), MOHAI shall ensure that the Armory Building is maintained in good operating condition and state of repair and in a condition suitable for the Public Benefits to be provided, subject to the terms and conditions of this Lease as further described in Section 6.2 below. MOHAI shall also maintain the Historic Features as provided in Section 6.3 below.

3.3 Public Benefits. A central element of this Lease is the identification of and MOHAI's commitment to the ongoing provision of certain public benefits as described herein. In fulfillment of MOHAI's commitment, from and after the Opening Date, MOHAI shall operate the Museum located in the Armory Building and shall perform or ensure the provision of certain "Public Benefits" identified in Exhibit E during the Term of this Lease, all at no cost to City. At the Superintendent's request from time to time throughout the Term, but no more frequently than annually, MOHAI will produce a report documenting the Public Benefits that MOHAI has provided during the designated time period (the "Public Benefits Report"). The Public Benefits Report shall include such information as the Superintendent may reasonably request but at a minimum shall contain a description of the benefits provided; the number of persons served, by date and age group, if known; and the value of any fee discounts or scholarships provided. In addition, on or before the Opening Date, MOHAI shall provide the Superintendent with a report documenting the public benefits provided during the last full year of its operations at its Montlake facility to use as a benchmark against future reporting.

3.4 Maritime Heritage Group. In addition to the Public Benefits identified in Exhibit E, from and after the Opening Date, MOHAI shall collaborate with City in its management of the Maritime Heritage Group, which will focus on cultural, educational and recreational maritimerelated activities at the "Historic Wharf" adjacent to the Premises and include from time to time Museum programming that links exhibits to visits to historic ships moored at the Historic Wharf.

3.5 Museum Operations.

3.5.1 Hours of Operation and Public Access. Notwithstanding the Public Benefits, the Armory Building will be open to the public only during regular hours of operation as determined by MOHAI but consistent with the requirements of Exhibit E. MOHAI may restrict access to the Armory Building as necessary for security purposes. MOHAI may close portions of the Armory Building to the public for offices, ancillary services, installation or repairs, as MOHAI deems necessary or desirable from time to time. MOHAI may use any portion of the Armory Building for its purposes when the Armory Building is not open to the general public. Nothing herein shall limit MOHAI's ability to regulate use of the cafe, restrooms or other facilities consistent with Museum security needs or to address unruly or inappropriate behavior.

3.5.2 Continuing Use of Montlake Facility. MOHAI may for some period of time maintain storage, office, public assembly and other space at the Montlake location as the transition to the Armory Building occurs. This use may continue until the Montlake facility is removed from service by the Washington State Department of Transportation ("WSDOT") or MOHAI has secured facilities fully replacing all of the facilities and functions provided at the Montlake facility on the Effective Date. Following the Opening Date, MOHAI shall pay all operations and maintenance costs for the Montlake facility during the time it continues to be occupied exclusively by MOHAI or on a pro rata basis with City if the use is shared between MOHAI and City. If the facility is not removed from service by WSDOT immediately upon MOHAI's vacation, the auditorium and other primary public assembly spaces within the Montlake facility shall be available for City Parks and Recreation Department-related uses as well as MOHAI uses (subject to WSDOT consent) and MOHAI and City shall develop a protocol for programming such spaces.

3.6 Property Operating Expenses. MOHAI shall bear all costs and expenses during the Term that are associated with the improvement, restoration, repair, remodeling, replacement, maintenance, operation, lease and management of the Armory Building and the Museum (the "Property Operation Activities") on an absolute net basis. Property Operation Activities shall exclude the improvement, restoration, repair, replacement, maintenance, operation and management of the Building Pile System and Wharfs. City is to bear no expenses of any kind with respect to the Premises, except as provided herein. "Property Operating Expenses" shall include, without any limitation, all costs and expenses associated with the following:

3.6.1 Insurance premiums and deductibles as required under this Lease or as MOHAI may elect;

3.6.2 All charges for public and private utility services, including but not limited to electricity, gas, heating, air conditioning, telephone and telecommunications service, garbage, janitorial services, sewer and water services;

3.6.3 Permits, licenses and certificates necessary for the Property Operation Activities;

3.6.4 Expenses incurred to comply with any Laws with respect to the operation of the Museum in the Armory Building (excluding expenses that are the responsibility of City under this Lease); and

3.6.5 Management, operation, repair, maintenance and restoration of the Armory Building to the extent required herein, including, without limitation, any of the building systems and their equipment and components.

As of the Effective Date, MOHAI shall be responsible for direct payment of all Property Operating Expenses accruing from and after the Effective Date as and when any such expenses are due. The parties shall cooperate to arrange for direct billing of all Property Operating Expenses from the service provider to MOHAI (to the extent practical; for example water service will be submetered from City's meter).

3.7 Real Estate Taxes. MOHAI shall bear all cost and expense of any taxes and assessments related to the Premises accruing during the Term, including without any limitation the following (collectively, "Real Estate Taxes"):

3.7.1 General real estate taxes levied against the Armory Building or taxes in lieu thereof;

3.7.2 Special assessments or taxes in the nature of improvement or betterment assessments;

3.7.3 Any taxes relating to operation of the Premises by MOHAI; and

3.7.4 All taxes on personal property and intangibles of MOHAI on or used in connection with the Premises.

As of the Effective Date, MOHAI shall be responsible for direct payment of all Real Estate Taxes accruing during the Term before any such taxes are delinquent, subject to the protest rights described below. The parties may agree to implement direct billing of all Real Estate Taxes to MOHAI, with appropriate notice to City. All Real Estate Taxes that are payable by MOHAI pursuant hereto for the tax year in which the Term commences, as well as during the year in which the Term expires, shall be prorated between City and MOHAI on an actual per diem basis. If any of the Real Estate Taxes that either of MOHAI is obligated to pay in whole or in part is permitted by law to be paid in installments, MOHAI may pay the taxes in installments. Any exemption for property tax, in lieu tax or leasehold excise tax will accrue to the benefit of MOHAI (i.e., it will have no obligation to pay such taxes under this Section 3.7 to the extent of such exemption).

MOHAI may contest the validity or amount, including the assessed valuation upon the Premises, of any Real Estate Taxes that they in good faith believe is excessive, improper or invalid. In such event, the payment thereof may be deferred during the pendency of such contest, if diligently prosecuted. City agrees to join at MOHAI's request in any such contest to the extent such joinder is a prerequisite to such prosecution under statute, regulation or administrative practice. In connection with a judicial or administrative challenge to any assessment, MOHAI may take advantage of any stay in collection available under statute, regulation, or court or administrative order or rules. Nothing herein contained, however, shall be so construed as to allow such items to remain unpaid for such length of time as shall permit the Premises, or any part thereof, to be sold by any governmental authority for the nonpayment of the taxes. Within thirty (30) days after the amount of such contested item is finally determined to be due, MOHAI shall pay the amounts so determined, together with any penalties, interest and expenses associated with such contest.

ARTICLE 4

USE OF PREMISES

4.1 Use of Premises. MOHAI shall use the Premises, including the Armory Building, for Museum purposes (including the display of historic materials and artifacts, and cultural and special events), ancillary purposes (including cafe and gift shop), functions and events hosted or sponsored by MOHAI (including short term event rentals of three (3) consecutive days or less), and related office, educational, research, administrative, storage and back-of-house uses only. The use of the Premises shall comply with this Lease, any easements, covenants, restrictions (including those imposed by the Federal Deed), as well as all laws, statutes, ordinances, regulations, rules and other governmental requirements of any kind applicable to the Premises (hereinafter "Laws"). Although the Premises are located in a City park area managed by City's Department of Parks and Recreation, prohibitions on the serving and consumption of alcoholic beverages on the Premises shall not apply and MOHAI may permit alcoholic beverages to be served on the Premises (e.g., in the cafe and terrace and at events, but not on the Wharfs, unless pursuant to a Parks Department permit as described in Section 1.6.3 above), provided that MOHAI is responsible for seeing that all required liquor permits/licenses are obtained..

