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GROUND LEASE AGREEMENT

between

CASCADIA STATE INFRASTRUCTURE AUTHORITY, as Lessor,

and

COLUMBIA BASIN WATER TREATMENT PARTNERS, LLC, as Lessee

Dated as of November 2, 2021

After recording, return to: Calderwood & Harkness LLP 901 Fifth Avenue, Suite 3200 Seattle, WA 98164

Attention: Oliver Mackenzie

Thurston County Auditor Recording No. 2021-1102-004788

This Ground Lease Agreement is entered into in connection with that certain Amended and Restated Limited Liability Company Agreement of Columbia Basin Water Treatment Partners, LLC, dated November 2, 2021.

GROUND LEASE AGREEMENT

This GROUND LEASE AGREEMENT (this "Ground Lease" or this "Lease") is entered into as of November 2, 2021 (the "Execution Date"), by and between:

CASCADIA STATE INFRASTRUCTURE AUTHORITY, a Washington State governmental authority created pursuant to Chapter 43.155A RCW, with headquarters located at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501 ("CSIA" or "Lessor");

and

COLUMBIA BASIN WATER TREATMENT PARTNERS, LLC, a Washington limited liability company, with its registered office at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501 (c/o CSIA), Employer Identification Number 88-3421076, Washington Unified Business Identifier Number 604-892-315 ("CBWTP" or "Lessee").

CSIA and CBWTP are sometimes referred to herein individually as a "Party" and collectively as the "Parties."

RECITALS

WHEREAS, Cascadia State Infrastructure Authority ("CSIA" or "Lessor") is a Washington State governmental authority duly created and existing pursuant to Chapter 43.155A of the Revised Code of Washington (RCW), headquartered at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501, and is charged under its enabling legislation with financing, developing, and overseeing critical public infrastructure across the State of Washington, including water treatment, transportation, energy, and communications infrastructure for the benefit of the citizens of the State;

WHEREAS, Columbia Basin Water Treatment Partners, LLC ("CBWTP" or "Lessee") is a Washington limited liability company duly organized and validly existing under the laws of the State of Washington, formed on November 2, 2021, with its registered office at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501 (c/o CSIA), Employer Identification Number 88-3421076, Washington Unified Business Identifier Number 604-892-315, and filed with the Washington Secretary of State on November 2, 2021;

WHEREAS, CBWTP is a joint venture entity formed pursuant to that certain Amended and Restated Limited Liability Company Agreement of Columbia Basin Water Treatment Partners, LLC, dated as of November 2, 2021 (as may be amended, supplemented, or restated from time to time, the "JV Agreement"), by and between CSIA (holding a fifty-five percent (55%) membership interest in CBWTP) and Pinnacle Water Solutions, LLC, a Delaware limited liability company (holding a forty-five percent (45%) membership interest in CBWTP) ("Pinnacle"), the JV Agreement governing the formation, capitalization, management, and operation of CBWTP as a public-private joint venture;

WHEREAS, CBWTP was purpose-formed to design, construct, own, and operate the Thurston County Advanced Water Treatment Facility (the "Facility"), a twelve million gallon-per-day (12 MGD) advanced water treatment plant serving Thurston County and adjacent municipal water systems in the greater Puget Sound region of Washington State, with a total estimated project cost of Forty-Five Million Dollars ($45,000,000);

WHEREAS, CSIA is the fee simple owner of a certain parcel of real property consisting of approximately fourteen and seven-tenths (14.7) acres located at 2480 Capitol Boulevard SE, Tumwater, Thurston County, Washington 98501 (the "Premises"), as more particularly described in Exhibit A attached hereto and incorporated herein by this reference, CSIA having acquired the Premises in its capacity as a governmental authority under Chapter 43.155A RCW for the purpose of public infrastructure development;

WHEREAS, CSIA desires to lease the Premises to CBWTP, and CBWTP desires to lease the Premises from CSIA, for the sole purpose of designing, constructing, operating, and maintaining the Facility, upon the terms and conditions set forth herein, such lease being an essential element of the public-private joint venture transaction and critical to fulfilling the public purpose of providing advanced water treatment services to Thurston County and surrounding communities;

WHEREAS, this Ground Lease Agreement is a material component of the public-private joint venture transaction contemplated by the JV Agreement, and the execution and delivery of this Ground Lease is a condition precedent to the closing of the transactions contemplated by the JV Agreement, including the capital contributions of the members of CBWTP and the commencement of the Facility design and development process;

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties agree as follows:

ARTICLE I — DEFINITIONS

Section 1.1 — Defined Terms

As used in this Ground Lease, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the JV Agreement.

"Applicable Law" means all federal, state, and local laws, statutes, ordinances, rules, regulations, codes, executive orders, judicial decrees, and administrative orders applicable to the Premises, the Facility, the Lessee, or the Lessor, including without limitation Chapter 43.155A RCW, the Washington State Environmental Policy Act ("SEPA"), the National Environmental Policy Act ("NEPA"), the Federal Clean Water Act, the Safe Drinking Water Act, all environmental laws of the State of Washington, the Washington Industrial Safety and Health Act, and all applicable building codes, zoning ordinances, land use regulations, and health and safety requirements of Thurston County and the State of Washington, in each case as the same may be amended, supplemented, or replaced from time to time.

"CBWTP" or "Lessee" means Columbia Basin Water Treatment Partners, LLC, a Washington limited liability company, Employer Identification Number 88-3421076, Washington Unified Business Identifier Number 604-892-315, and its permitted successors and assigns.

"Commencement Date" means November 2, 2021, the date on which the Term of this Ground Lease commences.

"Construction" means, collectively, the design, engineering, permitting, and physical construction of the Facility on the Premises, including all site preparation, grading, foundation work, building construction, installation of process equipment and systems, commissioning, start-up, and testing necessary to render the Facility operational for its intended purpose.

"CSIA" or "Lessor" means Cascadia State Infrastructure Authority, a Washington State governmental authority created pursuant to Chapter 43.155A RCW, and its successors and assigns.

"Environmental Laws" means all applicable federal, state, and local laws, statutes, ordinances, rules, regulations, permits, and orders relating to pollution or protection of the environment, public health, or natural resources, including without limitation SEPA, NEPA, the Federal Clean Water Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Washington Model Toxics Control Act (RCW 70A.305), the Washington Water Pollution Control Act (RCW 90.48), and all regulations promulgated thereunder, in each case as the same may be amended, supplemented, or replaced from time to time.

"Expiration Date" means the date that is ninety-nine (99) years from the Commencement Date, that is, November 2, 2120, unless this Ground Lease is earlier terminated in accordance with its terms.

"Facility" means the Thurston County Advanced Water Treatment Facility, a twelve million gallon-per-day (12 MGD) advanced water treatment plant to be designed, constructed, and operated on the Premises by the Lessee, including all treatment systems, storage facilities, distribution infrastructure, process control systems, laboratory facilities, administration buildings, and related appurtenances, as more particularly described in the plans and specifications to be approved in accordance with Section 6.2 hereof.

"Force Majeure Event" has the meaning set forth in Section 15.7 of this Ground Lease.

"Governing Board" means the governing board of CBWTP as established and constituted pursuant to the JV Agreement.

"Ground Lease" or "Lease" means this Ground Lease Agreement, including all exhibits and schedules attached hereto, as the same may be amended, supplemented, or modified from time to time in accordance with the terms hereof.

"Hazardous Substances" means any pollutant, contaminant, hazardous material, hazardous waste, hazardous substance, toxic substance, or any other substance regulated under any Environmental Law, including without limitation petroleum and petroleum products, asbestos-containing materials, polychlorinated biphenyls, lead-based paint, and per- and polyfluoroalkyl substances (PFAS).

"Improvements" means all buildings, structures, facilities, fixtures, equipment, and other improvements now or hereafter constructed, installed, or placed on the Premises by or on behalf of Lessee during the Term of this Ground Lease, including without limitation the Facility, all treatment systems, pipelines, storage tanks, pumping stations, laboratory facilities, administration buildings, roads, fencing, landscaping, parking areas, and utility connections, together with all replacements, additions, alterations, and modifications thereto.

"JV Agreement" means the Amended and Restated Limited Liability Company Agreement of Columbia Basin Water Treatment Partners, LLC, dated as of November 2, 2021, by and between CSIA and Pinnacle, as the same may be amended, supplemented, or restated from time to time in accordance with its terms.

"JV Termination" means the dissolution, winding up, or termination of CBWTP, whether voluntary or involuntary, including without limitation any termination resulting from (a) the exercise of default remedies under Section 8.2 of the JV Agreement, (b) dissolution elected by the members of CBWTP under the JV Agreement, (c) a judicial dissolution, or (d) any other event that results in CBWTP ceasing to exist as a legal entity under the laws of the State of Washington.

"Leasehold Interest" means the leasehold estate created by this Ground Lease in favor of Lessee in and to the Premises for the duration of the Term.

"Leasehold Mortgage" means any mortgage, deed of trust, security interest, or other encumbrance granted by Lessee in or on the Leasehold Interest to a Leasehold Mortgagee in accordance with Section 10.2 hereof.

"Leasehold Mortgagee" means any institutional lender or other entity that holds a Leasehold Mortgage that has been approved by Lessor in accordance with Section 10.2 hereof.

"Permitted Exceptions" means those easements, restrictions, encumbrances, and other title exceptions affecting the Premises as set forth in Exhibit B attached hereto.

"Permitted Use" means the design, construction, ownership, operation, maintenance, repair, and replacement of the Facility and related water treatment infrastructure on the Premises, and all uses incidental and ancillary thereto, including without limitation the treatment, storage, and distribution of water, the operation of laboratory and testing facilities, the maintenance of administrative offices in support of the Facility, and the provision of public tours and educational programs related to water treatment.

"Pinnacle" means Pinnacle Water Solutions, LLC, a Delaware limited liability company, and its permitted successors and assigns.

"Premises" means the approximately fourteen and seven-tenths (14.7) acres of real property located at 2480 Capitol Boulevard SE, Tumwater, Thurston County, Washington 98501, as more particularly described in Exhibit A attached hereto, together with all rights, privileges, easements, and appurtenances pertaining thereto.

"Rent" means the annual rent of One Dollar ($1.00) payable by Lessee to Lessor as set forth in Article IV of this Ground Lease.

"Reversion" means the reversion of the Leasehold Interest and all Improvements to CSIA upon the expiration or earlier termination of this Ground Lease, as set forth in Article XII hereof.

"Term" means the period commencing on the Commencement Date and expiring on the Expiration Date, unless this Ground Lease is earlier terminated in accordance with its terms.

Section 1.2 — Rules of Construction

(a) Unless the context clearly requires otherwise, words importing the singular number shall include the plural number and vice versa, and words importing gender shall include all genders. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The words "herein," "hereof," "hereunder," and words of similar import shall be deemed to refer to this Ground Lease as a whole and not to any particular provision hereof.

(b) References to "Articles," "Sections," "Exhibits," and "Schedules" shall be to Articles, Sections, Exhibits, and Schedules of this Ground Lease unless otherwise specified. References to "days" shall mean calendar days unless "business days" is expressly stated.

(c) The headings and captions in this Ground Lease are included for convenience of reference only and shall not affect the interpretation of this Ground Lease.

(d) Each exhibit and schedule attached hereto is incorporated herein by this reference and made a part of this Ground Lease as if fully set forth herein.

(e) Capitalized terms used but not otherwise defined in this Ground Lease shall have the meanings ascribed to such terms in the JV Agreement.

(f) This Ground Lease shall be interpreted without regard to any presumption or rule requiring construction against the party who caused this Ground Lease to be drafted. The Parties acknowledge that they have been represented by counsel and have participated equally in the drafting and negotiation of this Ground Lease.