4.2 Prohibited Activities. Nothing shall be done by MOHAI or its officers, directors or employees upon or about the Premises that violates any Law. MOHAI will not do or keep anything in or upon the Premises that may prevent the obtaining of any insurance required under this Lease or carried with respect to the Premises or that may void any such insurance. MOHAI agrees to adopt and implement a policy prohibiting any person, except for law enforcement officers and on-duty security personnel, from possessing firearms on the Premises or in the Armory Building.

4.3 Compliance with Laws. MOHAI shall be solely responsible, at its sole cost (as between MOHAI and City), for compliance with Laws affecting the design, construction and operation of the Armory Building and those affecting their use of the Premises throughout the Term. City agrees that MOHAI shall have the right to reasonably contest, at MOHAI's sole cost, any asserted or alleged violation of any Laws in the name of either of MOHAI, as MOHAI deem appropriate.

ARTICLE 5

ALTERATIONS

5.1 Alterations. "Alterations" are any alterations, additions or improvements made by MOHAI to the Armory Building. MOHAI may, from time to time, at its own cost and expense and without the consent of City make alterations to the Armory Building, except as provided below. Such alterations include, without limitation, the Project and the construction of the Terrace in the vacated portion of Terry Avenue that becomes part of the Premises. Notwithstanding the foregoing, MOHAI shall not make any alterations to the Armory Building or the Premises that affect the Building Pile System, the Wharfs or the Armory Building public entry and amenities (i.e., cafe and cafe restrooms) without City's prior written consent, which will not be unreasonably withheld. Changes to any exhibitry, whether fixed or temporary exhibits, are not subject to City review or approval provided they are not reasonably likely to affect the Building Pile System. Alterations to the Historic Features must be in compliance with Section 6.3. MOHAI may make any other alterations to the Armory Building, at its sole cost and expense, without City's consent.

5.2 Ownership of Alterations. Title to the any Alterations to the Armory Building constructed by MOHAI shall be vested in MOHAI until the expiration or earlier termination of this Lease, at which time the all alterations thereto shall become the property of City, free and clear of all liens and encumbrances, without any obligation on the part of City to pay therefor. At City's request, MOHAI shall deliver to City a complete set of all as-built or other building plans and all keys to the Armory Building and any other improvements on the Premises.

Subject to the terms of Section 9.1 relating to damage and destruction, upon expiration or earlier termination of the Term of this Lease, whether by lapse of time or otherwise (including any holdover period), MOHAI at its expense shall: (a) remove all of MOHAI's moveable, unaffixed personal property, goods and effects and those of all persons claiming under MOHAI from the Armory Building and the Premises; (b) to the extent required by City, remove all of its exhibitry and exhibitry-related casework, and (c) promptly and peacefully surrender the Premises (including surrender of all MOHAI's improvements, alterations and additions installed in the Armory Building or on the Premises) in at least as good a condition as at the conclusion of the Project, reasonable wear and tear and casualty excepted. Any property left on the Premises more than thirty (30) days after the expiration or termination of the Term shall be deemed to have been abandoned and to have become the property of City to dispose of as City deems expedient and MOHAI shall be liable for all costs associated with the disposal of such property. MOHAI hereby waives all claims for damages that may be caused by City re-entering and taking possession of the Premises or removing and storing MOHAI's property as herein provided. No such reentry shall be considered or construed to be a forcible entry.

Notwithstanding the foregoing, nothing herein shall give City any right whatsoever to the Museum Property, as further provided in Section 8 below.

5.3 Alteration Construction. In conducting any construction work on the Premises, MOHAI shall cause all work to be done in a good and workmanlike manner and shall comply with or cause compliance with all Laws. MOHAI shall obtain or cause to be obtained and maintain in effect, as necessary, all building permits, licenses and other governmental approvals that may be required in connection with such work and such insurance as the MOHAI, in consultation with City, determine reasonable for the scope and scale of the work to be undertaken.

5.4 Mechanic's Liens. MOHAI shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature upon, or in any manner to bind, the interest of City in the Premises for any claim in favor of any person dealing with MOHAI, including those who may furnish materials or perform labor for any construction or repairs to the Premises. Each such claim shall affect and each such lien shall attach to, if at all, only the leasehold interest granted to MOHAI by this Lease. MOHAI will pay or cause to be paid all sums payable by them on account of any labor performed or materials furnished in connection with any work performed on the Premises. MOHAI will discharge, by bond or otherwise, any mechanic's or materialman's lien filed against the Premises for work claimed to have been done for, or materials claimed to have been furnished to MOHAI, within sixty (60) days after filing. MOHAI shall indemnify, defend and hold City harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of City in the Premises or under the terms of this Lease.

ARTICLE 6

OPERATION, MAINTENANCE AND SUPPORT

6.1 Operation. MOHAI shall procure and maintain at its expense all permits and approvals that may be required for any use made of the Premises. MOHAI shall comply with the requirements of any Laws (i) regarding the condition of the Premises; or (ii) relating to the lawful use of the Premises. MOHAI shall conduct the Museum operations on the Premises in compliance with all terms and conditions of this Lease.

6.2 Maintenance and Repair By MOHAI. MOHAI, at its sole cost and expense (as between MOHAI and City), without cost or charge to or contribution by City, shall be responsible for and shall perform all improvements, repairs, replacements, restoration and maintenance to the Armory Building throughout the Term. Following completion of the Project, MOHAI shall at all times maintain the Armory Building in good operational order, condition and repair. If MOHAI fails to perform its obligations under this section following sixty (60) days' prior written notice (or such shorter period as may be necessitated by an emergency or dangerous condition, or such longer time as may be needed provided that MOHAI is diligently pursuing the necessary work) from City to MOHAI, City may perform such work and MOHAI shall be responsible for reimbursing City for the cost thereof.

Upon completion of the Project, MOHAI will provide City with a long-term maintenance plan for the Armory Building. Every five (5) years thereafter, MOHAI will provide City with a report on its performance against the plan during the preceding five (5) years, as well as an updated long-term maintenance plan. With the submission of each plan, MOHAI will demonstrate to City's reasonable satisfaction that it has or will have sufficient resources to meet its responsibilities identified in the long-term maintenance plan.

6.3 Maintenance of Historic Features. The Armory Building exterior contains certain historic elements and features (the "Historic Features"). The Historic Features are described in (i) the Federal Deed; and (ii) the Armory Building's landmark listings with the City of Seattle Landmarks Preservation Board and the National Register of Historic Places. MOHAI, at its sole cost and expense (as between MOHAI and City), without cost or charge to or contribution by City, shall be responsible for and shall perform all improvements, repairs, restoration and maintenance of the Historic Features throughout the Term required by and in compliance with the Historic Requirements. The "Historic Requirements" are those imposed by the Deed, the National Register of Historic Places and the City of Seattle Landmarks Preservation Board, all with regard to the Historic Features.

6.4 Maintenance and Repair By City. Subject to the provisions of Sections 1.6.1 and 9.2 and except as provided below, City, at its sole cost and expense (as between MOHAI and City), without cost or charge to or contribution by MOHAI, shall be responsible for and shall perform all improvements, repairs, replacements, restoration and maintenance to the Building Pile System and Wharfs throughout the Term in a manner that provides adequate support for the Amory Building and its use as contemplated by this Lease and in good, clean and safe condition compatible with Museum use.

Notwithstanding the foregoing, with respect to any measures or repairs with respect to the Building Pile System undertaken by MOHAI after issuance of a certificate of occupancy for the Museum pursuant to Section 1.6.1 in connection with (a) alterations to the Armory Building or Premises that affect the Building Pile System; or (b) specific changes or additions to exhibitry reasonably likely to affect the Building Pile System, such measures or repairs shall be considered part of the Building Pile System upon their completion (and be maintained, repaired or replaced by City as required herein).