ARTICLE II — PREMISES

Section 2.1 — Description of Premises

The Premises subject to this Ground Lease consist of approximately fourteen and seven-tenths (14.7) acres of real property located at 2480 Capitol Boulevard SE, Tumwater, Thurston County, Washington 98501. The legal description of the Premises is set forth in Exhibit A attached hereto and incorporated herein by this reference, which includes a metes and bounds description and the applicable lot, block, and plat reference as recorded with the Thurston County Auditor. As of the Commencement Date, the Premises are currently unimproved, consisting of vacant land with no existing structures, buildings, or other permanent improvements thereon. The Premises are situated adjacent to the Deschutes River watershed and are zoned for public utility and infrastructure use under the Thurston County Comprehensive Plan and applicable zoning ordinances.

Section 2.2 — Lessor's Title

CSIA represents and warrants to CBWTP that, as of the Commencement Date, CSIA holds fee simple title to the Premises, free and clear of all liens, encumbrances, mortgages, deeds of trust, restrictions, conditions, covenants, charges, claims, and other defects of title, except for the Permitted Exceptions set forth in Exhibit B attached hereto. CSIA further represents and warrants that it acquired the Premises in its capacity as a governmental authority under Chapter 43.155A RCW and that it has full legal authority and power to enter into this Ground Lease and to grant the Leasehold Interest to CBWTP as contemplated herein. CSIA shall defend Lessee's right to quiet enjoyment and possession of the Premises against the claims of all persons claiming by, through, or under CSIA, subject to the Permitted Exceptions.

Section 2.3 — Conveyance of Leasehold

CSIA hereby leases, demises, and lets the Premises unto CBWTP, and CBWTP hereby leases the Premises from CSIA, for the Term, subject to the terms, covenants, conditions, and provisions set forth in this Ground Lease and subject to the Permitted Exceptions. This Ground Lease conveys only a leasehold interest in the Premises; fee simple title to the Premises is retained by CSIA at all times during the Term and shall not be deemed to have been conveyed, transferred, or otherwise disposed of by virtue of this Ground Lease. Nothing in this Ground Lease shall be construed as granting to Lessee any right, title, or interest in or to the fee estate in the Premises.

Section 2.4 — No Merger

The Leasehold Interest created by this Ground Lease shall not merge with the fee simple estate of CSIA in the Premises, notwithstanding (a) CSIA's fifty-five percent (55%) membership interest in CBWTP, (b) any future acquisition by CSIA of additional membership interests in CBWTP, (c) any future acquisition by CBWTP or any of its members of any interest in the fee estate, or (d) the fact that the same person or entity may hold both the fee simple estate and the Leasehold Interest. The Parties expressly intend that the Leasehold Interest shall remain separate and distinct from the fee simple estate for all purposes, including without limitation for purposes of any Leasehold Mortgage, tax treatment, and the allocation of rights and obligations under this Ground Lease and the JV Agreement. No merger shall occur unless and until a written instrument expressly effecting such merger is executed by both Parties.

ARTICLE III — TERM

Section 3.1 — Initial Term

The Term of this Ground Lease commences on the Commencement Date, November 2, 2021, and shall expire on the date that is ninety-nine (99) years from the Commencement Date, that is, November 2, 2120, unless this Ground Lease is earlier terminated in accordance with the provisions hereof (the "Term"). There are no options to extend or renew the Term beyond the Expiration Date.

Section 3.2 — Early Termination Upon JV Termination

This Ground Lease shall automatically terminate, without the necessity of any further action by either Party, upon a JV Termination, including without limitation any dissolution, winding up, or termination of CBWTP pursuant to the JV Agreement, whether resulting from (a) the exercise of default remedies under Section 8.2 of the JV Agreement, (b) a voluntary dissolution elected by the members of CBWTP in accordance with the JV Agreement, (c) a judicial dissolution of CBWTP, or (d) any other event causing CBWTP to cease to exist as a legal entity under the laws of the State of Washington. Upon any such early termination, the Reversion provisions of Article XII of this Ground Lease shall apply immediately and automatically, and Lessee shall comply with the surrender obligations set forth in Section 3.3 and Article XII hereof. For the avoidance of doubt, the automatic termination of this Ground Lease upon a JV Termination shall not require the delivery of a notice of termination by Lessor, although Lessor may deliver such a notice for purposes of clarity and record.

Section 3.3 — Surrender at Expiration or Termination

Upon the expiration of the Term or any earlier termination of this Ground Lease, howsoever caused, Lessee shall immediately surrender and deliver possession of the Premises and all Improvements to Lessor in the condition required under Article XII hereof. Lessee shall remove all of its personal property and trade fixtures from the Premises within ninety (90) days following the date of expiration or earlier termination, provided that any personal property or trade fixtures not removed within such ninety-day period shall be deemed abandoned by Lessee and shall become the property of Lessor without compensation to Lessee. Lessee shall repair any damage to the Premises or Improvements caused by such removal. The obligations of Lessee under this Section 3.3 shall survive the expiration or earlier termination of this Ground Lease.

ARTICLE IV — RENT

Section 4.1 — Annual Rent

Lessee shall pay to Lessor annual rent in the amount of One Dollar ($1.00) (the "Rent"), payable in advance on each anniversary of the Commencement Date during the Term. The first annual Rent payment of One Dollar ($1.00) was due and payable on the Commencement Date and is hereby acknowledged by both Parties as having been paid and received in full upon the execution and delivery of this Ground Lease.

Section 4.2 — No Additional Rent

Except as otherwise specifically and expressly provided in this Ground Lease, no additional rent, percentage rent, escalation rent, or other monetary consideration of any kind shall be payable by Lessee to Lessor under this Ground Lease. The Parties acknowledge and agree that the nominal Rent of One Dollar ($1.00) per annum reflects CSIA's public-purpose interest in the development and operation of the Facility as critical public infrastructure for the benefit of Thurston County and surrounding communities, and that the true consideration for this Ground Lease includes the public benefits to be derived from the construction and operation of the Facility, the capital contributions of the members of CBWTP under the JV Agreement, and the mutual covenants and agreements of the Parties herein.

Section 4.3 — Net Lease

This Ground Lease is intended to be, and shall be construed as, an absolutely net lease. Throughout the Term, Lessee shall be responsible for and shall pay, before delinquency, all costs, expenses, taxes (to the extent applicable and not exempt), assessments, governmental charges, insurance premiums, utility charges, maintenance costs, repair costs, and all other charges, impositions, and expenses of every kind and nature whatsoever relating to the Premises and the Improvements, whether foreseen or unforeseen, ordinary or extraordinary. Lessor shall not be required to furnish any services or utilities, make any repairs or alterations, or incur any expense of any kind with respect to the Premises or the Improvements during the Term. The Rent payable hereunder shall be net to Lessor, and Lessee's obligations to pay all costs and expenses relating to the Premises and the Improvements shall be separate and independent obligations of Lessee.

ARTICLE V — PERMITTED USE

Section 5.1 — Permitted Use

The Premises shall be used by Lessee solely and exclusively for the Permitted Use, which encompasses the design, construction, ownership, operation, maintenance, repair, and replacement of the Facility and related water treatment infrastructure on the Premises, and all uses incidental and ancillary thereto. The Facility is planned as a twelve million gallon-per-day (12 MGD) advanced water treatment plant employing state-of-the-art treatment technologies, including membrane filtration, ultraviolet disinfection, and advanced oxidation processes, serving Thurston County and adjacent municipal water systems. Ancillary uses shall include, without limitation, the operation of water quality testing laboratories, the maintenance of administrative and operations offices, vehicle and equipment storage, public education and community outreach activities, and such other activities as are customarily associated with the operation of a municipal water treatment facility.

Section 5.2 — Prohibited Uses

Lessee shall not use the Premises for any purpose other than the Permitted Use without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's sole and absolute discretion. Without limiting the generality of the foregoing, the following uses are expressly prohibited: (a) any residential use; (b) any commercial retail use; (c) any industrial manufacturing use unrelated to water treatment; (d) any use involving the generation, storage, treatment, or disposal of Hazardous Substances, except for such Hazardous Substances as are customarily used in the operation of a water treatment facility and in compliance with all Environmental Laws; (e) any use that would violate any Applicable Law or the terms of any applicable zoning ordinance; and (f) any use that would constitute a nuisance or would unreasonably interfere with the use and enjoyment of neighboring properties.

Section 5.3 — Compliance with Laws

Lessee shall, at its sole cost and expense, comply with all Applicable Laws in its use, construction, operation, and maintenance of the Premises and the Facility throughout the Term. Lessee shall obtain and maintain compliance with all applicable environmental laws, zoning ordinances, building codes, health and safety regulations, and other governmental requirements of Thurston County, the State of Washington, and the United States of America. Lessee shall not use or permit the use of the Premises in any manner that would violate any Applicable Law or that would cause or permit the Premises or the Facility to be in violation of any Applicable Law.

Section 5.4 — Permits and Approvals

Lessee shall be solely responsible, at its sole cost and expense, for obtaining and maintaining in full force and effect throughout the Term all permits, licenses, approvals, consents, authorizations, and governmental certifications necessary for the Construction and operation of the Facility, including without limitation: (a) the Phase II Environmental Impact Determination from the Thurston County Department of Environmental Health; (b) all building permits and construction approvals from the City of Tumwater and Thurston County; (c) all water quality discharge permits from the Washington Department of Ecology; (d) all permits and approvals required under SEPA; (e) all drinking water system permits from the Washington Department of Health; and (f) all other federal, state, and local permits and approvals applicable to the Facility. This obligation is consistent with and supplementary to Section 4.3 of the JV Agreement, which allocates permitting responsibility to CBWTP. Lessor shall reasonably cooperate with Lessee, at Lessee's expense, in connection with Lessee's efforts to obtain and maintain such permits and approvals, including by executing applications and other documents as reasonably requested by Lessee, provided that Lessor shall not be required to incur any out-of-pocket cost or liability in connection therewith.

ARTICLE VI — CONSTRUCTION AND IMPROVEMENTS

Section 6.1 — Construction of the Facility

Lessee shall have the right and the obligation to design and construct the Facility on the Premises in accordance with the JV Agreement and all Applicable Laws. The Facility shall be designed and constructed to the standards and specifications contemplated by the JV Agreement, including the design parameters, performance criteria, and budget approved by the Governing Board. Construction shall not commence until all of the following conditions have been satisfied: (a) all required governmental permits and approvals necessary for the commencement of Construction have been obtained and are in full force and effect; (b) the conditions to commencement of Construction set forth in the JV Agreement, including without limitation supermajority Governing Board approval as required thereunder, have been fully satisfied or waived; (c) Lessee has obtained and provided evidence of all insurance coverage required under Article VIII hereof; and (d) Lessor has approved the plans and specifications for the Facility in accordance with Section 6.2 hereof. Lessee shall prosecute the Construction with reasonable diligence and in a good and workmanlike manner, using materials of good quality and in accordance with all Applicable Laws and the approved plans and specifications.

Section 6.2 — Plans and Specifications

Prior to the commencement of Construction, Lessee shall submit to Lessor complete and detailed plans and specifications for the Facility, including architectural, structural, mechanical, electrical, civil, and environmental engineering plans, for Lessor's review and approval. Lessor's approval shall not be unreasonably withheld, conditioned, or delayed. Lessor shall review such plans and specifications and shall provide written approval or written comments and objections within thirty (30) days after receipt thereof. If Lessor fails to respond within such thirty-day period, Lessor shall be deemed to have approved the plans and specifications as submitted. In the event Lessor provides comments or objections, Lessee shall revise the plans and specifications to address such comments and objections and shall resubmit the revised plans and specifications for Lessor's review and approval, which shall follow the same process. Material changes to the approved plans and specifications shall require the prior written approval of Lessor, which shall not be unreasonably withheld, conditioned, or delayed.

Section 6.3 — Ownership of Improvements During Term

All Improvements constructed, installed, or placed on the Premises by or on behalf of Lessee during the Term of this Ground Lease shall be owned by Lessee during the Term. Lessee shall have all rights, title, and interest in and to the Improvements during the Term, subject to the terms and conditions of this Ground Lease and the JV Agreement. Lessee's ownership of the Improvements shall include the right to depreciate the Improvements for tax purposes to the extent permitted by Applicable Law. Notwithstanding the foregoing, upon the expiration of the Term or any earlier termination of this Ground Lease, all Improvements shall automatically become the property of Lessor, free and clear of all claims, liens, and encumbrances, pursuant to the Reversion provisions set forth in Article XII of this Ground Lease.

Section 6.4 — Alterations and Modifications

Lessee may make alterations, modifications, additions, or improvements to the Improvements during the Term, subject to the following provisions:

(a) Material Alterations. Lessee shall not make any material alteration, modification, or addition to the Improvements without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned, or delayed. For purposes of this Section, a "material alteration" means any alteration, modification, or addition that (i) involves a cost in excess of Five Hundred Thousand Dollars ($500,000), (ii) materially changes the footprint, height, or structural configuration of any building or structure on the Premises, (iii) materially changes the treatment capacity or process technology of the Facility, or (iv) materially affects the value of the Improvements.

(b) Non-Material Alterations. Lessee may make non-material alterations, modifications, and additions to the Improvements without the prior written consent of Lessor, provided that all such work shall be performed in a good and workmanlike manner, using materials of good quality, and in compliance with all Applicable Laws.

(c) Notice. Lessee shall provide Lessor with written notice of any alteration, modification, or addition with an estimated cost in excess of One Hundred Thousand Dollars ($100,000), whether or not Lessor's consent is required, at least fifteen (15) days prior to the commencement of such work.

Section 6.5 — Liens

Lessee shall not permit any mechanic's lien, materialman's lien, construction lien, or other lien arising from Construction or any other work performed on or materials supplied to the Premises to remain on the Premises or the Improvements for a period exceeding thirty (30) days after Lessee receives notice of the filing thereof. Lessee shall promptly discharge, satisfy, or bond over any such lien at Lessee's sole cost and expense. If Lessee fails to discharge, satisfy, or bond over any such lien within such thirty-day period, Lessor may, but shall not be obligated to, pay and discharge such lien and Lessee shall reimburse Lessor for all costs and expenses incurred in connection therewith, together with interest at the rate of eight percent (8%) per annum, within thirty (30) days after written demand therefor. Nothing in this Ground Lease shall be construed as constituting the consent or request of Lessor, express or implied, to any contractor, subcontractor, laborer, materialman, or supplier for the performance of any work or the furnishing of any materials for any improvement, alteration, or repair of the Premises, and Lessor's interest in the Premises shall not be subject to any lien arising from any work performed by or on behalf of Lessee.

ARTICLE VII — TAXES AND ASSESSMENTS

Section 7.1 — Real Property Taxes

Lessee shall pay, before delinquency, all real property taxes, general and special assessments, governmental charges, and other impositions assessed or levied against the Premises and/or the Improvements during the Term, to the extent that the Premises and/or the Improvements are subject to taxation. The Parties acknowledge that the Premises may be exempt from certain real property taxes by virtue of CSIA's status as a Washington State governmental authority and the public-purpose nature of the Facility. In the event that any exemption from real property taxes is denied, revoked, or otherwise becomes unavailable, Lessee shall be solely responsible for the payment of all resulting real property taxes and shall indemnify and hold harmless Lessor from and against any liability for such taxes. Lessee shall have the right, at its sole cost and expense, to contest the amount or validity of any real property tax or assessment, provided that Lessee shall first pay or bond such tax or assessment to prevent any penalty, forfeiture, or sale of the Premises.

Section 7.2 — Tax Exemption

Lessor shall cooperate with Lessee, at Lessee's expense, in obtaining and maintaining any available exemptions from real property taxes, ad valorem taxes, and other governmental charges for the Premises and the Facility, including without limitation any exemptions available under the laws of the State of Washington for public infrastructure, governmental property, or property used for public purposes. Lessor shall execute such applications, certificates, and other documents as may be reasonably necessary to establish or maintain such exemptions, provided that Lessor shall not be required to incur any out-of-pocket cost or liability in connection therewith.

Section 7.3 — Personal Property Taxes

Lessee shall be solely responsible for the payment of all taxes, assessments, and charges levied or assessed against Lessee's personal property, trade fixtures, equipment, and other tangible and intangible property located on or used in connection with the Premises, regardless of whether such property is owned, leased, or licensed by Lessee.

ARTICLE VIII — INSURANCE

Section 8.1 — Lessee's Insurance Obligations

Lessee shall maintain, or cause to be maintained, at Lessee's sole cost and expense, throughout the Term, the following insurance coverages, each in amounts not less than the minimum coverage amounts set forth in Exhibit C attached hereto:

(a) Commercial General Liability Insurance. A policy or policies of commercial general liability insurance, on an occurrence basis, covering bodily injury (including death), personal injury, and property damage arising from the ownership, use, occupancy, maintenance, or operation of the Premises and the Facility, with per-occurrence and general aggregate limits as specified in Exhibit C.

(b) Property/Casualty Insurance. All-risk property insurance covering all Improvements, including the Facility and all fixtures, equipment, and other personal property located on the Premises, in an amount equal to the full replacement cost thereof, with coverage for fire, windstorm, hail, explosion, earthquake, flood, vandalism, and such other perils as are customarily covered under all-risk property insurance policies.

(c) Builder's Risk Insurance. During the period of Construction, builder's risk insurance in an amount equal to the full project value of the Facility, covering all risks of physical loss or damage to the work in progress, materials, and equipment, with coverage for the total project cost of Forty-Five Million Dollars ($45,000,000).

(d) Workers' Compensation Insurance. Workers' compensation insurance as required by the laws of the State of Washington, and employer's liability insurance with limits as specified in Exhibit C.

(e) Additional Coverages. Such other insurance as may be required by Applicable Law or as may be reasonably required by Lessor from time to time, including without limitation environmental liability insurance, professional liability insurance, and automobile liability insurance, with coverage amounts as specified in Exhibit C.

All insurance policies required under this Section shall be issued by insurers that are nationally recognized, financially sound, and licensed or authorized to do business in the State of Washington, with a minimum A.M. Best rating as specified in Exhibit C.

Section 8.2 — Lessor as Additional Insured

All liability insurance policies maintained by Lessee pursuant to this Article VIII shall name Lessor as an additional insured. All property and casualty insurance policies maintained by Lessee pursuant to this Article VIII shall name Lessor as loss payee, as its interest may appear. Each policy shall provide that the coverage afforded to Lessor shall not be affected by any act, omission, or default of Lessee or any other insured. All insurance policies required hereunder shall contain a provision that such policies shall not be canceled, materially amended, or allowed to lapse without at least thirty (30) days' prior written notice to Lessor (or ten (10) days' prior written notice in the case of cancellation for non-payment of premium).

Section 8.3 — Evidence of Insurance

Lessee shall provide to Lessor certificates of insurance evidencing all insurance coverages required under this Article VIII (a) on or before the Commencement Date, (b) annually thereafter on each anniversary of the Commencement Date, and (c) at any other time upon reasonable request by Lessor. Lessee shall provide complete copies of such policies to Lessor upon request. If Lessee fails to maintain the insurance required by this Article VIII, Lessor may, but shall not be obligated to, procure such insurance at Lessee's expense, and Lessee shall reimburse Lessor for all costs and expenses incurred in connection therewith within thirty (30) days after written demand.

ARTICLE IX — MAINTENANCE AND REPAIRS

Section 9.1 — Lessee's Obligations

Lessee shall, at its sole cost and expense, maintain, repair, and keep the Premises and all Improvements (including the Facility and all related infrastructure, landscaping, access roads, parking areas, and fencing) in good condition, order, and repair throughout the Term, in compliance with all Applicable Laws and in a manner consistent with the standards of a prudent operator of a public water treatment facility. Lessee's maintenance obligations shall include, without limitation, structural repairs, roof repairs, mechanical and electrical system maintenance, pavement maintenance, landscaping, and all other repairs and replacements necessary to maintain the Premises and Improvements in a condition suitable for the Permitted Use. Lessee shall promptly repair any damage to the Premises or Improvements, regardless of the cause of such damage. Lessor shall have no obligation to maintain, repair, or make any improvements to the Premises or the Improvements during the Term.

Section 9.2 — Environmental Compliance

Lessee shall not cause or permit the release, discharge, emission, or disposal of any Hazardous Substances on, under, from, or about the Premises in violation of any Environmental Law. Lessee shall handle, store, use, and dispose of all Hazardous Substances used in connection with the operation of the Facility in strict compliance with all Environmental Laws and in accordance with industry best practices. Lessee shall be solely responsible for the investigation and remediation of any contamination of the Premises or the environment arising from or relating to Lessee's use, occupancy, or operation of the Premises and the Facility during the Term, including without limitation any contamination resulting from the release, discharge, or disposal of Hazardous Substances by Lessee, its agents, employees, contractors, subcontractors, or invitees. Lessee shall indemnify, defend, and hold harmless Lessor from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of investigation and remediation) arising from or relating to any contamination of the Premises or the environment caused by or attributable to Lessee's activities on the Premises during the Term.

ARTICLE X — ASSIGNMENT AND SUBLETTING

Section 10.1 — Restrictions on Assignment

Lessee shall not assign this Ground Lease or any interest herein, or sublet all or any portion of the Premises, without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's reasonable discretion. Any purported assignment or subletting without the required consent of Lessor shall be void and of no force or effect, and shall constitute an Event of Default under this Ground Lease. Any assignment or transfer of membership interests in CBWTP shall be governed exclusively by the JV Agreement; provided, however, that any transfer of membership interests in CBWTP that results in a change of control of CBWTP (as defined in the JV Agreement) shall require the prior written consent of Lessor. No assignment or subletting shall relieve Lessee of its obligations under this Ground Lease unless Lessor expressly agrees in writing to release Lessee from such obligations.

Section 10.2 — Leasehold Mortgages

Subject to the prior written consent of Lessor (which consent shall not be unreasonably withheld, conditioned, or delayed), Lessee may grant a Leasehold Mortgage or security interest in its Leasehold Interest to an institutional lender as security for project financing for the Facility. The Parties acknowledge that, as of the date hereof, CBWTP intends to enter into a project finance credit facility with Pacific Cascade Bank, N.A. (Reference No. PCB-PF-2022-0417), as described in the commitment letter dated February 15, 2022, in an aggregate principal amount of up to Twenty-Seven Million Dollars ($27,000,000) (the "Project Finance Facility"), and that Lessor consents to the grant of a Leasehold Mortgage in favor of Pacific Cascade Bank, N.A. as Leasehold Mortgagee in connection with the Project Finance Facility. Leasehold mortgagee protections shall be provided as contemplated by the JV Agreement and as further set forth in Section 10.3 hereof. Lessee shall promptly provide Lessor with copies of all Leasehold Mortgage documents, including any amendments, modifications, or supplements thereto.

Section 10.3 — Leasehold Mortgagee Protections

The following protections shall apply for the benefit of any approved Leasehold Mortgagee:

(a) Notice of Default. Lessor shall deliver to each Leasehold Mortgagee of which Lessor has been given written notice, concurrently with delivery to Lessee, a copy of any notice of default or notice of termination given by Lessor to Lessee under this Ground Lease. No such notice shall be effective as to the Leasehold Mortgagee unless and until delivered to the Leasehold Mortgagee in accordance with this paragraph.

(b) Right to Cure. Each Leasehold Mortgagee shall have the right, but not the obligation, to cure any default by Lessee under this Ground Lease. The Leasehold Mortgagee shall have a cure period equal to the cure period granted to Lessee plus an additional thirty (30) days for monetary defaults and an additional sixty (60) days for non-monetary defaults. If a non-monetary default cannot reasonably be cured without the Leasehold Mortgagee obtaining possession of the Premises, the Leasehold Mortgagee shall have a reasonable additional period to obtain possession (including by foreclosure of the Leasehold Mortgage) and to cure such default, provided that the Leasehold Mortgagee diligently prosecutes such cure.

(c) New Lease. If this Ground Lease is terminated for any reason prior to the Expiration Date (including by reason of rejection in bankruptcy), Lessor shall, upon written request from the Leasehold Mortgagee delivered within sixty (60) days after such termination, enter into a new ground lease with the Leasehold Mortgagee (or its designee) on the same terms and conditions as this Ground Lease for the remainder of the original Term, provided that the Leasehold Mortgagee (or its designee) (i) cures all monetary defaults within thirty (30) days after the execution of the new lease and (ii) diligently proceeds to cure all non-monetary defaults that are reasonably susceptible of cure.