6.5 Operating Support.

6.5.1 City will contribute on an annual basis by April 1 of each year during the Term the amount of Three Hundred Thousand Dollars ($300,000) to MOHAI to be used to help defray the costs of operating, maintaining and repairing the Armory Building (the "Support Payments"). MOHAI shall separately account for the Support Payments and shall use them solely to pay operating and maintenance expenses for the Armory Building. MOHAI shall keep complete and accurate records and books of account with respect to all expenditures from the Support Payments account and shall provide City with copies of relevant records reasonably promptly upon City request.

6.5.2 If City reasonably determines that MOHAI has failed to maintain the Armory Building in good condition and repair as measured by its performance under the maintenance plan described in Section 6.2 above, then City may withhold the Support Payments until such time as MOHAI complete the necessary maintenance and repairs. City will reimburse MOHAI for the cost of such maintenance and repairs, up to the total amount of the withheld Support Payments, upon MOHAI's presentation of an invoice therefor.

6.6 Placement of Artifacts in the Park. From time to time, MOHAI may request that certain of its artifacts be placed in the Lake Union Park surrounding the Armory Building or on the Wharfs. Such a request shall be in writing and accompanied by details of the nature and proposed location of the artifact and the plans for installation. If approved by City in its sole discretion, MOHAI shall be responsible for the cost of installation and maintenance of the artifact. The placement of such artifact in Lake Union Park or on the Wharfs shall be at the risk of MOHAI and City shall not be responsible for any damage to or loss of such artifact. Following installation, MOHAI may remove the artifact at its discretion.

6.7 Maritime Heritage Group. Pursuant to the Development Agreement, City has organized the Maritime Heritage Group among City, MOHAI and certain other maritime heritage organizations resident at South Lake Union. The Maritime Heritage Group is documented through agreements between the various organizations and City establishing the basis for an ongoing collaboration on cultural, educational and recreational maritimerelated activities. Through the Maritime Heritage Group, the parties envision an integrated Museum and historic ship visitor experience that enhances Lake Union Park and the Historic Wharf and encourages knowledge and support for the preservation of the region's diverse history, particularly including its maritime history. City, by and through its Superintendent, will be responsible for management, at City's expense, of the Maritime Heritage Group.

MOHAI will cooperate with the other maritime heritage participants in the Maritime Heritage Group and will participate in the Maritime Heritage Group. MOHAI will enter into collaborative agreements from time to time as desirable and appropriate with the Center for Wooden Boats, Northwest Seaport and the Virginia V Foundation (and with similar organizations in the event the foregoing named entities' presence at South Lake Union ends) relating to, among other things, marketing, programming and reasonable shared use of appropriate Museum facilities for public accommodations (such as ticketing, merchandizing and way-finding facilities).

ARTICLE 7

ENVIRONMENTAL

7.1 Hazardous Substances.

7.1.1 For the purposes of this Lease, (a) the term "Environmental Law" means any federal, state or local law, statute, ordinance, regulation or order pertaining to hazardous substances or materials, including without limitation those defined in this Section 7.1 as "Hazardous Substances;" and (b) the term "Hazardous Substance" means any hazardous or toxic substance, material or waste, pollutants or contaminants, as defined, listed or regulated now or in the future by any federal, state or local law, ordinance, code, regulation, rule, order or decree regulating, relating to or imposing liability or standards of conduct concerning, any Hazardous Substances, including without limitation, (i) chlorinated solvents, (ii) petroleum products or by-products, (iii) asbestos, (iv) polychlorinated biphenyls, (v) lead-based paint, and (vi) mold, fungus and other microbial matter.

7.1.2 MOHAI agrees that:

(a) Neither MOHAI nor its employees, agents, contractors, assignees, subtenants, licensees or invitees will use, generate, manufacture, produce, store, release, discharge or dispose of on, under or about the Premises, or transport to or from the Premises, any Hazardous Substances except in such quantities as are typically used in connection with the construction, rehabilitation, operation and use of property of the similar sort for the uses permitted under this Lease and the Development Agreement, and then only in compliance with all Environmental Laws.

(b) MOHAI shall give prompt written notice to City of:

(i) Any proceeding or inquiry by any governmental authority known to MOHAI with respect to the presence or release of any Hazardous Substance on, in, about or from the Premises, Armory Building, Building Pile System or Wharfs, or relating to any loss or injury resulting from any Hazardous Substance, all caused or alleged to be caused by MOHAI or its employees, agents, contractors, assignees, subtenants or invitees;

(ii) All claims made or threatened by any third party in writing against MOHAI with respect to the Premises, Armory Building, Building Pile System or Wharfs relating to any loss or injury resulting from any Hazardous Substance caused or alleged to be caused by MOHAI;

(iii) Discovery after the Effective Date by MOHAI of any occurrence or condition on the Premises, Armory Building, Building Pile System or Wharfs that could cause them to be subject to any restrictions on occupancy or use under any Environmental Law; and

(iv) Any release of a Hazardous Substance on or from the Premises or the Armory Building by MOHAI.

(c) Excluded from all obligations of MOHAI under this Section 7.1 are any obligations, claims or liabilities arising out of the use or condition of or events occurring with respect to (i) the Building Pile System, Wharfs, Lake Union or surrounding City property or property in the vicinity, or out of the use thereof or the use of the Premises pursuant to the Maritime Heritage Group agreements (except for MOHAI's sole use) or members of the public, or (ii) Hazardous Substances existing on, under, in or about the Premises, the Building Pile System, the Wharfs, Lake Union or surrounding City property or property in the vicinity prior to the Effective Date unless arising in whole or in part from the MOHAI's conduct.

(d) Except as provided in Sections 7.2 and 13.1.2, MOHAI shall protect, indemnify, pay the defense costs of and hold harmless City Parties (as defined in Section 13.1.2) from any loss, damage, cost, expense, claim, suit, action, penalty or liability (collectively, "Claims"), including, without limitation, reasonable attorneys' fees and costs and the costs of any required or necessary repairs or cleanup of the Premises or the Armory Building and the implementation of any remediation or other plans required by any Environmental Law directly or indirectly arising out of or attributable to the presence, use, generation, manufacture, production, storage, release, discharge or disposal of a Hazardous Substance on, under or emanating from the Premises or the Armory Building (i) on or after the Effective Date and (ii) caused by MOHAI, its employees, agents, assignees, subtenants or licensees.

7.1.3 The indemnity provisions of this Section 7.1 shall survive expiration or termination of this Lease.

7.2 City Environmental Obligations.

7.2.1 City shall give prompt written notice to MOHAI of:

(a) Any proceeding or inquiry by any governmental authority known to City with respect to the presence or release of any Hazardous Substance on, in, about or from the Premises, Armory Building, Building Pile System or Wharfs;

(b) All claims made or threatened by any third party in writing against City with respect to the Premises, Armory Building, Building Pile System or Wharfs relating to any loss or injury resulting from any Hazardous Substance; and

(c) City's discovery of any occurrence or condition on the Premises, Armory Building, Building Pile System or Wharfs that could cause them to be subject to any restrictions on use under any Environmental Law.

Excluded from City's obligations under this Section 7.2 are any obligations, claims or liabilities arising out of the use or condition of the Armory on or after the Effective Date caused by MOHAI or its employees, agents, assignees, subtenants or licensees that are the responsibility of MOHAI under Section 7.1.2.