(d) Foreclosure. In the event of a foreclosure of the Leasehold Mortgage (or acceptance of a deed or assignment in lieu of foreclosure), the purchaser at such foreclosure sale (or the grantee under such deed or assignment) shall succeed to the Leasehold Interest, subject to the terms and conditions of this Ground Lease, without the necessity of obtaining the consent of Lessor, provided that such purchaser or grantee assumes in writing all of Lessee's obligations under this Ground Lease.

ARTICLE XI — DEFAULT AND REMEDIES

Section 11.1 — Lessee Events of Default

Each of the following events shall constitute an "Event of Default" by Lessee under this Ground Lease:

(a) Failure to Pay Rent. Lessee's failure to pay any installment of Rent or any other amount due from Lessee to Lessor under this Ground Lease when the same becomes due and payable, and such failure continues for a period of ten (10) days after written notice thereof from Lessor to Lessee.

(b) Failure to Perform Non-Monetary Obligations. Lessee's failure to perform, observe, or comply with any non-monetary term, covenant, condition, or obligation of Lessee under this Ground Lease (other than those specified in paragraphs (a), (c), (d), or (e) of this Section), and such failure continues for a period of thirty (30) days after written notice thereof from Lessor to Lessee, provided that if such failure is of a nature that cannot reasonably be cured within such thirty-day period, Lessee shall not be in default hereunder if Lessee commences to cure such failure within such thirty-day period and thereafter diligently and continuously pursues such cure to completion within a reasonable time, not to exceed one hundred eighty (180) days after the date of Lessor's notice.

(c) JV Termination. The occurrence of a JV Termination, including without limitation any dissolution, winding up, or termination of CBWTP pursuant to the JV Agreement.

(d) Bankruptcy or Insolvency. The filing by Lessee of a voluntary petition in bankruptcy or the adjudication of Lessee as bankrupt or insolvent; the filing by Lessee of any petition or answer seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal, state, or other statute, law, or regulation; the seeking by Lessee of, or the consent or acquiescence by Lessee to, the appointment of any trustee, receiver, conservator, or liquidator of Lessee or of all or substantially all of the property of Lessee or of the Leasehold Interest; or the making by Lessee of a general assignment for the benefit of creditors. The filing of an involuntary petition in bankruptcy against Lessee shall constitute an Event of Default if such petition is not dismissed within ninety (90) days after the date of filing.

(e) Abandonment. Lessee's abandonment of the Premises for a continuous period of twelve (12) months or more. For purposes of this paragraph, "abandonment" means the cessation by Lessee of all operations and activities on the Premises and the failure to maintain the Premises and Improvements in accordance with this Ground Lease for such continuous period.

Section 11.2 — Lessor Remedies

Upon the occurrence and during the continuance of an uncured Event of Default by Lessee (after the expiration of any applicable cure period), Lessor shall have the following remedies, each of which shall be cumulative and in addition to all other remedies available to Lessor at law or in equity under the laws of the State of Washington:

(a) Termination. Lessor may terminate this Ground Lease by giving written notice of termination to Lessee (and to any Leasehold Mortgagee of which Lessor has received notice), specifying a termination date not less than thirty (30) days after the date of such notice (except in the case of JV Termination, in which case termination shall be automatic pursuant to Section 3.2). Upon the effective date of termination, the Term shall expire as though the Expiration Date had occurred, and all rights of Lessee under this Ground Lease shall cease and terminate.

(b) Re-Entry. Following termination, Lessor may re-enter and take possession of the Premises and all Improvements, and may remove all persons and property therefrom, in accordance with Applicable Law.

(c) Other Remedies. Lessor may pursue any other remedy available at law or in equity under the laws of the State of Washington, including without limitation specific performance, injunctive relief, and the recovery of damages suffered by Lessor as a result of Lessee's default.

Section 11.3 — No Waiver

The failure or delay by Lessor to exercise any right or remedy upon the occurrence of an Event of Default shall not constitute a waiver of such right or remedy or of Lessor's right to exercise such right or remedy at any subsequent time. No waiver by Lessor of any Event of Default shall be deemed a waiver of any subsequent Event of Default. All rights and remedies of Lessor under this Ground Lease are cumulative and are in addition to all rights and remedies available to Lessor at law or in equity. Any waiver by Lessor must be in writing and signed by Lessor to be effective.

Section 11.4 — Lessor Default

If Lessor defaults in the performance of any material obligation of Lessor under this Ground Lease, Lessee shall give Lessor written notice specifying the nature of the default in reasonable detail. Lessor shall have a period of thirty (30) days after receipt of such notice within which to cure such default. If such default is of a nature that cannot reasonably be cured within such thirty-day period, Lessor shall not be in default hereunder if Lessor commences to cure such default within such thirty-day period and thereafter diligently and continuously pursues such cure to completion within a reasonable time. If Lessor fails to cure such default within the applicable cure period, Lessee may pursue any remedy available at law or in equity under the laws of the State of Washington, subject to any limitations on remedies against governmental entities under Applicable Law and subject to Section 15.11 hereof.

ARTICLE XII — REVERSION

Section 12.1 — Reversion Upon Termination

Upon the expiration of the Term on the Expiration Date or upon any earlier termination of this Ground Lease, howsoever caused, including without limitation early termination resulting from a JV Termination under Section 3.2 hereof:

(a) The Leasehold Interest shall automatically revert to CSIA, and CSIA shall be restored to full and complete possession and enjoyment of the Premises as though this Ground Lease had never been executed, except as otherwise expressly provided herein.

(b) All Improvements, including without limitation any partially or fully constructed Facility, all buildings, structures, fixtures, process equipment permanently affixed to the Premises, piping, storage tanks, treatment systems, pumping stations, laboratory facilities, administration buildings, roads, fencing, landscaping, utility connections, and all other improvements and appurtenances permanently affixed to the Premises, shall automatically become the property of CSIA, free and clear of all claims, liens, encumbrances, security interests, and interests of Lessee, Pinnacle, any Leasehold Mortgagee (to the extent the Leasehold Mortgage has been satisfied or extinguished), or any other third party. The Reversion shall be self-executing and shall not require any further action, conveyance, or instrument; provided, however, that Lessee shall cooperate with Lessor as set forth in paragraph (c) below.

(c) Lessee shall, promptly and at Lessee's sole cost and expense, execute and deliver to Lessor all documents, instruments, and agreements reasonably necessary or desirable to evidence and effectuate the Reversion, including without limitation a quitclaim deed or assignment of any interest in the Improvements, a bill of sale for any personal property or equipment that has become part of the Improvements, releases of any claims or interests, and any filings required by Applicable Law. Lessee shall cooperate in good faith with Lessor to facilitate an orderly transition of possession and operations.

Section 12.2 — Condition of Premises Upon Reversion

(a) Operational Facility. If the Facility has been constructed and is operational at the time of the Reversion, Lessee shall deliver the Premises and all Improvements to Lessor in good operating condition, ordinary wear and tear excepted, with all systems functioning in accordance with their design specifications and all permits and governmental approvals in good standing. Lessee shall deliver to Lessor complete and accurate as-built drawings, operations and maintenance manuals, equipment warranties, and all other documentation reasonably necessary for the continued operation of the Facility.

(b) Non-Operational or Partially Constructed Facility. If the Facility has not been constructed or is only partially constructed at the time of the Reversion, Lessee shall deliver the Premises to Lessor in a safe and environmentally compliant condition, with all Hazardous Substances properly removed or remediated in accordance with Environmental Laws, all open excavations filled or properly secured, all construction debris removed, and the site stabilized to prevent erosion and sedimentation. Lessee shall deliver to Lessor all available plans, specifications, engineering reports, permits, and other documentation related to the Construction.

Section 12.3 — Coordination with JV Agreement

The Parties acknowledge and agree that, upon a JV Termination, the distribution of CBWTP's assets (other than the real property interests addressed herein) shall be governed by the JV Agreement, including the distribution of cash, accounts receivable, personal property, and other assets in accordance with the members' capital accounts and the liquidation provisions of the JV Agreement. This Article XII governs solely the reversion of the real property Leasehold Interest and the Improvements to CSIA. The Reversion shall occur automatically and without regard to the allocation of CBWTP's other assets among its members under the JV Agreement, and no member of CBWTP shall have any claim or right to the Premises or the Improvements following the Reversion, except to the extent expressly provided in the JV Agreement with respect to distributions from the liquidation of CBWTP's assets.

Section 12.4 — Survival

The obligations of Lessee under this Article XII, including without limitation the obligations to deliver the Premises in the condition specified in Section 12.2, to execute and deliver documents in connection with the Reversion, and to remediate any environmental contamination, shall survive the expiration or earlier termination of this Ground Lease and shall remain in full force and effect until fully performed and discharged.

ARTICLE XIII — EMINENT DOMAIN / CONDEMNATION

Section 13.1 — Total Condemnation

If the entire Premises, or such a substantial portion thereof that the remainder is insufficient for the Permitted Use, are taken by the exercise of eminent domain or condemnation by any governmental authority or entity having the power of eminent domain (a "Total Taking"), this Ground Lease shall terminate as of the date of such taking (the "Date of Taking"), and the Parties' respective obligations under this Ground Lease shall cease as of the Date of Taking, except for those obligations that expressly survive termination. In the event of a Total Taking, the condemnation award shall be allocated between the Parties as follows: (a) Lessor shall be entitled to receive that portion of the award attributable to the value of the fee simple interest in the Premises (excluding the value of the Improvements and the Leasehold Interest); and (b) Lessee shall be entitled to receive that portion of the award attributable to the value of the Leasehold Interest and the value of the Improvements constructed by Lessee on the Premises, including the value of any partially completed Construction, relocation costs, and business disruption damages, if any. Each Party shall have the right to participate in any condemnation proceedings and to present evidence and argument in support of its claim to the condemnation award. If the condemning authority makes a single, undifferentiated award, the Parties shall cooperate in good faith to allocate the award between them in accordance with the foregoing principles, and if the Parties are unable to agree, the allocation shall be determined by binding arbitration in accordance with Section 15.3 hereof.

Section 13.2 — Partial Condemnation

If a portion of the Premises is taken by eminent domain or condemnation and the remaining portion of the Premises is sufficient, in the reasonable judgment of both Parties, for the continued operation of the Facility for the Permitted Use (a "Partial Taking"), this Ground Lease shall continue in full force and effect as to the remaining portion of the Premises, and the Rent shall not be adjusted (given its nominal amount). The condemnation award attributable to the taken portion shall be allocated between the Parties as set forth in Section 13.1, proportionally adjusted to reflect the Partial Taking. Lessee shall, at its expense, make such modifications and repairs to the Improvements as are reasonably necessary to restore the Facility to a condition suitable for the Permitted Use, utilizing the portion of the condemnation award allocable to Lessee for such purpose. If the Parties are unable to agree whether the remaining portion of the Premises is sufficient for the Permitted Use, the matter shall be resolved by binding arbitration in accordance with Section 15.3 hereof, and pending such resolution, this Ground Lease shall remain in effect.

ARTICLE XIV — DAMAGE AND DESTRUCTION

Section 14.1 — Obligation to Restore

In the event of any damage to or destruction of all or any portion of the Improvements, howsoever caused (including by fire, flood, earthquake, windstorm, or other casualty), Lessee shall, subject to the provisions of this Article XIV, promptly commence and diligently pursue the restoration, repair, or rebuilding of the Improvements to substantially their condition immediately prior to such damage or destruction, using the proceeds of the property and casualty insurance maintained by Lessee pursuant to Article VIII hereof. Lessee shall prosecute such restoration with reasonable diligence and in compliance with all Applicable Laws, using materials of good quality and in a good and workmanlike manner. This obligation to restore shall apply unless (a) the JV Agreement provides for the dissolution or winding up of CBWTP in connection with such casualty event, or (b) the Governing Board, acting in

GROUND LEASE AGREEMENT
between
CASCADIA STATE INFRASTRUCTURE AUTHORITY, as Lessor,
and
COLUMBIA BASIN WATER TREATMENT PARTNERS, LLC, as Lessee
Dated as of November 2, 2021
After recording, return to: Calderwood & Harkness LLP 901 Fifth Avenue, Suite 3200 Seattle, WA 98164
Attention: Oliver Mackenzie
Thurston County Auditor Recording No. 2021-1102-004788
This Ground Lease Agreement is entered into in connection with that certain Amended and Restated Limited Liability Company Agreement of Columbia Basin Water Treatment Partners, LLC, dated November 2, 2021.
GROUND LEASE AGREEMENT
This GROUND LEASE AGREEMENT (this "Ground Lease" or this "Lease") is entered into as of November 2, 2021 (the "Execution Date"), by and between:
CASCADIA STATE INFRASTRUCTURE AUTHORITY, a Washington State governmental authority created pursuant to Chapter 43.155A RCW, with headquarters located at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501 ("CSIA" or "Lessor");
and
COLUMBIA BASIN WATER TREATMENT PARTNERS, LLC, a Washington limited liability company, with its registered office at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501 (c/o CSIA), Employer Identification Number 88-3421076, Washington Unified Business Identifier Number 604-892-315 ("CBWTP" or "Lessee").
CSIA and CBWTP are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Cascadia State Infrastructure Authority ("CSIA" or "Lessor") is a Washington State governmental authority duly created and existing pursuant to Chapter 43.155A of the Revised Code of Washington (RCW), headquartered at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501, and is charged under its enabling legislation with financing, developing, and overseeing critical public infrastructure across the State of Washington, including water treatment, transportation, energy, and communications infrastructure for the benefit of the citizens of the State;
WHEREAS, Columbia Basin Water Treatment Partners, LLC ("CBWTP" or "Lessee") is a Washington limited liability company duly organized and validly existing under the laws of the State of Washington, formed on November 2, 2021, with its registered office at 1100 Jefferson Street SE, Suite 400, Olympia, Washington 98501 (c/o CSIA), Employer Identification Number 88-3421076, Washington Unified Business Identifier Number 604-892-315, and filed with the Washington Secretary of State on November 2, 2021;
WHEREAS, CBWTP is a joint venture entity formed pursuant to that certain Amended and Restated Limited Liability Company Agreement of Columbia Basin Water Treatment Partners, LLC, dated as of November 2, 2021 (as may be amended, supplemented, or restated from time to time, the "JV Agreement"), by and between CSIA (holding a fifty-five percent (55%) membership interest in CBWTP) and Pinnacle Water Solutions, LLC, a Delaware limited liability company (holding a forty-five percent (45%) membership interest in CBWTP) ("Pinnacle"), the JV Agreement governing the formation, capitalization, management, and operation of CBWTP as a public-private joint venture;
WHEREAS, CBWTP was purpose-formed to design, construct, own, and operate the Thurston County Advanced Water Treatment Facility (the "Facility"), a twelve million gallon-per-day (12 MGD) advanced water treatment plant serving Thurston County and adjacent municipal water systems in the greater Puget Sound region of Washington State, with a total estimated project cost of Forty-Five Million Dollars ($45,000,000);
WHEREAS, CSIA is the fee simple owner of a certain parcel of real property consisting of approximately fourteen and seven-tenths (14.7) acres located at 2480 Capitol Boulevard SE, Tumwater, Thurston County, Washington 98501 (the "Premises"), as more particularly described in Exhibit A attached hereto and incorporated herein by this reference, CSIA having acquired the Premises in its capacity as a governmental authority under Chapter 43.155A RCW for the purpose of public infrastructure development;
WHEREAS, CSIA desires to lease the Premises to CBWTP, and CBWTP desires to lease the Premises from CSIA, for the sole purpose of designing, constructing, operating, and maintaining the Facility, upon the terms and conditions set forth herein, such lease being an essential element of the public-private joint venture transaction and critical to fulfilling the public purpose of providing advanced water treatment services to Thurston County and surrounding communities;
WHEREAS, this Ground Lease Agreement is a material component of the public-private joint venture transaction contemplated by the JV Agreement, and the execution and delivery of this Ground Lease is a condition precedent to the closing of the transactions contemplated by the JV Agreement, including the capital contributions of the members of CBWTP and the commencement of the Facility design and development process;
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Ground Lease, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the JV Agreement.
"Applicable Law" means all federal, state, and local laws, statutes, ordinances, rules, regulations, codes, executive orders, judicial decrees, and administrative orders applicable to the Premises, the Facility, the Lessee, or the Lessor, including without limitation Chapter 43.155A RCW, the Washington State Environmental Policy Act ("SEPA"), the National Environmental Policy Act ("NEPA"), the Federal Clean Water Act, the Safe Drinking Water Act, all environmental laws of the State of Washington, the Washington Industrial Safety and Health Act, and all applicable building codes, zoning ordinances, land use regulations, and health and safety requirements of Thurston County and the State of Washington, in each case as the same may be amended, supplemented, or replaced from time to time.
"CBWTP" or "Lessee" means Columbia Basin Water Treatment Partners, LLC, a Washington limited liability company, Employer Identification Number 88-3421076, Washington Unified Business Identifier Number 604-892-315, and its permitted successors and assigns.
"Commencement Date" means November 2, 2021, the date on which the Term of this Ground Lease commences.
"Construction" means, collectively, the design, engineering, permitting, and physical construction of the Facility on the Premises, including all site preparation, grading, foundation work, building construction, installation of process equipment and systems, commissioning, start-up, and testing necessary to render the Facility operational for its intended purpose.
"CSIA" or "Lessor" means Cascadia State Infrastructure Authority, a Washington State governmental authority created pursuant to Chapter 43.155A RCW, and its successors and assigns.
"Environmental Laws" means all applicable federal, state, and local laws, statutes, ordinances, rules, regulations, permits, and orders relating to pollution or protection of the environment, public health, or natural resources, including without limitation SEPA, NEPA, the Federal Clean Water Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Washington Model Toxics Control Act (RCW 70A.305), the Washington Water Pollution Control Act (RCW 90.48), and all regulations promulgated thereunder, in each case as the same may be amended, supplemented, or replaced from time to time.
"Expiration Date" means the date that is ninety-nine (99) years from the Commencement Date, that is, November 2, 2120, unless this Ground Lease is earlier terminated in accordance with its terms.
"Facility" means the Thurston County Advanced Water Treatment Facility, a twelve million gallon-per-day (12 MGD) advanced water treatment plant to be designed, constructed, and operated on the Premises by the Lessee, including all treatment systems, storage facilities, distribution infrastructure, process control systems, laboratory facilities, administration buildings, and related appurtenances, as more particularly described in the plans and specifications to be approved in accordance with Section 6.2 hereof.
"Force Majeure Event" has the meaning set forth in Section 15.7 of this Ground Lease.
"Governing Board" means the governing board of CBWTP as established and constituted pursuant to the JV Agreement.
"Ground Lease" or "Lease" means this Ground Lease Agreement, including all exhibits and schedules attached hereto, as the same may be amended, supplemented, or modified from time to time in accordance with the terms hereof.
"Hazardous Substances" means any pollutant, contaminant, hazardous material, hazardous waste, hazardous substance, toxic substance, or any other substance regulated under any Environmental Law, including without limitation petroleum and petroleum products, asbestos-containing materials, polychlorinated biphenyls, lead-based paint, and per- and polyfluoroalkyl substances (PFAS).
"Improvements" means all buildings, structures, facilities, fixtures, equipment, and other improvements now or hereafter constructed, installed, or placed on the Premises by or on behalf of Lessee during the Term of this Ground Lease, including without limitation the Facility, all treatment systems, pipelines, storage tanks, pumping stations, laboratory facilities, administration buildings, roads, fencing, landscaping, parking areas, and utility connections, together with all replacements, additions, alterations, and modifications thereto.
"JV Agreement" means the Amended and Restated Limited Liability Company Agreement of Columbia Basin Water Treatment Partners, LLC, dated as of November 2, 2021, by and between CSIA and Pinnacle, as the same may be amended, supplemented, or restated from time to time in accordance with its terms.
"JV Termination" means the dissolution, winding up, or termination of CBWTP, whether voluntary or involuntary, including without limitation any termination resulting from (a) the exercise of default remedies under Section 8.2 of the JV Agreement, (b) dissolution elected by the members of CBWTP under the JV Agreement, (c) a judicial dissolution, or (d) any other event that results in CBWTP ceasing to exist as a legal entity under the laws of the State of Washington.
"Leasehold Interest" means the leasehold estate created by this Ground Lease in favor of Lessee in and to the Premises for the duration of the Term.
"Leasehold Mortgage" means any mortgage, deed of trust, security interest, or other encumbrance granted by Lessee in or on the Leasehold Interest to a Leasehold Mortgagee in accordance with Section 10.2 hereof.
"Leasehold Mortgagee" means any institutional lender or other entity that holds a Leasehold Mortgage that has been approved by Lessor in accordance with Section 10.2 hereof.
"Permitted Exceptions" means those easements, restrictions, encumbrances, and other title exceptions affecting the Premises as set forth in Exhibit B attached hereto.
"Permitted Use" means the design, construction, ownership, operation, maintenance, repair, and replacement of the Facility and related water treatment infrastructure on the Premises, and all uses incidental and ancillary thereto, including without limitation the treatment, storage, and distribution of water, the operation of laboratory and testing facilities, the maintenance of administrative offices in support of the Facility, and the provision of public tours and educational programs related to water treatment.
"Pinnacle" means Pinnacle Water Solutions, LLC, a Delaware limited liability company, and its permitted successors and assigns.
"Premises" means the approximately fourteen and seven-tenths (14.7) acres of real property located at 2480 Capitol Boulevard SE, Tumwater, Thurston County, Washington 98501, as more particularly described in Exhibit A attached hereto, together with all rights, privileges, easements, and appurtenances pertaining thereto.
"Rent" means the annual rent of One Dollar ($1.00) payable by Lessee to Lessor as set forth in Article IV of this Ground Lease.
"Reversion" means the reversion of the Leasehold Interest and all Improvements to CSIA upon the expiration or earlier termination of this Ground Lease, as set forth in Article XII hereof.
"Term" means the period commencing on the Commencement Date and expiring on the Expiration Date, unless this Ground Lease is earlier terminated in accordance with its terms.
Section 1.2 — Rules of Construction
(a) Unless the context clearly requires otherwise, words importing the singular number shall include the plural number and vice versa, and words importing gender shall include all genders. The words "include," "includes," and "including" shall be deemed to be followed by the phrase "without limitation." The words "herein," "hereof," "hereunder," and words of similar import shall be deemed to refer to this Ground Lease as a whole and not to any particular provision hereof.
(b) References to "Articles," "Sections," "Exhibits," and "Schedules" shall be to Articles, Sections, Exhibits, and Schedules of this Ground Lease unless otherwise specified. References to "days" shall mean calendar days unless "business days" is expressly stated.
(c) The headings and captions in this Ground Lease are included for convenience of reference only and shall not affect the interpretation of this Ground Lease.
(d) Each exhibit and schedule attached hereto is incorporated herein by this reference and made a part of this Ground Lease as if fully set forth herein.
(e) Capitalized terms used but not otherwise defined in this Ground Lease shall have the meanings ascribed to such terms in the JV Agreement.
(f) This Ground Lease shall be interpreted without regard to any presumption or rule requiring construction against the party who caused this Ground Lease to be drafted. The Parties acknowledge that they have been represented by counsel and have participated equally in the drafting and negotiation of this Ground Lease.
ARTICLE II — PREMISES
Section 2.1 — Description of Premises