7.2.2 Except as provided in Sections 7.1 and 13.2, City shall protect, indemnify, pay the defense costs of and hold harmless MOHAI and its board members, officers, employees and agents from any Claims, including, without limitation, reasonable attorneys' fees, expenses and costs and the costs of any required or necessary repairs or cleanup of the Premises, Building Pile System and Wharfs and the implementation of any remediation or other plans required by any Environmental Law directly or indirectly arising out of or attributable to the presence, use, generation, manufacture, production, storage, release, discharge or disposal of a Hazardous Substance on, under or emanating from the Building Pile System, Wharfs or the Premises, or, to the extent caused by City, its employees, agents, assignees or licensees.

7.2.3 The indemnity provisions of this Section 7.2 shall survive expiration or termination of this Lease.

ARTICLE 8

MUSEUM PROPERTY

8.1 Museum Property. Notwithstanding anything in this Lease to the contrary, City shall have no interest in, lien on or right of any kind to any fixtures, display cases, exhibits, art, artifacts, personal property or the Museum collection located in or used in connection with the Armory Building, or on the Wharfs or in Lake Union Park ("Museum Property"), however installed or located in the Armory Building, the Wharfs, on the Premises or in Lake Union Park. All Museum Property shall be and remain at all times the property of MOHAI or the other owners thereof as the case may be. Notwithstanding the foregoing, if MOHAI fails to properly maintain (in accordance with the approval of the Superintendent granted under Section 6.6 above) any Museum Property installed or located on the Wharfs, in Lake Union Park, or in the Public Use Area following thirty (30) days' prior written notice (or such shorter period as may be necessitated by an emergency or dangerous condition) from City to MOHAI, such Museum Property shall be deemed abandoned and City may perform remove and dispose of the same, without recourse to MOHAI and MOHAI shall be responsible for reimbursing City for the cost thereof.

ARTICLE 9

DAMAGE AND DESTRUCTION

9.1 Repair and Rebuilding. If all or part of the Armory Building is damaged or destroyed, then MOHAI shall at its sole cost (as between City and MOHAI) complete the repair and rebuilding thereof (the "Rebuilding"), provided that: (a) MOHAI determines that such Rebuilding is economically, legally and operationally feasible; (b) sufficient insurance proceeds are available and/or MOHAI raises the costs of such repairs from private donations or other sources; and (c) the Rebuilding will be complete at least five (5) years before the end of the Term. Notwithstanding the foregoing, MOHAI shall in any event be required to repair or restore any damage and destruction to the extent necessary to bring the Armory Building and Premises into a safe and sanitary condition and to remove debris (although not to the condition required for occupancy). All Rebuilding shall be done in consultation with City and the plans therefor shall be subject to City's reasonable approval. Nothing herein shall require MOHAI to repair and restore damage to Museum Property.

If MOHAI will be restoring the Armory Building, then MOHAI shall apply for any permits or approvals required in connection with such Rebuilding diligently after the applicable insurance claims have been adjusted and proceeds thereof made available to MOHAI and other funding, if necessary, has been arranged, and after City has approved of the plans for Rebuilding. MOHAI shall commence Rebuilding promptly after issuance of such permits and approvals and thereafter diligently pursue completion of such Rebuilding.

If the Armory Building is not repaired or restored as provided herein, then this Lease shall terminate on a date mutually agreed by the parties and MOHAI agrees to contribute to City all rights MOHAI has to all insurance proceeds (net of recovery costs (agreed by the parties to be reasonable third party costs for such recovery) and deductibles) for the loss of the Armory Building (excluding that received for Museum Property) as a result of such damage and destruction.

9.2 City Rebuilding of Building Pile Systems and Wharfs. MOHAI's obligation to restore as provided in Section 9.1 is subject to City's agreement to repair, restore or reconstruct as necessary the Building Pile System and Wharfs at its expense. Therefore, in planning for any Rebuilding, the parties shall work cooperatively together to expeditiously determine the feasibility and desirability of such Rebuilding and make plans for the same.

Further, if MOHAI decides to undertake to restore the Armory Building, then City shall restore and rebuilding the Building Pile System and Wharfs to the extent necessary to permit the restoration of the Armory Building for Museum purposes.

The obligation of City to restore the Building Pile System and Wharfs is in every instance limited to the amount of available insurance proceeds received by City (or made available by MOHAI if the parties agree under Section 12.7 to have MOHAI insure the Building Pile System and Wharfs) (together with the amount of any deductible attributable to the Building Pile Systems and Wharfs in excess of a commercially reasonable or available deductible) for the loss of the Building Pile System and Wharfs (and, if and to the extent that the same are self insured, then such self insurance shall be deemed to be in the amount of the full replacement cost of the Building Pile Systems and Wharfs).

9.3 No City Liability. In no event shall City be liable to MOHAI for destruction or damage by casualty to any of Museum Property, except for Claims for which City indemnifies MOHAI pursuant to Section 13.2 hereof.

ARTICLE 10

CONDEMNATION

10.1 Taking. "Taking" means a taking by condemnation or by the exercise of the power of eminent domain by a public or quasi-public authority or entity, whether or not there is a taking of title, or a conveyance in lieu thereof. If there is a taking of the entire Premises and the Armory Building, then this Lease shall terminate as of the earlier of the date title to the Premises is transferred or the date MOHAI is dispossessed by the Taking authority.

City further agrees that in any Taking by City pursuant to its power of eminent domain that results in the termination of this Lease, the measure of the damages to MOHAI for the value of the Armory Building shall be the cost to replace such facility, meaning funds sufficient to pay for a substitute facility of at least equal size, function, and capacity.

10.2 Termination for Material Interference. If there is a Taking of part of the Premises or Armory Building that in MOHAI's reasonable judgment materially interferes with MOHAI's ability to use the Premises for the purposes set forth herein, which interference cannot be feasibly, economically, operationally or legally remediated, then MOHAI shall have the right to terminate this Lease by giving City notice of its election within sixty (60) days after the Taking. If this Lease is so terminated, then it shall terminate on the earlier of the date when title is transferred, the date MOHAI is dispossessed by the Taking authority or thirty (30) days following MOHAI's notice; provided that such termination shall in no event extinguish or diminish MOHAI's right under Section 10.3 to receive a portion of the award payable on account of the Taking.

If the Taking does not materially interfere with MOHAI's ability to operate the Premises for the purposes set forth in this Lease, then this Lease shall continue in full force and effect as to the part not taken, except that MOHAI need not operate a Museum or provide the Public Benefits in the space so taken.

10.3 Taking Award. The parties are entitled to the following portions of any award or settlement in lieu thereof payable on account of a Taking:

(a) City shall be entitled to all amounts attributable to the value of the land comprising the Premises; and

(b) MOHAI shall be entitled to receive:

(i) All amounts attributable to the value of the Armory Building provided that such funds are used for a replacement facility for a regional history museum in Seattle. Such replacement facility shall be of comparable scale and quality to the Armory Building Museum. MOHAI shall provide public benefits at the replacement facility consistent with those enumerated in Exhibit E for not less than 40 years. In selecting the location for a replacement facility, MOHAI shall give priority consideration to a leasehold interest in any suitable City-owned site or facility that City may propose for such purpose. The term of the MOHAI lease in any such City-owned site or facility shall be long enough to justify the investment that will be necessary to replace the Museum and in no event less than the remaining term of this Lease when the Armory Building is taken;

(ii) All amounts attributable Museum Property; and

(iii) MOHAI's relocation expenses.

If MOHAI has not started construction on a replacement facility for a regional history museum in Seattle within seven (7) years after the Taking and payment of the Taking proceeds to MOHAI (with such extensions as City may grant in its reasonable discretion), then the Taking proceeds described in Section 10.3(b)(i) above shall be contributed to City and MOHAI shall have no further claim to them. The provisions of this Section 10 shall survive expiration or termination of this Lease.

ARTICLE 11

ACCESS TO PREMISES

11.1 Access. City and City's agents, employees, and representatives shall have the right to access, enter and inspect the Premises and the Armory Building at any reasonable time during the Operating Hours or when Museum staff is on Premises to escort the inspector for the purpose of ascertaining the condition of the Premises or the Armory Building, monitoring compliance with this Lease or for any other purpose permitted under the terms of this Lease. City understands that Museum operating requirements prohibit unaccompanied, unsupervised access (including inspection), except as specifically provided herein. City, in its capacity as the landlord under this Lease, shall have the right to enter the Armory Building only upon reasonable prior notice to MOHAI. In exercising such rights, the parties shall cooperate and shall take all reasonable steps to avoid disruption or unnecessary interference with MOHAI's use and operations of the Premises.

ARTICLE 12

INSURANCE, WAIVER OF CLAIMS AND LIMITATION OF LIABILITY

12.1 MOHAI's Liability Insurance. MOHAI, at its expense, shall purchase and keep in force during the Term Commercial General Liability insurance with limits of not less than Five Million and 00/100 Dollars ($5,000,000.00) combined single limit each occurrence, covering bodily injury to persons, including death, and damage to property. Such insurance shall provide coverage for MOHAI's premises and operations and contractual liability assumed in Article 13. MOHAI shall cause its Commercial General Liability insurer to name City as an additional insured under such insurance and such policy shall contain a severability of interests provision, a provision that the insurance provided to City as additional insured shall be primary to and not contributory with insurance maintained by City, and a provision that an act or omission of one of the insureds or additional insureds that would void or otherwise reduce coverage shall not reduce or void the coverage as to the other named and additional insureds.

12.2 Premises Property Insurance. Throughout the Term of this Lease, MOHAI shall maintain a standard form property insurance policy insuring City's and MOHAI's interests in the Armory Building (excluding Museum Property) against all risks of physical loss or damage (including earthquake and flood). The insurance required under this Section 12.2 shall provide coverage in an amount not less than one hundred percent (100%) of the replacement cost of the Armory Building with a commercially reasonable deductible or self-insured retention.

12.3 General Insurance Requirements. All of the insurance policies required to be maintained under Sections 12.1-.2 shall: (a) be issued by insurance companies authorized to do business in the State of Washington and having an A.M. Best's rating of not less than AVII, unless placed as a surplus line by an authorized Washington State surplus lines broker; (b) contain an endorsement requiring thirty (30) days' written notice from the insurance company to both parties before cancellation, non-renewal or change in the coverage, scope or amount of any policy; and (c) be written as primary policies, not contributing with and not supplemental to the coverage that other party may carry. Certificates of insurance evidencing that the insurance required under this section is in effect shall be delivered to City before any entry on the Premises by MOHAI, and shall be kept current throughout the Term. Such certificate shall reflect the status of City as additional insured (as to the insurance under Section 12.1), and shall provide for at least thirty (30) days advance notice to City in the event of cancellation. City and MOHAI shall assist and cooperate with any insurance company in the adjustment or litigation of all insurance claims arising under the insurance required by this Article. A certificate of demonstrating procurement of the required insurance, including an actual copy of the additional insured policy provision, shall be issued to The City of Seattle, P.O. Box 94669, Seattle, WA 98024-4669. However, the original certification shall not be mailed but sent either by facsimile transmission to (206) 470-1270 or emailed as an attachment in PDF format to riskmanagement@seattle.gov.

12.4 City Obligation to Insure Piles. City shall maintain or pay the allocated cost of standard form of property insurance, including earth movement, insuring against loss to the Building Pile System and the Wharfs. The insurance required under this Section 12.4 shall provide coverage in an amount not less than one hundred percent (100%) of the replacement cost of the Building Pile System and the Wharfs with a commercially reasonable deductible or self-insured retention.

Certificates of insurance evidencing that the insurance required under this Section 12.4 is in effect shall be delivered to MOHAI before any entry on the Premises by MOHAI, and shall be kept current throughout the Term. Such certificate shall provide for at least thirty (30) days advance notice to Ground Tenant in the event of cancellation. City and MOHAI shall assist and cooperate with any insurance company in the adjustment or litigation of all insurance claims arising under the insurance required by this Section 12.4.

12.5 Waiver of Recovery and Subrogation. City and MOHAI release and relieve the other from any liability they might otherwise have and waive their entire right of recovery for loss or damage to property located within or constituting a part or all of the Premises or the Armory Building to the extent that the loss or damage either (a) is actually covered by the injured party's property insurance, or (b) would have been covered by the property insurance the injured party is required to carry under this Article 12, whichever is greater. This waiver applies regardless of the cause or origin of the claim including without limitation loss due to the negligent acts or omissions of City or MOHAI, or their respective officers, directors, council members, employees, agents, contractors, invitees, MOHAI's assignees or subtenants. The parties shall have their property insurers endorse the applicable insurance policies to reflect the foregoing waiver of claims, provided however, that the endorsement shall not be required if the applicable policy of insurance permits the named insured to waive rights of subrogation on a blanket basis, in which case the blanket waiver shall be acceptable.

12.6 Limitation of Tenant's Liability. In no event shall City, its successors or assigns, have any recourse whatsoever for any damages payable, obligations assumed or indemnifications proffered by MOHAI under this Lease to (a) the Museum Property, endowment, archives or other property of MOHAI; (b) funds and pledges of funds raised by MOHAI for the Project or operation of the Museum; (c) proceeds, rents or other income derived, arising from or attributable to the Armory Building or Museum, excluding insurance or condemnation proceeds; or (d) any claims for relief related to the Armory Building or the Project, including claims arising under the insurance policies required to be carried under this Lease or actually carried by MOHAI, except as provided in Section 9.1 above. Under no circumstances shall City have any recourse whatsoever to MOHAI's officers, trustees, directors, agents, employees, contractor or licensees for any debt or obligation created by this Lease.

12.7 Reallocation of Insurance Responsibilities. Notwithstanding the allocations of responsibility to insure contained in Sections 12.112.4 above, the parties may by mutual agreement decide to reallocate such responsibilities, including having one or another party insure both the Building Pile System and Wharfs along with the Armory Building and allocating the cost thereof in an appropriate way among the parties. The parties will engage in good faith discussions, including consulting with their insurance professionals, to agree on the preferred arrangements for purchasing the insurance and sharing the cost thereof, which may change from time to time by mutual agreement. In addition, the parties may by mutual agreement amend the insurance requirements of this Lease from time to time as appropriate to address changes in insurance practices and the insurance needs of the parties consistent with their rights and obligations hereunder.

ARTICLE 13

INDEMNIFICATION

13.1 MOHAI's Indemnification.

13.1.1 Subject to the waiver of recovery and subrogation in Section 12.5, MOHAI shall indemnify, pay the defense costs of and hold harmless City and its council members and employees from Claims for damages, costs, personal injury, death or for loss or damage to property that arise out of or relate to: (a) the acts or omissions of any of MOHAI, its employees, agents, contractors, affiliates or licensees in the development, improvement, operation, maintenance or use of the Premises or conduct of the Project; or (b) any breach or default by MOHAI in the performance of any obligation on MOHAI's part to be performed under this Lease.

13.1.2 This indemnity does not apply: (x) to Claims to the extent they are caused by the acts, omissions or misconduct of City Parties; or (y) to damages, claims, suits, actions or liabilities waived under Section 12.5. The term "City Parties" means City, its council members, agents, employees, contractors and licensees.

13.1.3 Subject to Section 13.3, the foregoing indemnity shall also include reasonable costs, expenses and attorneys' fees incurred in connection with any indemnified Claim or incurred by City in successfully establishing the right to indemnity. MOHAI shall have the right to assume the defense of any Claim subject to this indemnity. City agrees to cooperate fully with MOHAI and its counsel in any matter in which MOHAI elects to defend, provided that MOHAI promptly reimburses City for reasonable costs and expenses incurred in connection with its duty to cooperate.