The Premises subject to this Ground Lease consist of approximately fourteen and seven-tenths (14.7) acres of real property located at 2480 Capitol Boulevard SE, Tumwater, Thurston County, Washington 98501. The legal description of the Premises is set forth in Exhibit A attached hereto and incorporated herein by this reference, which includes a metes and bounds description and the applicable lot, block, and plat reference as recorded with the Thurston County Auditor. As of the Commencement Date, the Premises are currently unimproved, consisting of vacant land with no existing structures, buildings, or other permanent improvements thereon. The Premises are situated adjacent to the Deschutes River watershed and are zoned for public utility and infrastructure use under the Thurston County Comprehensive Plan and applicable zoning ordinances.
Section 2.2 — Lessor's Title
CSIA represents and warrants to CBWTP that, as of the Commencement Date, CSIA holds fee simple title to the Premises, free and clear of all liens, encumbrances, mortgages, deeds of trust, restrictions, conditions, covenants, charges, claims, and other defects of title, except for the Permitted Exceptions set forth in Exhibit B attached hereto. CSIA further represents and warrants that it acquired the Premises in its capacity as a governmental authority under Chapter 43.155A RCW and that it has full legal authority and power to enter into this Ground Lease and to grant the Leasehold Interest to CBWTP as contemplated herein. CSIA shall defend Lessee's right to quiet enjoyment and possession of the Premises against the claims of all persons claiming by, through, or under CSIA, subject to the Permitted Exceptions.
Section 2.3 — Conveyance of Leasehold
CSIA hereby leases, demises, and lets the Premises unto CBWTP, and CBWTP hereby leases the Premises from CSIA, for the Term, subject to the terms, covenants, conditions, and provisions set forth in this Ground Lease and subject to the Permitted Exceptions. This Ground Lease conveys only a leasehold interest in the Premises; fee simple title to the Premises is retained by CSIA at all times during the Term and shall not be deemed to have been conveyed, transferred, or otherwise disposed of by virtue of this Ground Lease. Nothing in this Ground Lease shall be construed as granting to Lessee any right, title, or interest in or to the fee estate in the Premises.
Section 2.4 — No Merger
The Leasehold Interest created by this Ground Lease shall not merge with the fee simple estate of CSIA in the Premises, notwithstanding (a) CSIA's fifty-five percent (55%) membership interest in CBWTP, (b) any future acquisition by CSIA of additional membership interests in CBWTP, (c) any future acquisition by CBWTP or any of its members of any interest in the fee estate, or (d) the fact that the same person or entity may hold both the fee simple estate and the Leasehold Interest. The Parties expressly intend that the Leasehold Interest shall remain separate and distinct from the fee simple estate for all purposes, including without limitation for purposes of any Leasehold Mortgage, tax treatment, and the allocation of rights and obligations under this Ground Lease and the JV Agreement. No merger shall occur unless and until a written instrument expressly effecting such merger is executed by both Parties.
ARTICLE III — TERM
Section 3.1 — Initial Term
The Term of this Ground Lease commences on the Commencement Date, November 2, 2021, and shall expire on the date that is ninety-nine (99) years from the Commencement Date, that is, November 2, 2120, unless this Ground Lease is earlier terminated in accordance with the provisions hereof (the "Term"). There are no options to extend or renew the Term beyond the Expiration Date.
Section 3.2 — Early Termination Upon JV Termination
This Ground Lease shall automatically terminate, without the necessity of any further action by either Party, upon a JV Termination, including without limitation any dissolution, winding up, or termination of CBWTP pursuant to the JV Agreement, whether resulting from (a) the exercise of default remedies under Section 8.2 of the JV Agreement, (b) a voluntary dissolution elected by the members of CBWTP in accordance with the JV Agreement, (c) a judicial dissolution of CBWTP, or (d) any other event causing CBWTP to cease to exist as a legal entity under the laws of the State of Washington. Upon any such early termination, the Reversion provisions of Article XII of this Ground Lease shall apply immediately and automatically, and Lessee shall comply with the surrender obligations set forth in Section 3.3 and Article XII hereof. For the avoidance of doubt, the automatic termination of this Ground Lease upon a JV Termination shall not require the delivery of a notice of termination by Lessor, although Lessor may deliver such a notice for purposes of clarity and record.
Section 3.3 — Surrender at Expiration or Termination
Upon the expiration of the Term or any earlier termination of this Ground Lease, howsoever caused, Lessee shall immediately surrender and deliver possession of the Premises and all Improvements to Lessor in the condition required under Article XII hereof. Lessee shall remove all of its personal property and trade fixtures from the Premises within ninety (90) days following the date of expiration or earlier termination, provided that any personal property or trade fixtures not removed within such ninety-day period shall be deemed abandoned by Lessee and shall become the property of Lessor without compensation to Lessee. Lessee shall repair any damage to the Premises or Improvements caused by such removal. The obligations of Lessee under this Section 3.3 shall survive the expiration or earlier termination of this Ground Lease.
ARTICLE IV — RENT
Section 4.1 — Annual Rent
Lessee shall pay to Lessor annual rent in the amount of One Dollar ($1.00) (the "Rent"), payable in advance on each anniversary of the Commencement Date during the Term. The first annual Rent payment of One Dollar ($1.00) was due and payable on the Commencement Date and is hereby acknowledged by both Parties as having been paid and received in full upon the execution and delivery of this Ground Lease.
Section 4.2 — No Additional Rent
Except as otherwise specifically and expressly provided in this Ground Lease, no additional rent, percentage rent, escalation rent, or other monetary consideration of any kind shall be payable by Lessee to Lessor under this Ground Lease. The Parties acknowledge and agree that the nominal Rent of One Dollar ($1.00) per annum reflects CSIA's public-purpose interest in the development and operation of the Facility as critical public infrastructure for the benefit of Thurston County and surrounding communities, and that the true consideration for this Ground Lease includes the public benefits to be derived from the construction and operation of the Facility, the capital contributions of the members of CBWTP under the JV Agreement, and the mutual covenants and agreements of the Parties herein.
Section 4.3 — Net Lease
This Ground Lease is intended to be, and shall be construed as, an absolutely net lease. Throughout the Term, Lessee shall be responsible for and shall pay, before delinquency, all costs, expenses, taxes (to the extent applicable and not exempt), assessments, governmental charges, insurance premiums, utility charges, maintenance costs, repair costs, and all other charges, impositions, and expenses of every kind and nature whatsoever relating to the Premises and the Improvements, whether foreseen or unforeseen, ordinary or extraordinary. Lessor shall not be required to furnish any services or utilities, make any repairs or alterations, or incur any expense of any kind with respect to the Premises or the Improvements during the Term. The Rent payable hereunder shall be net to Lessor, and Lessee's obligations to pay all costs and expenses relating to the Premises and the Improvements shall be separate and independent obligations of Lessee.
ARTICLE V — PERMITTED USE
Section 5.1 — Permitted Use
The Premises shall be used by Lessee solely and exclusively for the Permitted Use, which encompasses the design, construction, ownership, operation, maintenance, repair, and replacement of the Facility and related water treatment infrastructure on the Premises, and all uses incidental and ancillary thereto. The Facility is planned as a twelve million gallon-per-day (12 MGD) advanced water treatment plant employing state-of-the-art treatment technologies, including membrane filtration, ultraviolet disinfection, and advanced oxidation processes, serving Thurston County and adjacent municipal water systems. Ancillary uses shall include, without limitation, the operation of water quality testing laboratories, the maintenance of administrative and operations offices, vehicle and equipment storage, public education and community outreach activities, and such other activities as are customarily associated with the operation of a municipal water treatment facility.
Section 5.2 — Prohibited Uses
Lessee shall not use the Premises for any purpose other than the Permitted Use without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's sole and absolute discretion. Without limiting the generality of the foregoing, the following uses are expressly prohibited: (a) any residential use; (b) any commercial retail use; (c) any industrial manufacturing use unrelated to water treatment; (d) any use involving the generation, storage, treatment, or disposal of Hazardous Substances, except for such Hazardous Substances as are customarily used in the operation of a water treatment facility and in compliance with all Environmental Laws; (e) any use that would violate any Applicable Law or the terms of any applicable zoning ordinance; and (f) any use that would constitute a nuisance or would unreasonably interfere with the use and enjoyment of neighboring properties.
Section 5.3 — Compliance with Laws
Lessee shall, at its sole cost and expense, comply with all Applicable Laws in its use, construction, operation, and maintenance of the Premises and the Facility throughout the Term. Lessee shall obtain and maintain compliance with all applicable environmental laws, zoning ordinances, building codes, health and safety regulations, and other governmental requirements of Thurston County, the State of Washington, and the United States of America. Lessee shall not use or permit the use of the Premises in any manner that would violate any Applicable Law or that would cause or permit the Premises or the Facility to be in violation of any Applicable Law.
Section 5.4 — Permits and Approvals
Lessee shall be solely responsible, at its sole cost and expense, for obtaining and maintaining in full force and effect throughout the Term all permits, licenses, approvals, consents, authorizations, and governmental certifications necessary for the Construction and operation of the Facility, including without limitation: (a) the Phase II Environmental Impact Determination from the Thurston County Department of Environmental Health; (b) all building permits and construction approvals from the City of Tumwater and Thurston County; (c) all water quality discharge permits from the Washington Department of Ecology; (d) all permits and approvals required under SEPA; (e) all drinking water system permits from the Washington Department of Health; and (f) all other federal, state, and local permits and approvals applicable to the Facility. This obligation is consistent with and supplementary to Section 4.3 of the JV Agreement, which allocates permitting responsibility to CBWTP. Lessor shall reasonably cooperate with Lessee, at Lessee's expense, in connection with Lessee's efforts to obtain and maintain such permits and approvals, including by executing applications and other documents as reasonably requested by Lessee, provided that Lessor shall not be required to incur any out-of-pocket cost or liability in connection therewith.
ARTICLE VI — CONSTRUCTION AND IMPROVEMENTS
Section 6.1 — Construction of the Facility
Lessee shall have the right and the obligation to design and construct the Facility on the Premises in accordance with the JV Agreement and all Applicable Laws. The Facility shall be designed and constructed to the standards and specifications contemplated by the JV Agreement, including the design parameters, performance criteria, and budget approved by the Governing Board. Construction shall not commence until all of the following conditions have been satisfied: (a) all required governmental permits and approvals necessary for the commencement of Construction have been obtained and are in full force and effect; (b) the conditions to commencement of Construction set forth in the JV Agreement, including without limitation supermajority Governing Board approval as required thereunder, have been fully satisfied or waived; (c) Lessee has obtained and provided evidence of all insurance coverage required under Article VIII hereof; and (d) Lessor has approved the plans and specifications for the Facility in accordance with Section 6.2 hereof. Lessee shall prosecute the Construction with reasonable diligence and in a good and workmanlike manner, using materials of good quality and in accordance with all Applicable Laws and the approved plans and specifications.
Section 6.2 — Plans and Specifications
Prior to the commencement of Construction, Lessee shall submit to Lessor complete and detailed plans and specifications for the Facility, including architectural, structural, mechanical, electrical, civil, and environmental engineering plans, for Lessor's review and approval. Lessor's approval shall not be unreasonably withheld, conditioned, or delayed. Lessor shall review such plans and specifications and shall provide written approval or written comments and objections within thirty (30) days after receipt thereof. If Lessor fails to respond within such thirty-day period, Lessor shall be deemed to have approved the plans and specifications as submitted. In the event Lessor provides comments or objections, Lessee shall revise the plans and specifications to address such comments and objections and shall resubmit the revised plans and specifications for Lessor's review and approval, which shall follow the same process. Material changes to the approved plans and specifications shall require the prior written approval of Lessor, which shall not be unreasonably withheld, conditioned, or delayed.
Section 6.3 — Ownership of Improvements During Term
All Improvements constructed, installed, or placed on the Premises by or on behalf of Lessee during the Term of this Ground Lease shall be owned by Lessee during the Term. Lessee shall have all rights, title, and interest in and to the Improvements during the Term, subject to the terms and conditions of this Ground Lease and the JV Agreement. Lessee's ownership of the Improvements shall include the right to depreciate the Improvements for tax purposes to the extent permitted by Applicable Law. Notwithstanding the foregoing, upon the expiration of the Term or any earlier termination of this Ground Lease, all Improvements shall automatically become the property of Lessor, free and clear of all claims, liens, and encumbrances, pursuant to the Reversion provisions set forth in Article XII of this Ground Lease.