13.2 City Indemnification.

13.2.1 Subject to the waiver of recovery and subrogation in Section 12.5, City shall indemnify, pay the defense costs of and hold harmless MOHAI and its officers, directors, trustees, agents, employees, contractors and licensees from Claims for damages, costs, personal injury, death or for loss or damage to property that arise out of or relate to the negligence or willful misconduct of City Parties in connection with the Premises, the Project or this Lease.

13.2.2 This indemnity does not apply: (y) to Claims to the extent they are caused by the acts or omissions or misconduct of the MOHAI, including its officers, directors, trustees, agents, employees, contractors, affiliates and licensees; or (z) to damages, claims, suits, actions or liabilities waived under Section 12.5.

13.2.3 Subject to Section 13.3, the foregoing indemnity shall also include reasonable costs, expenses and attorneys' fees incurred in connection with any indemnified Claim or incurred by MOHAI in successfully establishing the right to indemnity. City shall have the right to assume the defense of any Claim subject to this indemnity. MOHAI agrees to cooperate fully with City and City's counsel in any matter in which City elects to defend, provided that City promptly reimburses MOHAI for reasonable costs and expenses incurred in connection with its duty to cooperate.

13.3 Joint, Comparative or Concurrent Negligence of Willful Misconduct. If the parties are determined to be jointly and severally liable in any action, then each party's duty to indemnify and defend shall be proportionate to such party's allocable share of joint, comparative or concurrent negligence or willful misconduct.

13.4 Waiver of Indemnity. City and MOHAI agree that the foregoing indemnities specifically include, without limitation, Claims brought by either party's employees against the any other party. THE FOREGOING INDEMNITIES ARE EXPRESSLY INTENDED TO CONSTITUTE A WAIVER OF EACH PARTY'S IMMUNITY UNDER WASHINGTON'S INDUSTRIAL INSURANCE ACT, RCW TITLE 51, TO THE EXTENT NECESSARY TO PROVIDE THE OTHER PARTY OR PARTIES WITH A FULL AND COMPLETE INDEMNITY FROM CLAIMS MADE BY EACH PARTY AND ITS EMPLOYEES, TO THE EXTENT OF THEIR NEGLIGENCE. CITY AND MOHAI ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF THIS ARTICLE WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

ARTICLE 14

ASSIGNMENT AND SUBLETTING

14.1 Assignment and Subletting. No party may directly or indirectly make or permit an assignment, transfer, sublease or other alienation of such party's rights or obligations under this Lease at any time without the prior written consent of the other parties. Notwithstanding the foregoing, in the ordinary course of business for purposes consistent with normal Museum operations, MOHAI may sublet portions of the Premises or enter into licenses, concessions for a cafe and gift store, and permit short term event rentals (not to exceed three (3) consecutive days per event), which subleases shall be permitted hereunder. Nothing in this Section 14.1 shall change the requirements of Section 3.3 above under which MOHAI provides certain Public Benefits as the operator of the Armory Building.

Further notwithstanding the foregoing, MOHAI may assign its interest under this Lease to a nonprofit entity that agrees to be the successor operator of the Museum and assumes all of MOHAI's obligations hereunder, subject to the consent of City, such consent not to be unreasonably withheld provided that the successor tenant is either controlled by MOHAI or can demonstrate to City's reasonable satisfaction that it can successfully operate the Museum.

ARTICLE 15

DEFAULT AND REMEDIES

15.1 MOHAI's Default. Each of the following constitutes a default by MOHAI under this Lease ("Default"):

15.1.1 MOHAI transfers its rights and obligations under this Lease in contravention of Article 14;

15.1.2 MOHAI fails to perform or observe any covenant, provision or obligation of MOHAI under this Lease not specifically addressed in another section of this Section 15.1, including failure to perform the Public Benefits or Museum operations obligations under Sections 3.4 and 3.5, within ninety (90) days of the date of written notice of default from City (or if the breach requires longer than ninety (90) days to cure, either or both of MOHAI fails to start curing the default within ninety (90) days after receipt of written notice and to thereafter diligently prosecute the cure thereof to completion);

15.1.3 MOHAI vacates, abandons or ceases to use the Premises for Museum operations for sixty (60) consecutive calendar days or longer, subject to excuse for force majeure reasons or periods of reconstruction following casualty or condemnation;

15.1.4 MOHAI consolidates, dissolves or liquidates or takes an equivalent action or an involuntary case is commenced (other than by City) under any federal or state bankruptcy, reorganization, insolvency, moratorium or similar statute against MOHAI, or a custodian, receiver, trustee, assignee for the benefit of creditors or other similar official is appointed to take possession, custody, or control of the property of MOHAI unless such case, petition or appointment is dismissed, set aside or withdrawn or ceases to be in effect within ninety (90) days after the date such case is commenced or the date of said filing or appointment; or MOHAI becomes insolvent or admits in writing its inability to pay its debts as they mature, or commences any voluntary case or files any petition or action for relief relating to any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; or MOHAI makes an assignment for the benefit of creditors or enters into an agreement of composition with its creditors; or MOHAI fails generally to pay its debts as they become due; or MOHAI fails to have discharged promptly any judgment, execution, garnishment or attachment of such consequence as could impair the ability of MOHAI to carry on its operations or to fulfill its obligations under this Lease.

15.1.5 A court enters an order, judgment or decree approving a petition filed against MOHAI seeking an arrangement, composition, liquidation, dissolution or similar relief under the present or future federal, state or other statute, law or regulation relating to bankruptcy, insolvency or other relief for debtors (other than at the instigation of City), and the order, judgment or decree remains unvacated or unstayed for one hundred twenty (120) days.

15.2 City's Remedies for MOHAI's Default. If a Default occurs , then the parties shall use the dispute resolution procedures set forth in Section 18 hereof. Subject to Section 18 hereof if applicable, upon the occurrence of a Default, City may do any one or more of the following:

15.2.1 Terminate this Lease upon one hundred eighty (180) days' prior written notice. Then and in any such event, all improvements (excluding Museum Property) constructed or installed by MOHAI upon the Premises shall become the property of City without the necessity of any deed or conveyance from MOHAI to City;

15.2.2 Hold MOHAI liable for all other damages and reasonable expenses except attorneys' fees incurred by City in enforcing its remedies for any Default; and

15.2.3 Exercise any other legal or equitable right or remedy that it may have. Notwithstanding the foregoing, City may not elect to relet the Premises for its own or MOHAI's account or any other remedy that seeks to maintain MOHAI's obligation to pay or perform the Rent obligations hereunder after the date of termination of this Lease.

15.3 City Exigent Circumstances. Notwithstanding anything in Sections 15.2 to the contrary, if a Default by MOHAI has occurred that involves an imminent danger to public health or safety, then City shall not be required to exhaust all the dispute resolution procedures set forth in Section 18 before exercising its remedies under Sections 15.2 hereunder, but the parties shall nonetheless work together in good faith to try to resolve such dispute in accordance with such dispute resolution procedures.

15.4 City's Default. Each of the following constitutes a default by City under this Lease ("City Default"):

15.4.1 City fails to perform or observe any obligation of City under this Lease within ninety (90) days of the date of written notice from MOHAI (or if the breach requires longer than ninety (90) days to cure, City fails to start curing within ninety (90) days after receipt of written notice and thereafter to diligent prosecute such cure to completion).