Section 6.4 — Alterations and Modifications
Lessee may make alterations, modifications, additions, or improvements to the Improvements during the Term, subject to the following provisions:
(a) Material Alterations. Lessee shall not make any material alteration, modification, or addition to the Improvements without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned, or delayed. For purposes of this Section, a "material alteration" means any alteration, modification, or addition that (i) involves a cost in excess of Five Hundred Thousand Dollars ($500,000), (ii) materially changes the footprint, height, or structural configuration of any building or structure on the Premises, (iii) materially changes the treatment capacity or process technology of the Facility, or (iv) materially affects the value of the Improvements.
(b) Non-Material Alterations. Lessee may make non-material alterations, modifications, and additions to the Improvements without the prior written consent of Lessor, provided that all such work shall be performed in a good and workmanlike manner, using materials of good quality, and in compliance with all Applicable Laws.
(c) Notice. Lessee shall provide Lessor with written notice of any alteration, modification, or addition with an estimated cost in excess of One Hundred Thousand Dollars ($100,000), whether or not Lessor's consent is required, at least fifteen (15) days prior to the commencement of such work.
Section 6.5 — Liens
Lessee shall not permit any mechanic's lien, materialman's lien, construction lien, or other lien arising from Construction or any other work performed on or materials supplied to the Premises to remain on the Premises or the Improvements for a period exceeding thirty (30) days after Lessee receives notice of the filing thereof. Lessee shall promptly discharge, satisfy, or bond over any such lien at Lessee's sole cost and expense. If Lessee fails to discharge, satisfy, or bond over any such lien within such thirty-day period, Lessor may, but shall not be obligated to, pay and discharge such lien and Lessee shall reimburse Lessor for all costs and expenses incurred in connection therewith, together with interest at the rate of eight percent (8%) per annum, within thirty (30) days after written demand therefor. Nothing in this Ground Lease shall be construed as constituting the consent or request of Lessor, express or implied, to any contractor, subcontractor, laborer, materialman, or supplier for the performance of any work or the furnishing of any materials for any improvement, alteration, or repair of the Premises, and Lessor's interest in the Premises shall not be subject to any lien arising from any work performed by or on behalf of Lessee.
ARTICLE VII — TAXES AND ASSESSMENTS
Section 7.1 — Real Property Taxes
Lessee shall pay, before delinquency, all real property taxes, general and special assessments, governmental charges, and other impositions assessed or levied against the Premises and/or the Improvements during the Term, to the extent that the Premises and/or the Improvements are subject to taxation. The Parties acknowledge that the Premises may be exempt from certain real property taxes by virtue of CSIA's status as a Washington State governmental authority and the public-purpose nature of the Facility. In the event that any exemption from real property taxes is denied, revoked, or otherwise becomes unavailable, Lessee shall be solely responsible for the payment of all resulting real property taxes and shall indemnify and hold harmless Lessor from and against any liability for such taxes. Lessee shall have the right, at its sole cost and expense, to contest the amount or validity of any real property tax or assessment, provided that Lessee shall first pay or bond such tax or assessment to prevent any penalty, forfeiture, or sale of the Premises.
Section 7.2 — Tax Exemption
Lessor shall cooperate with Lessee, at Lessee's expense, in obtaining and maintaining any available exemptions from real property taxes, ad valorem taxes, and other governmental charges for the Premises and the Facility, including without limitation any exemptions available under the laws of the State of Washington for public infrastructure, governmental property, or property used for public purposes. Lessor shall execute such applications, certificates, and other documents as may be reasonably necessary to establish or maintain such exemptions, provided that Lessor shall not be required to incur any out-of-pocket cost or liability in connection therewith.
Section 7.3 — Personal Property Taxes
Lessee shall be solely responsible for the payment of all taxes, assessments, and charges levied or assessed against Lessee's personal property, trade fixtures, equipment, and other tangible and intangible property located on or used in connection with the Premises, regardless of whether such property is owned, leased, or licensed by Lessee.
ARTICLE VIII — INSURANCE
Section 8.1 — Lessee's Insurance Obligations
Lessee shall maintain, or cause to be maintained, at Lessee's sole cost and expense, throughout the Term, the following insurance coverages, each in amounts not less than the minimum coverage amounts set forth in Exhibit C attached hereto:
(a) Commercial General Liability Insurance. A policy or policies of commercial general liability insurance, on an occurrence basis, covering bodily injury (including death), personal injury, and property damage arising from the ownership, use, occupancy, maintenance, or operation of the Premises and the Facility, with per-occurrence and general aggregate limits as specified in Exhibit C.
(b) Property/Casualty Insurance. All-risk property insurance covering all Improvements, including the Facility and all fixtures, equipment, and other personal property located on the Premises, in an amount equal to the full replacement cost thereof, with coverage for fire, windstorm, hail, explosion, earthquake, flood, vandalism, and such other perils as are customarily covered under all-risk property insurance policies.
(c) Builder's Risk Insurance. During the period of Construction, builder's risk insurance in an amount equal to the full project value of the Facility, covering all risks of physical loss or damage to the work in progress, materials, and equipment, with coverage for the total project cost of Forty-Five Million Dollars ($45,000,000).
(d) Workers' Compensation Insurance. Workers' compensation insurance as required by the laws of the State of Washington, and employer's liability insurance with limits as specified in Exhibit C.
(e) Additional Coverages. Such other insurance as may be required by Applicable Law or as may be reasonably required by Lessor from time to time, including without limitation environmental liability insurance, professional liability insurance, and automobile liability insurance, with coverage amounts as specified in Exhibit C.
All insurance policies required under this Section shall be issued by insurers that are nationally recognized, financially sound, and licensed or authorized to do business in the State of Washington, with a minimum A.M. Best rating as specified in Exhibit C.
Section 8.2 — Lessor as Additional Insured
All liability insurance policies maintained by Lessee pursuant to this Article VIII shall name Lessor as an additional insured. All property and casualty insurance policies maintained by Lessee pursuant to this Article VIII shall name Lessor as loss payee, as its interest may appear. Each policy shall provide that the coverage afforded to Lessor shall not be affected by any act, omission, or default of Lessee or any other insured. All insurance policies required hereunder shall contain a provision that such policies shall not be canceled, materially amended, or allowed to lapse without at least thirty (30) days' prior written notice to Lessor (or ten (10) days' prior written notice in the case of cancellation for non-payment of premium).
Section 8.3 — Evidence of Insurance
Lessee shall provide to Lessor certificates of insurance evidencing all insurance coverages required under this Article VIII (a) on or before the Commencement Date, (b) annually thereafter on each anniversary of the Commencement Date, and (c) at any other time upon reasonable request by Lessor. Lessee shall provide complete copies of such policies to Lessor upon request. If Lessee fails to maintain the insurance required by this Article VIII, Lessor may, but shall not be obligated to, procure such insurance at Lessee's expense, and Lessee shall reimburse Lessor for all costs and expenses incurred in connection therewith within thirty (30) days after written demand.
ARTICLE IX — MAINTENANCE AND REPAIRS
Section 9.1 — Lessee's Obligations
Lessee shall, at its sole cost and expense, maintain, repair, and keep the Premises and all Improvements (including the Facility and all related infrastructure, landscaping, access roads, parking areas, and fencing) in good condition, order, and repair throughout the Term, in compliance with all Applicable Laws and in a manner consistent with the standards of a prudent operator of a public water treatment facility. Lessee's maintenance obligations shall include, without limitation, structural repairs, roof repairs, mechanical and electrical system maintenance, pavement maintenance, landscaping, and all other repairs and replacements necessary to maintain the Premises and Improvements in a condition suitable for the Permitted Use. Lessee shall promptly repair any damage to the Premises or Improvements, regardless of the cause of such damage. Lessor shall have no obligation to maintain, repair, or make any improvements to the Premises or the Improvements during the Term.
Section 9.2 — Environmental Compliance
Lessee shall not cause or permit the release, discharge, emission, or disposal of any Hazardous Substances on, under, from, or about the Premises in violation of any Environmental Law. Lessee shall handle, store, use, and dispose of all Hazardous Substances used in connection with the operation of the Facility in strict compliance with all Environmental Laws and in accordance with industry best practices. Lessee shall be solely responsible for the investigation and remediation of any contamination of the Premises or the environment arising from or relating to Lessee's use, occupancy, or operation of the Premises and the Facility during the Term, including without limitation any contamination resulting from the release, discharge, or disposal of Hazardous Substances by Lessee, its agents, employees, contractors, subcontractors, or invitees. Lessee shall indemnify, defend, and hold harmless Lessor from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees and costs of investigation and remediation) arising from or relating to any contamination of the Premises or the environment caused by or attributable to Lessee's activities on the Premises during the Term.
ARTICLE X — ASSIGNMENT AND SUBLETTING
Section 10.1 — Restrictions on Assignment
Lessee shall not assign this Ground Lease or any interest herein, or sublet all or any portion of the Premises, without the prior written consent of Lessor, which consent may be granted or withheld in Lessor's reasonable discretion. Any purported assignment or subletting without the required consent of Lessor shall be void and of no force or effect, and shall constitute an Event of Default under this Ground Lease. Any assignment or transfer of membership interests in CBWTP shall be governed exclusively by the JV Agreement; provided, however, that any transfer of membership interests in CBWTP that results in a change of control of CBWTP (as defined in the JV Agreement) shall require the prior written consent of Lessor. No assignment or subletting shall relieve Lessee of its obligations under this Ground Lease unless Lessor expressly agrees in writing to release Lessee from such obligations.
Section 10.2 — Leasehold Mortgages
Subject to the prior written consent of Lessor (which consent shall not be unreasonably withheld, conditioned, or delayed), Lessee may grant a Leasehold Mortgage or security interest in its Leasehold Interest to an institutional lender as security for project financing for the Facility. The Parties acknowledge that, as of the date hereof, CBWTP intends to enter into a project finance credit facility with Pacific Cascade Bank, N.A. (Reference No. PCB-PF-2022-0417), as described in the commitment letter dated February 15, 2022, in an aggregate principal amount of up to Twenty-Seven Million Dollars ($27,000,000) (the "Project Finance Facility"), and that Lessor consents to the grant of a Leasehold Mortgage in favor of Pacific Cascade Bank, N.A. as Leasehold Mortgagee in connection with the Project Finance Facility. Leasehold mortgagee protections shall be provided as contemplated by the JV Agreement and as further set forth in Section 10.3 hereof. Lessee shall promptly provide Lessor with copies of all Leasehold Mortgage documents, including any amendments, modifications, or supplements thereto.
Section 10.3 — Leasehold Mortgagee Protections
The following protections shall apply for the benefit of any approved Leasehold Mortgagee:
(a) Notice of Default. Lessor shall deliver to each Leasehold Mortgagee of which Lessor has been given written notice, concurrently with delivery to Lessee, a copy of any notice of default or notice of termination given by Lessor to Lessee under this Ground Lease. No such notice shall be effective as to the Leasehold Mortgagee unless and until delivered to the Leasehold Mortgagee in accordance with this paragraph.
(b) Right to Cure. Each Leasehold Mortgagee shall have the right, but not the obligation, to cure any default by Lessee under this Ground Lease. The Leasehold Mortgagee shall have a cure period equal to the cure period granted to Lessee plus an additional thirty (30) days for monetary defaults and an additional sixty (60) days for non-monetary defaults. If a non-monetary default cannot reasonably be cured without the Leasehold Mortgagee obtaining possession of the Premises, the Leasehold Mortgagee shall have a reasonable additional period to obtain possession (including by foreclosure of the Leasehold Mortgage) and to cure such default, provided that the Leasehold Mortgagee diligently prosecutes such cure.
(c) New Lease. If this Ground Lease is terminated for any reason prior to the Expiration Date (including by reason of rejection in bankruptcy), Lessor shall, upon written request from the Leasehold Mortgagee delivered within sixty (60) days after such termination, enter into a new ground lease with the Leasehold Mortgagee (or its designee) on the same terms and conditions as this Ground Lease for the remainder of the original Term, provided that the Leasehold Mortgagee (or its designee) (i) cures all monetary defaults within thirty (30) days after the execution of the new lease and (ii) diligently proceeds to cure all non-monetary defaults that are reasonably susceptible of cure.