15.5 MOHAI's Remedies for City Default. If a City Default occurs, then the parties shall use the dispute resolution procedures set forth in Section 18 hereof. If the mediation required pursuant to Section 18 hereof does not resolve the Dispute, then MOHAI may exercise any remedies available to it at law, including without limitation any one or more of the following:

15.5.1 Terminate this Lease upon one hundred eighty (180) days prior written notice. Then and in any such event, and the all improvements (excluding Museum Property) constructed or installed by MOHAI upon the Premises shall become the property of City without the necessity of any deed or conveyance from MOHAI to City;

15.5.2 Hold City liable for all other damages and reasonable expenses except attorneys' fees incurred by MOHAI in enforcing its remedies for any City Default;

15.5.3 MOHAI may cease or suspend the provision of some or all of the Public Benefits to the extent that the City Default makes it impossible or impractical to provide the same; and

15.5.4 MOHAI may exercise any other legal or equitable right or remedy that they may have.

15.6 MOHAI's Exigent Circumstances. Notwithstanding anything in Sections 15.5 to the contrary, if a City Default has occurred that involves an imminent danger to public health or safety, then MOHAI shall not be required to exhaust all the dispute resolution procedures set forth in Section 18 before exercising its remedies under Sections 15.5 or 15.6 hereunder, but the parties shall nonetheless work together in good faith to try to resolve such dispute in accordance with such dispute resolution procedures.

ARTICLE 16

NOTICES

16.1 Notices. All notices, demands or requests that may or are required to be given by one party to the other under this Lease shall be given in writing and delivered personally, or sent by U.S. certified mail, postage prepaid, return receipt requested, or nationally recognized overnight air carrier, and addressed to City's address or MOHAI's address, as follows:

City's address for notices: The City of Seattle

Dept. of Parks and Recreation

100 Dexter Avenue North

Seattle, WA 98109

Attn: Superintendent

With a copy to: The City of Seattle

Law Department

600 Fourth Avenue, 4th Floor

Seattle, WA 98104

Attn: Helaine Honig

MOHAI's address for notices: Museum of History and Industry

McCurdy Park

2700 24th Avenue East

Seattle, WA 98112-2099

Attn: Executive Director

With a copy to: K&L Gates LLP

925 Fourth Avenue

Suite 2900

Seattle, WA 98104

Attn: Gerry Johnson

Notices shall be deemed to have been given upon receipt or attempted delivery where delivery is not accepted. Either party may change its address and/or those receiving copies of notices upon written notice given to the other.

ARTICLE 17

MEMORANDUM OF AGREEMENT

17.1 Memorandum. This Lease shall not be recorded except as permitted in this Article 17. The parties shall promptly execute and record, at MOHAI's cost, a short form memorandum describing the Premises and stating the Term, the Effective Date and any other information the parties reasonably agree to include and/or necessary for any financing with respect to the Project.

ARTICLE 18

DISPUTE RESOLUTION

18.1 In General; Mediation. In the event of any dispute or difference that shall arise between the parties relating to the construction, meaning or effect of this Lease, or of the rights or liabilities of the parties hereunder, the parties shall first follow the procedures in this section before filing or initiating a lawsuit. The parties shall make their best efforts to resolve disputes as expeditiously as possible through negotiations at the lowest possible decision-making level, and in the event such negotiations are unsuccessful, the matter shall be referred to the Superintendent of City's Park and Recreation Department and the Executive Director of MOHAI. If those officials are unable to resolve the dispute within a period of fifteen (15) days after the matter has been formally referred to them for resolution, they shall meet during the immediately succeeding seven (7) days to select a mediator to assist in the resolution of such dispute. MOHAI and City agree to participate in mediation with the agreed upon mediator for a reasonable amount of time and in good faith. The cost of the mediation shall be shared equally between MOHAI and City.

ARTICLE 19

MISCELLANEOUS

19.1 No Partnership. Nothing contained in this Lease shall create any partnership, joint venture or other relationship between MOHAI and City. It is the intent of the parties that this Lease creates a leasehold estate in the Premises and that the relationship of the parties hereunder is that of landlord and tenant only.

19.2 Successors. This Lease shall bind and inure to the benefit of City, its successors and assigns, MOHAI and its successors and assigns.

19.3 Severability. If any provision of this Lease is determined to be invalid or unenforceable, then that provision and the remainder of this Lease shall continue in effect and be enforceable to the fullest extent permitted by law. It is the intention of the parties that if any provision of this Lease is capable of two constructions, one of which would render the provision void, and the other of which would render the provision valid, then the provision shall have the meaning that renders it valid.

19.4 Integration and Amendments. Together with the Development Agreement, this Lease contains the entire integrated agreement between the parties as to the matters covered herein and supersedes any oral statements or representations or prior written matter not contained in this instrument as to the matters set forth herein. This Lease shall not be modified except by a written document signed by City and MOHAI (or their successors in title) upon passage of an ordinance by the City Council.

19.5 Governing Law; Venue. This Lease shall be governed by and construed and enforced in accordance with the laws of the State of Washington.

19.6 No Waiver. Failure of either party to complain of any act or omission on the part of the other, no matter how long the failure may continue, shall not constitute a waiver of any rights under this Lease. No waiver by any party of any breach of any provisions of this Lease shall be deemed a waiver of a breach of any other provision of this Lease or a consent to any subsequent breach of any other provision. If any action of any party requires the consent or approval of another, consent or approval given on one occasion shall not be deemed a consent to or approval of that action on any other occasion. No extension of time for performance of any obligation or act shall be deemed an extension of the time for performance of any other obligation or act.

19.7 Construction. The following rules shall apply to the construction of this Lease unless the context otherwise requires:

(a) Words describing the singular number shall include the plural number and vice versa, except where otherwise indicated.

(b) All references herein to particular articles, sections or exhibits are references to articles, sections or exhibits of this Lease, unless otherwise expressly stated.

(c) The headings and table of contents herein are solely for convenience of reference and shall not constitute a part of this Lease nor shall they affect its meaning, construction or effect.

(d) This Lease shall not be construed as if it had been prepared by one of the parties, but rather as if all parties had prepared it.

19.8 Time. Time is of the essence of every provision of this Lease.

19.9 Cumulative Remedies. The rights and remedies that either party may have under this Lease or at law or in equity, upon any breach, are distinct, separate and cumulative and shall not be deemed inconsistent with each other, and no one of them shall be deemed to be exclusive of any other.

19.10 Authority. Each party hereto warrants that it has the authority to enter into this Lease and to perform its obligations hereunder and that all necessary approvals, acts or resolutions to authorize this transaction have been taken, and the signatories, by executing this Lease, warrant that they have the authority to bind the respective parties.

19.11 Consents and Approvals. In any instance when either party's consent or approval is required under this Lease, such consent or approval shall not be unreasonably withheld, conditioned or delayed. No permission, consent, or approval of City contained herein or given pursuant to this Lease is, or shall be construed as, a representation or assurance that the matter consented to or approved complies with applicable Laws, nor shall any such consent or approval be construed to authorize any failure to comply with such Laws. No action of the Superintendent in implementation of this Lease shall constitute or excuse any official action by any other City department or official that may be required by law, ordinance, rule or regulation.

19.12 Counterparts. This Lease may be executed in counterparts for the convenience of the parties, and such counterparts shall together constitute one Lease.

19.13 Force Majeure. Except as otherwise expressly provided in this Lease, time periods for any party's performance under any provisions of this Lease shall be suspended for periods of time during which such performance is prevented due to circumstances beyond such party's reasonable control, including without limitations, strikes, embargoes, shortages of labor or materials, governmental regulations, acts of God, unforeseen site conditions, casualty, war or other strife.

19.14 Exhibits. Exhibits A through E attached hereto are hereby incorporated herein and made a part of this Lease, and the term "Lease" shall include all exhibits hereto.

19.15 Limitation on Third Party Rights. Nothing in this Lease expressed or implied is intended or shall be construed to give to any person other than City or MOHAI any legal or equitable right, remedy or claim under or in respect of this Lease or any covenant, condition or provision herein contained; and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of City and MOHAI.

19.16 Rights Reserved by City. City reserves the right to do the following, without liability of any kind, so long as such actions do not substantially interfere with MOHAI's rights under this Lease or its ability to operate the Museum and provide the Public Benefits:

19.16.1 Appearance, Size and Location of Lake Union Park. Increase, reduce, and change in any manner whatsoever the number, appearance, dimension, and locations of Lake Union Park walks, buildings, landscaping, parking, and service areas, and make improvements, alterations, and additions to the portions of the Premises that are located outside of the Armory Building footprint.

19.16.2 Traffic Regulation. Regulate all traffic within and adjacent to the Lake Union Park.

19.16.3 Admission Charges. Impose a reasonable charge for use of facilities (other than the Museum) within Lake Union Park, including parking facilities.

19.16.4 Rules and Regulation Promulgation. Promulgate, from time to time, reasonable rules and regulations regarding the use and occupancy of any area of Lake Union Park; provided that no such rule or regulation that would directly or indirectly affect any right granted to MOHAI by this Lease shall be promulgated without City having given prior written notice of such action to MOHAI and at least thirty (30) days to comment on such proposed action unless such promulgation is because of a declared emergency.

19.16.5 Days and Hours for Operations. Determine the hours Lake Union Park will be open to the public. Nevertheless, regardless of park hours, City cannot restrict or block access to the Premises and Armory Building (recognizing that the Museum may be operating on different hours than when the park is open).

19.16.6 Park Concessions Determine the size, number, type and identity of concessions and operations being conducted or undertaken at Lake Union Park other than in the Armory Building.

[signatures on next page]

IN WITNESS WHEREOF, this Lease is executed on the day and year first above written.

City:

CITY OF SEATTLE, a Washington municipal corporation

By:

Name:

Title:

Approved as to form:

_____________________________

City of Seattle Assistant City Attorney

MOHAI:

HISTORICAL SOCIETY OF SEATTLE AND KING COUNTY, a Washington nonprofit corporation

By:

Name:

Title:

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 s/he signed this instrument, on oath stated that s/he was authorized to execute the instrument and acknowledged it as the ______________________ of the City of Seattle, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.

Dated: ________________________

(Seal or stamp)

(Signature)

(Printed Name)

Notary Public

My appointment expires

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 s/he signed this instrument, on oath stated that s/he was authorized to execute the instrument and acknowledged it as the ______________________ of the Historical Society of Seattle and King County, a Washington nonprofit corporation, to be the free and voluntary act of such party for the uses and purposes mentioned in the instrument.

Dated: ________________________

(Seal or stamp)

(Signature)

(Printed Name)

Notary Public

My appointment expires

EXHIBIT A

Legal Description of Premises

Lots 9 through 12, inclusive, Block 74, all in Lake Union Shore Lands,

Situate in the City of Seattle, County of King, State of Washington.

Together with the eastern one-half of Terry Avenue adjoining the foregoing described property, upon the vacation thereof by the City of Seattle.

Depiction of Premises on continuation of Exhibit A attached. (109 KB PDF document)

EXHIBIT B

Description of Portions of Lake Union Park Burdened by the Easements (130 KB PDF document)

EXHIBIT C

Depiction of Easements (except Utility Easement) (144 KB PDF document)

EXHIBIT D

Depiction of Public Use Area (129 KB PDF document)

EXHIBIT E

MOHAI Public Benefits

The Museum of History and Industry is committed to preserving and sharing the rich and diverse history of Seattle and its region with residents of and visitors to the city as well as to presenting exhibits and programs from institutions around the country that illuminate our shared national heritage. In partial consideration for the public support for the development of its new regional history museum at the Armory Building in Seattle's Lake Union Park and in fulfillment of its mission and ongoing commitment to the community, Ground Tenant and MOHAI (which for purposes of this Exhibit shall include any successor operator of the Museum) agrees that from and after the Opening Date of the Museum through the Term of the Lease, it will:

1. Regional History Museum. Cause the Armory Building to be operated as an integrated, publicly accessible regional history museum with exhibits and programs devoted primarily to the history, culture, industry, commerce and maritime heritage of the Puget Sound region and the Pacific Northwest, including related space for meeting and educational functions, book store/gift shop and cafe.

2. Opening Hours and General Admissions. Operate the Museum in the Armory Building at least fifty (50) hours per week, fifty (50) weeks per year, subject to the following admissions policy:

(a) General public admission will be subject to reasonable standard admission charges;

(b) Every day the Museum is open, any member of the public unable to pay the standard admission fee will be admitted (excluding special events) upon payment of whatever amount he or she determines he or she can pay. MOHAI will include this policy in its written admissions policies, including indication of this policy on its website;

(c) At least one (1) day per calendar month will be regularly scheduled when admission to the Museum (excluding special events) is free of charge to all visitors; and

(d) Children of elementary and middle school age (fourteen (14) years or younger) will be admitted free of charge every day the Museum is open. This excludes school and group admissions and special events.

3. School Programs. Develop and offer on-going educational programs for elementary, middle and high school classrooms and provide reduced fee and other scholarship assistance to students from schools that participate in federal free or reduced price school lunch programs. In the event regional or other programs provide scholarship or transportation benefits to students from schools, MOHAI will participate in such programs.

4. Cultural Diversity in Programming. Develop and implement programs and enrichment opportunities of interest to particular segments of the public by ensuring a robust slate of culturally diverse programming throughout the year, consistent with its traditional role in sharing and presenting the history of African Americans, Asian and Pacific Islander Americans, Hispanic Americans, Native Americans and others. To this end, MOHAI's programs and exhibits will incorporate the perspectives and stories of the entire Seattle community.

5. City Use. Make the Museum available for up to four public events each year, identified by City and scheduled to the mutual convenience of the parties. Such events cannot unreasonably interfere with the operation of the Museum. The group sponsoring such events must be either City or an organized nonprofit corporation and such event sponsor must execute a use agreement required by MOHAI including appropriate indemnities and agreement to pay for costs as hereafter described. There shall be no facility rental fee for such events, but MOHAI shall be compensated for (and may required advance payment of) audio/visual, after hours or special security or staffing, catering and other event special needs and costs, if MOHAI elects to provide the same. MOHAI will also allow City to make occasional use of the Terrace for events in Lake Union Park, subject to the terms and conditions for the four events described in this paragraph.

6. Meeting Space. Provide meeting room space for noncommercial use by South Lake Union community organizations for up to thirty (30) hours per month on a first-come, first-served basis, during hours when the Museum is open to the public, and subject to demand for such meeting space, MOHAI's rules regarding use of such space and MOHAI's scheduling convenience and execution of use agreements required by MOHAI (including appropriate indemnities and agreement to pay for costs as hereafter described). The parties recognize that separate, dedicated meeting space will not be included in the Project design and such meetings would need to occur in Museum areas that also serve other functions. There shall be no facility rental fee for such meetings, but MOHAI shall be compensated for (and may require advance payment of) audio/visual, special security or staffing, special set up and other event special needs and costs, if MOHAI elects to provide the same. MOHAI shall publicize the availability of such meeting space by, at a minimum, posting notice thereof in a prominent position on its website.

7. Public Restrooms. Make available for public use restrooms in the cafe to be located in the Armory Building during Operating Hours without requiring payment of Museum admission charges.

8. City Staff Work Space. Make available work space for regular use by City staff during Operating Hours or when Museum staff is on Premises in connection with the operation and maintenance of the Lake Union Park and the Maritime Heritage Group.

9. Publicly Accessible Cafe. Design and cause the cafe to be operated so as to serve not only the Museum but Lake Union Park users generally. The cafe's open hours (if less than normal Museum open hours, exclusive of special events) and access policies (if any) shall be subject to the review and approval of the Superintendent, which consent shall not be unreasonably withheld.

10. Emergency Use. MOHAI acknowledges that Lake Union Park and the Armory Building have been designated as "Tier 2 Sheltering Sites" in City's Emergency Response Plan and that use of the Armory Building for Museum purposes may be impacted in the event of a declared emergency. City and MOHAI shall develop a protocol concerning any such use, providing for management of the Premises during a declared emergency and City responsibility for any cost, damage or liability associated with such use.