(d) Foreclosure. In the event of a foreclosure of the Leasehold Mortgage (or acceptance of a deed or assignment in lieu of foreclosure), the purchaser at such foreclosure sale (or the grantee under such deed or assignment) shall succeed to the Leasehold Interest, subject to the terms and conditions of this Ground Lease, without the necessity of obtaining the consent of Lessor, provided that such purchaser or grantee assumes in writing all of Lessee's obligations under this Ground Lease.
ARTICLE XI — DEFAULT AND REMEDIES
Section 11.1 — Lessee Events of Default
Each of the following events shall constitute an "Event of Default" by Lessee under this Ground Lease:
(a) Failure to Pay Rent. Lessee's failure to pay any installment of Rent or any other amount due from Lessee to Lessor under this Ground Lease when the same becomes due and payable, and such failure continues for a period of ten (10) days after written notice thereof from Lessor to Lessee.
(b) Failure to Perform Non-Monetary Obligations. Lessee's failure to perform, observe, or comply with any non-monetary term, covenant, condition, or obligation of Lessee under this Ground Lease (other than those specified in paragraphs (a), (c), (d), or (e) of this Section), and such failure continues for a period of thirty (30) days after written notice thereof from Lessor to Lessee, provided that if such failure is of a nature that cannot reasonably be cured within such thirty-day period, Lessee shall not be in default hereunder if Lessee commences to cure such failure within such thirty-day period and thereafter diligently and continuously pursues such cure to completion within a reasonable time, not to exceed one hundred eighty (180) days after the date of Lessor's notice.
(c) JV Termination. The occurrence of a JV Termination, including without limitation any dissolution, winding up, or termination of CBWTP pursuant to the JV Agreement.
(d) Bankruptcy or Insolvency. The filing by Lessee of a voluntary petition in bankruptcy or the adjudication of Lessee as bankrupt or insolvent; the filing by Lessee of any petition or answer seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future federal, state, or other statute, law, or regulation; the seeking by Lessee of, or the consent or acquiescence by Lessee to, the appointment of any trustee, receiver, conservator, or liquidator of Lessee or of all or substantially all of the property of Lessee or of the Leasehold Interest; or the making by Lessee of a general assignment for the benefit of creditors. The filing of an involuntary petition in bankruptcy against Lessee shall constitute an Event of Default if such petition is not dismissed within ninety (90) days after the date of filing.
(e) Abandonment. Lessee's abandonment of the Premises for a continuous period of twelve (12) months or more. For purposes of this paragraph, "abandonment" means the cessation by Lessee of all operations and activities on the Premises and the failure to maintain the Premises and Improvements in accordance with this Ground Lease for such continuous period.
Section 11.2 — Lessor Remedies
Upon the occurrence and during the continuance of an uncured Event of Default by Lessee (after the expiration of any applicable cure period), Lessor shall have the following remedies, each of which shall be cumulative and in addition to all other remedies available to Lessor at law or in equity under the laws of the State of Washington:
(a) Termination. Lessor may terminate this Ground Lease by giving written notice of termination to Lessee (and to any Leasehold Mortgagee of which Lessor has received notice), specifying a termination date not less than thirty (30) days after the date of such notice (except in the case of JV Termination, in which case termination shall be automatic pursuant to Section 3.2). Upon the effective date of termination, the Term shall expire as though the Expiration Date had occurred, and all rights of Lessee under this Ground Lease shall cease and terminate.
(b) Re-Entry. Following termination, Lessor may re-enter and take possession of the Premises and all Improvements, and may remove all persons and property therefrom, in accordance with Applicable Law.
(c) Other Remedies. Lessor may pursue any other remedy available at law or in equity under the laws of the State of Washington, including without limitation specific performance, injunctive relief, and the recovery of damages suffered by Lessor as a result of Lessee's default.
Section 11.3 — No Waiver
The failure or delay by Lessor to exercise any right or remedy upon the occurrence of an Event of Default shall not constitute a waiver of such right or remedy or of Lessor's right to exercise such right or remedy at any subsequent time. No waiver by Lessor of any Event of Default shall be deemed a waiver of any subsequent Event of Default. All rights and remedies of Lessor under this Ground Lease are cumulative and are in addition to all rights and remedies available to Lessor at law or in equity. Any waiver by Lessor must be in writing and signed by Lessor to be effective.
Section 11.4 — Lessor Default
If Lessor defaults in the performance of any material obligation of Lessor under this Ground Lease, Lessee shall give Lessor written notice specifying the nature of the default in reasonable detail. Lessor shall have a period of thirty (30) days after receipt of such notice within which to cure such default. If such default is of a nature that cannot reasonably be cured within such thirty-day period, Lessor shall not be in default hereunder if Lessor commences to cure such default within such thirty-day period and thereafter diligently and continuously pursues such cure to completion within a reasonable time. If Lessor fails to cure such default within the applicable cure period, Lessee may pursue any remedy available at law or in equity under the laws of the State of Washington, subject to any limitations on remedies against governmental entities under Applicable Law and subject to Section 15.11 hereof.
ARTICLE XII — REVERSION
Section 12.1 — Reversion Upon Termination
Upon the expiration of the Term on the Expiration Date or upon any earlier termination of this Ground Lease, howsoever caused, including without limitation early termination resulting from a JV Termination under Section 3.2 hereof:
(a) The Leasehold Interest shall automatically revert to CSIA, and CSIA shall be restored to full and complete possession and enjoyment of the Premises as though this Ground Lease had never been executed, except as otherwise expressly provided herein.
(b) All Improvements, including without limitation any partially or fully constructed Facility, all buildings, structures, fixtures, process equipment permanently affixed to the Premises, piping, storage tanks, treatment systems, pumping stations, laboratory facilities, administration buildings, roads, fencing, landscaping, utility connections, and all other improvements and appurtenances permanently affixed to the Premises, shall automatically become the property of CSIA, free and clear of all claims, liens, encumbrances, security interests, and interests of Lessee, Pinnacle, any Leasehold Mortgagee (to the extent the Leasehold Mortgage has been satisfied or extinguished), or any other third party. The Reversion shall be self-executing and shall not require any further action, conveyance, or instrument; provided, however, that Lessee shall cooperate with Lessor as set forth in paragraph (c) below.
(c) Lessee shall, promptly and at Lessee's sole cost and expense, execute and deliver to Lessor all documents, instruments, and agreements reasonably necessary or desirable to evidence and effectuate the Reversion, including without limitation a quitclaim deed or assignment of any interest in the Improvements, a bill of sale for any personal property or equipment that has become part of the Improvements, releases of any claims or interests, and any filings required by Applicable Law. Lessee shall cooperate in good faith with Lessor to facilitate an orderly transition of possession and operations.
Section 12.2 — Condition of Premises Upon Reversion
(a) Operational Facility. If the Facility has been constructed and is operational at the time of the Reversion, Lessee shall deliver the Premises and all Improvements to Lessor in good operating condition, ordinary wear and tear excepted, with all systems functioning in accordance with their design specifications and all permits and governmental approvals in good standing. Lessee shall deliver to Lessor complete and accurate as-built drawings, operations and maintenance manuals, equipment warranties, and all other documentation reasonably necessary for the continued operation of the Facility.
(b) Non-Operational or Partially Constructed Facility. If the Facility has not been constructed or is only partially constructed at the time of the Reversion, Lessee shall deliver the Premises to Lessor in a safe and environmentally compliant condition, with all Hazardous Substances properly removed or remediated in accordance with Environmental Laws, all open excavations filled or properly secured, all construction debris removed, and the site stabilized to prevent erosion and sedimentation. Lessee shall deliver to Lessor all available plans, specifications, engineering reports, permits, and other documentation related to the Construction.
Section 12.3 — Coordination with JV Agreement
The Parties acknowledge and agree that, upon a JV Termination, the distribution of CBWTP's assets (other than the real property interests addressed herein) shall be governed by the JV Agreement, including the distribution of cash, accounts receivable, personal property, and other assets in accordance with the members' capital accounts and the liquidation provisions of the JV Agreement. This Article XII governs solely the reversion of the real property Leasehold Interest and the Improvements to CSIA. The Reversion shall occur automatically and without regard to the allocation of CBWTP's other assets among its members under the JV Agreement, and no member of CBWTP shall have any claim or right to the Premises or the Improvements following the Reversion, except to the extent expressly provided in the JV Agreement with respect to distributions from the liquidation of CBWTP's assets.
Section 12.4 — Survival
The obligations of Lessee under this Article XII, including without limitation the obligations to deliver the Premises in the condition specified in Section 12.2, to execute and deliver documents in connection with the Reversion, and to remediate any environmental contamination, shall survive the expiration or earlier termination of this Ground Lease and shall remain in full force and effect until fully performed and discharged.
ARTICLE XIII — EMINENT DOMAIN / CONDEMNATION
Section 13.1 — Total Condemnation
If the entire Premises, or such a substantial portion thereof that the remainder is insufficient for the Permitted Use, are taken by the exercise of eminent domain or condemnation by any governmental authority or entity having the power of eminent domain (a "Total Taking"), this Ground Lease shall terminate as of the date of such taking (the "Date of Taking"), and the Parties' respective obligations under this Ground Lease shall cease as of the Date of Taking, except for those obligations that expressly survive termination. In the event of a Total Taking, the condemnation award shall be allocated between the Parties as follows: (a) Lessor shall be entitled to receive that portion of the award attributable to the value of the fee simple interest in the Premises (excluding the value of the Improvements and the Leasehold Interest); and (b) Lessee shall be entitled to receive that portion of the award attributable to the value of the Leasehold Interest and the value of the Improvements constructed by Lessee on the Premises, including the value of any partially completed Construction, relocation costs, and business disruption damages, if any. Each Party shall have the right to participate in any condemnation proceedings and to present evidence and argument in support of its claim to the condemnation award. If the condemning authority makes a single, undifferentiated award, the Parties shall cooperate in good faith to allocate the award between them in accordance with the foregoing principles, and if the Parties are unable to agree, the allocation shall be determined by binding arbitration in accordance with Section 15.3 hereof.
Section 13.2 — Partial Condemnation
If a portion of the Premises is taken by eminent domain or condemnation and the remaining portion of the Premises is sufficient, in the reasonable judgment of both Parties, for the continued operation of the Facility for the Permitted Use (a "Partial Taking"), this Ground Lease shall continue in full force and effect as to the remaining portion of the Premises, and the Rent shall not be adjusted (given its nominal amount). The condemnation award attributable to the taken portion shall be allocated between the Parties as set forth in Section 13.1, proportionally adjusted to reflect the Partial Taking. Lessee shall, at its expense, make such modifications and repairs to the Improvements as are reasonably necessary to restore the Facility to a condition suitable for the Permitted Use, utilizing the portion of the condemnation award allocable to Lessee for such purpose. If the Parties are unable to agree whether the remaining portion of the Premises is sufficient for the Permitted Use, the matter shall be resolved by binding arbitration in accordance with Section 15.3 hereof, and pending such resolution, this Ground Lease shall remain in effect.
ARTICLE XIV — DAMAGE AND DESTRUCTION
Section 14.1 — Obligation to Restore
In the event of any damage to or destruction of all or any portion of the Improvements, howsoever caused (including by fire, flood, earthquake, windstorm, or other casualty), Lessee shall, subject to the provisions of this Article XIV, promptly commence and diligently pursue the restoration, repair, or rebuilding of the Improvements to substantially their condition immediately prior to such damage or destruction, using the proceeds of the property and casualty insurance maintained by Lessee pursuant to Article VIII hereof. Lessee shall prosecute such restoration with reasonable diligence and in compliance with all Applicable Laws, using materials of good quality and in a good and workmanlike manner. This obligation to restore shall apply unless (a) the JV Agreement provides for the dissolution or winding up of CBWTP in connection with such casualty event, or (b) the Governing Board, acting in

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